KOREA INDUSTRIAL WORLD INTELLECTUAL PROPERTY OFFICE PROPERTY ORGANIZATION
REGIONAL FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES ON THE LAW OF INTELLECTUAL PROPERTY FOR ASIA AND THE PACIFIC
organized by the World Intellectual Property Organization (WIPO) in cooperation with the Korea Industrial Property Office (KIPO) and with the assistance of the United Nations Development Programme (UNDP)
Seoul, August 20 to September 1, 1989
Geneva 1990 WI PO PUBLICATION No 681 (E)
ISBN 92-805-0236-0
WIPO 1990 FOREWORD
The World Intellectual Property Organization (WIPO) organized, in cooperation with the Korea Industrial Property Office (KIPO) and with the assistance of the United Nations Development Programme (UNDP) , a Regional Forum on the Impact of Emerging Technologies on the Law of Intellectual Property for Asia and the Pacific, which was held in Seoul, Republic of Korea, from August 30 to September 1, 1989.
The Forum examined the interrelationship of advanced or new technologies and the law of intellectual property, and it dealt, in particular, with the following technologies: computer technology (including microchips , integrated circuits, computer programs and the use of computers in creating, storing or recording information, sounds and images); new techniques of reproduction and communication, especially reprography and the transmission of audio and visual programs by satellite and by cable; and biotechnology.
The Forum provided an opportunity to the participants to better understand the complex matters involved, especially to government officials who would be involved in the formulation of appropriate policies concerning the intellectual property aspects of the said technologies.
The Forum was attended by some 100 participants most of whom came from developing countries in Asia and the Pacific region. They were representatives of a range of governmental, legal, industrial and commercial circles.
The present volume contains the program and the texts of the addresses and presentations by the speakers and panelists as well as the list of the participants.
Arpad Bogsch Director General World Intellectual Property Organization
Geneva, June 1990
TABLE OF CONTENTS
PROORAM . 3
SPEAKERS 7
OPENING STATEMENTS
Mr. Hong Shik Park, Commissioner, Korea Industrial Property Office, Seoul, Republic of Korea ....••... . 11
The Honorable, Mr. In Taek Lim, Deputy Minister of Ministry of Trade and Industry on behalf of Minister Seung Soo Han. . . 13
Mr . S. Alikhan, Deputy Director General, World Intellectual Property Organization . . • ...... • • • . 15
Mr. Jacob Guijt, Resident Representative UNDP, Seoul 19
COMPUTER TECHNOLOGIES
Keynote Address
Professor Jon Bing, Manager, 21 Norwegian Research Center for Computers and the Law, Norway
1. Integrated Circuits
Mr. Carlos M. Correa, Permanent _Secretary 35 Conferencia de Autorida~es Latinoamericanas de Informatica, Argentina
Mr. Robert Hart, Director ...... 51 Intellectual Property Department, Plessey Company Ltd., United Kingdom
Professor Kae Dal Kwack, 67 Hanyang University Republic of Korea
2. Computer Programs
Mr. Zentaro Kitagawa, Kyoto Comparative Law Center, Japan ...... 73
Mr. A. Bhojwani, Head, Software Grbup, Manufacturers' Association for Information Technology, India ...•••...... 87
Mr. Man Gi Paik, Director, Information Industry Division, Ministry of Trade and Industry, Republic of Korea ...... • ...... • . . . • . . 103 2 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES
NEW TECHNOLOGIES OF REPRODUCTION AND COMMUNICATION
Keynote Address
Professor Richard G. Donnelly, Director, Program on Management of Science Technology and Innovation, School of Government and Business Administration, George Washington University, United States of America • . . . . . • • ...... • . . 121
1. Reproduction and Reproqraphy
Mr. Shimpei Matsuoka, Managing Director Japanese Society for Rights of Authors, Composers and Publishers, Japan .. 129
Mr . Jukka Liedis, Special Advisor, Ministry of Education, Finland 137
2. Satellite and Cable
Dr. Walter Dillenz, Head, ...... 157 Legal Department, Society of Authors, Composers and Music Publishers, Austria
Mr . C. Creswell, Senior Assistant Secretary, International Trade Law and Intellectual Property Branch, Business Affairs Division, Attorney-General ' s Department, Australia ...... 167
Mr. Kyong Su Choe, Research Officer, Copyright Deliberation and Conciliation Conunittee, Ministry of Culture and Information BIOTECHNOLOGY Keynote Address Professor Didin S. Sastrapradja, Deputy Chairman, National Institute of Sciences, Indonesia .. 187 Mr. John H. Woodley, Partner, Sim & McBurney, Patent and Trademark Agents, Canada ..... 193 Mr. Moon Hi Ha.n, Head, Genetic Engineering Centre, Korea Advanced Institute of Scierice and Technology LIST OF PARTICIPANTS 243 PROGRAM * * * * Wednesday, August 30, 1989 Morning 08 . 30 Registration 09.30 Opening Ceremony Mr. Hong Shik Park, Commissioner, Korea Industrial Property Office His Excellency Mr. In-Taik Lim, Vice Minister for Trade and Industry, Government of the Republic of Korea Mr. S. Alikhan, Deputy Director General, WIPO Mr. J. Guijt, Resident Representative, UNDP 10.20-12.30 I. COMPUTER TECHNOLOOY Keynote Address Dr . Jon Bing, Manager, Norwegian Research Center for Computers and the Law, Oslo Integrated Circuits Moderator: Mr. Ludwig Baeumer, Director, Industrial Property Division, WIPO Panelists: Mr. Carlos Maria Correa, Permanent Secretary, Conference of Latin American Authorities on Informatics, Argentina Mr . Robert Hart, Intellectual Property Development Manager, The Plessey Company Limited, Liverpool Professor Kae Dal Kwack, Hangyang University, Department of Electronic Engineering, Seoul Discussion Afternoon 14.30-17. 00 Computer Programs Moderator: Mr. Henry Olsson, Director, Copyright and Public Information Department, WIPo' Panelists: Professor Zentaro Kitagawa, Dean and Professor, Facult y of Law, Kyoto Uni versity, Kyoto 4 ASIAN MD PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Mr. Ashok Bhojwani, Managing Director, TSG Consultants Private Limited, New Delhi Mr. Man Gi Paik, Director, Information Industry Division, Ministry of Trade and Industry (MTI >, Seoul Discussion Thursday, August 31, 1989 Morning 10.00-12.30 II. NEW TECHNIQUES OF REPRODUCTION AND COMMUNICATION Keynote Address: Professor Richard G. Donnelly, Director, Program on Management of Science, Technology and Innovation, School of Government and Business Administration, The George Washington University, Washington D.C. Reprography and Recording Moderator: Mr. Shahid Alikhan, Deputy Director General, WIPO Panelists: Mr. Shimpei Matsuoka, Managing Director, Japanese Society for Rights of Authors, Composers and Publishers (JASRAC), Tokyo Mr. Jukka Liedes, Special Government Adviser, Ministry of Education, Helsinki Discussion Afternoon 14.30-17.00 Satellite and Cable Moderator: Mr. Henry Olsson, Director, Copyright and Public Information Department, WIPO Panelists: Dr. Walter Dillenz, Head, Legal Department, Society of Authors, Composers and Music Publishers, (AKM), Vienna PROGRAM 5 Mr. C.C. Creswell, Senior Assistant Secretary, International Trade Law and Intellectual Property Branch, Business Affairs Division, Attorney-General's Department, Canberra Mr. Kyong Su Choe, Research Officer, Copyright Deliberation and Conciliation Committee, Ministry of Culture and Information, Seoul Discussion Friday, September 1, 1989 Morning 10.00-12.30 III. BIOTECHNOLOGY Keynote Address: Professor Dr. Didin S. Sastrapradja, Deputy Chairman, National Institute of Sciences, Jakarta Moderator: Mr. Ludwig Baeumer, Director, Industrial Property Division, WIPO Panelists: Mr. John H. Woodley, Partner, Sim and McBurney, Patent and Trade Mark Agents, Toronto Mr. Moon Hi Han, Head of Genetic Engineering Centre, Korean Advanced Institute of Science and Technology CKAIST), Seoul Discussion Afternoon Visit to the Kyongbokkung Palace (optional) Saturday, September 2, 1989 9.30-12. 00 Tour of the Samsung Electronics Company (opti onal) SPEAKERS prepared by the International Bureau of WIPO Professor Jon BING, a national of Norway, is Manager of the Norwegian Research Center for Computers and Law, Oslo University, which specializes in legal informatics, both legal information systems and legal expert systems. Professor Bing has published extensively in the areas of information law emphasizing data protection and legal protection of computer programs, data bases and integrated circuits. He is also a well known science fiction writer with novels, short stories, plays for stage, radio and television etc, to his credit. Mr. Ashok BHOJWANI, a national of India, is Managing Director of TSG Consultants Private Limited, New Delhi, India, a computer systems and management consultants corporation. Mr. Bhojwani has been in the computer field since 1964. He is former Vice-President of the Manufacturers Association of Information Technology of India. Mr. Kyong Su CHOE, _a national of the Republic of Korea, has since 1986 been Research Officer, Copyright Deliberation and Conciliation Committee, Republic of Korea. Mr. Choe was the author of the Report on Copyright Protection with Respect to Databases, published by the Committee in 1988. Previously Mr. Choe was Secretary of the Legal Research Institute, Korea University, having obtained Masters of Law degrees from Korea University and University of Dundee, United Kingdom. Mr. Carlos CORREA, a national of Argentina, is Permanent Secretary of CALAI (Conferencia de Autoridades Latino-americanas de Informatica, Argentina). Between 1984 and 1989, Mr. Correa was Under-Secretary for Informatics and Development, Ministry of Science and Technology, Argentina. Mr. Correa was Director of Research for SECYT-IDRC-ADEST (Informatics and Electronics) from 1985 to 1988 and Member of the Administrative Council of ADEST from 1982 to 1985. Prior to 1980 Mr. Correa was an international consultant to the IDB, UNCTAD, UNIDO, and the UN Center on Transnational Organizations. Mr. Chris CRESWELL, a national of Australia, is the Senior Assistant Secretary in the Australian Attorney-General's Department and in charge of the International Trade Law and Intellectual Property Branch, which is responsible for copyright law and policy in Australia. He is also a Member of the Copyright Law Review Committee, a government advisory body. Mr. Creswell is a graduate of the University of Melbourne Law School and has worked in a variety of legal policy positions in the Attorney-General's Department since 1971. 8 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Dr. Wa l ter DILLENZ, a national of Austria, is Deputy Director of AKM {Austrian Perfonning Right Society) and Editor in Chief of Autorenzeitung. He obtained his Doctorate of Law from the University of Vienna and after practising in Vienna, joined as Head of the Legal Department of AKM and since 1976 is Deputy Director General of AKM. Dr. Dillenz is a Member of the Legal and Legislation Committee of CISAC and in 1983 was appointed as Court Expert for Copyright by the Comme rcial Court of Vienna. In 1986, he was appointed as Deputy Member of the Copyright Arbitration Board, Ministry of Justice, Vienna. Professor Richard G. DONNELLY, a national of the United States of America, is Di rector of the Program on the Management of Science, Technology and Innovation at the George Washington University, Washington, DC, and specializes in the management of technological innovation and entrepreneurship and the commercialization of technology. He consults in the aerospace, electronics and speciality chemicals/materials industries and was previously a technical executive of a Fortune-50 firm, directing new product development for one of its top businesses worldwide. Earlier, Dr. Donnelly was a Member of the engineering faculty of the Massachusetts Institute of Technology, where he held the E.I. DuPont chair as Assoicate Professor and received his PhD . Dr. Moon Hi HAN, a national of the Republic of Korea, has since 1985, been President of the Genetic Engineering Center of the Korea Institute of Science and Technology (KAIST). Dr. Han obtained his doctorate in biology from the Florida State University in the United States of America. Dr. Han had held research positions at the Florida State University, the Medicine College of Georgia and at the University of Minnesota Medical School and teaching positions at the University of Minnesota and the Institute for Enzyme Research, University of Wisconsin. In 1983 Dr. Han was appointed as Director of the Genetic Engineering Cent~r, KAIST. He has been {1984-85) Managing Director, Korean Society of Biochemistry and a Board Member of the Korean Society of Microsobioloy. Mr. Robert HART, a British national, is a chartered Patent Agent and European Patent Attorney. At present he is the Intellectual Property Development Manager of the Plessey Company, plc. Mr. Hart is Chairman of the Intellectual Property Committee of the British Computer Society, a Member of the Chartered Institute of Patent Agents Software Protection Committee and also a Member of the Editorial Panel of the Journal of Computer Law and Practice. He represented the International Federation for Information Processing (IFIP) at the WIPO Committee on the legal protection of computer software in Geneva, 1983, and the UK at the WIPO Working Group on Technical Questions Relating to the Legal Protection of Computer Software, Canberra in 1984. He was a consultant to WIPO on the legal protection of semiconductor products and represented the Union of Industrial and Employers' Confederation of Europe {UNICE) at the WIPO experts meetings in 1986 to 1988, and is a past Member of the Board of UK Federation Against Software Theft. Currently he is acting as a technical consultant to DG III of the Commission of the European Community on the proposed directive on the legal protection of computer programs. SPEAKERS 9 Dr. Zentaro KITAGAWA, a national of Japan, Dean and Professor of Law at Kyoto Universit y; Director of Kyoto Comparative Law Center; Visiting Professor at t he University of Washington, Harvard Law School, Munich University, and Marburg University. He is a Member of the Public Officials Examination Board (National Personnel Authority), National Copyright Council Professor Kae Dal KWACK, a national of the Republic of Korea, is a Special Research Worker at the Inter University Semiconductor Research Center, Seoul National University. Professor Kwack formerly held teaching positions in the Electronic Engineering Department of Han Yang University, Seoul and was formerly Chairman of the Committee on Semiconductor, at the Korean Institute of Telematics and Electronics. Professor Kwack obtained his doctorate at "L'Institut National de Polytechnique," in Toulouse, France. Mr. Jukka LIEDES, a national of Finland, is Special Government Adviser, Ministry of Education, Helsinki since 1980. Mr. Liedes was: Legal Adviser of the Finnish Composers' International Copyright Bureau Teosto from 1970 to 1980; Secretary General of the Finnish Artists' and Phonogram Producers ' Copyright Bureau Gramex from 1971 to 1973; Chairman of the Board from 1973 to 1980; Secretary of the Governmental Committee of Ministers on Mass Media Policy from 1983 to 1987; Chairman of the Committee of the Nordic Countries on Satellite Broadcasting from 1984 to 1987; Secretary of the Government Copyright Committee from 1976 to 1984; Chairman of the said Committee since 1985. Mr. Liedes is Chairman of the National Video Commission since 1982; Member of the National .Commission on Space Affairs since 1985; Vice-chairman of the National Mass Media Culture since 1987. He was Secret ary of the Finnish Copyright Society from 1975 to 1984 and is Chairman of the said Society since 1985. Chairman of the Finnish Computer and Law Association since 1985 . Mr. Liedes has written articles in national and international periodicals and journals on cultural and technological development and copyright. Mr. Shimpei MATSUOKA, a national of Japan, has been Managing Director of the Japanese Society for Rights of Authors, Composers and Publishers (JASRAC) since 1986, having joined the Board of Directors in 1980. Mr. Matsuoka graduated from the University of Tokyo in 1958. In 1966, he joined the management of ZEN-oN MUSIC COMPANY LTD, a leading Japanese Music publisher. He became the President of the company in 1982, and left it i n 1986. As a Director on the Board of JASRAC, Mr. Matsuoka represented publishing interests. 10 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Mr. Man Gi PAIK, a national of the Republic of Korea, has been since 1989, Director, Information Industry Division, Ministry of Trade and Industry (MTI). Previously, Mr. Paik was a Patent Examiner at the Korea Industrial Property Office (KIPO), Assistant Director, Electronics Industry Division, MTI, Assistant Director, Information Industry Division, MTI, Associate Professor, International Intellectual Property Training Institute and Director EDPS Division of KIPO. Professor Dr. Didin S. SASTRAPRADJA, a national of Indonesia, is the Vice-chairman of the Indonesia Institute of Sciences and a Professor at the University of I ndonesia, Jakarta. He obtained his doctorate degree in botany from the University of Hawai and, after serving as Director of Bogo Botanic Gardens, was appointed to the Indonesia Institute of Sciences as Executive Secretary and then as Deputy Chairman prior to his current appointment. Professor Sastrapradja is the author of several books and some 70 scientific papers. Mr. John WOODLEY, a Canadian national, is a partner of Sim & McBurney, Patent and Trade Mark Agents, Toronto. He is Vice-President of Canada for the Licensing Executives Society, and a Member of the Patent & Trademark Institute of Canada, Association of Professional Engineers of Ontario, Chemical Institute of Canada and the Canadian Society of Microbiologists. Mr. Woodley is a co-author of Hughes and Woodley on Patents, which relates to the patenting of technology in Canada and the enforcement of patent rights. After graduating in chemical engineering from Queen's University in 1970, Mr. Woodley worked for one year as a process engineer with a pharmaceutical company. From 1971, he practised in the field of patents and trade marks and was registered as a Canadian patent agent in 1973, a Canadian trade mark agent in 1974, and an American patent. agent in 1974. OPENING ADDRESS delivered by Mr. Hong Shik Park Commissioner Korea Industrial Property Office Seoul, Republic of Korea Honorable Deputy Director General of the World Intellectual Property Organization (WIPO), Mr. Shahid Alikhan, experts from different countries and distinguished guests from home and abroad. Today I would like to extend my sincere welcome to you on the occasion of the Regional Forum on the Impact of Emerging Technologies on the Law of Intellectual Property or Asia and the Pacific Region. As you know, recent progress in technology and information has been creating new forms of intellectual property in computer technologies, reproduction, reprography and biotechnology. High technologies play an important role in the economic development of a country. Therefore many countries show special interest in developing, utilizing and safe-guarding these technologies. Computer technologies are being rapidly disseminated very widely. The protection of integrated circuits and computer programs has become a burning issue. In reproduction, reprography, satellite and cable communication, the appearance of new technology calls for effective protection for these technologies and inventors. Developments have also been occuring very rapidly in relation to biotechnology. Genetic engineering as an emerging technology calls for international safety standards. With this trend, the issue of intellectual property rights is now highlighted internationally, as a matter of great importance. In fact, WIPO has organized the Committee of Experts on Biotechnological Inventions and Industrial Property to establish standards of protection at the international level. Also recently WIPO produced a draft Treaty on the Protection of Intellectual Property in Respect of Integrated Circuits which was adopted in the diplomatic conference in Washington last May . Also GATT, with active discussions in the Uruguay Round, is dealing with intellectual property rights and trade issues together. In Korea, we have been strengthening our protection of intellectual property by introducing important amendments to the patent laws and by signature of the Budapest Convention and implementing computer program protection law. The Korean government also is in the process of amending the major industrial property laws, which are to be implemented in 1990. We are looking forward to a broader protection of rights owners and inventors as well as keeping a.breast at the international level. It is indeed meaningful to hold this Forum in Seoul when stronger protection of inteliectual properties has been called for and at the same time intellectual property has become a major factor of trade conflicts. To conclude, I hope today's discussion will provide new momentum in analyzing the impact of emerging technolgies on the law of intellectual property and in establishing protection guidelines. Thank you. OPENING ADDRESS delivered by The Honorable, Mr. In Taek Lim, Deputy Minister of Ministry of Trade and Industry on behalf of Minister Seung Soo Han Distinguished Deputy Director General of WIPO, Mr. Shahid Alikhan and distinguished guests from home and abroad. It is my utmost pleasure to be here during the opening cermony of teh Regional Forum on the Impact of Emerging Technologies on the Law of Intellectual Property for Asia and the Pacific and to deliver my congratulatory address. First of all, I'd like to extend my welcome to participating experts from Asia and the Pacific region. Also I'd like to express my special thanks to WIPO and UNDP for their cooperation for a successful forum. As you know, intellectual property has kept abreast with social change by creation and adaptation. Intellectual property will also widen its applicable area in the coming age of the information society and, inevitable, its value and importance will increased. Conventional intellectual property laws cannot keep up with emerging new technologies any more which has become an international concern. Good examples are found in computer programs, IC layout, biotechnology, and satellite communication. Advanced technology i s crucial for a country's economic strength. Thus, every country is paying special attention to establish an appropriate legal protection system. One of the effective ways to further promote high technol ogy is to help developed technology to be well protected, thus, to be smoothly transferred to les s developed countries. It is timely for WIPO to organize this forum in Seoul in cooperation with KIPO since Korea has now become one of the lOth largest trading countries. In this forum, which will continue for three days, you will analyze new technology, study the impact on the law of intellectual property, seek responsive solutions for the future and to review tec~ology transfer through appropriate protection. In this sense, I think this will be a meaningful forum. And I's like to express my deep interest i n the forum. At the same time, I hope to see your active participation and discussion in the forum . I also wish this forum will contribute to the recognition on intellectual property laws connected with emergin technologies and to seek possible solutions in related industry as well as government administration. I wish you success during the forum. To conclude, I hope that participants from abroad have enjoyable stay in Korea. Thank you very much for listening. OPENING STATEMENT delivered by Mr. S. Alikhan Deputy Director General World Intellectual Property Organization Honorable Mr. In-Taik Lim, Vice Minister of Trade and Industry, Mr. Hong Shik Park, Commissioner of the Korea Industrial Property Office, Mr. Jacob Guijt, Resident Representative of the United Nations Development Programme in the Republic of Korea, Distinguished speakers and participants, Ladies and Gentlemen, The World Intellectual Property Organization (WIPO> is pleased indeed to be organizing, in cooperation with the Government of the Republic of Korea, the Korea Industrial Property Office (KIPO), and with the assistance of the United Nations Development Programme (UNDP), this Regional Forum on the Impact of Emerging Technologies on the Law of Intellectual Property. It is an honor, and pleasure for me, on behalf of the Director General, Dr. Arpad Bogsch, to welcome all the participants to this Forum. We would like to express our deep appreciation, to the Honorable Vice Minister for Trade and Industry for having kindly agreed to inaugurate this Forum. This is the second in a series of regional fora being convened by WIPO pursuant to a worldwide Forum on the Impact of Emerging Technologies on the Law of Intellectual Property, which was held at WIPO headquarters in September 1988, to discuss the relationship of intellectual property to several areas of high technology which are of fundamental importance. A Regional Forum on the Impact of Emerging Technologies on the Law of Intellectual Property for African and Arab countries was held in Cairo in May this year. In addition to the present meeting, WIPO will also organize a similar forum for developing countries in Latin America and the caribbean in Montevideo, Uruguay in December 1989. As indicated in the title of the Forum, the purpose of this meeting is to examine the interrelationship of advanced or new technologies and the law of intellectual property. The topics to be examined include biotechnology, computer technology and new techniques of reprography and communication. The meaningfulness and the viability of intellectual property is conditioned on its responSe to the changing demands of society and the role of thos& technologies in meeting such demands. It is particularly difficult for the goverments of many countries to legislate on ·these matters without knowing what is occuring and what is planned in other countries and, in that context, it is useful to have the benefit of the views of business leaders, scientists, researchers and legal specialists. 16 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The intellectual property system has both a national and international scope and affects various aspects of development. Intellectual property institutions play an important role in the promotion of inventiveness and national creativity, _rewarding inventors, authors and works. An adequate intellectual property system implies the existence of an appropriate legal framework administered by modern and efficient national offices; these have an important role in the national strategies for promotion of innovation and local inventiveness. On the one hand, the granting of patents is directly related to the local development of technology; on the other hand, patent documents are an excellent tool for the diffusion of technological information, thus making available to interested sections such as industry, research and development institutions, universities, inventors, etc ... the state-of-the-art in respect of specific technological sections and providing the reference to alternate technologies that might be adequate in facing local industrial challenges. We are, therefore, happy to see gathered here such a large array of varied expertise in the different related fields and hope that the discussions in this Forum will assist the participants in identifying issues and providing information on the possible solutions in respect of emerging new technologies and the law of intellectual property, thus enabling government officials to formulate appropriate policies, both of the national and international levels. I should like to convey, through you Honorable Vice Minister In-Taik Lim, to the Honorable Mr. Seung-Soo Han, Minister of Trade and Industry who was to be here but for his absence from the country on official business, and to the Government of the Republic of Korea, the appreciation and warm thanks of WIPO for hosting this meeting in Seoul. It is indeed most appropriate that the Forum is being held in your capital city which combines in itself the wisdom of tradition with the foresight of modernity. Ladies and Gentlemen, the convening of this Forum is the latest example of the continuing close cooperation between the Government of the Republic of Korea and the World Intellectual Property Organization. The Republic of Korea, is, of course, a state member of the World Intellectual Property Organization. It is also a party to the Paris Convention for the Protection of Industrial Property, a convention which was concluded over 100 years ago, the Patent Cooperation Treaty, and the Budapest Agreement on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure. Aside from these links with the international community in the field of industrial property, the Republic of Korea has been an active participant in WIPO's development cooperation program. · Your Government has been a generous host to WIPO meetings; it has with unfailing regularity nominated participants in regional and sub-regional meetings organized by WIPO; it has sent government officials each year to WIPO training courses held in industrialized countries; and it has received trainees from other developing countries of the region. The Republic of Korea is thus a valued member of the international community of states in respect to intellectual property. I would like to express my gratitude to the government officials from the Korea Industrial Property Office, particularly Commissioner Mr. Hong Shik Park; the Deputy Commissioner, Mr. Seung-Hwan Lee; the Director General of Planning and Management Bureau, Mr. Sang-Yull Lee; the Director of International Cooperation Division, Mr. Du-Hyun Chang; the until recently Mr. Shahid ALIKHAN 17 Liaison Officer with WIPO, Mr. Tae-chang Choi; the present Liaison Officer, Mr . Joon-Kyu Kim, and officials of the International Intellectual Property Training Institute, who have been responsible for the efficient organization of this Forum, and f~r providing all the facilities required for the conduct of this Forum. This Forum is an activity under a regional project entitled "The Effective Use of the Intellectual Property System for Economic and Technological Development and Sophistication" financed by UNDP, and executed by WIPO. Our grateful thanks are due to the UNDP for its support in the development of intellectual property for the benefit of developing countries in this region of the world, and to its Resident Representative Mr. Jacob Guijt, the Deputy Resident Representative, the Assistant Resident Representative and their staff for their unstinted cooperation. I am also grateful that the Resident Representative accepted my invitation, to come and also address the opening of this Forum. WIPO, as member governments are aware, deals with a very specialized area of activities and is responsible, inter alia, for promoting national creativity and for facilitating the transfer of technology related to industrial property to developing countries in order to accelerate their economic, social and cultural development. Our development cooperation program and activities in the region, like those included in our intercountry program and country projects, are intended i nter alia, to help modernize related legislation, strengthen national infrastructures, and provide them with a group of trained specialists. This Forum has brought together experts from the regional countries and outside who possess considerable knowledge and experience of the topics to be discussed. I wish to greet each of the speakers and to thank them for the time and effort they have committed to the preparation of their papers for this Forum, which will greatly enrich the ensuing discussions. The speakers from abroad are: Mr. Ashok Bhojwani, Managing Director, TSG Consultants Private Limited, New Delhi, India; Dr. Jon Bing, Manager, Norwegian Research Center for Computers and the Law, Oslo, Norway; Mr. Carlos Maria Correa, Permanent Secretary, Conference of Latin American Authorities on Informatics, Argentina; Mr. C.C. Creswell, Senior Assistant Secretary, International Trade Law and Intellectual Property Branch, Business Affairs Division, Attorney-General's Department, Canberra, Australia; Dr. Walter Dillenz, Head, Legal Department, Society of Authors, Composers and Music Publishers, (AKM), Vienna, Austria; Professor Richard G. Donnelly, Director, Program on Management of Science Technology and Innovation, School· of Government and Business Administration, The George Washington University, Washington D.C., United States of America; Mr . Robert Hart, Intellectual Property Development Manager, The Plessey Company Limited, Liverpool, United Kingdom; Professor Zentaro Kitagawa, Dean and Professor of Faculty of Law, Kyoto University, Kyoto, Japan; Mr. Jukka Liedes, Special Government Adviser, Ministry of Education, Helsinki, Finland; Mr. Shimpei Matsuoka, Managing Director, Japanese Society for Rights of Authors, Composers and Publishers (JASRAC), Tokyo, Japan; Professor Dr. Didin S. Sastrapradja, Deputy Chairman, National Institute of Sciences, Jakarta, Indonesia; and Mr. John H. Woodley, Partner, Sim and McBurney, Patent and Trade Mark Agents, Toronto, Canada. The speakers from the Republic of Korea are: Mr. Man Gi Paik, Director, Information 18 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Industry Division, Ministry of Trade and Industry (MTI) , Seoul; Professor Kae Dal Kwack, Department of Electronic Engineering, Hangyang University, Seoul; Mr. Moon Hi Han, Head of Genetic Engineering Centre, Korean Advanced Institute of Science and Technology (KAIST), Seoul; and Mr . Kyong Su Choe, Member, Copyright Deliberation and Conciliation Committee, Ministry of Culture and Information, Seoul. I wish also to introduce to you my colleagues Mr. Henry Olsson, Director of the Copyright and Public Information Department, and Mr. Ludwig Baeumer, Director of the Industrial Property Division, senior officials of WIPO, who shall also be moderating various sessions at this Forum. I would also like to introduce you to my colleague Mr. Michael Blakeney, Senior Program Officer, Development Cooperation and External Relations Bureau for Asia and the Pacific, WIPO, who has been responsibl e for administrative arrangements concerning this Forum . I would like also to greet all the participants in the Forum. The overseas participants come from Bangladesh, China, India, Indonesia, Malaysia, Pakistan, the Philippines, Sri Lanka, Thailand and Viet Nam. Additionally, we have a distinguished gathering of participants from the Republic of Korea who come from various sectors concerned with the development and protection of high technology --from government and academic circles, the legal profession, computer associations, industry and commerce. Finally, I would like to greet the representatives of the non-governmental organizations from the International Confederation of Societies of Authors and Composers (CISAC), the International Federation of Phonographic Industry (IFPI), and the Asian Patent Agents Association We are grateful to them for having accepted our invitation to attend this meeting. In concl usion I should like to mention that more than ever, high technol ogy is perceived by industrialized and developing countries as an important means of fostering economic growth and rapid technological development. It is but natural that questions concerning the impact of emerging technologies on the law of intellectual property should increasingly engage the attention of legislators and policy makers in individual states, and in the community of states as a whole. Informational cooperation with a view to securing a sound legal framework and climate for research and development, is an indispensable requirement for technological innovation, trans-border flow of technology and industrial growth. Each of the countries represented here plays an important role in the deliberations that are taking place in the international forum, at WIPO, to enhance that cooperation. Honorable Vice-Minister In-Taik Lim I thank the Government of the Republic of Korea once more for hosting this Forum and I hope its deliberations will prove both interesting and fruitful for the participants. Thank you. OPENING STATEMENT delivered by Jacob Guijt Resident Representative UNDP, Seoul It is an honour and privilege to address you at the opening of this Regional Forum on the Impact of Emerging Technologies on the Law of Intellectual Property. As the world's largest multilateral technical assistance organization, UNDP (short for the United Nations Development Programme) is involved in development activities with numerous facets, and in many sectors . We do not bring about development by means of capital investments, there are other organizations, whose primary task it is to move capital. For us development means development of human capabilities and generation and transfer of know how, and to achieve maximum effect with limited financial means, injected at strategic points of the development process. We often like to see our role as catalytic, as stimulating key points in the development process, expecting to generate movements which then gain their own momentum . Our strategies are aimed at recognizing and supporting activities and organizations which with a modest degree of stimulation can spread development widely. We feel that the intellectual property system is such a field of activity, and WIPO and the national intellectual property systems which it assists are such organizations. Technology driven industrial development is undoubtedly among the most important factors, if not the most important single factor, to generate the current dynamism of the rapidly growing economies of Asia. UNDP is fully aware of the absolutely essential role which the protection of intellectual property plays in this context . . If anything, promotion of development is the creati on of incentives,. and the protection of intellectual property should be the centre of any system to reward those who create know how with the fruits of their labour and ingenuity, and to protect intellectual property protection is therefore an area which deserves our full support. Fully in line with our general approach we recognize how effective intellectual property systems can have an enabling and stimulating effect, and with a wide spread of effects way beyond the costs involved. On the other hand, small, ineffective and old fashioned intellectual property protection systems can be crippling. Governments are well advised ·to make full use of what WIPO has to offer to upgrade t heir intellectual property systems. Your host country, the Republic of Korea, is a fine example of a country which has used assistance from UNDP and WIPO for all it could, to establish an up to date Korea Industrial Property Office, and its daughter International Intellectual Property Training Institute. In UNDP we take great pride in what we have achieved with limited means in this part of our programme, and we consider it a fine example of how well chosen strategically placed small inputs can have an enormous effect on an entire major economy. 20 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES It is all the more necessary to give attention to this key function because of the explosive technological developments of our times. Only a few days ago here in Seoul a congress on biochemistry convened, also partly sponsored by UNDP, i n which one of the participants stated that the all important field of genetic engineering research was not even foreseen two decades age. This creates problems of legislation, of describing and canonizing forms of industrial know how, and of administration, of seeing to it, that patent institutions are qualitatively and quantitatively equipped to keep up with the floods of know how which are being generated. I am sure you will find it a fascinating task, to discuss the problems which the new technological developments create for the intellectual property system. I trust that it will be stimulating for you to be aware that in this event you constitute the cutting edge of the developmnt process in Asia. It is a source of great satisfaction for us, that we can sponsor this congress in the context of our regional project in this field. The presence of the Deputy Director General, WIPO, Mr. Shahid Alikhan, adds lustre to this gathering, and I am sure that it will add to your effectiveness as well as your pleasure that you are in the hands of a host Government with a superb track record for hospitality - or should I say field and track record. I wish you every success. CCMPUTER TECHNOLOOY AND "INDUSTRIAL COPYRIGHT" by Professor Jon Bing I. COMPUTER PROGRAMS: The Soft Machine 1. The meeting of law and information technology represents challenges of various kinds. The trade in information technology products and related services is avigorous and increasing part of international commerce, and as such the application of law to these activities is important. When applying the law, one does, however, discover that the products of information technology, and its related services, do not neatly fit into the established categories. The major example is computer programs. 1 2. In the 1960 ies, computer programs emerged as a subject for trade in its own right. The development of programs was costly, and it was believed that this investment deserved some sort of legal protection. But considering the legal nature of the computer program, the lawyer was presented to a problem of qualification. 3. On the one hand, one could compare a special purpose hard-wired computer, where the logic was locked into the circuity of the machine itself, and a general purpose computer which was programmed to function exactly as the hard-wired computer. Presuming that the function was novel, the hard-wired computer easily might be seen as an invention in the terms of patent law. And arguing by analogue, one might suggest that whatever made the general purpose computer function in the same way, also should be qualified as "an invention", ie. treated by law as a machine. And there were in several jurisdictions decisions which suggested that this argument was accepted. 4. On the other hand, ·one could pull out the program itself, and demonstrate that it was a list of commands written in a somewhat stunted English, but nevertheless not too different from a series of detailed instruction which, for instance, accompany do-it-yourself kits. And such trivial prose obviously did not qualify as an invention or as a machine, though it might qualify as a literary work if meeting the standards of originality. 5. It is somewhat unfair to indicate the two competing lines of analogous reasoning in the ma.nner set out above. But it does bring out an important characteristic of computer programs: If one aspect is emphasized, it is similar to writing. The double nature of the computer program makes it difficult to apply the traditional distinction between the inventions of patent law and the works of copyright law. 6. This problem is by no means restricted to the law of intellectual property. It is reflected in the problems related to tax law when applying the rules of sales tax or value added tax, properties of both categories, and the attempts to resolve the problem of qualification have been many and diversified within different jurisdictions. Likewise, the law on the sale of goods also make the same distinction, and again programs or programmed devices have been difficult to qualify. Turning to the law of damages, one will find that a similar distinction is made with respect to product liability - it is by no means trivial to determine with respect to many national statutes 2 whether the strict product liability applies when the damage is caused by a malfunctioning program. · 22 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 7. Recognizing that this is a general problem, one is left with a few possibilities of choice. One would be to qualify computer programs as an instance of one of the existing categories, another would be to develop a new legal concept - the sui generis approach. It is suggested that this is not mainly to be understood as an analytical choice, there is one of legal policy. And the main thrust of this paper will be to examine some of the implications of the choice made. II. COPYRIGHT AND COMPUTER TECHNOLOOY 8. The period of hesitancy with respect to computer programs and intellectual property was ended when the United States in 1980 enacted an amendment to its quite recent copyright Act of 1976, which made explicit mention of computer programs. This was followed by a response from many countries which amended their national legislation to include computer programs. By this, the other alternatives - especially the sui generis alternati ve was in practice abandoned. 9. One might reflect on why computer programs were qualified as work subject to copyright. An obvious reason was that copyright law offered an international legislation to include structure, which would create an international regime of protection. Though the relevant treaties - the Berne Convention and the Universal Copyright Convention - include minimum standards for national legislation, they do not govern in great detail what is to be qualified by national legislation as a copyrighted work. By including computer programs under national copyright law, the principle of national treatment extended that protection to foreign works . Sweeping programs under the umbrella of copyright created - nearly as a by-product - an international regime, sorely needed by an industry characterized by its international nature. 10 . For many jurisdictions, the decisive factor was the decision by the United States to include computer programs within their copyright legislation - though this had emerg.ed as the prevailing international view at the end of the 1970'ies. The importance of the United States information technology industry world-wide made the decision very consequential. 11. But the sui generis had many supporters. It may be suggested that if the United States had not been in the process of revising its copyright legislation throughout the 1970'ies, and postponed the decision on computer programs after a special study had been carried out, which l ead to the Computer software Act of 1980, the discussion of a sui generis protection might have been more viable. As late as 1978, the World Intellectual Property Organization suggested sui generis "Model provisions" for the protection of computer programs, and the possibility of a treaty on a similar basis was briefly discussed (1983). 12. In many jurisdictions, it is presumed that a work has to be further categorized, below the level of a copyrighted work. The prevailing view is that is to be seen as a type of literary work, following the rules of literary works where no special provisions for computer programs as a sub-category is included. This has, as we will see, interesting consequences. PROFESSOR JON BING 23 13 . Compared to traditional literary works as novels, poetry or even schol arly literature, computer programs have a different flavour. It should be appreciated that copyright protection for some time ini tiative to the Berne Convention of 1886 i~ time falls close to the invention of the rotary press in 1863, which for the first time made printed matter really cheap. 14. Appreciating this traditional interdependence between copyright law and technology, it is nevertheless evident that the interests of computer industry are different from those interests voiced by traditional authors or publishers. It i s likewise evident that these interests are backed by commercial policies of high priority, both on a national and an international level. This will obviously create a tension where the interests are not quite identical. Examples of such tension will be indicated and discussed in this paper. 15. This paper will mainly be concerned with copyright p rotection of computer programs, as this highlights the problems of "i ndustrial copyright" . But one should emphasize that also other segments of the informati on technology related industries are dependent upon copyright protection. 16. This paper will examine some of the problems related to copyright and computer technology. But this should not overshadow the f act that copyright has proven itself remarkably versatile, and seem to offer through its principles an adequate protection though provisions have to be amended in detail . Information technology has already had an impact on copyright law, creating developm~nts and straining some principles. But copyright law nevertheless has proved itself also to be a framework able to support the activities of our emerging information society. III. INFORMATION SYSTEMS AND DATA BASES 17 . Computerized information systems depend on data bases, i e col lection or compilations of information in the form of texts or records. 18. The elements of such systems may be protected works, and the systems as a whole may be a protected work. Consequently, one may have two tiers of protection, protection of the elements in the data bases, and protection of the compilation as such. 19. Traditionally, the elements of data bases have been entries describing certain objects, like the inventory records of a retailer, the invoices of a company, employers or cars. In such cases, the elements as such are obviously not subject to copyright protection. Also if the described object itself is a protected work, like in bibliographical systems, the description itself (consisting of author's name, title, publisher, etc) was not protected. Such compilations may nevertheless be a work in its own right, but this would presume that the selection of elements represented an individual, creative effort. Generally, items are selected according to strict rules, leaving no or little discretion to the person or persons establishing or maintaining the system. Such data bases, and the information systems associated with them, would consequently fall outside the scope of copyright protection. In some jurisdictions, however, there may be a non-copyright protection to compilations not meeting the test of originality, a type of protection perhaps more related to the area of unfair competition. 3 24 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOOIES 20. There are, however, emerging data bases in which the elements are protected works in their own right. The first example was actually legal information retrieval system, in which the authentic texts of statutes, cases doctrine etc, were entered. 4 Such systems started next were the information systems making secondary use of the editorial material of newspapers of magazines. In these systems the elements were the traditional works authored by journalists and free-lancers. 21. Today, we see this type of systems proliferating for text books, scientific and technical documentation, etc. Other categories of protected works than the literary works are also being included though the emergence of 5 6 multi-media systems, in which text, pictures, and sound recordings • In this way, data bases may not only be conglomerates of data represented in different media, but also conglomerates of different regimes of intellectual property. 22 . Traditionally, the major issue with respect to information systems and data bases was seen as whether consent of the copyright holder was necessary to record a work in machine readable form. Today, a machine readable representation is considered a copy of the work as a paper copy. The main practical problem is related to the fact that such copies easily may be reproduced - and experience with traditional reprography by photocopying or audio equipment has taught that this may be a formidable challenge to copyrig~ holders. 23. Pe~ . more interesting as a matter of principle may be the numerous actors involved with the information system: The author (or primary holder of the rights}, the "publishers", the data base hosts, information brokers, and end users. The relations between these has to be captured in contracts, the outline of which still is emerging. 7 Also activities in such systems - for instance displaying a text on a screen, or downloading texts in computerized form from a central facility through the telecommunication network to the Copyright law has readily been applied to such system, and a joint recommendation of the WIPO and UNESCO of 1983 concerns the "settlement of copyright problems arising from the use of computer systems for access to works" . IV. TWO FURTHER EXAMPLES: Creation of Works and Integrated Circuits 24. Computers are also used to create other works - a trivial example is the use of a word processing program to create a traditional literary work, a situation not very different from using mechanical tools like a type-writer, and in which one has to hunt to identify subtle problems special to information technol ogy. Most difficult may be situations in which programs are used to create musical compositions or generate computer programs. These issues are a lso dealt with in the joint recommendation of the WIPO and UNESCO of 1983 on the "settlement of copyright problems arising from the use of computer systems for the crea~ion to works". 25. Lastly, one has the issue of integrated circuit, which has been given an intellectual property protection outside the scope of traditional copyright legislation. An i ntegrated circuit is a complex design of logic and storage circuits imprinted onto a thin wafer of semiconductor material ("a silicon chip") . The development of such a circuit requires investments and the PROFESSOR JON BING 25 designs may be original demanding a high price in the market place. It is easily appreciated that the development of integrated circuits should benefit from some sort of protection, but it was initially not obvious what form this protection should take: Possible candidates were both the patent and copyright legislation. 26. The world has, however, followed the example of the United States, set by their Semiconductor Chip Protection Act of 1984. The system of sui generis protection for integrated circuits graduated to the international level May 1989, when a treaty was succesfully negotiated under the auspices of WIPO in Washington DC. 27. In this way, computer technology has mid-wifed a completely new type of intellectual property protection. It has a flavour of its own. The holder of the right is given an exclusive right to copy the layout design of the circuit, and to distribute it. The protection is also characterized by a rather brief period of protection (according to the Treaty, minimum eight years), and by the special provision of reverse engineering, which imply that the layout design of a circuit may be copied - a circuit may so to say be taken apart for the purpose of analyses and research the information gained in such a way, may then be used to create new and original circuit. Through the provisions of reverse engineering, one has sought to establish - as in traditional copyright legislation - that the exclusive right only includes the design as such, not the ideas or logic represented by the circuit. 28. These examples of works created by computer assisted systems and integrated circuits emphasize that the issues are not limited to those related to computer programs. This will enhance the role which "industrial copyright" will play in the near future, the dynamic, the vitality - and the problems information technology will bring to the area of intellectual property law. V. SOME CURRENT ISSUES IN APPLYING COPYRIGHT LAW TO COMPUTER PROGRAMS A. The Level of Originality 29. To qualify as a protected work, a computer program has to meet the standard of originality. This standard is set out in the conventions, but is the language gives considerable freedom to national law for interpretation. It is well known that within certain jurisdictions, the "threshold" is relatively higher for a utilitarian object than for an artistic object. It has also been observed that for computer programs, there are tendencies at the courts within certain jurisdictions to apply rather high standards. 8 The implication is that a certain fraction of the programs on the market, within that jurisdiction, does not enjoy copyright protection. 30. Another issue is that of partitioning a computer program. It is well known that a novel is a protected work, and that if the novel is partitioned furthe~ into chapters or paragraphs, these will also typically be protected works viewed 'separately. But wheri further partitioning the paragraphs into sentences, the protection will be doubtful, and if the sentence is partitioned into words, copyright protection does not extend to this level. 26 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 31. Similarly, a computer program may be partitioned into elements like for instance modules, sub-routines, sentences, commands and names for variables. It may be argued that compared to a literary work like a novel, the protection is lost at a higher aggregate level. This may be related to the tendency mentioned above, to apply a relatively higher "threshold" for the test of originality. 32. It may also be related to the very nature of copyright protection, in which only the textual surface is protected, not the content. This presumes that there is room for exercising choice when selecting words and phases. Computer programs are written in formal languages, where the syntax and semantics are determined in detail. This may reduce the freedom of the programmer (as compared to that of a novelist), there may be recommended or even optimal solutions for certain functions. Though the program beyond doubt is a protected work seen as a whole, this may not be quite as apparent when an element of the program is considered. If the case is not one where a protected program is slavishly copied, but where there is a question of whether the program has been adapted, producing a derivative work, the indications may very well be identified parts of the program. In such a case, the court will have to address the problem of partitioning. 33. This relates to another and practical problem - how to determine whether one program infringes the rights in another program. Apart from the examples of slavish copying, this is in practice a difficult problem. The traditional way of determining infringement, is for the court to exercise expert judgement on the basis of a first hand inspection of both works. This may be appropriate for novels, but is impractical for a program written in a high-level language and perhaps running into several hundred thousand lines. Suggestions have been made for quantitative methods, but they have not been widely accepted. The court may be turned towards indicia, like similarities of screen lay-outs, names of variable, sequence of sub-routines etc. This may again develop into some sort of protection for the look and feel or sequence and structure of computer programs, which currently is an issue under United States law. And it is .suggested that such a development has an uneasy relation to the nature of copyright law, which do not offer protection of the content of the program. 34. The problems discussed here are not mainly related to copyright law as such, but the application of such law by the courts. It is, perhaps, too early to asses whether such problems are real, or only of an academic nature. But if a high "threshold" for the test of originality is applied, if protection is lost at a rather high level of aggregation, and if the courts fail to cope with the problems of evidence for infringement, then the practical value of copyright protection may be lost for a large fraction of the programs at the international market. In that case, one is more or less back to square one, and will have to start looking all over again for a legal regime offering adequate protection. It is suggested that one would hope that this implied development will not take place - and that this may have consequences for the application of copyright law. B. The Problem of Moral Rights 35. In many jurisdictions, the author has moral rights with respect to a work, rights which may not be transferred, and which consequently always will remain with the original author. The major example of such moral right may be PROFESSOR JON BING 27 the right of the author to have his of her name associated with the work on publication, but there also is the right of the original author to protect his or her reputation or the reputation of the work. 36. Many have seen this as inappropriate for computer programs, which are - as emphasized above - an industrial, rather than an individual, product. It is feared that the moral right would give the original author or authors a control of the program which would be an obstacle to optional marketing strategies. The interests of the original author, it is maintained, is mainly of an economical nature, and should be restricted to this area. 37. The moral rights offered by national legislations may differ. But it is suggested that these generally are related to some sort of standard derived from the trade in the type of works concerned. To the extent that this is correct, it would seem that the moral rights are minimized by the very standards prevailing within the program industry, and in practice therefore will be quite modest: The original author will not be able to exercise these rights apart from quite exceptional cases. 38. A more interesting issue may be that the copyright arises on the hands of the original author or authors, which have to be individuals. The original copyright holder will in most jurisdictions not be a legal person, though in practice a legal person will be marketing the programs. Therefore some transfer of copyright by contract has to take place. This issue is related to the one discussed below, the problem of determining the authorized copyright holder - especially when he or she is employed to create the program. C. Collective creation of programs, especially in employment 39. It has several times been emphasized that computer program is a work resulting from an industrial process rather than an individual creative effort. Developing a major computer program is organized and planned, the efforts of many are coordinated and monitored in order to produce a program according to plans or contracts. Such coordination is clearly different from the way in which a typical literary work is created, but are not too different from how a newspaper is produced, or a movie is made. 40. Though one may find some analogoues in other types of copyrighted works, the process of creating a major computer program is characterized by the collective effort. One may suggest four different ways in which individuals cooperate in the creation of a program: 41. First, there is a vertical cooperation, between system designers and programmers. The system designers specify the functions of the program, using textual descriptions, flow charts, pseudo code or other ways of laying down the structure of the program, and the functions of the different elements. The programmers do the actual coding, solving the problem of how to realize the specification in the formalism of the selected programming language. There is presumed generally to be a dependency between the specification and the coding, similar to that between a synopsis and a film manuscript, the systems designers and programmers having joint copyright in the resulting program. 28 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 42. Second, there is a horizontal cooperation between programmers . They will partly work on the same module of the program, making it impossible to distinguish between the results of their efforts, thus owning copyright jointly in the relevant program module. But partly different groups may be engaged in the coding of different modules, which may be seen as separate works - the relation between the different groups being descri bed similar to the authors of an anthology: Separate rights to different elements of the overall computer programs . 43. Third, there will generally be a temporal cooperation. Throughout the time of a project, staff will be changed. And after the initial release of a program, it will be maintained over time - errors will be corrected, the programs, or the program may be functionally enhanced. These later contributions may themselves have the sufficient originality to attract copyright, a new version of a program being a derived work with respect to the former version. 44. Fourth, there may be a technical cooperation. In developing a computer program, one may use a program library or a fourth generation tool or a program generator. If the elements of a program library is copyrighted, the integration of such elements in a new program may result in joint copyright, this depending on the license agreement for the library. Using a program generator may be seen as one example of using a computerized system to create works, covered by the joint WIPO and UNESCO recommendation. As a rule, the copyright holder of the generator should not have any rights in the program resulting from using the generator, but one has seen examples of license agreements for generators which seek to secure this position for the copyright holder of the generator. 45. It is, therefore, easy to maintain that the creation of a major computer program is a prime example of a collective work: A work created by many, and to which many have copyright. The further identification of which individuals actually have contributed to the final program in such a way that that individual should share the rights, may be difficult. It may present itself as no small administrative task to keep track of the numerous different holders of rights. In practice, some sort of agreement has to be made between the copyright holders for the exercise of their rights. 46 . The most obvious type of agreement would be derived from the employment or contracting of the creators, channelling the right to one person (generally a legal person), ie the employer or contractor. In this way, the analogue to a movie once more may be mentioned, where national legislator often has presumptions of the rights being transferred to the producer. 47. With respect to the copyright of employees, however, national solutions vary. In some countries there are legislations or doctrines which lay down presumptions for the transfer of copyright from the employees to the employer with respect to works created in employment. ' However, there are jurisdictions which lack such statutory provisi ons, and where the view of the doctrine is that only those elements of copyright is transferred which is necessary to realize the business purpose of the employer. This principle has been forged with examples from traditional areas of copyright, perhaps foremost journalist and employees of broadcasting companies. In these areas, the employment contracts will govern the transfer of copyright in more details. PROFESSOR JON BING 29 48. Employment contracts for programmers often lack an explicit regulation of the copyright issue, and consequently one has to fall back on the general principle. A not uncommon case is that a company develops a program for in-house purposes. The program is, however, successful and the company sell copies of the program (with the necessary license) to third parties. The programmers may then maintain that the company is not in the business of selling programs, and that the company has not acquired right with respect to its employers to grant licenses to third party, this not being necessary to realize its business purpose. The employees are only too happy to give the company the necessary rights, but- of course- for a share in the profit. 10 49. Though parallels may be found in some other situations where works are created, it would seem fair to maintain that the collective aspect of the creation of computer programs is pronounced, and that the relation between employers and employees with respect to programs may be different from the more general situation with respect to literary works. The situation therefore may deserve the attention of legislators for a s pecial solution. 1 1 D. The term of protection 50. It has been maintained that the general term of protection for copyrighted works - fifty years after the death of the creator - is rather too long for computer programs. These have, it has been pointed out, a much briefer commercial life, and it is consequently inappropriate. On the other hand, it has been pointed out that numerous examples of trivial traditional works exist, and that there does not seem to be a problem with the standard period of protection with respect to these works. Also, the commercial life of programs are increasing with standardized operative systems and enhanced compatibility. 51. It may be suggested that the length of ti~e term of protection is not a vital issue. 12 Another problem seems, however, i~ ~rinciple to be more difficult: The determination of. expiration of the te~n of protection. The term expires fifty years after the death of the author or a'-1-l:hors. As discussed in some detail above, computer programs will typically have a large number of authors, and there may be different versions to which diff~. rent groups of authors are associated. It would seem rather complex in pracc~~e to determine when the last of the copyright holders had died, especially afteL some time has lapsed. 52. This is, however, a problem of the future. The first real computer - ENIAC - was constructed in 1949, and the fifty years term of protection will not be an issue for some years yet. But it may illustrate that an alternative, technically more simple rule for the calculation of the term of protection might be appropriate. E. Trade in copies of programs - and the question of incorporation 53. Published copies of a literary work may be the subject of trade - the rights of the author is according"to national law, generally exhausted by the first sale. On this principle thrive second hand book shops, public libraries etc. It is rather obvious that an identical principle with respect to computer programs easily would undermine the market. A computer program is 30 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES easy to copy, any computer is also an extremely efficient copying machine, and the copy has the identical quality of the original. If a lending library for published computer programs were established, its purpose could easily be construed as facilitating unauthorized copying of programs. 54. As the problem of unauthorized copying is recognized as severe, legislators have addressed this issue. 13 The solution has been seen to limit the right of second hand trade in computer programs. National legislation has sought different solutions, sale of a published copy is generally permitted, but lending or renting the copy may be limited according to different schemes. The explicit reason given for such statutory amendments is generally the problem stated above: Lending libraries for computer programs will have an impact on the possibility of the copyright holder to commercially exploit the program. 55 . As national legislations vary, one should be careful not to generalize. But an inherent problem is associated with the solution mentioned above. A general prohibition to lend or rent a published program to a third party may have an impact on situations where the program is incorporated in another article. For instance, in a car, there may be an integrated circuit into which is stored a protected program. The car may be subject to lease or hire, including the incorporated program. 56. As the situation of programs incorporated in articles is rather different from the lending library situation being the cause of the statutory amendments, the problem may be circumscribed by interpretation. Or one may read an implicit consent from the copyright holder into the act of offering the car for sale. Situation may, however, arise which are not obvious. And it is believed that this example identifies a problem arising out of the nature of a program as a "soft machine": It is used as a technological device, not as a literary work, and this may need a response in the form of an explicit statutory provision addressing the issue. F. Secondary provisions relating to copyrighted works 57. Finally, it might be appropriate to mention that outside the intellectual property legislation itself, there are a number of legal provisions governing, for instance, copyrighted works . Some of these provisions have been indicated initially - provisions of tax law, sales law, etc. Such provisions may perhaps vary according to national law in a higher degree than copyright law, which is coordinated to some extent on an international level . Therefore only a few comments will be offered. 58 . The development of computer programs is an industry of its own. Programs may be valuable in usual, commercial terms. The businesses which develop programs, have a need for financing and credit. To be given sufficient financial freedom, the business generally has to offer security. A similar need may be realized in any computer intensive business, where the value of the computer facility is a large fraction of the value of the business as such, and intimately associated wlth the operation of the business. 59. The copyrights to the programs may have a value which would make them appropriate security, but the law on securities may lack procedures for making them a satisfactory object. The law often will have been forged with a view to traditional copyrighted works, which generally are marginal to industrial PROFESSOR JON BING 31 businesses. Often the hardware may be offered as security, but without a corresponding possibility to have access to the associated programs, the hardware will have limited value. Taking a close look at the law of securi ties, and the requirements and procedures in establishing securities, one will find - it is believed - that there may be a need for clarification and, perhaps, amendments. 60. This problem is often enhanced with some of the special prov1s1ons governing liquidation with respect to copyrighted works. These prov1s1ons have been developed with a view to publishing houses, recording companies and other traditional businesses basing their activity on copyright licenses. For instance, there often is a statutory restriction to sell an individual publishing right without the consent of the author. But businesses depending on large computer programs will also base their operations on copyright licenses, which are not indvidually transferrable to a third party. The estate may find this a severe limitation to its possibility of realizing the assets to the highest possible price. 61. It is again believed that such auxiliary legislation is formed on an implicit understanding of the general nature of a copyrighted work, and designed to protect the moral rights of the copyright holder. In relation to "industrial copyright" this is inappropriate, and may actually be an element impairing the growth of the information industries. VI. A TENTATIVE CONCLUSION 62. In this paper, it has been suggested that works subject to "industrial copyright" have a nature different from the traditional copyrighted works. These works are associated with interests of economical and industrial policies world wide, which explain their impact on copyright legislation. This impact is today already considerable, but this category of works has special properties which presume further adaptation of the legislation, some of which have been discussed above. This creates a certain tension between the interests associated with traditional works, and the interests associated with the works related to information technology. When the centenary of the Berne Convention was celebrated, writers and artists met in cafes and drank its health in red wine - at the next anniversary, chilled martinis will be served in the board rooms of the information industry. 63. It has been suggested that a sui generis approach might ideally have been an optimal solution, the emerging legal regime of integrated circuits is offered as an example of such a possibility. For computer programs, data bases, etc, this is, however, not a realistic possibility. The industry has slowly been brought around to consider such works in the perspective of copyright law, as legislation and courts develop a legal regime based on t he princi ples of copyright. 64. However, another possibility still remains. Computer programs 14 may be qual ified as a special type of copyrighted works. Within national legislati on , such works may be made subject to a set of especially drafted prov1s1ons. This mi ght solve a range of the issues discussed above: The threshol d f or qualifying something as a protected work, procedures for det ermining i nf ringement, coping with the issue of moral rights, the employer- 32 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES employee issue, alternative technical rules for determining the period of protection, the issue of second-hand trade in such works and their incorporation in other articles etc. This might be achieved under the Berne Convention by a re-structuring of national legislation for instance, by adopting a special title of the statute for such works. This approach might also make it easier to adopt solutions for subject to "industrial copyright" outside the scope of the intellectual property legislation, on such issues as, for instance, tax law, sales law, securities and liquidation. 65. These possibilities emphasize the exciting element of development which information technology has brought to intellectual property law. In this area of law is the legal foundation for our emerging information society. It may be difficult to prophesy the details in future developments, but maintaining that legal policy will be intensely concerned with this fusion of law and technology, is hardly an extrapolation. In this paper, the term "computer programs" is preferred to that of "computer software". The latter term often is defined to include documentation, which is a type of technical literature to which much of the arguments in this paper do not apply. Cf the distinction made in WIPO's model provisions of 1978, sect lCii) and (iii). z The directive of the European Communities is also open to this problem, cf Mads Bryde Andersen Edb og ansvar, Jurist- og /konomforbundets forlag, Copenhagen 1989:386 with references. 3 This is the case with respect to the Nordic countries, where a special protection of compilations is offered, a type of protection which have become very current with the emergence of data bases. 4 In many jurisdictions these types of text are excluded from the categories of protected works, while other jurisdictions let the state retain copyright in the legal instruments, cf the traditional Anglo-American doctrine of Crown Copyright. Also, there will generally be headnotes, abstracts etc which are seen as copyrighted works. s Also photographs, which may be subject to protection outside the scope of the copyright legislation. Obviously, the photograph may also be of a protected work, like a painting. 6 Which, again, may be subject to both copyright, the right of performing artists and the right of the phonogram producer. 7 For instance, the International Federation of Journalists has shown concern in this respect, cf for instance Jon Bing Electronic Publishing: Data bases and computer programs. CompLex 6/87, Norwegian University Press, Oslo 1987. PROFESSOR JON BING 33 8 This has, for instance, been observed with respect to decisions by the courts of the Federal Republic of Germany, cf for instance the decision by Bundesgerichtshof reported in GRUR 1985:1041. 9 Cf also the United States doctrine on "work for hire" . 1 0 The issue sketched above is at the core of a current case before the Danish courts, where a company set up to maintain the paperless information system of shares and bonds sold their special purpose programs for a considerable sum to a similar company set up in another country. The case was to be tried in September 1989. 1 1 In France, the special provisions for computer programs introduced in the copyright legislation include an explicit provision that copyright is transferred from employee to the employer (art 45). Cf also the "proposal for a council directive" of the European Communities, com(88); 816. 1 z This has, neverthless, been addressed by legislators. In France, the special provisions for computer programs introduced in the copyright legislation include a provision limiting the term of protection to 25 years (art 48). It has been questioned whether this is in accordance with the responsabilities of France under the Berne Convention, which includes the definition of "literary and artistic works" . It has been maintained that the WIPO model provisions of 1977 indicated that computer programs were not seen as embraced by the Convention, and the subsequent inclusion of programs in national copyright law by a large number of national legislations, does not necessary imply that the Convention applies to computer programs. Cf S Ricketson The Berne Convention for the protection of literary and artistic works: 1886-1986, London 1987: 900. 1 3 One effect is the limi tation of the right to copy for "private purpose", which is part of many national legislations, with respect to computer programs. Examples are Denmark and France. 1 4 And other categories of work of a similar nature, including some of the more traditional examples like technical drawings. INTmTED CIRCUITS - THE WIPO TREATY by Mr. Carlos M. Correa 1. Introduction The Diplomatic Conference convened by the World Intellectual Property Organization (WIPO) in May 1989, adopted a "Treaty on Intellectual Property in respect of integrated circuits". The adoption of this Treaty has been of particular importance for many reasons. First, it constitutes a major step towards the internazionalization of a sui generis approach for the protection of lay-out designs of integrated circuits. Such an approach was established for the first time by the United States in 1984 and it means t he creation of a new and specific form of intellectual property protection. Second, the Conference outcome was based on an intense preparatory work -four meetings of a Committee of Experts were held since 1985, in addition to consultative meetings for developing countries- The work undertaken allowed the preparation of the Treaty in a very short time, even before most countries legislated on the matter. In particular, no developing country has so far enacted regulations on integrated circuits protection, a situation that the Treaty may contribute to change significantly in the near future. Third, in spite of the very specific scope of the Treaty, its negotiations were viewed by many countries as trascending it. In fact, such negotations have taken place in a context characterized by the i niti atives of developed countries -and particularly of the United States- t o es tabl ish international norms and standards in different areas of intellect ual property and to give a new role in the field to GATT. Fourth, the Treaty on lay-out designs of integrated c ircuits contains rules for the settlement of disputes in line with the procedures applicable or under discussion in the framework of Gatt. This constitutes an important innovation vis-a-vis other conventions on intellectual property . Finally, while developing countries opposed during the preparatory work the basic concept and many of the main provisions of the draft treaty, contrary to some expectations those countries actively participated at the Conference in the negotiation of various provisions. Moreover, they supported the adoption of the negotiated text. Paradoxically, and i n contrast, the country which appeared most committed to and i nterested in the establishment of the Treaty, the United States (followed by Japan) finally voted against the Conference's text. The history of the legal protection of lay-out designs of integrated circuits is a very recent one. As_mentioned, the first legislati on was enacted in the United States only in 1984, and the second one - that of Japan came as a -reaction in 1985. The American and Japanese semiconductor industries have combatted during all that period for the supremacy in world markets in t hat field. In fact, the American Semiconductor Chip Protection Act (SCPA) was prompted by an alleged illegal copying of American lay-out 36 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES designs by Japanese firms (Laurie, 1988). The reality showed, however, that the Japanese semiconductor industry developed manufacturing excellence and improved its technological strength over time. Today it controls a larger share of the world market than American firms and is reported to be technically more advanced in many fields (in particular, in the area of manufacturing equipment). "Viewed in static terms", states an American expert, "Japanese producers simply seem to be better, more competent, more agressive competitors" (Borrus, 1988, p . 9). Only one case has been brought up to the courts under the SCPA but involving two American firms (Brooktree Corp. vs. Advanced Micro Devices 1 Inc. ) • The U.S and the Japanese laws adopting the sui generis regime for semiconductors were followed by many other developed countries. The EEC adopted in December 1986 a Directive (87/54/EEC) on the basis of which many Member States The speed and considerable uniformity with which the just mentioned countries legislated on the matter, can only be explained by the strong reciprocity clause contained in the SCPA. In contradiction with the well accepted principle of national treatment, it provided for a system of strict material reciprocity whereunder lay-out designs originating in other countries would only be protectable in the United States if those countries granted similar protection to American designs. Though the applicability of copyright to such designs had been held in many countries -United Kingdom, Canada, Australia, etc-, the U.S. specfic regulation forced those countries to consider a similar regime in order to obtain protection in the United States (till recently, the major market in the world for semiconductor products). Of course, given its ascending position in the field, an appropriate and rapid 2 response was, as indicated, of utmost importance for Japan • 2. Contents and scope of the Treaty on intellectual property in respect of integrated circuits . The Diplomatic Conference convened in Washington from May 8 to 26, 1989, approved with 49 votes the text of an international convention, based on the draft prepared by the WIPO Secretariat (WIPO a, 1989). Developing countries and the majority of developed countrie.s, in particular the EEC, found a common ground to establish accep~able international standards on the issue. 1. Southern District of Carolina Court, Civil No. 88-1750-E (CM), 13-12-88. The decision applied the reverse engineering exception provided by the SCPA (section 906). 2 In November 1987, 35% of all registrations made by the U.S. Copyright Office under the SCPA were of Japanese mask works. European firms only accounted for 5% of total registrations. MR. CARLOS M. CORREA 37 3 Japan and the United States voted against the text finally approved • As discussed below, the issue of non-voluntary licenses and the treatment of industrial articles that contain infringing chips were the main points of disagreement for the . two countries that, paradoxically, control around 90% of the world production and trade of semiconductors. Notwithstanding the relatively well-defined scope of the discussions, many delegations strongly felt that the decisions taken at the Conference would trascend the field of integrated circuits. For instance, it was believed that the treatment afforded to the issue of the non-voluntary licenses could affect the negotiations on the revision of the Paris Convention 4 and other discussions within GATT • Likewise, the provisions on disclosure and settlement of disputes could be relevant for other areas. Moreoveor, the Treaty was an important test for the ability of WIPO to manage international negotiations vis-a-vis GATT. The following paragraphs contain a brief analysis of the discussion and of the approved text of the main provisions of the Treaty. a) Definitions. The discussions on definitions concentrated on two substantial issues (the concept of "integrated circuit" and of " lay-out design/topography"), and on the question of defining an "International Organization" to the effect of becoming a Contracting Party to the Treaty. Unlike the WIPO Secretariat's draft, the Conference opted for defining "integrated circuit" instead of "microchip". The definition makes it clear that it covers "a product in its final form or an intermediate form", a clarification deemed essential by the United States 5 and other Group B delegations. The basic point behind this amendment to the draft relates to the protection of "gate arrays" and other integrated circuits (e.g. Programmable Logic Devices-PLDs.) which can not be conside·red "finished" products. The replacement of "capable of performing a function" by "intended to perform ... " addressed also the problem of such intermediate products. Another important discussion took place in connection with the applicability of the Treaty to integrated circuits containing only one active element. While some proposals made could have been interpreted as allowing the protection of "discrete" components -which was unacceptable for developing countries-, the compromise solution found clearly indicates that such components are not covered by the Treaty. 3 Five countries (Sweden, Canada, Switzerland, Holy See, Liechtenstein abstained.) 4 According to some observers, the eventual impact of the wording of article 6.3 on other sectors, and particularly on pharmaceuticals, affected the final position of the U.S. delegation on the Treaty. 5 The issue of protection of intermediate forms is still unclear in the United States. Though the Semiconductor Industry Association, for instance, maintains the protectability of "cell libraFies" and "standard cells" they are not deemed eligible by the Copyright Office (Laurie, 1988, p. 25) . 38 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 6 As regards to the definition of "lay-out design (topography)" , the approved text avoids all implication about the requirement of fixation as a condition for protection. Moreover, it is clear that the three dimensional disposition of the elements may be in any form ("however expressed"). U.S. and Japanese law include the actual fixation of the lay-out into a microchip among the conditions to be met to obtain protection. Some developing countries held at the Conference that it was convenient to retain such a requirement in the text, in order to avoid protection to merely theoretical designs. Developed countries -particularly Australia, Norway, the EEC- and a number of developing countries argued, in contrast, that the protection of unincorporated designs would be in the benefit of countries that may have design capabilities but not those necessary to manufacture the chips. The solution adopted followed this second approach though, as far as developing countries are concerned, the practical validity of the argument is doubtful . Till now, in effect, those countries have produced very few integrated circuits designs which have become internationally traded, and there is no reason to expect the development of a special comparative advantage in that field in the near future. Almost all the discussion of the draft treaty was based on the problems of the semiconductor industry. Those concerning independent "design houses" only emerged explicitly at the Conference itself. The role of such houses and the extent to which the protection devised may be necessary for their activities, would require further investigation. The issue of the "Intergovernmental Organization" was brought up by the EEC desire to become a party to the Treaty independently from its member States. Having approved common rules on the matter (EEC Directive of December 1986), the member States have transferred to the Community the competence to be, as such, a party to an international convention on the matter (WIPO b, 1989). The approved text admitted that possibility. b) Subject matter The Treaty provision on the subject matter of protection does not differ substantially from the. one discussed during the preparatory work. It spells out in para 3.l.a the basic obligation under the Treaty -to secure intellectual protection in respect of lay-out designs- but leaves to each country the freedom to choose the measures to ensure the prevention of the acts considered illegal under article 6. Para 3.2.a determines the requirements for protection of a lay-out design by combining the concept of "originality" and that of "intellectual effort" (employed in the U.S. and in the EEC regulations, respectively). It also adds as a qualification the condition -expressly provided for in the U. S and in the U. K legislation- that the lay-out should not be "commonplace among creators of lay-out designs (topographies) and manufacturers of integrated 7 circuits at the time of their creation" • 6 The use of this combined expression, agreed upon during the preparatory work for the Conference, avoided complex discussions on the most appropriate terminology to be applied in this field. 7 Article 3.2.b of the Treaty specifies, however, that "a layoutdesign (topography) that consists of a combination of elements and interconnections that are commonplace shall be protected only if the combination, taken as a whole, fulfills the conditions referred to in subparagraph (a)". MR. CARLOS M. CORREA 39 Article 6.2c of the Treaty (approved by the Conference upon a proposal, later on modified, of the Soviet Union) clarifies the extent of the title-holder rights in respect of another lay-out design which is identical. It makes it clear t~t those rights can not be exercised against a third party if such a design has been independently created. A fortiori, the same rule would apply if the result is not an identical but a similar or substantially similar design independently developed. The provision contained in 6.2. c -though technically superfluous- is a strong indication of the radical difference existing between the rights conferred under the Treaty and the protection granted under patent law and other titles of industrial property. Those rights do not confer exclusivity neither on the functionalities of the design nor on a specific expression thereof. They only protect, in essence, against copying; more precisely, the protection is only against slavish copying and not against that based on an own "intellectual effort" (see pointe below). Article 3 contains two paragraphs which did not appear in the draft text. On the one side, it states that "the right of the holder of the right in respect of an integrated circuit applies whether or not the integrated circuit is incorporated in an article". This insertion -proposed by the Group of 77 during the final negotiations- was a compromise offered in order to avoid an explicit reference in article 6 to industrial articles that 8 incorporate infringing microchips • Many developing countries, as mentioned before, considered unreasonable to treat on the same footing the cases of sale, importation and other forms of distribution of pirated chips and those where the latter are incorporated in industrial articles. While accepting the principle that the right of the title-holder does not terminate with the incorporation of a chip in an article, those countries did not want to accept that the title-older would have exactly the same legal actions in those two different situations. In effect, it may be extremely difficult to determine whether chips imported or incorporated in imported products are infringing or not, especially if -as discussed in the framework of GATT negotiations- custom authorities are obliged to adopt measures at the border. If the title holder of the rights relating to a chip is, for instance, authorised to stop the importation of industrial articles because they may include an infringing chip (independently of its relevance both in terms of cost and function in the product) 9 trade flows could be significantly distorted. On the other side, article 3 incorporated a paragraph allowing any country to limit protection to semiconductor integrated circuits. The Treaty definitions do not specify the type of material in which the lay-out may be 8 Such a reference was eliminated from articles 6.1. and 6.4., as drafted by WIPO Secretariat. Article 6.5 of the draft ("articles temporarily or accidentally entering the territory of a Contracting Party"), which could also have implications on this problem: was also deleted. 9 In some cases (e.g.computers) chips may be an essential part of the product. In others, however, they may be incidental both functionally and as a proportion of total cost (e.g. a digital clock in a car>. 40 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES inco~rated . Most laws in force (in U.S., Japan, EEC countries, Denmark, 0 etc.) , however, specifically refer to "semiconductor products", a limitation that many countries would like to be free to apply. c) The legal form of protection Article 4 was adopted without significant discussion. It was introduced in the draft text at the request of developing countries during the preparations for the Conference, in order to allow different countries to apply existing intellectual property laws for chips protection. While exercising this freedom, however, the Contracting Parties are bound to comply with the obligations under the Treaty. Article 12, on the other side, provides that the Treaty "shall not affect the obligations that any Contracting Party may have under the Paris Convention for the Protection of Industrial Property or the Berne Convention for the Protection of Literary and Artistic Works". According to the intepretation of the Director General of WIPO, the effect of that article is that " if a Contracting Party chose to implement its obligations under the Treaty through a law made, totally or partly, on the basis that layout-designs are works under the copyright law or are a subject matter of industrial property law, and that Contracting Party is a party not only to the proposed Treaty by also to the Berne Convention or the Paris Convention, the said law must be compatible not only with the proposed Treaty but also with that or those Conventions. For example, if a Contracting Party considered layout-designs to be works under its copyright law and was a party to both the proposed Treaty and the Berne Convention, layout-designs would have to be protected without formalities (even though the proposed Treaty admits formalities) and for 50 years after the death of the author (even though the proposed Treaty admits a shorter period of protection). Or, if the Contracting Party is party to both the proposed Treaty and the Paris Convention and protects layout-designs by patents for inventions or utility models, layout-designs would require the grant of a patent or other official certificate (even though the proposed Treaty admits protection without any procedure before a government authority) " (WIPO a, 1989, p. 66). If the interpretation quoted in the precedent paragraph is correct, there will not be much advantage for a country which adheres to the Treaty to apply copyright law in this field. An almost natural option will be to establish a special regime for the protection of lay-out designs , in order to reasonably limit the term and other rights of the "creator". If a title of industrial property were to be applied, the trade-offs of the different possible solutions should be carefully weighed. Clearly, patents confer a much stronger right than the sui generis regime. Unfair competition might be the sole institution under which some room of maneuvre may be found. However, to the extent that any Contracting Party is obliged to comply with the Treaty's minimum standards, the final result may not be too different _from the application of a suit generis approach. I 0 One exception is the recently enacted Australian law on the matter which applies in general to "circuit layouts" without specifying any material. MR. CARLOS M. CORREA 41 In other words, the flexibility apparently created by article 4 is de facto limited by the need to comply with the Treaty's compulsory standards and by its article 12. In a final analysys, the best that a country adhering to the Treaty could probably do is to establish a law that deals with the specificities of integrated circuits protection. d) National treatment As mentioned before, the SCPA contained a strict material reciprocity clause. It "often has been regarded as the most blatant and severe stroke ever led against the principle of international treatment by a developed nation" (Dreier, 1988, p.9). In fact, most regulations enacted in order to respond to the U.S. law -including the EEC Directive- also incorporated that condition, with the noticeable exception of the Japanese law. As stated by Dreier in respect of the SCPA, "this had exactly been its purpose: to incite foreign nations to explicitly grant protection for semiconductor chips - and this irrespectively of the question, whether traditional laws were in fact inappropriate or not. In this respect, the legislative history contains sufficient material to believe that mere affirmative statements that protection would already be provided for by existing copyright laws would have just as few chances to be accepted as references made to unfair competition law. Consequently, in order not to have the products of their own nationals unprotected within the US and not to loose the US market, other chip producing industrialized nations didn't have much choice but to comply with the SCPA's legal mechanism" (Dreier, 1988, p. 7). Given the results of the reciprocity clause of the SCPA and the de facto considerable harmonisation of the legislation of developed countries on the 11 matter , it was a logic step to expect a movement towards the establishment of an international treaty that set down the minimum standards of protection including a restoration of the national treatment principle. Article 5 of the Treaty precisely states that principle, the application of which is in any case subject to the compliance of the obligations under the Treaty. The approved text introduces some amendments to the draft treaty, which was based on the Paris Convention wording. It refers specifically to a real and effective establishment for the "creation" of lay-out designs or for the "production" of integrated circuits. This text implicitly reflects the exclusion of the "fixation" criterion as well as of a mere "commercial" establishment as a basis to benefit from national treatment. e) Scope of protection i) Acts requiring the authorization of the title-holder Article 6 may be regarded as the core of the Treaty, for it establishes the content and limitations of the title-holder rights and, therefore, the extent of the minimun standards of protection to be respected by the Contracting Parties. II Such an harmonisation has been, however, partial in many respects. The EEC Directive, for instance, gave the member States the option to choose between copyright or a specific protection, or a cumulation of both (see Cohen Jehoram, 1987, p.38). 42 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Article 6.1 enumerates -in a non-taxative way- the acts that require the title-holder authorization. On the one side, since non-fixed lay-out designs are eligible for protection, the reproduction "by incorporation in an integrated circuit or otherwise" will be unlawful if made without authorization (except for non-original parts of the design). This provision, as drafted, comprises the total or partial reproduction of the layout design on a mask, on a computer tape, on paper, or by any other means including the manufacture of a microchip (WIPO a, 1989, p. 30). On the other, the Treaty specifies the unlawfulness of the acts of "importing, selling or otherwise distributing for commercial purposes a protected layout-design (topography) or an integrated circuit in which a protected layout-design (topography) is incorporated" if made without authorization. All references to the unlawfulness of the same acts when performed in respect of industrial articles that contain infringing integrated circuits were ommitted. As indicated above (see point b of this section), such an ommission was a critical part of a broader negotiati ng compromise. In fact, as noted by some delegates of developing countries, the majority of regulations on the matter (with the clear exception of those of United States and Japan) do not explicitly mention industrial articles. Many delegates of developing countries thought that the solution adopted in the Treaty will leave national legislative and judicial authorities more flexibility to determine the concrete measures applicable in each case. ii) Reverse engineering Although no explicit mention is made in the Treaty, it clearly contains the exception of reverse engineering, which has been common practice in the semiconductors industry. It is also formally recognised - although with some differences- by national laws enacted until now on the matter. The pertinent provision article 6.2.a- is, like the totality of article 6, selfexecuting, i.e. no special provision at the national level would be required in order to give it full effect. The said provision, on the other side, not only authorizes reverse engineering, which has an industrial aim, but other acts made for "private purposes" or for the "sole" purpose of research or teaching. This means that the reproduction of a lay-out design, for instance, at a universitary laboratory for purposes of training, is to be deemed legal. Provision 6.2.b. clarifies the extent of the reverse engi neering exception. It states that as long as there is an intellectual effort involved (which is necessary to comply with the originality requirement> the rights of the title- holder of the reverse engineered design can not be used against the creator of the second design. The Treaty should be interpreted in the sense that it permits the copying of original parts of a first lay-out design into a second one, as long as the latter is also original. As mentioned before (see point b above), only "slavish" copying is illegal, but not that based on an intellectual effort. iii) Non-voluntary licenses Determinant in the refusal by United States and Japan of the final text of the Treaty, and considered critical by developing countries, the provision on non-voluntary licenses was one of the most difficult issues dealt with by MR. CARLOS M. CORREA 43 the Conference. The approved text was the result of intense negotiations around the basic draft prepared by the WIPO Secretariat and new proposals 12 submitted by the EEC and the United States • The adopted provision constitutes an important departure from the original position of the Group of 77. However, its basic concept -the possibilty of granting a non-voluntary license "to safeguard a national purpose deemed to be vital" by the national authority -satisfied to a considerable extent the Group's expectations. On the other side, the text reflects a number of conditions derived from various proposals of developed countries, which set out the framework in which such l i censes can be granted. Those conditions are a) the "non-ordinary" character of the circumstances to be taken into account; and b) the existence of previous "unsuccessful efforts" 13 made "in line with normal commercial practices" • The EEC proposal read as follows: "(a) Notwithstanding paragraph (1), any Contracting Party may, in its legislation, provide for t he possibility of its executive or judicial authority granting a non-exclusive license for t he performance of any of the acts referred to in paragraph (1) by a third party without the authorization of the holder of the right after serious and unsuccessful efforts to obtain such authorization ("non- voluntary license") where the granting of the non-voluntary license if found, by the granting authority, to be necessary for the safeguard of a vital public interest, i.e. defense or public health; t he non-voluntary license shall be subject to the payment of an equitable remuneration by the third party to the holder of the right, which remuneration shall, in the absence of agreement bet ween the third party and the holder of the right, be fixed by the granting authority. (b) The granting of any non-voluntary license, and fixing of equitable remuneration, referr ed to in subparagraph (a) shall be subject to judi cial review. Any such license shall be revoked when the facts that jus tify it cease to exist. (c) A non- voluntary license gra.nted under this paragraph shall not be assignable. (2) Further declaratory note on Article 6 (3) : For the purposes of the application of Article 6 (6), a non- voluntary license cannot be regarded as replacing the consent of the holder of the right". The text added that the following declaratory note should be inserted in the records of the Conference as note to para (a): "The provisions of this Treaty are without prejudice to any measures taken under the legislation of the Contracting Parties intended to secure free competition". 12 The Group of 77 unanimously supported, during the negotiations, alternative A of the WIPO Secretariat article 6.3.a.l with a clear and unqualified reference to "public interest" as a premise· to grant such licenses. The United States proposal, based on the text submitted by that country in GATT for standards on patents, limited the applicability of complusory licenses "to address, only during its existence, a declared national health or public safety emergency, or to remedy an adjudicated violation of antitrust or other law designed to secure fair competition and to prevent abuses of dominant market position, or to allow use exclusively for govermental purposes". · I 3 The reference to "normal commercial practices" was negotiated against the deletion -sought by developing countries- of a criterion according to which the remuneration for the license should be corm~ensurate with the "market value" of the license. 44 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Further, article 6.3 determines the terms whereunder a non-voluntary license can be granted. It must be a) non-exclusive; b) available only for 14 the domestic market ; c) subject to the payment of "an equitable remuneration"; d) subject to judicial review; and e) revokable when the conditions that justified its granting have ceased to exist. These terms are considerably more restrictive than those authorized by the Paris Convention, and in particular than those proposed for its revision by developing countries. Under such Convention, in particular, there is no restriction relating the market and the license may last for all the lifetime of the title. In exchange, the Paris Convention does not refer to the broad concept of "national purpose". In addition, article 6.3.b. recognises the right of any country " to apply measures, including the granting, after a formal proceeding by its executive or judicial authority, of a non-voluntary license, in application of its laws in order to secure free competition and to prevent abuses by the 15 holder of the right" • The drafting of this provision may allow two ways of interpretation. It may be construed, on the one side, as permitting the control of abuses only to avoid distortions to "free competition". A second valid interpretation is that the regulations for the control of abuses do not necessarily need to be aimed at dealing with competition problems. In fact, 16 many abuses may stem from situations where competition is not affected • It is doubtful to what extent the provision on non-voluntary licenses of the Treaty may affect future negotiations on other areas of intellectual property. The Group of 77 may claim a relative success, due to the recognition of the notion of "national purpose" and the possibility to act against "abuses". Group B, on its side, obtained the insertion of a number of limitations that innovate in the field of compulsory licenses. Of course the nature of the right ensured under the Treaty substantially differs from those granted under industrial property rights and, in particular, in the patents field, where a stronger monopoly is conferred. A likely conclusion for many developing countries is that the type of provision reached in the Treaty -for a title which does not. prevent more than copying-should a fortiori apply to stronger titles. Of course, if the text of article 6.3 is taken into account, a substantial trade-off will exist with regard to the conditions to be met for granting a license. 14 With this restriction developed countries wanted to exclude the use of the license to make exports, particularly to countries where the lay-out designs are not protected. The possibility of making such a use, in the field of patents, is recognised by some legislations, e.g. in Mexico. 1 5 The adopted text avoided the implication contained in the Group B proposal in the sense that the license could only be granted on the basis of existing antitrust legislations. The Group of 77 argued that such a legislation does not exist in many countries, and that other measures to avoid abuses should be equally applicable. 1 G A stilL unresolved debate on the tests to judge abuses in business practices took place during the negotiations of an international Code of Conduct on Transfer of Technology. The Group of 77 held there the applicability of a "development test" significantly broader than the test based on competition rules. See Correa, 1988, p. 10. MR. CARLOS M. CORREA 45 iv) Innocent infringement Another important issue of discussion at the Conference concerned the content of the provi~ion on "innocent infringement". The controversial point was the inclusion or not of a reference to the payment that the innocent infringer should make after knowing that he was dealing with unlawfully copied 17 microchips • The adopted text limits itself to establishing -as a mandatory provisio~for all Contracting States- the exception in favour of such an infringer. Developing countries' mainconcerns related to the implications of the payment provision for the acquirer of articles incorporating infringing microchips (finally eliminated from article 6, as mentioned before) and to the treatment of the products held in stock by the innocent acquirer. Being silent on the payment issue, article 6.4 wisely leaves the question of the consequences of the infringement to national laws . v) Exhaustion of rights Article 6.5 introduces the well-known exception of "exhaustion of rights", as a facultative provision for Contratcting States. Its main aim is to ensure that after the first sale of a microchip is made, by the title-holder or with his consent, he can not prevent "parallel imports" of the products already put in the market. As explained in the notes to the draft treaty, "it follows from the drafting of the provision in paragraph {6) that Contracting Parties would be free to provide for national exhaustion (where rights are exhausted only when the first authorized sale occurs on the territory of the Contracting Party) , regional exhaustion (where rights are exhausted when the first authorized sale occurs on the territory of a region to which the Contracting Party belongs), or international exhaustion (where rights are exhausted following a sale anywhere in the worl d)" (WIPO a, 1989, p. 6). g) Exploitation, registration and disclosure Like most national laws on the matter, the Treaty spells out in article 7.1 some conditions on which protection may be made conditional. Since the protection of unfixed lay-out designs prevailed at the Conference, that provision leaves freedom to grant protection since the creation of the design {like under the United Kingdom regulations), to subject it to "commercial exploitation" (like most laws in force do) or even to registration {like in the United States to institute civil actions, in Japan and other countries). This article may, thus, allow different ex·isting laws to maintain l 7 The draft text proposed a clause -supported originally by the Group B according to which the innocent infringer "shall be obliged to pay the holder of the right an equitable remuneration in respect of each microchip imported, sold or otherwise distributed, as part of some other article or separately, for commercial purposes, after actual notice has been given to the said person by the holder of the right that the reproducing or incorporation had been done without his authorization, the amount of such remuneration to be fixed, failing agreement between the parties, by a court or another impartial authority designated by legislation" (WIPO a, 1989). 46 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES their present solutions and new regulations to adopt any of the referred bases for protection. They could even opt, for instance, to require commercial ization plus r egistra tion within certain period of the latter, like in Uni ted States and J apan, in order t? confer or to maintain protection. Arti cle 7.1 refers to "ordinarily" commercially expl oited lay-out designs. Such a qualification emerged as a compromise vis-a-vis the proposal of developing countries to refer to "public" exploitation. That proposal was i nt ended to exclude situations in which a lay- out design may be commercialised under confidential terms, without being apparent to the consumer public and to competitors. In fact, that concern has been addressed by many regulations and, i n particular, by the EEC Directive and West European laws on the 1 8 mat ter • A point of pa rticular importance for many delegations related to the ext ent of disclosure to be required under the Treaty, on the understanding that i ts provision on the matter will be the maximum a national law could ask for. For developing countries, the discussion on this issue was viewed as trascending the integrated circuits field, to the extent that it could create a precedent for other areas. In particular, it was feared that through the Treaty a mul tilateral system for trade-secrets protection could be established. Between the desire of some developing countries to include a reference to the "electri cal schematic diagrams" of the chips, and that of developed countries of being able to exempt the title-holder from presentation of any confidential material, the adopted solution represents a fair compromise. On the one s i de, the 'applicant may be required (though not necessarily, given the non- mandatory nature of this provision) to describe the "electronic function that the integrated circuit is intended to perform". On the other, he is not obliged to submit information relating to t he "manner of manufacture" of the int egrated circuit, provided that the information supplied is sufficient for the identification of the lay- out design. At t he moment, the.re does not seem to exist great harmonisation on this matter among developed countries (in some of them, such as Sweden and the United Kingdom, moreover, no registration is required). The Treaty will not certainl y contribute very much to that harmonisation, given the range of opt ions a t hand for national authorities to deal with registration procedures. 1 8 According to the EEC Directive, for instance, "commercial exploitation shal l not include exploitation under conditions of confidentiality to the extent t hat no further distribution to third parties occurs, except where exploit ation takes place under conditions of confidentiality required by a measure t aken in conformity with Article 223 (1) (b) of the Treaty". The UK regulati on of 1987 provides, along these same lines, that "no account shall be taken of any commercial exploitation which is subject to an obligation of confidence i n respect of information about the topography exploited unless either (a) the topog raphy has been commercially exploited on a previous occasion (whether or not subject to an obligation of confidence), or (b) the obl i gation i s imposed at the behest of the Crown, or of the government of any country outside the United Kingdom, for the protection of security in connection with the production of arms, munitions or war material". MR. CARLOS M. CORREA 47 Article 7.2.b contains a limitation for those countries that at the same time require commercial exploitation and registration to grant protection. The latter can not be imposed before two years counted from the date of first commercialization anywhere in the world. This minimum period was necessary, according to some de~eloped countries' delegations, for the title-holder to prepare the information to be supplied or to present the samples of the microchips. That term may be, however, significantly longer than really needed for that purpose in view, in particular, of the speed with which developments take place in the semiconductors field (a few months may be crucial for succes or failure in that market). In any case, to the extent that the duration of protection could be counted from the creation of a lay-out design (see following point) or from the date of first commercial exploitation, the implications of the said rule on the term of protection can be reduced. h) Duration of the protection The Conference overcame complex discussions on the term of protection, by virtue of a -finally accepted- informal proposal of the WIPO Director General, which very simply states that "protection shall last at least eight years". While many countries held that five years were sufficient, . others wanted longer terms. In practice, ten years was the standard set out by the SCPA for the regulations adopted in other developed countries. The Treaty, on the one side, allows for a lower minimum. On the other, it is silent about the date from which the term is to be counted. This again leaves freedom to apply different solutions, such as from first commercial exploitation, application for registration or registration. One open question is whether a country could decide to count that term since the creation of the lay-out design, however determined. Nothing in the Treaty seems to exclude such possibility. 1 9 In fact, some laws recognise protection from the creation date • i) Settlement of disputes Article 14 of the. Treaty introduces an important innovation in the area of international conventions on intellectual property. Notwithstanding a general initial reluctance of the Group of 77, the Conference was able to get an agreement on the basis of a revised version of the proposal contained in the draft text (which was based on a draft submitted by the United States at the fourth session of the Committe of Experts). Unlike the Paris and 8erne Conventions, which only provide for the right to resort to the International Court of Justice in order to solve interpretation or enforcement disputes, the Treaty sets out procedures for consultations, failing which a panel may be constituted in order to analyse the facts and make recommendations. On that basis, the Assembly created by the Treaty (which shall meet in ordinary session once every two years) shall, "by consensus, make recommendations to the parties to the dispute, based upon its interpretation of this Treaty and the report of the panel" (article 14.4). I 9 See, for example, art. 5.b of UK regulation of 1987. 48 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The texts considered by the Conference resembled, with more or less differences, the proposal for settlement of disputes adopted at the GATT Mid-Term Review Meeting of Montreal, in December 1988. They were certainly inspired by the GATT procedures. It was strongly felt by most delegations that nothwithstanding the specific field under discussion, the text to be approved would have implications in other discussions of intellectual property within WIPO and elsewhere. As compared to the draft proposal {which was only incorporated by WIPO as an "alternative") , the adopted text contains a number of improvements. First, it includes a new paragraph on ''other means of settlement" such as good offices, conciliation, mediation and arbitration to which the parties may agree to resort. Second, the conditions for the setting up and functioning of the panel have been specified with more detail, i ncluding in particular the possibility for the parties to the dispute to agree on the terms of reference for the Panel 's work. Third, the panel is to be convened by the Assembly {and not by the Director General of WIPO). Fourth, the Treaty requires the Assembly to adopt rules on the selection of panel members and for the panel proceedings. Fifth, article 14.3.c determines the procedures to be followed by the panel and the participation the parties to the dispute may have. Sixth, and most important, the outcome of the process does not include the possibility for the Assembly to authorize or apply sanctions to the Contracting Party deemed to have violated the Treaty, or to its nationals. Such a possibility was deemed unacceptable by many delegations, particularly from developing countries. 3. Effects of the Treaty on innovation, production and trade of integrated circuits It is still difficult to foresee what the future of the Treaty may be. It will depend, on the one side, on the final attitude of United States and Japan as regards to the approved text. It seems unlikely that they could reopen the question of integrated circuits in the framework of GATT, given the number of countries that supported the Treaty, including the EEC member States and developing countries such as South Korea, Brazil, Mexico, India, China and Argentina. On the other, it remains to be seen whether these latter and other developing countries formally adhere to the Treaty, a process that will require in most cases legislative steps at the national level. Though during the preparatory work for the Conference many delegations from developed countries argued that a treaty could foster innovation and transfer of technology in the field, both effects are doubtful. First, the almost unexistence of litigation under the specific laws in force in developed countries would indicate that copying is a phenomenon far less important than 20 assumed • Second, the international protection of lay-out designs is not likely to promote in any manner more innovation in the field. It has occurred 20 In view of this situation, two American experts have concluded that the the SCPA was "a solution in search of a problem" (Siegel and Laurie, 1989, p.l4). MR. CARLOS M. CORREA 49 in the past without any form of protection; moreover, a strong protection could hinder creativity rather than stimulate it, as observed in respect of the American semiconductor industry (Levin et al, 1987). The nature of the rights conferred und~r the sui generis, and in particular the provisions for "reverse engineering" contemplated by the Treaty do not seem likely, in reality, to adversely affect the rate of innovation. The impact of the Treaty in this respect may be, in essence, quite neutral. Third, the Treaty does not contain specific rules on technology transfer. There is no founded reason to assume that the existence and application of the Treaty could by itself promote such a transfer. It could rather allow title-holders to charge higher prices for licenses, in the case they agree to grant them. One situation in which the Treaty may contribute to the transfer of lay-out designs is, however, the case of granting of a non-voluntary license in accordance with article 6. A system of international protection for the lay-out designs of integrated circuits should not be expected to have substantial implications on productive activities in those countries which have technological and financial resources to undertake them. As shown by recent experience, protection did not affect the rising strength of Japan in the field, neither the developments taking place in some European countries and South Korea. However, the legal protection does create higher barriers of entry for countries which do not possess those resources and, in this sense, contributes to the concentration of the industry around a few countries and firms. If the effects on the areas considered before are not likely to be substantial, those on trade of microchips may be of some relevance, particularly if copying becomes a more widespread phenomenon. Though there are no indications in that sense, technological change may make copying easier or more convenient in the future (Laurie, 1988). In that case, the Treaty provisons and their implementation at the national level may be crucial to combat trade in infringing chips. As regards to trade in articles that incorporate such chips, as mentioned before, the concrete measures to be applied will be dependent on national legislations. It will be important to frame them in such a way that trade is not distorted and importers are not affected by facts that are completely outside their control. In sum, the effects of the Treaty are mostly uncertain, as it is the own Treaty acceptance as an international standard by all countries with important interests in the field. Probably, the main impact of the Treaty -leaving aside its value as precedent for other discussions on intellectual property will be on trade related aspects, rather than on innovation, technology transfer or the distribution of productive capabilities· in the world. 50 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES REFERENCES Borrus, Michael , 1988, Competing for America's stake in microelectronics Control, Ballinger, Cambridge. Cohen Jehoram, H., 1987, "The European Commission pressured into a 'dis-harmonising' Directive on chip protection", European Intellectual Property Review. Correa, Carlos M., 1988, "Capitulo 4 del Proyecto de cOdigo internacional de conducta para la transferencia de tecnologia: alternativas para la negociacion", in Unctad, TO/CODE TOT/52 . Dreier, Thomas, 1988, "The case of Computer Programs and Integrated Circuits", "National Treatment, Reciprocity and Retorsion - New Tendencies for Improving the International Protection of Intellectual Property" , Ringberg Castle, July 1316. Laurie, Ronald S., 1988, "Legal protection of integrated circuits designs in the United States", paper submitted to WIPO World Forum on Intellectual Property, Geneva, 1988. Siegel, Daniel and Laurie, Ronald, 1989, "Beyond microcode: Alloy v. U1tratek. The first attempt to extend copyright protection to computer hardware" The computer lawyer, vol. 6, Nro.4, April, p.l4. WIPO a, 1989, Diplomatic Conference for the Conclusion of a Treaty on the Protection of Intellectual Property in Respect of Integrated Circuits, Draft Treaty prepared under Rule 1(1) of the Draft Rules of Procedure, by the Director General of WIPO, Washington D.C. 8 a 26 May, IPIC/DC/3. WIPO b, 1989, Conferencia Diplomatica para la Concertacion de un Tratado sobre la Proteccion de la Propiedad Intelectual respecto de los Circuitos Integrados, Estatuto de la Comunidad Economica Europea y Division de Competencias entre la Comunidad y sus Estados Miembros en relacion con el Tratado propuesto, Documento presentado por la Comision de las Comunidades Europeas, Washington, D.C. , 8 a 26 de mayo, IPIC/DC/5. LEGAL PROTECTION OF SEMICONDUCTOR PRODUCTS by Mr. R.J. Hart 1. A Brief History In 1984 the US Semiconductor Industry was successful in persuading Congress to pass the US Semiconductor Chip Protection Act (Ref 1) which is a sui generis law, outside existing systems of Intellectual Property. The major problem for the US appeared to be that their copyright law did not include, as the 1956 UK Copyright Law did, protection for artistic works, regardless of t heir artistic content, when reproduced in three dimensional form . Accordingly, the US Semiconductor Chip Protection Act (USSCPA) was introduced based upon copyright principles but limited to 10 years of protection and introducing the concepts of reverse engineering, and contributory infringement. Because the USSCPA is a sui generis law, no existing international conventions were deemed to be applicable. Accordingly, the US SCPA included a reciprocity requirement which effectively means that anyone who is not resident in the US, or does not have a US subsidiary to whom they can assign all their rights, can not seek registration for their mask works in the US, unless are a national of a country which has been granted a Presidential Proclamation of reciprocity or are a signatory of an International Treaty to which the US is also a party. This reciprocity requirement has created shock waves throughout the international semiconductor industry and has lead to: The Japanese Circuit Layout Right Act (Ref 2), A WIPO Draft Treaty (Ref 3) and An EC Directive (Ref 4) with implementing legislation in UK (Ref 5), West Germany (Ref 6), France (Ref 7), Denmark (Ref 9), Holland (Ref 10), Italy, Spain (Ref 11) and Ireland (Ref 13) and draft legislation in Greece, and Belgium, as well as an Act (Ref 8) in Sweden and Austria. At the time of writing, no Presidential Proclamations have been awarded. However, interim protection under the Section 914 of the US SCPA has been granted to the Member States of the European Community, Japan, Australia, Sweden, Switzerland, Finland and Canada. The UK Interim Protection, which was obtained separately from that for the rest of the Community, was initially based upon the applicability of copyright law. Before considering the legal situation in detail, some issues , relating to what semiconductor chips (or integrated circuits) are, how they are manufactured, why they require protection and how are they pirated, require discussion. 1.1 What Constitutes an Integrate~ Circuit? Integrated circuits are semiconductor products, sometimes referred to as "chips", which perform electronic and related functions. Semiconductor materials are elements or compounds that partially conduct electricity and are influenced by electrical currents applied to them. They are intermediate between conductors, which fully conduct electricity, and insulators which do not appreciably conduct any ele.ctricity. 52 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Semiconductors in use currently include silicon, germanium and gallium a r senide. The circuits implemented can perform (i) logic functions, using digit al switching techniques involving storage and gating functions using hundreds of thousands of transistors, or (ii) so-called analogue functions of amplification and modulation using electronic techniques, as well as optical techniques. Numerous functions are performed by integrated circuits, from standard component forms, such as micro-computers, gate arrays , memory devices through semi-custom design chips using gate arrays and programmed logic arrays, to compl ex custom design integrated circuit chips for use in the telecommunications field, for example. In the analogue field optical and electronic modulators, amplifies and demodulators can readily be implemented in integrated circuit form. Integrated circuits are formed from layers of semiconductor material with insulators of various compositions that combine to form the transistors, capacitors, resistors, diodes and other components required to make up the electronic circuit. The layers of semiconductor material are "doped" in predetermined places with traces of other elements such as boron, phospherous and arsenic. The layers are sandwiched together with insulating and metal layers to form the component. Physically a semiconductor integrated circuit device of the order of 0.6 ems square may contain in excess of 100,000 transistors which perform the functions which, when implemented in discrete electronic component design, may require a room full of components with their associated mounting and interconnection arrangements. The configuration of the various "layers" of an integrated circuit are determined by directing a pattern of light onto a photosensi tive surface. The pattern may, for example, be determined by the use of "masks" which act as a king of stencil is the manufacturing process, although with more advanced systems a computer controlled laser may be used to directly expose the photosensitive surface. 1.2 How are Integrated Circuits Made? The first step is to take a pure semi conductor mate r i al wafer, say silicon, which is a 10 ems to 17 ems diameter disk suitably prepared. Hundreds of semiconductor chips will be photoengraved onto the wafer so that at the end of the process, the wafer will resemble a round sheet of postage stamps. The wafer is coated with a thin layer of silicon dioxide usually in a steam bath. The silicon dioxide layer is then coated with a thin layer of an acid-resistant substance or "resist". the resist is typically unpolymerised rubber or synthetic rubber dissolved in a solvent. The solubility in certain solvents changes dramatically when the resist is polymersied by exposure to ultra-violet light either directly or through stencil like masks. 1.3 Why should Integrated Circuits be Protected? The semiconductor industry is an essential component of the economy of an industrialised nation. MR . ROBERT J. HART 53 Increasingly, through customised integrated circuits, more and more electronic control functions are being implemented into integrated circuit from with the attendant increase in processing power, energy conservation, physical space saving and cost of production. To a very large extent, the unparalleled growth achieved by the electronics industry over the past two decades has been due to the development of the semiconductor chip. The chip has made possible the creation of many of the new high technology products which have caused this growth. It has led to the development of new industries. Personal computers, hand-held calculators, word processors, video games, and digital watches are but a few of the products which the rapid development of the chip has made possible. Semiconductor chips have had a significant effect on other products as well. Today, motor cars, ovens, telephones, radios, television sets, and washing machines all contain semiconductor chips and, as a result are able to perform more effici ently than ever before and frequently can be sold at a lower price. By reducing production costs and increasing product quality, the semiconductor chip plays a major role in keeping a wide array of products competitive in world markets. Continued innovation in semiconductors, however, with all its desirable effects, is threatened by the piracy, or unauthorised reproduction i . e. copying, of semiconductor circuit layout patterns. As chips have grown more efficient and powerful, each new development has cost more in R & D investment and man-hours. Today the development of a new family of semiconductor chips can require a substantial period of development to complete, demands thousands of hours of engineers' and technicians' time, and may cost up to £10 million or more. These high fixed or front-end costs must be reflected in the price at which those semiconductor chips are sold, as firms seek to achieve a rate of return sufficient to cover past R & D and investment and provide for continued development of new products. A pirate firm, on the other hand, can produce a perfect copy of another firm's semiconductor chip for as little as £50,000 to £100,000 for the main chip of a chip family. An entire family of chips can be copied for less than £1 million. As result, pirate firms with no R & D investment to recoup can set their prices far lower than can the firms that have underwritten the development costs. The result is a reduction in the price at which the innovative firm can sell its chips. Often this means a loss in market share for the innovative firm. Protection is, therefore, required to prevent the direct unauthorised copying of an integrated circuit chip product as we ll as against the infringement of the rights in patenable inventions embodied in the chip product. 1.4 How are Chips Pirated? The technology for copying chips is well developed and relatively inexpensive in comparison with the cost of designing the chip and initially preparing masks for chip manufacture. The copyist simply removes the plastic or ceramic casing; photographs the top metal connection layer; dissolves the metal away with acid in order to photograph the semiconductor material in the 54 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES next layer; and then photographs underlying layers by varying the depth of focus of the camera so that it picks up the desired layer of the translucent semiconductor material lying below. The photographs can then be used, either solely for purposes of analysis (Which, as "reverse engineering", should be legitimate in itself) or simply to reproduce unauthorised copies of the masks that were used to make copies of the original chip (which is piracy). 1.5 How are Integrated Circuits Designed? Increasingly the design process involves computer aided design (CAD) techniques; particularly in the field of custom design. The design process, as far as the integrated circuit is concerned, starts at the point when the logic design has been completed. This design is the starting point for the product and although in many cases it may not be inventive, it represents a significant investment of skill and labour in achieveing the design. The logic design is converted into a so-called NET LIST and becomes the input data for the computer aided design (CAD) system. Figure 1 shows in diagramatic form the component parts of a CAD system. Each block is a software package, whereas each open statement indicates input or output actions on the system. 1.6 What Requires Protection? At this point in time there is no doubt that the chips themselves and their masks require protection against unauthorised reproduction. Currently, and more as technology progresses, the PLOTS (e.g. "masks" making digital computer information) also require protection against unauthorised copying. This is because, not only will such "plots" be used to make masks specific to a manufacturer's process, but also because they can be used to produce masks which could be implemented in a . different process or can be used in the Computer Aided Manufacture situation to directly control the production of the integrated circuit component parts. 1.7 What Type of Protection is Needed? The type of protection required for the vast majority of integrated circuits is against an unauthorised third party, directly or indirectly, reproducing either the masks or the "plots" which can be used to directly produce an integrated circuit product. These items (hereafter referred to as mask works and often called topographies in the industry) are the vulnerable items which are easily reproduced but require substantial investment to produce in the first place. The protection provided must also be obtained quickly since the "lead time" for a new product may be only of the order of one or two years. Protection against the unauthorised reproduction of substantial parts of a semiconductor chip product is also required to prevent the appropriation of the design by making a minor modification, or by including it in a larger design. While protection against copying of the masks works is very important, the protection of novel and inventive circuitry embodied on the chip should not. be overlooked. MR. ROBERT J. HART 55 The problem of protection of integrated circuits by intellectual property laws is similar to that which was encountered upon the introduction into the electronics industry of printed circuit board techniques. The specific layout of a printed circuit board, with its patterns of interconnection, was considered, by legal experts, to be the three dimensional expression of the card "art work layout-drawing" and as such was protected in the UK by copyright if the layout-drawing was an original work. It should be noted that the copyright in the lay-out drawings does not extend to cover the actual circuit diagram nor the functions performed by the electronic equipment achieved by the circuit diagram. 2. The legal Protection of Semiconductor Integrated Circuits I shall now consider the existing laws of Intellectual Property and why sui generis legislation has been introduced for the protection of semiconductor integrated circuits. 2.1 What are the Legal Systems Which Can be Used to Protect "Mask Works"? All of the existing systems of protection for intellectual property rights must be considered as possibilities for the legal protection of integrated circuits. These involve, in the UK, for example, the statute law of Patents, Registered Designs/Design Copyright and Copyright. I do not intend to consider the patent situation in detail only to remark that there ~s little doubt that ·the circuitry incorporated in an integrated circuit is an industrial application and many of the designs incorporated into integrated circuits will be novel. However, the vast majority of these designs will be no more than the interconnecting of standard cells to achieves a required result and as such may not meet the requirements of invention to be patentable. Those designs which do meet the requirements of patentability, should be protectable by patent .by claiming the circuit and its function regardless of its imple.mentation. The methods of manufacture and the techniques used in the fabrication of integrated circuits are of course suitable items for protection by the patent system. The layout of the cells of a customised chip embodied as a mask work, will rarely, if ever, satisfy the standards of inventiveness required for patentability. A chip may be the product of millions of pounds and thousands of hours of effort which is the result of hard work rather than patentable intention. Some very unique products may not contain unique circuit designs of a patentable nature. Yet the layout for such a product may be quite unique, involving much original effort which is not necessarily inventive. For these reasons the vast majority of integrated circuit designs will not be protectable by patent through the Pate~t Offices of the World. 2.2 Copyright Copyright provides protection for original literary and artistic works regardless of their artistic content. However, the UK Copyright system and its derivatives, in for example New Zealand, Australia, South Africa and Ireland, appear to be unique in extending protection in a two dimensional drawing to its three dimensional counterpart with the possible exception of 56 ASIAN AND PACIFIC FORUM ON THE I MPACT OF EMERGING TECHNOLOGIES the Netherlands. The vast majority of Copyright systems do not provide protection for functional works at all, nor do t hey include the two dimensional to three dimensional protection of the UK. For these reasons integrated circuits are NOT protected by the majority of copyright systems of the world and there is doubt, therefore, that they would be able to fit within the confines of the international treaties of Berne and UCC on Copyright. 2.3 Sui Generis Laws Accordingly, the US and Japan have introduced sui generis laws f o r the specific protection of semiconductor integrated circuits or chips. In addition WIPO has produced an International Treaty on the subject which was adopted at a Diplomatic Conference in Washington in May and the Council of Ministers of the European Community had adopted a Directive on t he legal protection of original topographies of semiconductor products. Consideration will be given to the US Semiconductor Chip Protection Act 1 in Section 3 of this paper, the Japanese Act Concerning the Circuit Layout of a Semiconductor Integrated Circuit 2 in Section 4, the EEC Directive on the Legal Protection of Original topographies of semiconductor products 4 in Section 5 and the World Intellectual Property Organisation (WIP0)3 Treaty in Section 7. 3. The US Semiconductor Chip Protection Act President Reagan signed the US Semiconductor Chip Protection Act of 1984 on the 9th November 1984 and this marked the first introduction of a new type of intellectual property law in the United States for over 100 years. It also marks the first intellectual property legislation directed to a new kind of technology. The new law is neither a copyright law nor a patent law, but a hybrid form of industrial property legislation that combines aspects of copyright law, patent law and new elements found in neither. The Act, which came into force on 8th January 1985, created a new form of sui generis legal protection in the United States for "mask works" and the semiconductor chip (S . C.C) products in which they are embodied, separate and distinct from copyright law. Thus existing copyright conventions probably do not apply, and unlike copyright law, registration is mandatory. The essential features of the Act are: (i) Protection extends to mask works which are the threedimensional images or patterns formed on or in and fixed in a semiconductor chip product. (ii) Protection does not extend to ideas and concepts. (iii) A mask work must be original to be protected. (iv) Registration is mandatory within 2 years after the date on which the mask work was first commercially exploited. (v) Protection last for 10 years to the end of the year from the date of registration or first commercial exploitation whichever occurs first. MR. ROBERT J. HART 57 (vi) Exclusive rights are: a. to reproduce the mask work b. to import or distribute Semiconductor chip products embodying the mask work c. to induce the reproduction or import or distriLution (contributory infringement> of the mask work or Semiconductor Chip Product incorporating the mask work (vii) Reverse engineering permits the unauthorised reproduction of a mask work for the purpose of teaching, analysing or evaluating the concepts embodied in the work and also permits the results of such conduct to be incorporated in an original mask work which is to be made to be distributed. (viii) Innocent infringer provisions are included and (ix) Marking is provided for and if used consists of the symbol M and the name of the owner of the mask work. So far, only two cases have been filed under the Act and the first court decision was issued in December 1988 (Booktree Corporation V.A.M.D.Inc.). An earlier case was filed by Apple Computer Company against Relax Technologies, but did not lead to a court decision. 4. Protection of Semiconductor Product Designs - the EEC Directive. Introduction On the 16th December 1986 the Council of the European Communities published a Council Directive 4 on the legal protection of the topographies of semiconductor products. The Directive in Article 11 requires Member States to bring into force laws, regulations or administrative provisions necessary to comply with the Directive by 7th November 1987. This date was significant since it was the date upon which all of the interim order of reciprocity originally granted under section 914 of the US Semiconductor Chip Protection Act expired. In fact on the 7th November 1987, President Reagan signed an Act 12 which extends the Secretary of Commerce's power to issue interim orders through 1990 . The new Act also modified the US SCPA to ·permit the President to revoke a Presidential Proclamation issued under the US SCPA. The mains features of the Directive are as follows: 1. Definitions (a) Semiconductor product ( b > Topography (c) Commercial exploitation 58 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 2. Originality -Creators own intellectual effort 3. Ownership of rig~ts - Employers, Commissioners 4. Registration/Deposit - Discretionary 5. Exclusive Rights - Reverse Engineering 6. Licences 7. Term- 10 years from first commercial exploitation or registration 8. Exclusions - concepts, process, system, techniques or encoded information 9. Marking - Discretionary 5. The Japanese Act Concerning the Circuit Layout of a Semiconductor Integrated Circuit. The Japanese Cabinet approved the sui generis bill, prepared by the Ministry of International Trade and Industry (MIT!), in March 1985 and it passed the Diet on May 24th 1985. It was promulgated on May 31st 1985 as Law No, 43 of 85 and it came into effect on January 1st 1986 . In addition the Cabinet Order Concerning the Registration of Circuit Layout Rights (Cab. Order No. 326,1986) and the Ministerial Ordinance Concerning the Registration of Circuit Layout Rights (Min.Ordinance No.81,1985) were issued. These latter instruments are involved with procedural regulations concerning the registration of a circuit layout right and related rights. Outline of the Act. The contents of the Act are basically similar to the US Semiconductor Chip Protection Act. There are, however, three major differences in that:- (i) protection is extended to all persons regardless of nationality whereas the US law is based upon reciprocity. (ii) protection starts on the date of registration under the prov~s~ons of the Act, rather than on the date of commercial exploitation, while under the US law protection starts on whichever is the earlier of the two dates; and (iii) infringement may result in criminal punishment. 6. WIPO WIPO has produced a Treaty 3 which was ~dopted at a Diplomatic Conference in Washington. The treaty covers the following issues from a protection point of view: (i) Definitions (Article 2) MR. ROBERT J. HART 59 (ii) The Subject Matter of the Treaty (Article 3). (iii) The Legal Form of the Protection (Article 4) (iv) National Treatment (Article 5). (v) The Scope of the Protection (Article 6). (vi) Exploitation, Registration Disclosure (Article 7) . (vii) The Duration of the Protection (Article 8). Articles 9 to 20 involve administrative issues such as the setting up of an assembly, the relevance of the International Bureau, Amendment, safeguards for Paris and Berne Conventions, Dispute settlement, and issues on becoming party to, entry into force of and de nunciation of the Treaty. From my presentation point of view I will briefly consider the protective issues of articles 2 to 8 inclusive. 6.1 Article 2. - Definition.s . The treaty provides definitions for integrated circuit, layout-design (topography), holder of the right, protected layout-design (topography) and some administrative definitions. The definition of "integrated circuit" differs from that used in the US SCPA, Japanese Act or EEC Directive but is defined in such a way as to mean essentially a lay-out design topography which has been integrally formed in and/or on a piece of material and is capable of performing an electronic function. It should be noted that the definition envisages only one active elements and it may well be that protection for discrete components could be included under a law which conforms with the treaty. The definition of "layout-design (topography)" differs from "mask work" The rema~n~ng definitions are all self explanatory and need no comment with the exception of "Integrovernmental Organisation". This latter definition was of great significance to the Commission of the European Community as this treaty is the first in which the Commission has been able to act on behalf of member states. The power given to Commission by the Treaty in Article 14 is not great, however, it is a significant step for the Commission to be recognised in this way. 6.2 Article 3 . - The Subject Matter of the Treaty. Paragraph (1) obliges each Contracting State to secure intellectual property protection in respect to lay-out designs in accordance with paragraph (2), in the sense that they are the result of their creators own intellectual effort and are not commonplace. This requirement of originality is very similar to that required by Article 2 (2) of the EC Directive. The qualification on originality as the "result of the creators own intellectual effort" does not appear in the US SCPA at 902 (b) and (c) or the Japanese Act, although the common place exception does. The requirement or originality in the Japanese Law is encompassed in the word "creator" in section 3 (1) . It should be noted that "original" in the US SCPA, means "not copied" according to the legislative history, however, an alternative meaning for "original" also appears in the legislative history on reverse engineering. For further comment see section 7.5. It should be noted that the Treaty makes no reference to the protection of layout-designs where the act of creation is achieved with computer means. Clearly it is in the interest of industry for such layout-designs to be protected and the Treaty may leave it open for an infringer to argue that protection does not subsist in a copied layout-design on the grounds that the original was computer generated not created by intellectual effort. It is suggested that the creator in such a case, should be the person by whom the arrangement for the creation of the layout-design are undertaken. This is of course the way in which "computer generated" designs are defined under the UK Copyright, Designs and Patent Act 1988. Subparagraph 3 (l)(b) is an important sub paragraph which has been transferred from Article 6 from the Draft Treaty. Subparagraph 3 (l)(b) ensures that integrated circuits incorporated into larger pieces of equipment, such as TV sets or the like, will, be actionable by the holder of the right. Subparagraph (l)(c) is also interesting in permitting those countries whose legislation has been limited to semiconductor integrated circuits to ratify the Treaty. 6.3 Article 4. - The Legal Form of the Protection In this article each Contracting Party is free to implement its obligations through a special law (as per the US SCPA, the Japanese Circuit Lay-out Act and the laws which have implemented the EEC Directive) or its law on copyright, patents, utility models, industrial designs, unfair competition or any other law or combination of these laws. MR. ROBERT J. HART 61 Patent law in my op1n1on is nor suitable since novelty is not the same as originality and most Patent systems in addition require an inventive step. 6.4 Article 5. - National Treatment The first paragraph of this article provides for national treatment in which each Contracting State is obliged to accord to foreign nationals and companies the same treatment that it accords to its own nationals. This is a very important issue for the Treaty to handle since only the Japanese Act has not put reciprocity requirements on who obtain protection. The US SCPA, at Section 902 (a) (i) defines that a mask work is eligible for protection. (A) if the owner of the mask work is: (i) a national or domiciliary of the United States, (ii) a national, domiciliary or sovereign authority of a foreign nation that is party to a treaty affording protection to mask works to which the United States is also a party or (iii) a stateless person, wherever that person may be domiciled or (B) the mask work is first commercially exploited in the United States or (C) the mask work comes within the scope of a Presidential proclamation issued under paragraph (2) Paragraph (2) of Section 902 defjnes that: "Where the President finds that a foreign nation extends, to mask works of owners who are nationals or domiciliaries of the United States protection (A) on substantially the same basis as that on which the foreign nation extends protection to mask works of its own nationals and domiciliaries and mask works first commercially exploited in that nation, or (B) on substantially the same basis as provided in this chapter, the President may by proclamation extend protection under this chapter to mask works (i) of owners who are, on the date on which the mask works are registered under Section 908, or the date on which the mask works are first commercially exploited anywhere in the world, whichever occurs first, nationals, domiciliaries, or sovereign authorities of that nation, or (ii) which are first commercially exploited in that nation" . Thus so far, there have been no Presidential proclamations granted by the United States. A number of interim order have been issued under the International transitional provisions (Section 914) of the US SCPA ba the Secretary of Commerce . These orders permit nationals of countries who have demonstrated to The Secretary of Commerce, (i) that, that nation is making good faith efforts and reasonable progress towards - (A) entering into an international .treaty or (B) enacting legislation that is in compliance with that required for a Presidential Proclamation. Interim orders have been granted to European countries such as Switzerland, Finland and all the states 62 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES of the European Community. These interim orders ran out on the 7th November 1987, although this date was extended until May 31st 1989 by the Patent and Trademark Office who are holding hearings to decide i f protection should be extended further. Austria has also applied under 914. There are no corresponding provisions in the Japanese Act whereas the EC Directive limits the right of Protection to natural persons who are nationals or habitual residents of a Member State or persons who first commercially exploit or are exclusively authorised to commercially exploit a topography within a Member State. The UK Statutory Instrument 6 implement the EC Directive. The Directive, at Article 2 (6) gives Member States the right to negotiate and conclude agreements or understandings with third States and Multilateral Conventions and the UK has already extended protection to the US. The Swedish Act, at Section 11, defines that the Act applies to layout-designs created by Swedish nationals or persons who habitually reside in Sweden, as well as to layout-designs first distributed in Sweden. On condition of reciprocity, the Swedish Government may extend the application of the Act to other countries. (2) Court Proceedings etc. This paragraph allows Contracting Parties to treat foreigners di f f erently only in that a local agent may be appointed for application procedures or designate an address for service. In court proceedings special rules may be applied. The exceptions are similar to those referred to in Article 2( 3) of the Paris Convention. 6.5 Article 6. -The Scope of Protection (1) Acts Requiring the Proprietors Authorisation The treaty at Sub-paragraph (1) identifies three acts which are unlawful if performed without the authorisation of the right holder: (i) reproducing whether by incorporating in an i.e. or otherwise in its entirety or any part thereof a protected lay- out design (ii) importing, selling or otherwise distributing for commercial purposes a protected lay-out design or an integrated circuit incorportating the protected lay-out design. This contrasts with the US SCPA and the EC Directive in that (i) and (iii) have direct equivalents in Section 905 (1) 2 (2) and Article 5 (1) respectively. Neither have the act of incorporating, however, in Europe at least it would be argued that in the manufacture of a chip there was a reproduction of the topography. The Japanese law at Section 23 defines the Acts deemed Infringe.ments as being production, transfer, lease, exhibition for the purpose of transferring or leasing, or the import for business purposes of object s which are to be used primari ly for the initiation of a registered circuit layout. MR. ROBERT J. HART 63 (2) Acts not Requiring the Proprietors Authorisation These acts are defined as exceptions for Teaching and Research etc and the so-called Reverse. engineering exception. The teaching and research etc. The Reverse Engineering exception is a new type of qualification on an Intellectual Property right permitting the rights in a first chip to be swept aside if the reverse engineering requirements are satisfied. The reverse engineering limitations on protection in the US SCPA are found in Section 906 (a), (1) and (2), in Article 12(2) of the Japanese Act and in Article 5(4) of the EEC Directive. As mentioned previously the Swedish Act includes, at Section 2, limitations on protection which equate to Section 906 (a) (1) of the US SCPA and Article 5(3) of the EC Directive but does not extend to the use of the results of analysis and evaluation to create another mask work topography as Section 906 (a)(2) and Article 5(4) do respectivley. It may well be that each of the Reverse Engineeiring provisions will lead to differing interpretations of what the limitations of Protection are. For a more detailed consideration of "reverse engineering" see High Technology: Reverse Engineering, The Dual Standard" in EIPR Vol.9 Issue 5 May 1987 and the opinion in EIPR Vol 11 Issue 4 May 1989. (3) Measures concerning use without the consent of the Holder of the Right Non-exclusive licences may be provided in a countries legislation in circumstances that are not ordinary after unsuccessful efforts, made by the said third party in line with normal commercial practices, to obtain such authorisation, where the granting of the non-voluntary license is found, by the granting authority, to be necessary to safeguard a national purpose deemed to be vital by that authority, the non-voluntary license shall be available for exploitation only in the territory of that country and shall be subject to the payment of an equitable renumeration by third party to the holder of the right. (4) Sale and Distribution of Infringing Microchips Acquired Innocently This paragraph indicates that no Contracting Party is obliged to consider unlawful innocent infringement. Innocent infringement requires a person performing or ordering such acts not to know or have reasonable grounds to know that such rights exist. The US provisions permit a person who, when he acquires a semiconductor product, does not know (or has no reasonable grounds to believe) that the product acquired is an infringement of a third parties rights, to distribute those products without penalty. However, any activities performed after the person is made aware of the existence of such rights, are subject to reasonable royal ties or adequate renumeration. Simila·r provisions are included in the Japanese Act. 64 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The EC Directive defines that an innocent acquirer, and any successor in title shall not be prevented from commercially exploiting the product. However, Member States are required to ensure that for acts committed after that person knows, on.demand of the right holder, national law will permit the payment of adequate renumeration. It should be noted that no such provisions are included in the Swedish Act. The UK Statutory Instrument provides for so-called innocent infringement. However, it differs from the US provision in that a difference is made between reproducing the topography and/or manufacturing a semiconductor product from the topography on the one hand and dealing in a reproduction or a semiconductor product on the other. In the first case, the owner is entitled only to an account of profits whereas in the second case he is only entitled to damages based upon a reasonable royalty. (5) Exhaustion of Rights The right in a protected layout-design or an integrated circuit incorporating that layout-design may be exhausted once the layout-design or integrated circuit is put on the market anywhere in the world by or with the consent of the right holder. The exhaustion of rights is a conditional exception. Section 906 (b) of the US SCPA relates to exhaustion of rights but only in respect of the chip product. Article 5(5) of the EC Directive defines exhaustion but only in a member state, whereas Section 12(3) of the Japanese Act is applicable but only afte~ a semiconductor integrated circuit has been tranferred. 6.6 Article 7 - Exploitation - Registration Disclosure. By this article a Contracting Party is free not to protect a lay-out design until it: (i) has been commercially exploited somewhere in the world or (ii) registration has been applied for The EC Directive at Article 4 makes registration not obligatory and indeed the UK and Ireland have introduced laws which do not require registration. Registration is required in West Germany, Holland, France and Spain. The Japanese law at Section 3 calls for Registration as does the US SCPA at Section 908. MR. ROBERT J. HART 65 6.7 Article 8- Duration of Protection. Under the Treaty protection shall last for at least eight years. All the alternatives in existance so far all within this period, for the specific periods specifed see the EC Directive at Article 7(3), Section 10(2) of the Japanese law and section 904(b) and (c) of the US SCPA. Articles 9 to 20 The remaining articles deal with administrative issues involving Assembly (Article 9), the responsibilities of the International Bureau (Article 10), ways of amending certain provisions of the Treaty (Article 11), safeguards for Paris and Berne Conventions (Article 12), Reservations (Article 13) settlement of disputes (Article 14), becoming Party to the Treaty (Article 15), Entry into Force of the Treaty (Article 16), Denunciation of the Treaty (Article 17), Languages of the Treaty and signature (Article 18), Depository functions (Article 19) and signature (Article 20) . These issues are normal to International Treaties with the exception of Article 14. In the final version of the Draft Treaty the disputes settlement procedures were included as Article 13 bis. It could, therefore, be considered as a significant step forward for the final Treaty to include a specific Article 14 on this issue. However, the original Draft Treaty included sanctions against contracting Parties who were in dispute permitting the Assembly to expell the offending Contracting Party from the Assembly. The lack of such disiplinary facilities it is believed created further problems for the US and Japanese delegations. 66 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOOIES REFERENCES 1. A. Semiconductor Chip Protection Act of 1984 (Title III of Public Law 98-620 of November 8, 1984) of the United States of America. (See Industrial Property March 1985) 2. B. Law No. 1425 -Act on the Protection of the Lay-out design of Circuitry in Semiconductor Products. 3. WIPO Document IPIC/DC/46 Dated May 26th 1989 . 4. See Official Journal of the European Community 27/1/87 5. Statutory Instruments 1987 No 1947 Designs - The Semiconductor Products (Protection of Topography) Regualtions 1987. 6. Law of 20th October 1987 on the Protection of the Topographies of microelectronic semiconductor products (see Industrial Property 1988 (Jan). 7. Law No 87- 890- See Journal Official De La Republic Fran9aise 5 Nov. 1987 (See Industrial Property 1988 feb) 8. Act on the Protection of the Lay-out design of the Circuitry in Semiconductor Products of 18th December 1986 (No 1425). 9. See Industrial Property May 1988. 10 . See Industrial Property September 1988. 11. See Industrial Property June 1988. 12. S442 (P.L.lOO- 159). 13 . Statutory Instruments No 101 of 1988. THE PRarECTIVE LAW OF INTOORATED CIRCUIT CHIP AND ITS IMPACTS by Professor Kae Dal Kwack Toward the end of the 20th centuries as new emerging technologies have developed, the world industry changes into the integration of technologies and knowledges. With its trend, we have required that the emerging technologies such as integrated circuit chip layout, computer software, biotechnology should be protected by Intellectual Property Right. In case of lay out design of IC, the research and the development requires vast money, long time, and hi-technology, but its reproductions are far easier by rapid technological developments. We need the special law of Intellectual Property Law to recover the defects which could not protect the technologies related IC, by the existing related laws of the patent law, the copyright law, and so on. Besides, the conditions of contract such as technology transition, foreign direct investment based on the complexity and diversification of foreign trade are increasing, and we should be confirmed about provisions for such contracts. On the other hand, the USA has enacted the protective law of IC in 1984, and protected only products of countries which held a similar protective law by the same law. And she has looked for the matter which protects a new chip made in USA from reproducing permissonless by foreign semiconductor companies as well as the matter of protection of world level. From 1985, the feasibility of protection for ICs, led by WIPO, was considered, and held 4 times Committes of Experts on Intellectual Property in respect of IC. In May 1988, WIPO held a conference of the developing countries and a appraisal meeting, where advanced countries assert to be admitted layout design of IC, as a new intellectual property right, and to hold a diplomatic conference for protection by a special law, but many of developing countries are sceptical to see layout design of IC as a intellectual property right. The developing countries feel actually, however, the limit of objection, and then although they appreciate the international treaty, they insisted that advanced countries admit sufficiently their opinions, and consider enough validity for treaty contents. Finally, on May 8 to 26,1989, it was held a diplomatic conference for the conclusion of a treaty on the protection of intellectual property in respect of integrated circuits in Wasington, and an IC treaty was made as a result. It is inevitable that we enact the protective law of IC for such international flow, therefore we in advance investigate the effects on the related industries. In case of enacting the protective law of IC, we have to prepare to decrease side effects. The protection law of IC is the law about which the circuit device technologies on a chip not protected by the patent law, hut now shall admit as the Intellectual Property Right to protect human's spiritual creature, similar to the patent law, the copyright law, the utility model law, and the artistic design law, which has a mean that it grants the nature of bodiless property to layout design. 68 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The characteristics of this law are the grant of authority without practical investigation, the short protective duration, and the registration to essential condition of authority. When holding the protective law of IC based on the diplomatic treaty, we shall consider the following examination subjects. To begin with, the subject matter of the protection contains that it shall apply to layout design that are original in the sense that they are the result of their creator's own intellectual effort and are not commonplace among creators of layout designs and manufacturers of ICs at the time of their creation, and to a layout design that consits of a combination of elements and interconnections that are commonplace shall be proteced only if the conbination. To put it concretely , an integrated circuit means a product, in its final fonn or an intermediate form, in which the elements, at least one of which is an active element, and some or all of the interconnections are integrally formed in and on a piece of material and which is intended to per form an electronic function. The idea, process, sequences, system, operation, concepts, principle, and discovery are not the subject matter of the protection. As the scope of the protection, acts requ~r1ng the authorization of the holder of right are the act of reproducing, whether by incorporation in an integrated circuit or otherwise, a protected layout design in its entirely or any part thereof, except the act of reproducing any part that does not comply with the requirement of originality, and the act of importing, selling or otherwise distributing for commercial purposes a protected layout design or an integrate circuit in which a protected layout design is incorporated. Acts not requiring the authorization of the right which are not protected by the law, contain the act which is performed by a third party for private purpose of evaluation, analysis, research or teaching, and the act in respect of the second layout design without being regarded as infringing the rights of the holder of right in the first layout design. Non-voluntary license, one of the points at issue, is admitted to safeguard a national purpose deemed to be vital by the authority only in the territory of that country, and it can execuse in application of its laws in order to secure free competition and to prevent abuse by the holder of the right. And it is sale and distribution of infringing ICs acquired innocently that can applicable within a national law. Exhaustion of right contains which such a layout design is incorporated, that has been put on the market by, or with the consent of the holder of the right. As for exploitation, registration, and disclosure, it needs commercially exploit, to registrate, and its period shall not be less than two years counted from the said date. The duration of the protection shall last at least eight years with a national law, without the initial date in reckoning. As a negative effect on the developing country, the followings are expected. First, as the total technical achivements are protected as rights the mask duplication by using reverse engineering is strongly challanged. Therefore developing countries, which stand on relatively weak the technical base, can hardly perform active R & D, and will be accelerated the technical subordination to the advanced country. PROFESSOR KAE DAL KWACK 69 Second, the protection law of re chip, which are different from the patent law has difficulties in asserting uninfringement evidently. Actually, there is wide room for the holder of the right to assert disturbance. Specialy, in the case. of developing countries, because it is not their own purpose, there are many handicaps to the technology user in the law suit of disturvance and controversy. Third, the royalty and excessive expenditure of research cost would weaken the competitive power. The increasing of the cost of technology introduction and its frequency invokes the excessive expenditure of royalty, and the increasing of research cost beyond investment extent leads to the rising of prime cost and the weakening of competitive power. Namely, it is necessary to ensure the technology capability and to take a burden both of the patent right needed for producing and pay for using the right. Fourth, there would be an increasing oppression of the patent right introduction by the holder of the right. Because the extent of protective law of re. chip is in the middle of the chip producing process, in effect, it is difficult to seperate the patent law of the faculty and the circuit design in the first half of process and protection the I.C. in the second half. Therefore there would be increasing of oppression from advanced countries holding many patent rights of producing. Also, the I.e. manufacturing equipments and researching technology for semiconductor materials would be obstructed. For developing process technical development of the equipments and in the material field must be preceded. But in the case of developing countries, if the technical subordinance becomes serious it can discourage the willing of technical develoment of equipments and material field. Until now, the negative aspects are mentioned, on the other hand, the positive aspects are as follows:. First, it will take a rule of stimulating the domestic association industry to survive for himself. Because the industry of developing countries have been introduced the technology to resolute the impending problems without long term technology like I.e. design have a infirmly base. But when the law is enact, it gives a chance to make a long term self-help plan, because we can't rely on the outside any more. Second, they will be vigorous exchanges of technology with a few advanced trades which have been evaded transition of technology, -because it is insufficient protective installation for the laws, and it can help the growth of all industries in far seeing. Besides, it can reinforce the stand of their own countries for foreign trade. So, domestic latent technologies are protected and this law can deal practically when international controversy occurs. Third, they will be efficiently able to prepare for the foreign trade pressure. Increasing of the credibility from other countries will actively prepare them for the international flow to make firm the international stand of them. 70 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Fourth, enacting the law for the prot ection of I.C. chip will make it possible to set up the sound international trade as well as balance with other Intellectual Property .Rights. Next, we can think about its affecting to the electronic industries. The semiconductor industries and electronic industries are denpendent on each other. Therefore, many effects are expected when the law enacts. Besides, these can be examination subjects for the protection law of I.C. as a Intellectual Property Law, which are deposit things at application, business secret, public summons and readings of registration, judgement system, measure of right infringement, and the existing laws etc. At this year's international treaty which may be the basis of the protective law of I.C , USA and Japan disagreed because that non-voluntany license to be admitted a national purpose deemed to be vital, the duration of the protection without the initial date in reckoning, the provisions for the acquirer innocently, and so on. But the technologies such as layout design and I.C. industry are concentrated on a few advanced countries, the law making based on the national laws of these minority is very unreasonable. Therefore, the treaty should be the minimum not the optimum. In addition, due to the rapid develoment of layout design and IC technology, legalizing the technical problem becomes a very difficult job. So, to accommodate the future technical advances treaty revision must be continuously performed. Next, let's consider the effect of legalization on the industry; the effect on the semiconductor industry will be considered first and on the related industry afterward. According to the statistica of international trade, it is reported that S.C. industry is very prospective in comparison with the others for the coming 3 or 4 years. And its weight, as a key industry, is continuously increasing. But, developing countries are very weak in their technical know-how and the research and development capabilities. They have no background with which they can complete with the advanced countries in the international trade market. In other rom both the protection law of IC and the patent law. However, for the long run, the legislation is unavoidable . Above all, if we get down to the negative aspects, ·increasing of price on a chip will be able to decrease the profits, and threatening the infrining against illegal copyright in exporting, confiscation and destroial of products, and the propriety of the patent right, extortion of purchase, can be diffused into whole electronic industries. On the positive aspects, the efforts is accelerated that uplift efficiently for use of semiconductor necessary to manufacture the products. And we can take the chance to make ·powerful technological relation with I.C. companies and live research development for use of custom I .C. rather than general purpose I.e. PROFESSOR KAE DAL KWAeK 71 By now, we have discussed the effects on the position of developing countries in making the protective law. And now, we can consider the following ways for preparing to it. As for enacting the law, we should take into full consideration the problems of holding the law, and collection of the opinion of the industries to try to decrease the effect. In addition, we should endeavor to proceed such enforcement of technology developments as the expansion of technology investments, the industrial educational cooperations, the collection of related intelligences, and the insurance of elites of industry, etc. Although we enact a protective law of I.e. at rightly timing, which is based on the international treaty lead by WIPO, we need particular considerations of goverment policy, taking into account the industry of I.e. which is technology-oriented apparatus industry. Though it is inevitable that the hi-technologies are admitted as the law of intellectual property, we should set aside the measure for the profits of only one's own country and try to set up the sound international trade, being based on the interdependency. LmAL PROTECTION OF CCMPUTER PROORAMS IN JAPAN ONE ASPOCT OF TmOLCGY LAW by Dr. Zentaro Kitagawa 1. An Age of Legal Experiment 1.1 Prevalence of the Copyright Approach In the 1980s, computer programs have been protected under copyright law 1 in many countries • Since computer programs are a technical device for running a machine, an overall application of the traditional copyright framework to computer programs has not been feasible. Modifications and exceptions of such copyright framework have therefore been introduced in order to make this new technology device compatible with traditional copyright doctrine. For example, moral rights, which are intrinsic to the copyright for a literary work, are not necessarily suited to computer programs and, therefore, have been restricted in cases of up-grading and adaptation of a program for a computer of a different type. The legislative trend to protect computer programs by copyright arose first of all to meet the pressing need to protect programs against copying. The traditional copyright framework has been accepted as the most effective method readily available. Whether or not copyright protection is the best means to protect computer programs, this tendency creates a worldwide legal order for the protection of computer programs, because unde'r the regime of the multilateral copyright treaties (the Berne Convention for the protection of Literary and Artistic works, and the Universal Copyright Convention) a country which extends copyright protection to a computer program is obliged to grant protection, under those treaties, to the computer programs of foreign persons whose countries are parties to those treaties. Once such a worldwide legal order is created, it will continue to exist. 2 See, for example, Legal Protection For Computer Programs: A Survey And Analysis Of National Legislation And Case Law, UNESCO/WIPO/GE/CCS/2. (Dec. 17, 1984) 2 The International Bureau of WIPO refers to this by saying that the need for a special treaty on the protection of computer programs is not great, "should the tendency for recognizing computer software as a subject matter of copyright be confirmed and spread". Memorandum of the Director General on Draft Treaty on the Protection of Intellectual property In Respect of Integrated Circuits, IPIC/CE/2; June 28, 1985. 7 4 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOOIES The copyright approach to protection of computer programs has not been understood to be the sole form of protection and, even today, has not escaped 3 critical scrutiny. Some alternatives have been advanced • The French law has actually introduced a unique rule for the duration of protection into the 4 copyright protection system • 1.2 The Copyright Approach Examined In Japan, two attempts at introducing a sui generis type of protection have been made. The most recent one was the 1984 unpublished draft of a "Program Rights Act" prepared by the Ministry of International Trade and 5 Industry (MITI) • This attempt was at once challenged by the 1984 draft to amend the Copyright Act prepared by the Cultural Affairs Agency, the draft 6 which became law one year later • A similar competition between these two government agencies over the protection of computer programs occurred between 1972 and 1973. In 1972, the Study Committee on the Legal Protection of Software, established by MITI, 7 published a proposal for a sui generis statute • This proposal was then criticized by 1973 Report of the Copyright Council (the 2nd Subcommittee), which considered the computer program to be a "work" under the copyright law. It is not intended here to enter into the details of these confrontations between these two agencies, but only to point out the fact that the copyright approach in Japan has been introduced only after exceptionally long debates at 8 the governmental level • One may infer therefrom that the features of a computer program are such that they may still require further consideration, even after copyright protection becomes the statutory form of protection for computer programs in Japan. 3 Brazil and Korea, for example. 4 Twenty-five years' duration of protection under the amended Copyright Act, Art . 48 (Loi no 85-660 du 3.7.1985) s Information Industry Committee, Industrial Structure Council: Aiming Towards Establishment of Legal Protection for Computer Software (Interim Report; December 1983) . 6 Law No. 62, 1985. 7 The main contents of the proposal are the introduction of program registration, the publication of a problem outline, ten years' period of protection, the establishment of an informal dispute settlement mechanism, etc. 8 See, ·as to this legislative rivalry, Z. Kitagawa, Allgemeiner Urherberrechtsschutz oder Sonderrecht fuer Computerprogrammen in Japan? --Ein Zwischenbericht, GRUR Int. 1985. Heft 3, 173 . DR. ZENTARO KITAGAWA 75 In this regard, the findings of the OTA report, "Intellectual Property 9 Rights in an Age of Electronics and Information ", are highly instructive. The report finds that, "the present system of copyright law, which evolved under the model of print publication, may no longer serve to determine the boundaries of ownership in computer-based methods of creation and dissemination," and that "neither copyright law nor patent law has successfully accommodated works of function, such as computer programs. Copyright law may provide either too much or too little protection for 10 them • The OTA report questions the validity and usefulness of the copyright approach, particularly its uniform application. Considering that such fundamental perspectives have been presented in the U. S. A. based on the lengthy and comprehensive survey of the subject, my following view is, I believe, still valid: "Legal protection of software is an international legal phenomenon. As for the appropriate form of legal protection of software, we have not yet passed the time of legal experimentation. The legal experimentations may be based on a traditional framework of law, or they may be designed to introduce a new 'algorithm' into the law. Whatever type of legal protection they may envision, we must try to understand the nature and probable outcome of each legal experiment with professional 11) intelligence and insight." 11 However, now that the tendency for legal protection of computer programs adopts the copyright approach, we had better focus our attention on the efficacy and usefulness of the legal experiments in the form of a copyright framework, without losing much broader perspectives for possible alternatives. 11 I expressed it 1984 as the chairman to the plenary session on the legal protection of computer software at the IV World Computing Services Industry Congress, in Tokyo. 2. Outline of Copyright Protection in Japan for Computer Programs 2.11 Definition of "Program" According to the definition given in the 1985 Amendment to the Japan's Copyright Act of 1970 : "Program" means the expression of a combination of instructions to a computer for the purpose of obtaining a specific result by 12 operating the computer • This definition is broad enough to be interpreted in a comprehensive way. "A combination of instructions" can be embedded in any medium,. from paper to disks to magnetic tape, even to an ROM chip. The program may take any form. It may be "source code" expressed in alpha-numeric language such as Fortran or Pascal and appearing as words, letters and numbers. 9 U.S. Congress, Office of Technology Assessment, April 1986 (hereinafter cited as the OTA report) . l 0 Ibid, Chapter 3 (Findings), p . 59 . 12 Ant. 2, para. 2, item 10-2. 76 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES It may also be "object code", written in a machine readable format, and usually created from the source code automatically in a process of so-called compilation, which ac~ually runs the computer. Furthermore, since no qualifications are added to the definition of "program" with regard to its purpose or function, a "program" includes operating systems as well as applications program. The term: computer is broad, encompassing everything which can perform at least three functions - storage, operation, and control - ranging from supercomputers to wordprocessors to microprocessors. For clarification of the copyrightability of a program, the term "program work" has been added to the examples of "work" 13 (chosaku-butsu) defined in the Act • The Japanese definition of program is rather simple, and does not show us any particularity. This may easily be confirmed by comparing it with some other definitions. Let us take one example from the WIPO's definition. Section 1 (vii) of its "Draft Model Provisions" of 1988 reproduces that Section of the "WIPO Provisions on the Protection of Computer Software" of 1977. It defines a "computer program" as a set of instructions expressed in words, codes, schemes or in any other form, which is capable, when incorporated in a machine-readable medium, of causing a "computer"-- an electronic or similar device having information-processing capabilities-- to 14 perform or achieve a particular task or result • 2 . 2 Moral Rights; Right to Preserve Integrity The Copyright Act sets forth two types of author's rights. One is moral 1 5 rights which protect the author's personal interests • Moral rights are inali enable. Among the author's moral rights, the right to preserve integrity deserves particular attention in relation to computer programs 1 6 The provisions for moral rights under the former Copyright Act may cause some trouble if the right to preserve integrity should apply to computer programs in a literal sence. If so applied, this right would hardly be reconcilable with the phenomenon that a computer program is as a matter of 1 3 Art 10. para. 1, item 9. "Program Work" does not include program-related documents or materials, such as program flowcharts, system design or user instruction manuals. These are regarded as either literary works (Art. 10, para. 1, item 1) or graphic works of scientific nature (Art. 10, para. l, item 6). 1 4 WIPO, Draft Model Provisions for Legislation in the Field of Copyright, CE/MPC/I 2-III, para. 28 . 1 5 Art. 18-20.(Chosakusha-jinkakuken) 1 6 Art. 20. DR. ZENTARO KITAGAWA 77 fact, often modified and improved by its user (up-grading, debugging) . The former Act, of course, paid attention to special circumstances and provided generally that the right to preserve integrity should not extend to those modifications which were deemed unavoidable in light of the nature of the work 17 to be protected as well as the purpose and the manner of utilization • In order to make it clear that such modifications should continue to be allowed, the amended Act specifically sets forth an exception for computer programs: Modification of "program work" is allowed if it is necessary to enable the computer program to be utilized in a specific computer in which such program could not otherwise be utilized, or if such modification is necessary for more 18 effective use in a computer • Debugging and up-grading of a computer program are examples of such modification. Also permitted is modification of a computer program to make it "interoperable" with a computer of a different type and extending the function of an original program for more efficient utilization of the program. 2.3 Rights of Reproduction and Adaptation The other type of author's rights is copyright which is an exclusive right to protect the author's economic interests in the use of the work. For computer programs, the most important right is the author ' s right to reproduce a com~uter program in a tangible form, e.g., a magnet ic tape or floppy 1 disk • Also important is the right of adaptation which is the right to 20 translate, transform, or otherwise adapt one ' s program work • The author's rights of reproduction and adaptation will necessarily impede the proper utilization of a computer program if they are applied to a computer program without any restriction. The reproduction of a back-up copy of a licensed computer program or the adaptation of a licensed program for the licensee's computer or the conversion of a licensed source program into a object code, which is deemed to. be a reproduction, are necessary to support the proper utilization and the effective marketing of computer programs. Failure to fully protect the author's rights of reproduction and adaptation in such instances does not unduly hurt the author's interests. These restrictions on the author's rights of reproduction and adaptation may be regarded as an 21 inherent restriction of a copyright. The amended Act reads as follows : "The owner of a copy of a program work may, to the extent deemed necessary for 1 7 Art. 20, para. 2, item 3 (now item 4 under the amended Act) . 1 8 Art. 20, para. 2, item 3. 1 9 Art. 21. (fukusei-ken) 20 Art. 27. Chon-an-ken) 2 1 Art.47-2, para.l, 1st Sentence. 7 8 ASI~ AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES such owner to utilize the work in a computer, reproduce or adapt the work concerned (including the reproduction of a derivative work made from such 22 work)" • It must be noted that the amended Act permits only the owner of a copy of a program to reproduce or to adapt the "program work." As for the author's 23 right to lend copies of a "program work," no restrictions are made • The reasons for this are that business practices concerning lending are different depending on either the types of program works to be lent or the purposes for which program works are lent; such variety makes uniform regulation on this subject inappropriate. Consequently, the Copyright Act has left the solution of this issue to the parties to decide whether to adopt a contractual restriction on the author ' s right of lending. 2.4 Idea and Expression Dichotomy The right of reproduction is infringed when a slavish copy of a computer program is produced. This is quite clear. In cases where a program has been modified by somebody else, if a later produced program is substantially similar or identical to the already existing one, the second program is, unless it is independently created, an illegal reproduction. If the second one is different from the first, there is no infringement. The traditional and fundamental paradigm in copyright law is the distinction between idea and expression. This is called "idea-expression dichotomy". It holds that not the "idea" underlying the program work, but its expression is protected. Clarity seems to exist in the rationale behind the unprotectability of an idea. Extension of copyright protection to ideas would be detrimental to the development of art, literature, and science, which is the very purpose of copyright law itself. The question of illegal reproduction depends therefore on whether or not the expression in the second program is substantially similar or identical to the first one. We have not yet succeeded, however, in establishing a set of workable rules or standards for analyzing and evaluating the expression in programs. This is a new field, which requires interdisciplinary study between law and computer technology. The critical point is that the term 'expression', which is a basic copyright concept, is entirely strange to computer programmers. They do not determine something as the expression of a computer program at any stage of programming. They may be aware. that their ideas are not protected, but that the expression, which seems to them an irrelevant element in programming is protected, and are frustrated by the lack of legally operative rules or standards for determining which part of their programs is 22 Copies of "program work" thus made may not be distributed, and such work may not be made available to the public by use of those copies. ·Furthermore, maintaining those copies in violation of Art.47-2 is not allowed. See Art.49, para.l, items 3 and 4. 23 Art.26-2. DR. ZENTARO KITAGAWA 79 expression. It is equally true that lawyers, most of whom are not trained in software programming, find it very difficult to identify some part of a computer program as i~s expression in the sense of the law. In this regard, widely accepted would be the view that the copyrightable expression is not be limited to the strict line-by-line program code. Otherwise mechanical and trivial changes in a computer program could make its expression different, thus easily enabling anybody to escape liability for infringement. The view that the copyrightable expression is extended, for ·example, to the logic, design, structure, or performance of computer programs is often supported, but not free from criticism, since it sounds, at least to many lawyers, almost tantamount to saying that copyright protection extends to "procedure, process, system, method of operation, concept, or principle". These are, however, those elements of computer programs which are specifically excluded from copyright protection, because they do not belong to the 24 expression of computer programs • The recent discussions about the protectability of "structure, sequence and organization" in Whelan Associates, Inc. v. Jaslow Dental Laboratory, Inc. 25 have added some new aspects to the above question of the expression in computer programs, but, in my view, have not clarified the legal darkness around it. With regard to the exceptions to protectable expression, the Copyright Act provides that the copyright protection afforded to "program work" shall not extend to the pro~ramming language, rules (kiyaku), or algorithm (kaiho) 2 used for creating it • Indeed, these exceptions are necessary because since a program can only be completed through a variety of technological intermediaries (e.g., flowchart, algorithm) and with the help of programming language or interface information, the idea-expression dichotomy in computer programs does not become very meaningful without identifying which of these matters belongs to the expression of a program. These exceptions have been .introduced as the result of an attempt to analyze and evaluate computer programs within the legal framework of copyright protection. Only to the extent that computer programs sufficiently fit that framework can the rationale for these exceptions be properly understood. 24 U.S. Copyright Law, Sec. 102 (b). This was so provided by the 1976 amendment. zs 797 F. 2d. 1222 (3rd. Cir. 1986), cert. denied 107 S. Ct. 877 .. Z6 Art. 9 para. 3. The meanings of programming language, rules or algorithm are provided for in the following items (1) (2) and (3): (1) "Programming language" means characters and other signs and the system thereof which are used as the means to express a program. (2) "Rules" mean the special conventions in a specific program with regard to the use of the programming language referred to in the preceding item. (3) "Algorithm" means the method to combine instructions to the computer in respect to a program. 80 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 2 . 5 Corporate Creation The Act has adapted a more straight forward doctrine of corporate authorship for a computer program than that for other works . Corporate authorship of a work is, in general, admitted in cases where, on the initiative of a juridical person or other employer, a work is made by a person engaged in the business of the juridical person or other employer if such work is made public under the name of such juridical person or other employer. In such cases, the author of the work shall be deemed to be that juridical person 27 or employer • The requirement of publication does not apply in the case of 28 computer programs , because completion or use of a computer program does not necessarily presuppose its being made public. This makes the publication requirement inappropriate for corporate creation of a computer program. 2.6 The Use of an Infringing Copy Under the Copyright Act, copyright does not extend to limit the "use" of a computer program in a computer. However, if this should extend even to cases where an infringing copy of a computer program is used in a computer, the result would be unjustifiably detrimental to the author's interests. In the case of works other than program works, such use of infringing copies usually accompanies acts which also make such copies available to the public by distribution . These acts are, then, deemed to be an infringement of the 29 copyright • The use of an infringing copy of a program work is, however, usually not accompanied by acts which make it public. The Amended Act takes notice of this special feature of computer programs by declaring that the use for business purposes of a copy of a program work in a computer which was made by an act which infringed the copyright on said program work, shall be deemed to be an infringement of the copyright in the program work only when such fact of infringement was known at the time of obtaining rights to use the 30 copy" • Ignorance of the fact of infringement is a defense . 2.7 Registration of the Date of Creation The copyright owner may obtain registration of the date on which the work concerned was first published or first made public. The presumption that this is the date of first publication or first making public follows from such . t t• 31 reg~s ra ~on . Since computer programs are usually utilized without being published or made public, the copyright owner of a computer program does not have much incentive to register such date . Instead, the amended Act introduces a new system of registration of the date of creation of a program work, with the 27 Art. 15, para. 1. 28 Art. 15, para. 2. As expressly provided for in the paragraph 2 of Art. 15, the corporate creatorship can be changed by a agreement. 2 9 Art. 113, para. 1, item 2. 30 Art.113, para .2. 3 1 Art. 76 . . DR. ZENTARO KITAGAWA 81 presumptive effect as to such date3 z. No registration of such date is allowed after six months have passed from the date of creation of a program 33 work • In accordance with Article 78-2 of the Copyright Act, which provides that registration of a program work shall be separately provided for by law, the Act concerning Special Provisions for Registration with Regard to a Program Work ["Program Registration Act"] was enacted in 1906 and entered into force on January 1 , 1987, although most of the provisions concerning designated 34 registration organs had entered into force earlier, on October 1, 1986 • The Program Registration Act contains provisions on registration procedures, designated registration organs, and penalties. 3. An Evaluation of the Copyright Approach 3.1 Introduction As the current tendency for protection of computer programs adopts the copyright approach, it is not appropriate to consider a grand design for an ideal form of protection. Of importance, in the present circumstances, is an in-depth analysis of copyright protection in the light of the special features of computer programs. This may eventually crystallize potential perspectives which could i n the future contribute to the evolution of a new paradigm in the field of technology law. 3.2 A Review of Program Copyright Up to now, copyright law has developed its own legal rationale which is 35 best suited to so-called works of art • We may assume that the author of a work of art wants to express his or her work in an externally recognizable way, such as print publishing or recording. This is not the case with computer programs. The externa~ization of computer programs themselves is not intended by their authors; it may even have no meaning to their authors. Computer programs may be characterized as works of are useful articles 3 6 which may be function • Works of function either physical objects, such as punch cards for a loom, or written works, such as instruction manuals. 3Z Art.76-2, paras.l and 2. 33 Art.76-2, para.l. proviso. 34 Supplementary Provisions Art. 1. See K. Pilny, Die Registrierung von Computer-Software in Japan -- Ein neues Gesetz und seine Pranis, GRUR Int. 1988. 26. 35 Works of art are "works created for their own intrinsic value - whether that value is primarily aesthetic, entertaining, or educational in nature." (The OTA report, op. cit. p.66). 36 Works of function are "those works that .use information to describe or implement a process, procedure or algorithm". {the OTA report, op. cit. p . 78.) 82 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Computer programs are hybrid works of function - they physically implement and control a process, while employing words and symbols. They are hybrid, because they have two aspects in themselves - the descriptive aspect and the functional aspect 3 7 . - Since the nature of computer programs does not vary from country to country, the OTA report will be one of the most interesting studies on this subject. Whether the conclusions reached are acceptable or not, it is urgent to analyze what the report suggests for us in applying the copyright law to computer programs. The recent "Draft Model Provisions for Legislation in the Field of Copyright" (1988) WIPO express "some hesitation concerning the 38 recognition of computer programs as literary and artistic works" • An analogy that computer programs are just like a "book" we cannot read seems to 3 9 illustrate their technological as well as legal speciality • In this regard the division of copyrightable works into three categories: works of art, works of facts and works of function is of particular interest. Copyright protection presupposes originality of a work. The term "originality" in some countries, such as in the U.S.A., just means that the work is not a copy of another work. In some other counties, as in West Germany, a higher standard of originality is required for protecting computer programs. Namely, a recent decision rendered by the Federal Highest Court of Germany held that copyright protection can be claimed for computer pro~rams 4 which are products of an obviously above-average creative achievement • This makes obtaining copyright protection for programs far harder and therefore subjects the West Germany holding to strong criticism. Yet this case has raised the question of the standard of originality required of computer programs. As shown in many recent statutory developments in many countries, special principles of or exceptions to traditional copyright protection have been introduced into the law of program copyright. Now, a comparative analysis of these exceptions is needed and an attempt should be made to find out the rules and principles underlying them. Even if no statutory exceptions or special provisions are provided, there may exist latent gaps to be filled in by courts and doctrines. In those instances, it is not recommendable simply to apply the traditional copyright law to computer programs. There remain many legal issues to be studied on an interdisciplinary basis. 37 See the OTA report, op.cit. p.80 38 WIPO, CE/MPC/I/"-III, p. 13, Comment 68. 39 SOFTIC, Proceedings on International Symposium on Legal Protection of Computer Software (1987), p .253, 256-7 (Kitagawa's Comment). 40 Inkasso Programm in 1985 GRUN 1041, 17 IIC 681. DR. ZENTARO KITAGAWA 83 The problem of reverse engineering is one of these issues. There is a gap regarding this matter in modern copyright laws. Reverse engineering in general, means the process to analyze and evaluate existing technology and to find its underlying technological information. It means, in its practical sense, the reproduction of another technological product resulting from the use of such act of reverse engineering. This type of activity is allowed in the field of patented products for the purpose of conducting an experiment or 4 1 research • In the chip protection legislation, reverse engineering is also subject to statutory regulation. The doctrine of reverse engineering was first 42 introduced in the U.S.A. based on an established industry practice • The Japanese law provides that a circuit layout right does not extend to acts conducted solely for the purpose of analysis or evaluation of a semiconductor 43 integrated circuit • The U.S. law provides, in addition to that aspect of reverse engineering, that one may incorporate the result of such analysis or 44 evaluation in an original mask work which is later distributed • The new WIPO Treaty contains more detailed, but in principle similar, provisions for reverse eng1neer1ng. . 4 s . With regard to computer programs, no such industry practice has grown out of competing mainframers. Yet the concept of reverse engineering has made its way into the field of computer programs and is now one of the most prominent legal problems concerning program copyrights. Such recent changes are due to the extensive and integrated use of computer systems in various sectors of our society. A simple answer to reverse engineering will be incomplete, because there are various kinds of reverse engineering of computer programs. To make this 46 clear, let me refer to a recent Berlin symposium on reverse engineering • The symposium first analyzed the technological aspects of reverse engineering, then pointed our some legal issues, and finally discussed two proposed legal models. In two papers, technological aspects, which were analyzed. As for its purpose, reverse engineering is conducted to develop a compatible product which competes with an existing product. It is also necessary to satisfy the users' needs for making various vendors' programs interoperable and for 41 Patent Act, Art.69 (1) . 89-194. 42 R. Stern, Semiconductor Chip Protection, 1986, p.l 43 Act Concerning the Circuit Layout of a Semiconductor Integrated Circuit of Japan (Law No. 43, 1985), Art.l2 (2). 44 Semiconductor Chip Protection Act, Sec. 906 (a) (1) (2). 45 Treaty on Intellectual Property in Respect of Integrated Circuits (May 26, 1989), Art.6(2) (a) (b). 4S International Symposium on Legal Protection of Software in Berlin, March 29-30, 1989. The proceedings wiil be published in the future. 84 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES developing a converter, which makes different application programs interoperable, or makes data on different storage media portable to each other. Furthermore, reverse engineering is used for program maintenance and for discovery of an infringements. Reverse engineering is, therefore, a multipurpose activity. As for techniques of reverse engineering, multiplicity should be kept in mind. Some are, for example, study of manuals, test runs, connection tests, line traces, storage media dump, memory dump, reverse assemble, reverse compilation and analysis of source programs. In some of these techniques the program to be reverse-engineered is treated as a "black box" . In test runs, for example, a repeated comparison of data fed to the program with the program's outputs may often show necessary target information such as protocol specifications. No program code is thereby reproduced. The same may also be said of such techniques as connection tests, line traces and storage media dump. An shown above, reverse engineering in the sense of technology is divided into several types. Thus, from legal points of view it may be analyzed only after the type of reverse engineering has been ascertained. Many lawyers have been inclined to regard reverse engineering as a single technological act and interpret its legal nature as such. The Berlin symposium, I believe, has shown that the gap in the law in respect of this matter is to be filled in accordance with each type of reverse engineering. 3.3 Correlation of Technological Terms and Legal Terms Computer technology requires its own special expertise, as well as a large number of technical terms which layman, including lawyers, find hard to understand. Terms such as protocol, microcode, algorithm, interface, reverse engineering and loading are examples. Nevertheless, lawyers need to understand the meanings of such technological terms whenever they have to handle cases concerning computer programs. For them, these technological terms might at first appear as precise as many technical terms in the field of science and technology. On the contrary, as seen above in the case of reverse engineering. On the other hand, many of them are not always precisely defined, much legal jargon sounds mysterious or even awful, to experts in computer science and technology. A good example of such imprecision is the doctrine of the idea-expression dichotomy in copyright law. In the field of technology law we therefore continually encounter the need for "translation" of technical terms of computer technology into legal terms. For these new terms either an existing legal term must be recycled, an existing technological term must be adapted, or a new legal term must be created. In any event, to avoid misunderstandings and to understand technology-related matters correctly, the problems of such correlation and accommodation become an essential part of copyright law with respect to 47 computer programs • 47 See Kyoto Comparative Law Center, Comments on Chapter 5 of the EC Green Paper on Copyright and the Challenge of Technology, Computer Law and Practice, Nov . /Oct. 1988 p . 70-71. DR. Z.ENTARO KITAGAWA 85 The following remarks are just some of the threshold issues in this regard. The first issue is whether or not so-called "interface" is protected under the copyright law. Around the time of the amendment of the Copyright Act of Japan, there were two opposing views. One contended that interface belongs to the public domain, the other that it should be protected to the extent of its expression. However, it is now evident that at the level of computer technology, interface will be divided into several kinds of matters - 48 among others, language, rules, or programs • "Language" includes programming language, job control language, operator command and machine language; "rules" includes data formation storage medium and communication protocol; and "program" includes interface between programs, compiler, OS, and interface with peripheral equipment. Therefore, the legal problem of an interface can appropriately be handled only after its technological ramification has been ascertained. Then follows the legal correlation, as above mentioned. "Loading''' is another example where correlation is poor. "Loading" is, according to one view, reproduction of a computer program. Another view criticizes this. In connection with this confrontation, the problem of the right to use arises. If such right should be added to the catalogues of author's rights, loading would be a typical case of use. However, the amended Copyright Act has not included use, except for the unusual situation in which an infringing copy of a computer program work is 4 9 used • Furthermore, several types of use will soon require clarification under the amended Act, for example, the use of a computer program loaded in a host computer or a workstation at many computer terminals or at other workstations in an on-line system or the use of a program once stored in the external memories of several computers. As these examples show, the electronic and technical processes of running computer programs are another area of 50 interdisciplinary study between law and technology • Returning to the idea-expression dichotomy, this is a unique conceptual framework, a doctrine which is entirely unknown to many experts in computer technology. If such experts were asked what is the test for determining the identity of a computer program, it never occurs to them to think about the "expression" of their programs. The conceptual gap between technology and law has not yet been filled with a workable theory. In this sense, correlati on has not been successfully made here. Such workable theory, in my view, will be produced by coordinating the legal concept of expression with some technological intermediate. Since the computer program is a function-related product, its function may serve as such intermediate. 48 SeeM. Ohashi, Legal Analysis of Interface, Juristo. No. 865 p.92 (1986 . 7.15.; Japanese) 49 Art. 113, para. 2 (see 2.6 above) so See Kyoto Comparative Law Center, ibid., p.71. 86 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES There are more issues to be mentioned, but the issues mentioned above will, I believe, suffice to show us the existence of the problem of correlation and, at the same time, the difficulty of solving them solely by way of law. 4. Concluding Remarks At the beginning of this paper I started with the understanding that legal protection of computer programs is still in an age of legal experimentation. As an example of this I have explained the outline of the Copyright Act of Japan as amended in 1985, and tried to clarify what kinds of new legal issues arise or will arise under the traditional copyright doctrine. Some of these issues have not yet found any proper answer . Also, the problem of correlation of technological terms and legal terms needs interdisciplinary study. As is evident from the analysis in my paper, Japan has just entered the age of legal experimentation and is also true of many other countries. In addition, we should not forget the fact that we have entered the age of unprecedented technological innovation. Again, such innovations bring about legal problems whose solutions may or may not be found within the 51 boundaries of existing legal devices and frameworks • The so-called "interactive computing" is a good example. CAD, interactive computer graphics, computer-processed music, interactive fiction - these are the result of interactions between a person and a programmed machine. How can the rights in these products of interaction and those in the program itself be separated from each other? The ownership and originality must be reviewed. It has been the purpose of this paper to present some basic aspects of the interaction between law and technology. More detailed considerations will be my next target. 51 The OTA report, Op. Cit. p.69-73. COPYRIGHT LAWS AND THE NATURE OF COMPUTER SOFTWARE by Mr. Ashok Bhojwani 1. Introduction 1.1. Computer software has a nature which is different from that of other products, services and intellectual property. Existing laws relating to intellectual property protect some of the facets of software, but not all. There is a need to understand the nature of software so that new laws can be designed. These laws should take an integrated view of computer software. If possible, the design of these laws should take into account the fast and furious developments taking place in the field of information technology, so that the laws are not obsolete even before they are implemented. 1.2. This paper describes some aspects of the nature of software. It discusses what needs protection and where the real value of software lies. A balance is also suggested between protection of the creative work of software developers and their liability, responsibility and accountability. 1.3. Some important issues in the laws of intellectual property are examined in this context. A conclusion is drawn that Copyright Laws, as they exist, are not quite appropriate for the protection of computer software. In fact we may be protecting the wrong kind of things, may be for the simple reason that we do not know how to protect the really valuable aspects of software. 1.4. The ideas in this paper are a refinement of a presentation made by the author at a WIPO Forum in Geneva in September 1988. The author acknowledges with gratitude the interest taken and the time and effort of administrators, lawyers and software professionals to critique the thoughts expressed in that paper. 2. The Nature of Software The word software means different things to different people. The scope of the word, in all its inflections, is important. It defines the frame of reference, which colours our thinking and the images that we conjure up when we encounter the word. The image can be that of intell·ectual property (e.g.a book), a service activity (e.g.writing of programs), goods (e . g retailing of a software package) and, perhaps, other analogies. Most analogies tend to be imperfect or limited. One way to appreciate the nature of software is to understand its life cycle, the major elements of which are described in the following sections. 2. 1. Functional Capability This is the creative part of the life cycle and defines what the software will do. It serves to fulfill a need. An idea is easily replicated. There is, apparently, no legal protection for ideas. One Cannot, for example, copyright the idea of a software package intended for word processing. 8 8 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 2.2. Look and Feel Visualization of look and feel is an extremely creative process. Frequently, this is the factor which makes the difference between success and failure in the market. Taken together, the idea and the look and feel constitute the architecture of the software, much as they would for a building. This includes, for example, the style of interaction with the software using the keyboard and the mouse, the actual layout of the screen image, etc. A successful software package has an architecture which combines elegance, aesthetics and functionality. The architecture is easy to copy. In keeping with the cliche that imitation is the best form of flattery, there is much flattery in the world of software. The architecture cannot be protected by mechanical or electronic methods. It is there for everyone to see. In fact most software packages produced in the recent past have significant architectural similarities. Recently some standards have emerged, for example IBM's Systems Applications Architecture, which, inter alia, defines the look and feel of software for a broad range of IBM systems. 2.3. Design and Programming. The final product may take the form of the software package that the consumer acquires in the market. Behind it lies a series of steps. There is the software design which defines how the software will meet the architectural specifications. This is followed by the actual programming in a programming language like C. Ada, Pascal, Cobol , etc. 2.4. Reusable Code Usually the programs are written by human programmers. Often such programs include sections of prewritten programs which may have been written by others. To pursue the analogy of a building. such programs are like the standard fittings that one would use while constructing a house . Reusable code makes the job of the programmer much easier. As much as 70% of a software package may consist of reusable code. This would be termed as plagiarism in the world of book publishing! Whereas in the software universe this is just another case of not having to reinvent the wheel. Many software packages also use standard libraries of programs which are licensed by the software developer from other software developers. This has important ramifications on the laws of copyright. 2.5. Non Unique Literary Expression The programs written by the programmer in a source language like Cobol have often to be compiled into object code which is readabl e by the machine. It is important and useful to note that different compilers produce different object codes from the same source program. Each of these object programs will perform the same function. It is also possible to decompile an object program. The source program so produced will appear to the lay person and to the expert as being totally different from the original source program. Therefore, it is feasible to alter the basic form and literary expression of a computer program using automated software tools such as compilers and MR. ASHOK BHOJWANI 89 decompilers. While the basic form and expression change, the functionality does not. This, perhaps, implies that a software package is not unique due to its literary representation but rather in terms of its look and feel and its functional capabilities. This makes computer programs quite different from most other forms of literary and artistic expression. 2.6. Automatic Program Generators Recent advances in software technologies are making automated programming a reality. These new technologies allow automated generation of software and are known by names such as Automatic Program Generators. These program generators produce computer programs from the functional specifications provided by the user. Therefore, the final literary expression of the software is produced in a fashion quite remote from the person who visualized the functional capability and the look and feel of the software. 2.7. Multi-author, Multi-national Programming Generally books have authors who are easily identifiable. This may not be the case with computer software Computer Programs are often written by groups of programmers. For large software projects, involving many hundreds or thousands of person-years of work, the computer software may be authored by teams of programmers, working in different countries. The individual programs are then integrated together into a software package. The final package may contain significant portions of reusable code. Therefore, the final literary expression may have multiple authors residing in different countries and governed by different laws protecting the software. 2.8. Making the Invisible Visible The design and program are made visible in the form of user and system manuals. Without such documentation, the software would be totally invisible. Even these will be less and less visible as time goes on because much of the documentation will be produced in machine readable form. Paperless documentation, if you will . With the introduction of hypertext and hypermedia and the use of expert systems these documents will also take on a rather on a rather nebulous and transitory form. 2 . 9. Production/Manufacturing Manufacturing of a software package means its duplication from one floppy diskette to another. Other media and technologies could also be used, such as magnetic tapes, compact disks and ROM (Read Only Memory) chips. Software may also be down-loaded using data communication facilities . Unlike many other manufacturing processes, there is no significant investment in work-in-process inventory. which consists primarily of floppy disks or other media. The valuable portion is the invisible software. In this sense software production is similar to the process of duplicating audio and video tapes. 2.10 Copy Protection 90 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES During this process of duplication, the software manufacturer may introduce some means of copyright protection. This may take the form of using locking mechani sms which do not permit copying of the software. For example, specially designed floppy diskettes may be used which cannot be copied using the standard software provided with t he comput er. I have yet to find a lock for which human i ngenuity has not discovered a key! Some of the best selling software packages for the IBM PC are those which unlock var ious copy protection mechanisms. It has been found that, for PC software, copy protection provokes consumer resistance. Therefore, most widely marketed PC packages are now available without copy protection. 2.11. Licensing Title does not pass to the customer. The customer does not buy the software. Software is normally licensed. The license gives the licensee the right to do certain things such as make copies for backup purposes or permit a specified number of users to use that copy of the software. For low-cost software packages, like for Personal Computers, the license, typically, consists of a printed License Agreement which is packed in a sealed plastic pouch along with the floppy diskettes. This Agreement, visible through the clear plastic, warns the customer that opening the pouch means acceptance of the Agreement. Often the pouch also contains a Registration Card which may be sent to the licenser by the licensee. For expensive software the license agreement may need to be signed in advance by t he licensee. The license may even be withdrawn by the licenser under certain conditions. 2.12. Distribution Once the software product is ready it is marketed through a variety of distribution channels. This requires advertising, comparisons with competing products, appropriate packaging, pricing and distribution through retail or other outlets. Some software is sold across the counter in retail shops. Other software packages have to be licensed directly from the producer of the software. Sometimes, soft ware packages are bundled with other equipment. For example, a printer, may be sold with a free copy of software to allow fancy printing. The fact that the copy is free does not change the fact that it is licensed to the buyer of the printer. A recent trend has been to distribute software via data communication links- which may cross nati onal and state boundaries. Software has also been distributed over the ai r-waves, for example by the BBC, as part of its educational efforts . 2. 13 Use of software This is the utilitarian step of the process. Unlike many other intellectual properties, computer software is used for var ious purposes. Using computers means using the computer software. The user may use software which resides in the same location or a different place. In fact, over computer networks, the user may not even be aware of where the software is MR. ASH OK BHOJWANI 91 physically located. Recent developments are making it possible for different portions of the software to reside in different computers, which may be physically located in different countries and connected together in a network. As a result; the concept of software has become even more vague . It is difficult to find an analogy for this kind of situation. It is as if you are listening to a live concert by a symphony orchestra whose string section is located in Vienna, the percussion instruments in Lagos and the wind section in New Orleans! 2.14 Redistribution/Resale A computer centre could install a software package and permit many users to use the same copy of the package over data communication channels. In some ways this is analogous to the concept of cable television, except that the users could be located in different countries. When a used computer is sold, the software usually goes with it. Most computer users do not understand the copyright implications of reselling the software. 2.15 Support After the customer licenses the software, there may be a need fort support. Such support may include training, problem reporting and error correction services as well as access to updated versions of the software. Normally, support is provided only to those who have registered as licensees of the software. Software goes through a continuing process of development. Usually, a new version or release of software is issued by the software supplier every six to twelve months. Some of these new editions are offered free to customers, while others are made available at a charge. Again it is difficult to find an analogy in other intellectual properties. Some say that software is like the music in an audio cassette. This is true to a certain extent. But have you ever heard of continuing updates to your music cassette? How about training and a manual to understand how to listen to each piece of music? Other facets of software and music may also be compared. 2.16 Life Cycle Typical life cycles for computer software are up to 4 years for PC software and up to 10 years for software for larger computers. Software becomes commercially non viable as newer and more attractive architectures replace it. New software products are better able to exploit the latest hardware technologies which offer better capabilities in terms of speed, cost, function, reliability and miniaturization. The product life cycles of computers are now varying between 2 and 4 years. This time frame needs to be considered when designing laws to protect the commercial and intellectual rights of owners of computer software. 92 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES It is useful to compare t he software life cycle with that of the life cycle of other products, services, technologies or intellectual properties. We like to listen to old musical work, we enjoy poetry and books some of which have a magic that goes on and on over decades and even centuries. One cannot say this about software, which is a relatively perishable commodity. Visualise software and you visualise nothing. It is like a dream. It is sometimes easier to define intangibles in terms of what they are not. Software is not manufactured. It is invisible, cannot be touched or felt . It cannot be constrained within national boundaries. It is neither a literary work nor an art form. Aesthetics is not its goal. Software has a metaphysical existence. This leads to difficulties in explaining it to lay persons. This is also the reason why those who understand and control software could wind up being the priests of the Information Age! Software has been in existence for less than 50 years. Perhaps we still need time to understand and comprehend its scope and variety. Perhaps this is the reason why we have chosen to protect it under copyright laws. However, as we better understand the nature of software we would realize that the needs for protection are different. 3. Reasons for Protection 3.1. Enlightened Self Interest At a WIPO Seminar held in New Delhi in 1987, officials of the Government of India stated that respect for laws on intellectual property was extremely important for India because of major research and production thrusts in the areas of software development, design of LSI/VLSI/ASIC components and biotechnology. For example India has plans to export computer software worth USS 1000 million by the next decade . It is in the enlightened self interest of India to protect intellectual properties. Software companies also see the need to protect computer software. On the other hand some users and countries may not feel the compulsions of such enlightened self interest. This has special relevance when the cost of software is perceived as being inconsistent with the rest of the economic standards in a country. 3.2. Encourage Creators One belief is that unless t here is a commercial benefit, creative people may not come forth to produce software in sufficiently large numbers. There is a counter view. Most authors continue to write books and many artists continue to create paintings for commercial benefit but for the fulfilment of their inner drive and passion. I think both beliefs have validity because in some respect software is similar to a book, and in others to a work of art. Yet it is fundamentally different in its other facets. I can tell you from experience that it requires a creative passion to develop the idea of a new software package. I also feel that, at least in the area of personal computing, a new age of renaissance has dawned. People are writing extremely creative software with commercial profit being a secondary motive in many cases. MR. ASHOK BHOJWANI 93 3 . 3 . Protection of Commercial Interests The protection of commercial interests for software extends beyond the individual. Corporate interests are involved in many cases. Unlike the book trade, in the software business I would guess that the bulk of the royalties flow to corporations and not to individuals. We have the Lotuses and the Microsofts but not the Michael Jacksons and Agatha Christies. The authors of software are, typically, quite anonymous. In fact most software packages are developed at enormous cost by groups of programmers. The costs of marketing run into the tens of millions of dollars. Furthermore, the software needs protection in multiple countries. It has been recognized that information is a resource, which is as important as the traditionally accepted resources of land, capital, machines and people. A great deal of profit arises out of the processing and analysis of information. In order to process large volumes of information we must use software. Effective use of good software gives a strong competitive advantage. Banks, air-lines and manufacturing companies have used information systems for strategic advantage. Estimate of the losses to US companies, due to software piracy in 1985, range from USS 20 billion to USS 60 billion (I believe that the bulk of the piracy also occurs in the United States) This is equivalent to a loss of tens of thousands of jobs in the US market. Therefore, software protection, in addition to being a matter of intellectual property is an important trade issue. Software piracy concerns have already led to some unpleasant trade consequences in international relations. 4. The Why of Piracy There are certain perceptions and attitudes which prevent the acceptance and enforcement of intellectual property laws . 4.1. High License fees On some computers you have to pay more for the software than for the hardware . It is expected that in the near future IBM will realize greater revenue and profit from software than from hardware. The invisible and intangible will cost more than the visible and the tangible. Unlike audio and video tapes, there is a wide variability in price of software packages. On PC ' s a Word Processing package may cost only $100, while specialised software for computer aided design may cost $5.000, and software for treatment planning of cancer may cost as much as $40,000. This, I believe, creates a problem in terms of consumer perceptions. The consumer perceives a cost of the package in terms of the visible, i.e. the floppy disk, the manual and the packaging. The invisible part is not given a high value. An immediate and inevitable comparison is made between the cost of a typical prerecorded audio or video tape. Within this framework, the cost of most software packages is perceived as being unreasonably high. 94 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 4.2 Price and Piracy High price is one of the factors which encourages software piracy. The buyers must perceive the price as being reasonable and legitimate. These words can and do arouse emotions. It is as if the pirate is calling the legitimate owner a plunderer or neo-colonialist or other such phrase in vogue. Will a fair value reduce piracy? I believe that it will. Book publishers have low cost Asian Editions of books for students. Can we have a similar concept for software? This will not reduce piracy in the developed countries. However, it will allow consumers in the poorer countries to afford the software. 4.3. Cost/Benefit Perception Real productivity in using information technology comes from software. The pricing of software is generally based on what the market can bear in the developed countries. Recently there has been a welcome trend to distribute software based on the cost of production. Software companies tend to charge the same price in the developing countries as they do in the developed ones. Cost/Benefit justification becomes more difficult in the developing countries because the value of the gains in productivity are smaller in absolute terms. The question arises as to what is the fair value? This value is related to the economy of each country. Thus, one may be willing to spend $500 on a software package to improve the productivity of a financial planner earning a salary of $5000 per month. But what would one be willing to pay to obtain a similar percentage improvement in the productivity of a planner earning $500 per month? Clearly it becomes difficult to argue that a price considered fair in USA is also fair in all other countries. This is one of the problems. that software companies and consumers need to address before governments get into the act of regulation and control of software prices. It really boils down to the difference between a necessity and a luxury. It is perceived as yet another example of denial of opportunity to poorer segments of society. 4. 5. Balance of Payments Purchase of legal software imposes balance of payments problems for the developing countries because the United States dominates the field of software, controlling, I would estimate, in excess of 70% of the word trade in this field. I am sure it is tempting for some countries so turn a blind eye to software piracy. One of the rationalizations trotted out is that the benefits of information technology should flow to everyone. 5. Some Legal Issues Lawyers and software people must learn to understand each others language if innovations are to be brought about in legislation dealing with software. MR. ASHOK BHOJWANI 95 There is a need for a new set of intellectual property laws intrinsically suited to the protection of computer software. Many countries appear to have force-fitted computer software into the framework of Copyright Laws just because they happen to be the most convenient legislation around. Also, perhaps those who advocated the coverage of computer softwareunder the laws of copyright did not, at that time, understand the real nature of software. However, with the almost universal use and application of computer software I am sure that there is much better understanding of the nature of the beast. Therefore, I believe that the time has come to work out sui generis laws for computer software. 5.1. What needs protection? 5.1.1. There is a commercial value to much of the software development life cycle. Different groups of people may perform different parts of the software development activity, even at geographically separate locations. For example, the idea of the package could be developed and documented in San Francisco, the design could be performed in Tokyo, the programming and draft documentation prepared in New Delhi, the customer-ready manuals printed in Singapore and the marketing and support provided in USA and Western Europe. 5.1.2. Most software developers will agree that given the idea and a definition of the look and feel of a software package, it is not too difficult to write computer programs to realize that concept. None of these expressions would infringe on each others' copyright because they would have been written independently of each other. This kind of reverse engineering of computer software is fairly simple. This is the reason that successful packages breed imitations. In the software business, the idea and the look and feel of software under development, are normally kept secret until the package is released in the market. A major portion of the value of a software package is in the idea and the look and feel of the package. 5 . 1.3. Copyright laws provide protection to the final expression of each stage, that is, the concept document, the design documentation, the actual sequence of program instructions (computer programs) and the supporting manuals are protected. However, as we have already discussed, different compilers produce different object code and the process of decompiling compiling can totally alter the physical expression of the package. Therefore, protection is provided to the non-unique portion of software, and that too to a single literary representation. 5.1.4. The idea and the look and feel of software are not protected under the copyright laws of most countries. There is little doubt in my mind that these are commercially valuable. Perhaps we do not know how to protect such high level intellectual activities. It is possible to take a view that such intellectual activities should be in the public domain much like the great ideas in philosophy, economics, sociology and the natural sciences . We do not, for instance, allow Copyright or Patent protection to the Theory of Relativity. However, this view creates a problem because we seem to be unable to protect that. which is valuable and able to protect only the trivial aspects of software through the copyright laws . 96 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 5.2. Cross National & Team Production The fact that software may be produced by teams of people, from different countries, creates interesting problems with regard to the protection of software. Copyright laws do not appear to be designed to protect corporate creations. Most software packages use program fragments from earlier software, the authors of which could be different. Multi-country efforts can further complicate this issue. There is a need to address these problems. For example, under which country's laws is the software protected if the authors have written the software in different countries? A significant portion of the software package may consist of reusable code, plagiarised from earlier works, without even knowing who the author was and usually without giving credit or commercial benefit to such authors. Corporations normally insist on employment contracts in which the copyrights are automatically assigned to the corporation. I believe that this practice can raise some rather interesting legal issues. 5.3. Multiple Users of Software Data communications links have made it possible for several users to use software located in a remote computer centre. Such users could be in the same country as the computer centre but need not be. Should the commercial rights of the author be protected by imposing an additional license fee for each user of the software? This is analogous in some ways to cable/satellite distribution of video and television programs . There is a need to study the implications of this because it involves multi-country usage. There need not be a general broadcast as in the case of satellite television, only discretionary use of the software installed in the computer. This also raises the issue of how a user in a country, using computers located in other countries, can be sure that the intellectual property rights of the concerned parties are indeed being protected and that the relevant laws in this respect are not being violated? 5.4. Distributed Computing This is an emerging concept, In this the user does not even know where the software resides in a network of computers located at different places, perhaps in different countries. Multiple copies of the software could exist in the network. The network software would decide which copy gets used at that time based on factors such as computer load and tariffs. To complicate matters further, bits and pieces of the software itself .could be scattered in different computers located in different nations. I find it difficult to find an analogy for this in other intellectual properties. 5.5. Ongoing Adaptation The fact that software requires continuing modifications, means that there is no final published work. The software developer gives version numbers to the software at some convenient point of time. For example, the initial issue of the software could be called Version 1.0. A few months later, this could be replaced by a corrected Version 1.1. A subsequent enhanced version could be referred to as Version 2.0. and so on. This is similar to editions of textbooks. Therefore, each version has to be MR. ASHOK BHOJWANI 97 copyrighted. However, some authors prefer to keep sending corrected copies of the software as time goes on. This clumsy in theory and practice. I can well imagine the practical problems of proving copyright violations because the author would have to keep meticulous records and copies of every version supplied to others. 5.6. Utilitarian Nature of Software In the copyright laws of some countries, software has been classified along with literary works. However, literary works have a stronger cultural aspect to them than software - which seems to have more of a commercial motivation. Software has a utilitarian nature, it is not like a work of art in that it elevates the spirit or is designed primarily to be attractive and aesthetic. It is the use of software that is commercially beneficial, not merely the act of copying it. Fragments of program code are unlikely to achieve the fame and value of a painting by Picasso or the writings of Gandhi or Lincoln. Perhaps due to the utilitarian nature of software, most of the commercial benefits in terms of royalties and prestige go to corporations rather than individuals. 5.7. Litigation Life and the Software Life Cycle There is a need for rapid settlement of litigation relating to software, rapid enough to be consistent with the short product life cycles. Otherwise the product is obsolete by the time the legal issues are settled. Injunctive relief does not seem to provide a fair and adequate solution. Furthermore, the decades of protection given to literary works appear to be unnecessary for the short lived software life cycles. 5.8. Classification of Software There is considerable confusion in the policies and laws relating to computer software for purposes of commercial classification, statistical monitoring, protection and tariffs. I know of one country in which the software license value on imported software is taxed under the income tax laws, the software is considered to be goods for purposes of import dury, as a literary work in the copyright laws while software development is classified as an industry. In this case the government in question has taxed different facets of software under different laws. Perhaps the administrator of each law believes that he has taxed its essential aspect. This is a good example of the confusion that arises when the nature of software is not understood. Therefore, considerable thought is needed to understand the fundamental nature of software. When is a computer not a computer? If a hospital buys a computer along with software for treatment planning of cancer, has it bought a computer or has it bought a piece of medical equipment? The same computer could take on the nature of an accounting machine, a point-of-sale terminal, a process controller or what have you, depending on the software used on it. The nature of the machine, thus, gets determined by the. software used on it. This trend is accelerating as more and more machines and appliances become microprocessor based. 98 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Therefore it is not only the nature of software which defies classification under traditional categories, the classification of machines is also becoming more difficult as time goes on. This has an impact on the classification of equipment for purposes of laws, tariffs and certification. For example, Country X does not permit the import of PC's for various reasons. However, it does permit the import of Desk Top Publishing (DTP) Systems. Consumers, therefore, may import the latter which is nothing but a PC with specialized DTP software and a laser printer. 5. 9. Are Data Bases Software? There is a need to understand the distinction between software and information date bases. This is important in the context of new knowledge based software products and on-line information services. Should large data bases be protected as intellectual property? They change continuously as information is fed into them from all over the world. They are certainly intellectual property but they are not static in nature. Therefore, under existing laws, it is not clear what would be protected. We are bound to see tighter coupling between software, expert systems and information bases. Even the design of Integrated Circuits, for the protection of which so much heat is generated, boils down to a design data base, design rules and computer programs which assist the designer . Conceptually, except for the current trade related emphasis and the direct skills required, the technology for the design of integrated circuits is not significantly different from that needed for the design of carpets, automobiles and other products. 5.10 Derivative Product There is a need to appreciate that software produces derivatives such as output reports, data bases, other software, even poetry, music and literature. It can be argued that almost all software is derived software because it is produced using the facilities provided by operating systems and language compilers. Emerging software technologies are expected to produce most software programs automatically. If that view prevails, what will we really copyright? What should be the status of such derivatives in law? Whom will we protect? 5. 11 Resale of Software If the owner of a computer sells the computer, what should be the status of the software? Should the new owner enter into a new relationship with the owner of the software copyright or license? I understand that even books are not supposed to be resold without the consent of the publisher. However, since software is utilitarian and very closely linked to the hardware, the problem takes on different dimension. 5. 12 Try before you Buy We hear music over the radio and then decide to buy an audio cassette or compact disc. How can the potential user of a software package decide whether the package will meet his needs? Should rental of software be permitted? Since software is easy to copy this can increase piracy. On the other hand there is a genuine need to try it before you buy it. This issue has to be MR. ASHOK BHOJWMJI 99 considered in the context of a software bank (dealer/library, etc) accessible by users from all over the world using data communication links including satellite channels. 5.13 Collective Royalty In some countries (e.g.France ) they levy a tax on the sale of blank audio cassettes on the grounds that a certain percentage of them will be used for unauthorized copying. Based on market surveys they determine the expected loss of royalty. The amount so collected is distributed to performers. It is interesting to speculate whether such a concept would work for software also. 5.14 Validity of License Agreements Under some laws affecting computer software, a license agreement is valid only after the licensee signs it. This raises a question regarding the validity of printed agreements which are visible through bubble packaging. Suppose the buyer of the software opens the package and throws away the agreement. Can he claim that the agreement is not binding since he has not signed it? While does not appear to allow him to abuse the Copyright on the software, it seems to create an opportunity by which license terms can be violated with impunity. One solution to the problem would be to amend the laws to permit such unsigned license agreements for computer software. However, that could tend to make the agreements quite one sided, in favour of the licenser. Another concept might be to provide software with automatic protection, under the law, which is reasonable for both licenser and licensee. Even this latter approach would face difficulties because it is not feasible to foresee all possible current and future .uses of the software. Consumers have a need to make copies for legitimate purposes, such as to use the software in ways that were not thought of by the software producers. In a purely technical sense, such use may violate the terms of the software license agreement. The uses are limited only by the limits of human creativity and, ultimately, machine creativity. There is, I believe, an even greater need to examine whether software can be sold outright, like a book, rather than being licensed. I think it would be useful to examine the proposition that piracy may be a result more of license terms and conditions than copyright conditions. - Reference works such as dictionaries, popular quotations and thesauri are now available in the form of computer readable floppy disks and compact disks. Purchase of these involves a license agreement, whereas purchase of the equivalent book does not. I feel that, given the will, it should be possible to eliminate software licensing for the end user. There may be alternatives to licensing. However, at present most software developers license their software and do not sell it outright like a book. It may be possible to sell software like a book, at least to individual customers. I believe that it is useful to explore this possibility because it would simplify commercial relationships for the overwhelming majority of 100 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES software buyers. This would also eliminate the complications introduced into intellectual property laws by the fact that software is licensed. I believe that the market is too large and fragmented to monitor and enforce compliance with license terms. This in itself is probably a good reason to try and find alternatives to the system of licensing. 5.15 Product Liability for Software and Information Protection is only one side of the coin. Since software is utilitarian, should the other side of the coin relate to product liability in order to create a sense of responsibility and accountability? Like other literary works, should software have the fundamental right to be wrong? Should it be provided a constitutional equivalent of freedom of speech? There is a need to appreciate the integrated way in which hardware and software operate. A synergy in which the whole system is greater than the sum of its parts and absolutely useless without either. Almost every modern machine has a computer controlling it. This is in the shape of a tiny chip called a microprocessor. The real control, however, is provided by the software. The hardware fails due to mechanical failures, thermal stresses, wear and tear, etc. Software is impervious to such failures. Software fails due to unexpected input, trivial overflows and the presence of other bugs in the program. Failure in the software can cripple a machine as effectively as failure in the hardware. Bugs in the software may make the machine behave differently from the way it was supposed to behave, leading to unpredictable and, possibly, disastrous consequences. A software package may produce faulty results leading to business losses. Moreover, as noted above, the reasons for failure of software are fundamentally different from those of hardware . They say that you can make mistakes when you calculate by hand, but to really commit a blunder you need to use a computer. In the computer, hardware failures rarely lead to disaster. It is the software failure which need to be watched. Even without the linkage with hardware, a piece of software may produce faulty results leading to business loss . Most software license agreements absolve the software supplier of any liability due errors in the software. Should software suppliers be made liable for the consequences of malfunctions in software? There is no way, at the current state of the art, to be one hundred percent sure that a software package will work correctly under all the conditions it is going to encounter. This could be a technological limitation. We currently do not know how to engineer software to the same level of reliability as hardware. It could also be a philosophical limitation. Software, having its basis in an intell ectual and creative activity, may not be rateable for reliability or correctness of behavior in a way comparable to hardware. To use another imperfect analogy, the leather binding, printing and overall design of a book may be rated as near perfect - but how would you obtain a consensus on the correctness and the quality of the ideas in the book? MR . ASHOK BHOJWANI 101 Even well engineered hardware products fail. There are precedents, in some countries, with regard to the liability of products such as airplanes, cars, tyres, etc. Software has now become critical enough for society so demand higher levels of reliability from it. Therefore, the question arises whether along with the protection of software we need to develop international standards on the liability relating to computer software - and by extension, other intellectual properties which have high potential of contributing to disasters. The resolution of this issue can have a major impact on the economic structure of the software business. 5.16 Future Developments Software is the common factor in many emerging technologies. Artificial intelligence, bio-chips, automatic language translation and hypermedia are just a few of the technologies which are likely to give us further food for thought in respect of laws relating to the protection of computer software. It is important to try and anticipate some of these trends. However, it is difficult to do this, he crystal ball is not as clear as one would like it to be. Laws seem to be doomed to follow developments in software technology. It is going to be a case of too little and too late? 6. Conclusion The nature of software is largely intangible. It is difficult to understand this nature, in a complete sense, by analogy with the nature of other well understood products, services and intellectual properties. Copyright laws do not seem to be suitable to protect some of the most valuable and essential aspects of computer software. The value of software does not lie in the physical expression and the sequence of the lines of code in the computer programs. The real value of software lies in the idea and concept, the look and feel and the unusual ways in which software is used. There is a need to arrive at a uniform unde,rstanding on the nature of software. This understanding should lead to the development of new, internationally consistent legislation specifically designed for the nature of computer software. LEGAL PROTECTION OF COMPUTER SOFTWARE KOREAN EXPERIENCE by Mr. Man-Gi Paik I. Introduction Although Korea was the first country in the world to introduce the use of metal letters for mass printing in 1234 A.D., the concept of copyright as a private property right has been slow to develop in Korea. During the Yi Dynastry (1392-1910) the Sunbi Spirit of Confucianism focused the attention of scholars and artists on the achievement of academic and artistic excellence, rather than on obtaining economic rewards for their creative works. The legacy of the Sunbi Spirit is not easily changed, but as Korea's impressive economic development propels the nation into an integrated global economy, recognition and protection of copyright is becoming a critical measure of Korea's success in achieving modernization. The Korean government clearly recognized the need to update and revitalize the old Copyright Law of 1957, which was not sufficient to provide adequate protection of copyright, and therefore a completely revised Copyright Law was approved and became effective as of July l, 1987. At the same time, the Korean government enacted the Computer Program Protection Law ("CPPL") which provides the details of protection of computer programs as a form of copyrighted work. The passage of these new laws was heralded by the literary, artistic and scientific communities, both within Korea and in foreign countries, as a major milestone in Korea's efforts to protect and promote cultural and technological endeavors. Before 1987, there had been many debates on the legal protection of computer software in Korea. But the Government finally reached a conclusion that the software industry cannot grow without effective protection against copying. There was also some controversy as to whether Copyright Law (promulgated on January 28, 1957) protects software. There was no judicial precedent on this point. In addition, some commentators believed that software may be protectable by patent, trade secret or other special form of legislation. Main points uf inadequacy when software is protected by various legal means was as follows. 1) Patent and Patent-type Protection Patent laws and related types of laws are directed to the protection of novel, inventive ideas as implemented in a method, article of manufacture or apparatus . Patents thus serve a very useful function in protecting those who produce technological advances. The patent laws reward the disclosure of the idea itself by protecting the copying of its technical embodiment. It a patentable appratus of method includes the use of a computer and computer program, some measure of protection is afforded to the software in combination with other elements of the invention. However, this is a very small segment 104 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES of the software market. The guidelines used by the Korea Industrial Property Office for examination of computer-related inventions clearly rule out the protection of virtually all business, educational, and even scientific software. As set forth above, however, the main element which requires protection in a computer program is the way the idea is expressed in the programming process rather than the actual idea itself. Patent protection and patent-type protection are thus unsuitable for the protection of software because they do not protect the written expression. Furthermore, patent law requires a determination of novelty and invention is accomplished by means of an examination process. This process entails a search for other, prior disclosures of a similar nature and the detailed comparison of these prior disclosures with the article for which protection is sought. The examination procedure would be further complicated by the fact that dozens if not hundreds of different computer programming languages exist. Even an expert computer programmer is not likely to be skilled in more than a bandful of different computer languages. This being the case, the task of comparing large sections of computer software written in different languages will involve many people and require a great deal of time . As a result, the expense of such an examination procedure would be excessive. 2) Trade Secret Protection Korean law does not include any statute which is specific to protection of trade secrets. Rather, trade secret infrigement falls under the general heading of torts. Although a civil action could be maintained for damages resulting in the wrongful misappropriation or use of a secret computer program, this ,protection may be .relatively meaningless. Companies may sign trade secret agreements with purchasers of the software, but employees and other users of the software may not be contractually bound by the agreement of the software purchaser. At some point, the status of the software as a trade secret may be lost. Once trade secret status is lost because the program is no longer secret, the program is ejected into the public domain. Copying and distribution of the software would then no longer be an infrigement of the rights of the software owner. Trade secret law also would not provide a cause of action or support an injunction against a distributor of software who obtained the software from a misappropriator there of without participation in the misappropriation. Certainly widely used forms of software distribution are also inimical to maintenance of the trade secret status of software. Since the trade secret status requires a relation ship between the software vendor and the purchaser of the soft ware, which is typically handled by way of written contract, it is not possible for software vendors to rely on distribution outlets such as computer stores, and computer distributors to obtain such signed agreements from everyone to whom software is sold. MR. MAN-GI PAIK 105 3) Other Special Forms of Protection In 1984, Japan considered the passage of special legislation directed to software prot ection called the Program Right Law. It subsequently abandoned this course of action by passage of legislation amending its Copyright Law to specifically provide for protection of computer software thereunder. A similar proposal was made in Korea, but was abandoned because of the disagreements among relevant Ministries. Perhaps the most compelling reasons given for this course of action was that the worldwide trend had already accelerated toward the provision of copyright protection for software. The fact that many countries abandoned the idea of providing special legislation for computer software does not necessarily mean that copyright protection is a perfect legal framework. In view of the fact that computer software has a nature which is different from that of other products, services and intellectual property, the most appropriate legal system for computer software should be continuouly sought for. II. Computer Program Protection Law in Korea Under the previous Copyright Law of Korea, it was not clear whether computer program work ( "Program(s) " ) could be classified as protectable subject matter. The new Copyright Law expressly lists programs as works protected under the law, but contemplates that a separate law would be enacted to provide the details for protection of programs. The CPPL was in fact enacted and came into effect on July l, 1987, the same date that the Copyright Law became effective. The CPPL in effect provides the same protection for programs as is provided for any other copyrighted work, except that CPPL protection applies only to works that were created ,on or after July l, 1987. A program is defined in the CPPL to mean "works expressed in the form of a series of instructions or commands which are used directly or indirectly to obtain a specific result in a computer or other device having information processing capability." Therefore, both source code and object code and any other form in which a program is embodied are protected under the CPPL. Derivative programs, which are defined as programs made using the original program by means of adaptation, are protected as independent programs. The CPPL has the same provisions for protection of programs of foreigners as in the Copyright Law . Under in CPPL a computer program may be registered with the Ministry of Science and T'echnology (now delegated to the Federation of Korea Information Industry ("FKII"). The nature and effect of registration of a program are similar to that of other copyrighted works. However, registration of a program has another important presumptive effect which does not apply to the registration of other copyrighted works. Anyone who has infringed a regi stered program is presumed to have been negligent in the act of infringement. Due to this presumptive effect, the copyright holder of a registered pr·ogram can claim damages in an infrigement case without proving the infringer's negligence. 106 ASIAN AND Pi\CIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The Gov·ernment maintains two kinds of registers. The Program Register is for the purpose of registration of program themselves. The program Copyright Register contains the records of other copyright-related matters, such as any transfer of or limitation on program copyrights. A program author who desires to register his program must submit an application therefor in a prescribed form to the FKII. The application requests information on the applicant (name, residence, registration number, trade name, address and phone number), information on the program (name or title, creation date, outline of the program, and form of reproduction) and information on the program author (name, nationality, residence registration number, address and phone number). In case the program author is dead, the person designated by the program in either object code or source code must be submitted in the form of microfilm or microfiche. If the reproduction is not a whole copy of the program, it must include excerpts of the beginning, middle and last parts of the program to sufficiently show that the program is an original work. Since the CPPL became effective in July, 1987, there have not been any reported decisions in the Korean courts. However, there is one pending software infrigement case that illustrates the fact that the enforcement authorities are not yet familiar with the law and are proceeding cautiously in dealing with the problem of software piracy. In April, 1988, Korea Palantir Software Co . , Ltd ("Korea Palantir") accused two sole proprietorships of criminal infrigement of software that had been licensed to it by a U. S. software firm. Korea Palantir alleged that the defendants reproduced for sale the Korean version of "PWP", a word processing software, without a license from Korea Palantir therefor. Under receipt of Korea Palantir's accusation, the police requested the prosecutor's office to obtain an arrest warrant from the court. The prosecutor's office, however, instructed the police to reinvestigate the case including, among other things, whether the software in questi on is entitled to protection under the CPPL . Under the CPPL, only those software programs created after July l, 1987 are entitled to copyright protection. In the present case, the original "PWP" software was created before July 1, 1987, and thus it could not be protected under the CPPL. Korea Palantir argued, however, that the Korean version was created after that date and such version could be protected as a "derivative program" under the CPPL seperately from the original software. Under the CPPL, a "derivative program" is defined as a program made from the original program by means of adaptation. "Adaptation" is defined as creation of a new program by making use of all or a considerable part of the series of instructions or commands of the original program. Such a derivative program is entitled to copyright protection as an independent program. The police asked for a formal opinion of the Program Deliberation Committee in the Ministry of Science and Technology on whether the Korean version of "PWP" constituted a derivative program. MR . MAN-GI PhlK 107 Tne Program Deliberation Committee concluded tnat the Korean version of PWP was a derivative program of the original English version of PWP, which was developed by Palantir, an American company, because the Korean version was created by changing 5,000 lines of the original 25,000 lines and newly adding 7,000 lines, which could be deemed to fall within the scope of "adaptation" as defined in the CPPL. Following receipt of the Program Deliberation Committee's op~n~on, the police and prosecutors concluded that defendants should be indicted for violation of the criminal provisions of the CPPL and the case was sent to the court. An important preliminary issue is whether Korean law affords protection of the screen display of the game separately from the computer program itself. Arguments in favor of this propositions include (i) the £act that the creative process often entails the designing of the screen display prior to the writing of the software which is then tailored to produce such display and (ii) the fact that consumers recognize a particular game primarily by the screen display and thus, consumer confusion would result from no t affording independent protection to the screen display. There was not precedent for some time in this area despite the recent enactment of the CPPL. Finally, however, the Japan Amusement Machinery Manufacturers Association succeded in registering the video game's computer program under the CPPL while, independently registering the screen display under the Copyright Law with the Ministry of Culture and Information III. Recent Development of Korean Software Industry Most of the revenue in the Korean industry is produced by small and medium-sized companies. As of August l, 1988, total number of firms was 463, increased by 61 than in 1986. The industry, however, is clearly relatively small in Korean, given that the revenues for 1987 were only US $ 140 million, whereas the world software market is more than US $ 300 billion. In addition, the exportation of software from Korea only brought revenues of about 7,2 million dollars in 1987. Since the enforcement of the CPPL, the Korean software firms showed a remarkable increase in research and development expenditures. According to the registration statistics of computer program, the numbers of registration of the Korean firms were 152 in 1987, 821 in 1988, and 368 in 1989 (January to April). Considering the fact that the registration under the CPPL is optional, the real numbers must be much higher than those show above. Out of registered programs, system software occupies 40 percent, while application software remaining 60 percent. One interesting feature of the registered programs is 49 percent of the programs were written for use in personal computers. 108 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Software packages for personal computer are the most vulnerable to illegal copying without effective protection. It indicates that the CPPL played a major role in expediting the development of indigenous software. A company which may spend tens or hundreds of thousands of dollars developing a software package would be greatly handicapped in the selling of that package so long as others are able to freely distribute copies thereof for little more than the cost of the disk or tape used to provide the copy. The importation of software into Korea increases in a rapid pace. In 1987, the figure was US$ 29 million. As the instalment base of computers goes up rapidly, it is inevitable to import more computer programs. Two years' experience in Korea showed that the provision of software protection stimulated growth of the domestic software market. A greater pool of software was produced in Korea to meet the specific needs of Korea. A greater number of programmers have been trained and drawn into the industry once they are motivated to enter the field by the prospect of being rewarded for their efforts. The results of providing protection for software has been beneficial to both the software industry and to the users of software. Companies which otherwise might not have had suitable software available to them were able to obtain software to meet their needs and increasing their productivity. One additional advantage from providing software protection was that software manufactures from other countries became willing to bring new ideas and techniques into the country. One of the most effective ways in which the Korean software industry can be promoted is by the licensing of technology from abroad. Unde r such licenses, the source code for the software would likely brought into Korea and local compani es would modify such software, as necessary, to meet the needs of .the local software users. Such licenses were not easily possible before Korea enacted the CPPL. IV . Rema i ni ng Issues Although the Korean court has no case yet on the so-called "Idea - Expression Dichotomy" issue, the dividing line between expression and ideas is not always a bright one . The idea- expression dichotomy has a long history, expecially in the U.S . Copyright Law . But in area of computer software, the courts seem to favor the copyright owner more so than they do in other areas. As computer software is works of function of which value lie more in function than in expression itself, there is a clear need to apply idea- expression dichotomy for software not in the same way as literary works. In Whelan Associates, Inc v. Jaslow Dental Lab., the court concluded that the detailed structure of the program was part of an idea rather than the idea itself. In addi tion, in several cases the court have taken the view that if the "look and feel" of the two program i s the same and the defendant had access to the copyrighted program, then there is copyright infringement. Thus if there MR. MAN-GI PAIK 109 is substantial copying of the details of a program designed to fulfil a particular function on one type of hardware, the fact that substantial effort is used to convert the program to run on different hardware is no defense, even if a different language is used to write the software. This is especially true if the screen images at each stage of the program are the same or if similar errors appear in both programs. Unique characteristics of software will continuously pose many problem in the future as long as Korea protects computer program under the current CPPL. It comes from the fact that software does not completely match with copyright concept. Therefore, for the better protection of computer software, sustained efforts in the national as well as international level is necessary to adapt the legal framework to the real world of software in a more accurate manner. 110 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES THE COMPUTER PROGRAM PROTECTION LAW CHAPTER I . GENERAL PROVISIONS Article l. Purpose The purpose of this Law is to contribute to the promotion of computer program related industries and technology, and to the sound development of the national economy by protecting the rights of authors relating to computer programs (hereinafter referred to as "programs"), and by ensuring the fair use thereof. Article 2. Definiti ons The definition of terminology used in this Law shall be as follows: 1. "Program" shall mean work( s) expressed in the form of a series of instructions or commands which are used directly or indirectly to obtain a specific result in a computer or other devices capable of information processing (hereinafter referred to as "Computer"). 2. "Program author" shall mean a person who has created a program. 3. "Reproduction" shall mean the reproduction by fixing a program into a tangible medium of expression without adding creativity. 4. "Revision" shall mean the creation of a new program by making use of all or considerable part of a series. of instructions or commands of the original program. 5. "Derivative program" shall mean a program made from the original program by means of revision. 6. "Release" shall mean the act of publishing a program or making it available to a specified or unspecified segment of the population (hereinafter referred to as "General public"). 7. "Publication" shall mean the distribution of a program reproduced in a quantity sufficient to meet the demand of the general public. 8. "Distribution" shall mean the transferring or lending of the original program or reproductions thereof to the general public. Article 3. Programs by Foreign Authors 1. Programs of foreign authors (this term includes foreign corporations throughout this Article) shall be protected under the treaties to which the Republic of Korea has acceded or concluded. MR. MAN-GI PAIK 111 2. Programs created by a foreign corporation having its main office in Korea, and foreigner's programs first published in Korea (including programs published in Korea within 30 days after the publi cation in a foreign country) shall be protected under this Law . 3. If any country fails to protect programs of Korean citizens, protection under the related treaty and this Law for the programs of a citizen of that country may be restricted in like manner even if the programs fall under the category of Paragraph 1 or Paragraph 2 above. Article 4. Exclusion from Application 1. This Law shall not apply to programming languages, program syntax and program algorithms used in creating programs. 2. The definition of terminology used in Paragraph 1 shall be as follows: (a) "Programming language" shall mean characters or other symbols, and configurations thereof used as a means of the expression of a program. (b) "program syntax" shall mean a special pre-arrangement with regard to the use of programming language in a specific program. (c) "program algorithm" shall mean a combination method of instructions or commands in a program. Article 5. Derivative Program Derivative programs shall be protected as independent programs. CHAPTER II . PROGRAM COPYRIGHT Article 6. Presumption of Program Authorship 1. The person whose name (hereinafter referred to as "real name") or generally known pseudonym or abbreviation, etc. (hereinafter referred to as "pseudonym") is indicated in a general manner as the name of the author on the original program or its reproductions, or at the time of release of the program, shall be presumed to be the program author. 2. If a program does not bear a notice of the program author in accordance with the provisions of Paragraph l, the person who released or published the program shall be presumed to be the holder of the program copyright. Article 7. Authorship of Program Created in the Course of Duty The authorship of a program created by a person who is engaged in the business of the state, a corporation an organization or other employer 112 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES (hereinafter referred to as "a corporation, etc." in this Article) in the course of his duties under the planning of the corporation, etc., and which has been released under the name of the corporation, etc. shall be attributed to the corporation, etc., unless otherwise specified in an agreement or in the employment regulations. Article 8. Program Copyright 1. A program author shall have the rights prescribed in Articles 9 through 11 and the rights to reproduce, revise, translate, distribute and publish the program. 2. A program copyright originates from the time it is created, and does not require the fulfilling of any procedures or formalities. 3. A program copyright shall exist for a term of fifty {50) years from its creation. Article 9. The Right to Release 1. The program author shall have the right to determine whether or not to release the program. 2. If a program author has transferred or lent a program not yet released or licensed for use under the provisions of Article 16, he shall be deemed to have consented to its release unless otherwise specifically agreed. 3. If a derivative program, which has been created with the consent of the original program author, has been released, the part of the original program contained in the revision shall be deemed to have been released. Article 10. The Right to Indication of Name 1. The program author shall have the right to indication of his real name or pseudonym on the program or its reproductions, or in releasing the program. 2. Anyone who uses a program shall indicate the author's real name or pseudonym as indicated by the program author unless otherwise specifically instructed by the program author. Article 11. The Right to Preserve the Integrity The program author shall have the right to preserve the integrity of the title, contents and format of the program, with the exception of the following situations: (a) Limited modifications to a program which cannot be used other than on a specific computer, may be made as necessary for use on another computer. MR. MAN-GI PAIK 113 (b) Limited modifications of a program may be made as necessary for more efficient use on a specific computer. (c) Modifications deemed unavoidable in light of the nature of a program or the purpose of the use thereof may be made. Article 12. Limitations on Program Copyright A released program may be reproduced or used within the limited scope necessary to accomplish the purpose in the following cases: a) When necessary for a court procedure. (b) When a person in charge of education at an educational institution established under the Education Law, reproduces or uses the program for the purpose of providing for the curriculum within a limited scope not unfairly detrimental to the interest of the program author, in view of the type, use, number of reproductions, and nature of the program. (c) When inserting the program in text books necessary for the purposes of school education at high schools and other schools of a similar or lower level . (d) When reproducing or using the program at such a limited place such as a home for personal purposes. Article 13. Reproduction, etc by the Program User 1. Anyone who is entitled to possess and use the reproduction of a program may make a copy of the reproduction within the scope necessary for safeguarding against destruction, loss, damage and deterioration thereof. 2 . When the right to possession and use of a reproduction of a program is lost or ceases, the aforementioned copies of the reproduction made pursuant to the provisions of Paragraph 1 above shall be destroyed, unless otherwise specifically indicated by the program copyright holder, provided, however, that this shall not apply in cases where such right is lost due to the destruction of such reproduction. Article 14. Transfer of Program Copyright A program copyright may be transferred 1n whole or in part. Article 15. Co-authored Program 1. The copyright of a program which has been jointly created by two or more authors, and which cannot be used by partitioning the portions contributed by each author (hereinafter referred to as "co-authored program"), shall be 114 ASI.Ml MID PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES jointly shared by the persons who contributed to the creation of the program, and their co-authored shares shall be deemed to be equal unless otherwise specifi call y agreed to by the program co-authors. 2. No copyright of a co-authored program shall be exercised without the unanimous consent of all of the program co-authors, nor may any co-author transfer or pledge his share without the consent of the remaining co-authors. However, a co-author shall not obstruct the reaching of an agreement or refuse to consent thereto, other than in good faith. 3. When a co-author has died without heirs or has renounced his share, the share shall be distributed to the remaining co-authors in accordance with their share ratio. Article 16. License to Use a Program 1. The program copyright holder may license other persons to use his program. 2. Anyone who has been licensed to use the program in accordance with the provisions o£ Paragraph 1 may use the program within the limits as to the method of us,e and conditions of the license, and shall not transfer the right to use the program to a third party without consent of the program copyright holder. Article 17 . Use of Programs of Unknown Copyright Holder 1. If a license to use a program is unobtainable because the program copyright holder is unknown, or his whereabouts is unknown, despite reasonable efforts to locate him, the pertinent program may be used after obtaining the approval of the Minister of Science and Technology as prescribed by the Presidential Decree, and depositing such an amount of compensation money as determined and notified by the Minister of Science and Technology. 2. The reproduction of a program to be used pursuant to the provision of Paragraph 1 shall indicate that approval of the Minister of Science and Technology has been obtained and shall give the date of such an approval. Article 18. Promotion of Program Distribution Unless a justifiable reason exists, the program copyright holder shall cooperate with a request from a bona-fide-end- user for supply for use of a program which has already been published and distributed program. Article 19 . Exercise, etc. of the Program Copyright Pledged 1. Program copyrights which have become the object of pledge shall be exercised by the copyright holder unless other-wise specifically agreed to in the pledge agreement. MR. MAN-GI PAIK 115 2. A pledge of a program copyright may be exercised against a copyright holder's right to receive money or other things as a result of the transfer of the program copyright, or transfer, lease or licensing of the program, pursuant to the provisions of Article 16, provided however, that such money or things shall be attached prior to their payment or delivery. Article 20. Lapse of Program Copyright The program copyright shall cease to exist in the following cases: 1. If the program copyright reverts to the State in accordance with the provisions of the Civil other laws, as a result of the death of the Code or without heirs; 2. If the program copyright reverts to the State in accordance with the provisions of the provisions of the Civil Code or other laws, as a result of dissolution of the corporation or organization holding the program copyright. CHAPTER III. REGISTRATION Article 21. Registration of Programs 1. The program author may register the following items, provided, however, that this shall not apply when more than one (1) year has elapsed since the creation of the program: (a) The name or title of the program; (b) Nationality, real name and address of the program author; (c) Date of creation of the program; and (d) Outline of the program. 2. If the program author dies, the person designated in his will or his heir may file the registration in accordance with Paragraph 1 unless otherwise specifically provided by the program author. 3. The registration prescribed under Paragraph 1 shall be made by the Minister of Science and Technology by recording it in the Program Registry. 4. The Minister of Science and Technology shall announce registration of a program by publishing an official bulletin of programs registered pursuant to the provisions of Paragraph 1. 5. Matters necessary for program registration or for the program bulletin, matters relating to application for public inspection and delivery of photocopies of the the program registry, and fees payable shall be prescribed by the Presidential Decree. 116 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Article 22 . Submission of Program 1. Anyone who files a registration for a program pursuant to the provisions of Paragraphs 1 and 2 of Article 21 shall submit a reproduction of such a program to the Minister of Science and Technology at the time of registration. 2. When such a submission is made pursuant to Paragraph 1, the program shall be presumed to have been created on the registered date of. creation. 3. Matters necessary for the submission of a program shall be prescribed by the Presidential Decree. Article 23. Duty of Confidentiality A public official who is handling, or has ever handled, matters relating to the management of the reproductions of programs submitted pursuant to the provisions of Article 22, shall not disclose confidential information which has come to his knowledge in the course of his duty. Article 24. Registration of Program Copyright None of the following may be asserted against a third party unless registered: (a) Transfer of program copyright (excluding inheritance and other general succession) or limitation on disposition thereof; (b) Establishment, transfer, change, extinction of pledges or limitation on disposition thereof, the object of which is the program copyright. . CHAPTER IV. REMEDIES OF INFRINGEMENT OF RIGHTS Article 25. Claim for Abatement, etc. of Infringement 1. The program copyright holder may demand the suspension or prevention of infringement by any person who has in- fringed or is likely to infringe his program rights. 2 . If Paragraph 1 shall be applicable, the copyright holder may concurrently demand the destruction of articles made by the acts of infringement, and tools, etc. used for the acts of infringement, or other such actions as necessary for the prevention of infringement. MR. MAN-GI PAIK 117 Article 26. Acts Deemed to Be Infringement If the making within Korea at the time of importation of a program would have infringed the program copyright, such importation for the purposes of distribution. in Korea shall be deemed to be an infringement of such program copyright. Article 27. Claims for Damages 1. A program copyright holder may claim for damages against any person who has intentionally or negligently infringed his rights in the program. 2. Anyone who has infringed the registered program copyright of another shall be presumed to have been negligent in the commission of the infringing act. 3. The amount of profit which the infringer has gained through his infringing act shall be presumed to be the amount of damage sustained by the program copyright holder. 4. In addition to the amount of damages prescribed in Paragraph 3, the program copyright holder may claim damages in an amount equivalent to the amount which he would normally be able to earn by the exercise of his rights. Article 28. Infringement of the Co-authored Program Each co-author or copyright holder of the co-authored program may, without the consent of the remaining co-authors or copyright holders, bring claims pursuant to the provisions of Article 25, and may claim for damages in proportion to his share with respect to the infringement of such program copyright pursuant to the provisions of Article 27. CHAPTER V. SUPPLEMENTARY RULES Article 29. Program Deliberation Committee 1. The program Deliberation Committee (hereinafter referred to as "Committee") shall be established to consider important matters regarding the program copyright and matters regarding use and distribution of programs. 2. The committee shall consist of, and be run by competent officials and experts in the field of programs and copyrights, to be appointed by the Minister of Science and Technology and Minister of Culture and Public Information, upon mutual consultation. 3. Matters necessary for the functioning, constitution and operation of the Committee shall be prescribed by Presidential Decree. 118 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Article 30. Consultation with Other Relevant Ministry The Minister of Science and Technology shall consult with the n to decide on and Minister of Culture and Public Information to decide on and implement the important matters regarding the program copy right pursuant to the provisions of this Law. Article 31. Relationship with Other Laws In addition to the provisions of this Law, relevant provisions of the Copyright Law shall apply to the protection of program. Article 32. Delegation of Authority The Minister of Science and Technology may delegate his authority relating to program registration and submission as set forth in Articles 21 and 22 to another organization prescribed in the Presidential Decree. Article 33. Measures for Fostering The government shall take necessary measures in relation to program protection such as controlling of creation of demand, etc. , from the standpoint of fair trade, to ensure program quality assurance, technology improvement, promotion of development, etc. CHAPTER VI. PENAL PROVISIONS Article 34. Penalties 1. Anyone falling under one of the following categories shall be subject to punishment by penal servitude of up to three (3) years or a fine of up to three (3) million Won: (a) Anyone who has infringed upon the program copyri ght by means of release, reproduction, revision, translation, distribution or publication; (b) Anyone who has committed an act prescribed in Article 26. 2. Anyone falling into one of the following categories shall be subject to punishment by penal servitude of up to one (1) year or a fine of up to one (1) million Won. (a) Anyone who has altered or concealed the real name, or pseudonym of a program author, or altered the title of a program without proper authorization; (b) Anyone who has fraudulently registered a program, as set forth in Article 21, or fraudulently submitted the reproduction of a program, as set forth in Article 22; MR. MAN-GI PAIK 119 (c) Anyone who has violated the provisions of Article 23. Article 35. Provisions of Concurrent Punishment If a representative of a juridical person, or an agent, employee, or any other working staff of the juridical person, or of an individual has violated Article 34, in connection with the business of the juridical person or the individual, such juridical person, or individual shall also be fined under Article 34 in addition to the punishment of the person who has committed the act. Article 36. Filing of Complaint The crimes of Article 34, Paragraph l, and Paragraph 2, item 1 shall be prosecuted only upon the filing of a complaint. Article 37. Status as State Official in Relation to the Application of Penal Provisions Officers and employees of an organization performing duties delegated by the Minister of Science and Technology pursuant to the provisions of Article 32, shall be deemed to be state officials in relation to the application of Article 34, Paragraph 2, item 3 of this Law and Articles 129 through 132 of the Criminal Code. ADGENDA Article 1 . Enforcement Date This Law shall take effect on July 1, 1987. Article 2. Transitional Measures This Law shall not apply to programs which were created prior to the enforcement date of this Law. NEW TmOLOOIES IN REPRCGRAPHY AND CMICATION by Richard G. Donnelly INTRODUCTION The dissemination and publication of information reprography and communication - play a crucial role in the economy, in science, in education and an informed citizenry. The effective utilization of information, a key factor in maintaining a nation's economic competitiveness and stimulating technological innovation, depends critically on the broad process involving information acquisition, storage, retrieval, and dissemination or publication. New developments impacting this process have appeared at a rapid pace in recent years, propelled by emerging technologies and willingly accepted by an increasingly information-dependent golbal society. Several ma j or themes are evident: The consumer and the citizen are able to make increasingly sound judgments concerning purchases and politics on the strength of greatly improved information systems. The availability of accurately reproduced information has proved to be a great equalizer, allowing the wellinformed to at times dominate the merely well-established. Cycles for development of new product - and the duration of periods of competitive advantage - have shortened due mostly to fas ter, more comprehensive information diffusion. Reproduction, communication and information management processes are merging in a clearly apparent technically-driven trend. These rather lofty, even profound changes in the way we are able to do business and lead life have come about because of the emergence of new technology. In the revolution of modern information management, function follows form, in opposition to the dictates of the great architects whose revolution preceded this one by the better part of a century. FUNCTIONS AND FORMS OF INFORMATION MANAGEMENT The key functions which information management of any era have embodied are acquisition, storage, retrieval, and dissemination or publication. Inextricably involved in these are the various communication technologies we broadly term reprography. In t he earliest times, even before cave ·drawings, a form of natural reprography was probably noted by early humans the observation of fossilized records of the existence of previousl y unknown and long-departed species. 122 ASIAN AND P~CIFIC FORUM ON THE IMP~CT OF EMERGING TECHNOLOGIES Curiousl y, the chemical processes involved in forming ancient fossils bare striking similarity to some of those utilized today to form the microelectronic circuitry on which so much of modern reprography depends. This similarity of form across the ages presages a similarity of broad function as well. Information acquisition in earliest times may have been largely inadvertent observation, followed by recovery of an observed object, sequestering of the treasure in a safe place, and subsequent display and informed "grunting" to a fellow pioneer. Today, the observation may be more purposeful, the storage more secure, the retrieval more complicated and the dissemination more revealing (although some of contemporary technical discourse may be little better than grunting). Regardless of the eon, the overall effect is alike - new information is gained and passed on. Reprography and its related communications technologies the forms of information technologies - do, of course, make a difference in the way the functions of information management are accomplished. We must examine these technologies in greater detail to be able to explore the functions which fill applications needs. Consider reprography to be, quite simply, the complete set of methods available for reproduction of information and images and consider also the related communications technologies to be, again quite simply, methods for transmission of audible, video, digital and other kinds of information. Individual technologies which fall within these definitions encompass this extended but non-comprehensive list : xerography; laser and related printing; other method of printing and publishing; electronic publishing; electronic means of storage and retrieval of information, including optical disk, digital tape, write-once readmany (WORM) systems, solid state memory; video display terminal; scanning and related input methods and interpretation to yield digital information; facsimile; voice mail; electronic mail; two-way video communication, including cable, satellite and other systems for longdistance education and electronic conferencing; video telephones; cellular and other mobile ~elephones; microwave and other long-distance communication; and others: ~ description of emerging technologies in reprography and communications may be even broader, though less well defined. Methods which may become available in the next 10 or 20 years are the general fields of: high-definition digital images, including electronic means for reproducing huge engineering, drawings; millimeter wave communications; the "library of the future"; instant point-to-point communication; and others. ST~TUS OF THE KEY TECHNOLOGIES Some key aspects of reprography and its related communications technologies reflect the dynamic emergence of new technical approaches; The extensive research and development activities pursued by large and small firms, the broad end user communities targeted by manufacturers and purveyors of services, and the myriad kinds of information disseminated MR. RICHl\RD G. DONNELLY 123 The wide-ranging applications being pursued or planned by end user organizations to exploit new electronic information technologies - particularly optical storage, high-end electronic publishing, and artificial intelligence (AI)/ex~ert systems The complex and interwoven technical, financial, legal/ ethical and cultural barriers to the implementation and use of new information technologies The policy and practical implications of the transition taking place from paper-based to "paperless" systems of information management and dissemination. Three reprography technology areas especially noteworthy; optical storage, high-end electronic publishing, and AI/expert systems. Optical Disk CD-ROM optical storage hardware development has proceeded faster than the development of the software required to drive optical storage devices and controllers that integrate the hardware into existing computing systems. In addition, the successful commercial introduction of the 5.25 inch Compact Disk format has fostered the downscaling of WORM disk technology. However, there are several potential barriers to the introduction and utilization of optical disk technology. In organizations with large corporate databases, those with the greatest potential need for high density information storage, a near-term change in storage technology may be unlikely. The actual technology utilized for storage may not have a significant impact on the utility of the database system, and there may not be any payoff in the short-run in converting microfiche to optical disk storage. There are also technical barriers requiring software and hardware development. In many cases no commercial equipment is available to meet specialized needs, so that an organization would have to develop its own equipment to do this. Furthermore, a dual system would have to be supported for years. In addition, the primary barrier, and determining factor, would be the funding available for such projects. Electronic Publishing The potential advantages in productivity improvement and cost savings that can result from the utilization of electronic publishing technologies are recognized throughout industry and government. Current implementation is most evident in "print on demand" systems in the organizations that have responsibility for the publication of maintenance and training documentation. Electronic publishing efforts have the potential to have an immense impact on printing and publishing throughout the industrialized world. In particular, the establishment of industry-wide, national or preferably international standards for date exchange will provide the ability to receive and integrate documents freely in electronic format. Evaluation and planning for the implementation of electronic publishing capabilities is being conducted widely today. The long-range goal of many organizations is an electronic publishing base for electronic distribution of 124 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES publishing materials and on-demand printing. It is envisioned that users, at multi-function workstations, will be able to query the publishing base to search for, read, and print publications, or portions of publications, of interest. This transition to electronic publishing is being driven by a need for cost efficiency and paperwork reduction. However, the tremendous volume of archived documents and proprietary, business-sensitive, or personally sensitive requirements for access control are clear inhibitions to the implementation of electronic publication technology. Artificial Intelligence/Expert Systems A high level of optimism pervades the AI effort in organizations which anticipate using AI for the management of information. There appears to be an emerging consensus that: Approaches based on expert systems are beginning to influence the way is which information is managed There is great potential for the application of true AI to information management But the availability of true AI is still many years away. For both corporate and governmental database operators and users, the most troublesome part of the database retrieval process is the identification of specific documents or citations of interest. This retrieval process a key potential target for the application of AI/expert systems. To avoid the huge "data dump" which is typically returned when an unskilled operator searches a database, a working knowledge of database contents could be built into an AI/expert systems-supported searching routine . Such a system would assist the user in more accurately defining "the question". The primary goal of database operators is an intelligent front-end system that can be used to identify, access, interrogate, and post-process information from both corporate and public domain databases. In addition to optical disk storage, electronic publishing, and AI/expert systems networking technology, high density digital tape, interactive videodiscs, digitizing image scanners, and smart workstations are of interest. END-USE APPLICATIONS To illustrate the interplay of the key aspects mentioned above we will now examine some actual cases in which real organizations tackle the need to continue to serve their information management functions, cost effectively, while seeking to advance their functional capabilities through adoption of new technologies . Case 1. Certainly, one of the most ambitious attempts anywhere to apply emerging information technologies is the Computer-Aided Acquisition and Logistics Support (CALS) effort of the United States Department of Defense (DOD) Office of Production and Logistics. The CALS initiative has the potential of affecting the way all DOD organizations acquire, store, retrieve, MR . RICHARD G. DONNELLY 125 and disseminate the largest, most complex flow of technical data and information we know of. CALS is designed to institute within DOD and its industrial support network an integrated system of systems that can create, transmit, and use technical information in digital form for the design, manufacture, and support of defense systems and equipment. Although the emphasis in CALS is on logistics, the program is expected to have widespread impact on many other functional areas because it promotes one of the main objectives of contemporary reprographics - the transition from paper intensive systems of information transfer to an automated and integrated mode of operation. The types of information involved include text, numerical data, illustrations, graphics, and engineering drawings. Currently, DOD buys literally tons of paper along with each major system, and the medium of information exchange is paper. DOD has thirty-eight repositories around the country which store engineering drawings for its own use in supporting defense systems, including spare parts reprocurement and training. In the past, the associated documentation and drawing have been stored pri marily as aperture carde on microfiche. The objective of CALS i s to move towards the digital data exchange of such technical information. In its first phase, stretching into the mid-1990s, CALS will develop and implement common digital data interchange standards to permit neutral format exchange both within DOD and between DOD and industry. Those standards include graphics format standards, text editing standards, and communications protocols. Whereas CALS Phase 1 seeks to convert current paper flows to digital electronic flows in a file transfer environment, Phase II is targeted on new functional capabilities. In Phase II, CALS will devel op integrated product databases or models that will incl ude information needed for design, manufacture, and support, and make it accessible to a variety of industry and DOD users through electronic means. This will permit shared access to distributed databases. Case 2 . Applications of optical storage, high-end electronic publishing, and AI/expert systems in manufacturing industries, particularly those involving manufacture of large or highly complex systems, can provide a capability for storing, retrieving, updating and reproducing engineering drawings and data in digital form. This is accomplished in several organizations by scanning aperture cards onto 5. 25" or non-standard 12" WORM (Write-once-Read- Many) optical media and storing them in j ukeboxes . WORM is available now, and lends itself well to applications which call for centralizing the data in a corporate database and archiving historical documents which do not require modification. When fully implemented, such programs can utilize universal standards to permit complete exchange of data via optical disk. Interestingly, and somewhat ironically, because of the enormous volumes of information which must be digitized, the most effective way to transmit such information today is by creating the optical disk at one of the fabrication or design and development locations and then sending it by overnight maill Transmitting such volumes of information via standard long-distance computer terminal-to-terminal methods would take hours for each drawing set. This type of system can also avoid the intermediate steps of creating the engineering drawings in hard copy, since it permits direct communication between design and development and fabrication sites of CAD-CAM (Computer-Assisted Design-computer-Assisted Manufacturing) program output. 126 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Case 3. Many projects in automated printing and publishing systems are underway in both the private and public sectors. Entire operating manuals are being provi ded on digital computer to reduce the volume of paper which would need to be carried to operate sophisticated systems in remote locations. For example, on many defense platforms there is no physical space available for the several huge manuals which would be necessary for field repairs . (A recent study done in the US Navy fleet estimated that there are 50 tons of paper on a ship) . The transition going on in the Navy from paper- based or microform based systems to a totally digitized environment has been characterized as "the largest media conversion effort ever attempted by humankind". The Navy is currently using some magnetic media and a number of automated publishing systems in the dissemination and publication of information. The automated publishing systems in place are in the $60,000 - $150,000 range, not high-end electronic publishing systems, but rather mid-range systems appropriate to the kind of work that is required by the Navy. Also under development or installation in many private sector organizations are automated publishing technologies which both implement an automated database of specifications and standards and enable electronic capture and distribution of new documents/revisions generated via word processing and related electronic publishing equipment. In the area of high-end electronic publishing, adopting the "standardization markup language" for ASCII display permits the direct acquisition of publications from publisher's tapes or disks used to drive printing equipment. Case 4. CALS program work in AI/expert systems focuses on including trouble shooting aids in intelligent technical manuals and improving contractor capabilities in computer-assisted design of more reliable manufacturing systems. Also, AI/expert systems are being evaluated in logistics applications to overcome the lack of institutional memory due to personnel turnover. Repositories of proprietary or otherwise sensitive personal, business or science and technology information often have highly specialized needs - enormous volumes of information, need for restricted access , multiple types of information readable through any one terminal , non- specialist database interrogators, and occasionally both organization-internal and external users . R & D Conducted on AI/Expert Systems include the use of AI for improved (intelligent) searching of databases containing information, improved logistics systems, and self-diagnostic hardware (computer) trouble shooting. AI will eventually removing the current requirement of creating and searching databases in a syntactic or keyword fashion. Ideally, such systems would learn and remember relationships between blocks of information, rather than simply retrieving specific files by searching for specific words. Case 5. The 103 laboratories and R & D centers within DOD generate 30,000 - 35,000 major technical reports and hundreds of thousands of smaller information documents annually. Most documents are generated as hard-copy, although some are acquired as microfilm/microfiche or as magnetic tape. MR. RICHARD G. DONNELLY 127 One approach to reprography is to digitize the image of a report, convert it to ASCII, and store it on a high density storage medium. Digitized raster scans of text can be converted to ASCII to facilitate storage, high speed transmission, and high speed printing. Organizations which store reports as microfiche or hard-copy are employing an effective seven to ten manhours to reduce a single page document to stored form. There may not be any payoff in the short-run, however, in converting microfiche to optical disk storage, because of the tremendous conversion costs. Making the retrieval process more efficient and effective for users is the biggest problem. Retrieving any known document simply involves making and sending a hard-copy of the report, either from the hard-copy original or from microfiche. Since the most troublesome part of the retrieval process is the identification of the proper documents, the key to improving retrieval techniques is the incorporation of expert systems technology into the database searching process. The goal is to provide the user community with a single, user-friendly system front-end that can be used to identify, access, interrogate, and post-process information from databases. The development of more sophisticated AI and expert systems for the retrieval and dissemination of information - to help people ask the right questions - is evolving as a key future priority. Case 6. In much of business and industry, especially in endeavors involving science and technology information, there is no clear separation between the dissemination and the retrieval functions, since much of what is retrieved by users does indeed constitute dissemination. Currently, in many organizations actual dissemination of documents is done through printing hard-copy from microfiche by xerographic process. The newest hardware in this area is the two-sided printer which Xerox is commercializing and high speed ion deposition printers. R & D in the dissemination hardware and associated software is noteworthy in: Multiple-satellite, "packet-switching", technol ogy is under development. This would permit highly directional communications links to be established between individuals or offices, rather than depending on widely "broadcast" communications. Multi-media mail mixed graphics, text, structured data, voice - would be transmittable over a single digital channel. Many of the hardware systems mentioned above have ·a major associated software development component. For example, multi-media conferencing is a substantially software-based extension of the multi-media mail system project . Case 7. The Defense Logistics Agency (DLA) main function is to support the logistics of the services, other DOD offices, and NATO installations. DLA manages 60% of the items required by the services and has 13,000 - 15,000 terminals in its network of centers, depots, and inventory control points (ICPs) . The data transmitted on the DLA network are sensitive, but not classified. This includes handling requisitions (30 million/year), performing necessary cataloging (15 billion characters), managing inventories, 128 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES administering 350,000 contracts at any time, and related activities. Text, numerical data, and engineering drawings are the types of data managed. DLA disseminates its information to internal DOD clients, to NATO partners and bases, to vendors, and to DOD contractors. Very large volumes of data, including much technical information, are processed in the course of DLA's function as the procurement, material management, and contract administration agency for all the DOD service branches and NATO. DLA now uses standard technology for requisition information. Most sites currently rely on batch processing and very little is accessible on-line via telecommunications systems. DLA is currently working with the US National Institute of Standards and Technology to gain technical advice and support in the installation of fiber-optic links between its various information exchange sites (depots and ICPs) and local terminals. For individual bases, fiber optics will be coming in three to four years, providing funds are available ($50-100 million per base). Long-haul transmission is still a problem, with the data-carrying capacity being the main issue. Current networks are far too limited to handle the contemplated information flow. A substantial upgrading of hardware is implied. In an associated program, DLA is seeking to develop programming languages suitable for exchanging logistics data provided at high speeds. BARRIERS TO THE ADOPTION OF INFORMATION TECHNOLOGY Several possible explanation for the relatively slow infusion of innovative information technology into the management of information at a number of organizations are: Information management is not a primary priority and is underfunded Rapid evolution of information technology complicates decision making Access control increases the complexity of implementation Cost of converting existing systems may be prohibitive. New technologies in reprographics and associated communications are nonetheless emerging steadily, and will strongly influence the future course of both business and endeavors within the public sector. REPRCGRAPHY AND RECORDING by Mr. Shimpei Matsuoka The technological development of reprography and recording has strongly influenced the whole concept and system of copyright protection for the last 10 to 15 years. While the standard of protection of copyright of the traditional media -- book publishing, phonograph record manufacturing, and broadcasting -- has reached a more or less uniform level among nations adhering to the Berne or Universal Copyright Convention, there is no uniformity for the remuneration of copyright owners on the use of copyrighted materials for reprography or home taping. Even among the EEC countries, which are expected to operate as a single economic body in 1992, no agreement has been reached on these issues; however, they have been discussed at many conventions, meetings, and symposia. Just to explain the present situation in different countries would make an interesting report for this forum. However, I would like to concentrate instead on the Japanese state of affairs at this time with emphasis on the protection of music copyright from home taping. Our country is well known as the leader in developing technology for reprography as well as home taping. It is also the major supplier of hardware for reprography and home taping throughout the world with tape recorders, video recorders and copying machines widely purchased by Japanese consumers as well. According to reliable surveys ownership of audio tape recorders is pervasive. More than 90% of Japanese households own at least one audio tape recorder while the national average is two recorders per household. For example, if you have four teenagers in your family, you would not be surprised to find more than 4 tape recorders at home. More than 500 million units of GO-minute cassettes are sold every year. Ownership of video recorders is also widespread. One out of every two households has a video recorder and more than 5% of households have two video recorders. The use of reprography machines is so widespread as to betaken for granted in the business world and it is becoming increasingly a fixture in private homes. Yet, despite such widespread ownership and use of audio and videotape recorders and reprography machines, our efforts to obtain satisfactory remuneration for creators have not been successful. An account of past discussions on the issue in Japan, a description of the present situation, and an overview for the future will probably 1::-es·t illustrate the whole picture on the interrelationship of copyright and the technological development of reproduction tools. In 1970 sweeping revisions were made in the copyright law of Japan. Although the word "revision" is used technically, it actually amounted to the creation of a new copyright law. Private use of copyrighted materials is defined in Article 30, Subsection 5, where several other types of fair use exemptions are listed. While the outline of private use or private reproduction was inherited from the previous copyright law, all reference to mechanical or chemical reproduction systems which were specifically mentioned in the old law, is entirely absent from the revised article. It is of 130 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES interest to note that at the time of the 1970 rev1s1on, audio and video tape recording systems as well as reprography machines such as Xerox were already in existence . In West Germany, GEMA had already been collecting royalties from audio and video tape recorders when the revision of Japanese copyright law was discussed in Japan. Although our lawmakers, Diet members, were aware of the practice in West Germany of assessing such royalties, it was unanimously agreed that the use of tape recorders or Xerox machines would not develop to the extent that the interests of copyright owners would be threatened. It was believed that the use of tape recorders or Xerox machines for private reproduction, on the contrary, would facilitate the wider exploitation of materials in traditional media. Because tape recorders were fairly expensive at the time, only recording companies could afford high quality open reel recorders; and although audio cassette tape recorders were being sold then, the quality of cassette recordings was believed too poor to compete with traditional phonograph discs. In the area of reprography, managers of businesses where reprography machines were installed, warned employees to avoid making unnecessary machine copies. No one could have foreseen at the time of the law ' s revision that technological development would make it possible for everyone to enjoy first class quality of sound and audio entertainment through home recorders and cassettes. As a society, we are increasingly exposed to various types of reproductions which were once available only through record companies, book publishers or movie producers. Now almost anyone who wishes may reproduce copyrighted material by means which are commonly available to all. These reproductions freely circulate outside traditional distribution channels. Such development of new types of reproductions has created two serious problems in the field of copyright. The first is the expansion of opportunities for pirate operations. The other is the pursuit of compensation for authors for new types of reproductions. I will try to give an overview for both problems as follows. Pirated phonograph records presented a problem well before the advent of the cassette era. When pre-recorded cassettes were introduced, pirated cassettes became the most popular pirated product. Pirated audio and video cassettes were manufactured and sold in almost every country in the world. The cost of machines and blank tapes was so low that anyone could start a pirate business with very little investment capital. Since pirate operators do not pay any royalties or fees, every yen or won they added over the cost of blank tapes became profit. Pirate operations present the most serious problem for record manufacturers, movie producers, as well as music authors' societies, in the world. Since our country is surrounded on all sides by ocean, we are in a better position to protect our domestic market from being inundated with imported pirated products. The Government takes a restrictive position against general importation of goods which helps to ensure strict inspection at the port of entry for sound products, too. With the close cooperation of customs officials, we have been fairly successful in restricting the flow of pirated products into Japan from foreign countries. MR. SHIMPEI MATSUOKA 131 On the other hand, we must expend much time, money, and effort to combat domestic pirate operators in our own market. For the last several years, pirate operators have appeared in many parts of our small country, mostly producing and sellin9 video cassettes since the price difference between pre-recorded video cassettes and blank tapes is substantial enough to turn lucrative profits. With the rise of international concern for the protection of intellectual property in general, the Japanese police have become more and more interested in curbing the activities of pirated cassette producers. Last year the Government agreed to revise the copyright law to give us a better chance of seeking redress from infringers. In the past, we had the burden of proving in court that an operator was actually distributing illegal products and that he was acting with specific knowledge. Now the revised law says that "possession for distribution" is sufficient proof to establish infringement of copyright. While we must continue the battle against pirated products, we can still apply to the problem tradi tional international concepts of copyright, and most of the current international organizations can be of assistance in this area. Reprography and home taping, however, require different approaches. The greatest problem concerning reprography and copyright is to create a new system and to operate the system in a field where the notion or concept of collective administration of copyright has never been established. In Japan, we believe that it will be some years before most of our households own Xerox or similar types of reprographic machines for home use. Most copying by private persona for private use, although technically infringing upon the interests of copyright owners , has had a negligible impact at present. Reprography in business offices, laboratories, and other similar institutions does not constitute free use of copyrighted materials. Business corporations or educational institutions have already grasped the situation. In principle, they agree to compensate copyright owners to avoid maintaing situations of infringement. The question now is how to establish a system for licensing and collecting fees for the use of copyrighted materials. Unlike musical authors, literary and scientific authors have not been familiar with administering their copyrights collectively. Scientific authors, who never dreamed of earning money by writing study reports, are sometimes very slow in enforcing their copyrights. Moreover, book publishers differ yet from music publishers in that few ways of exploiting copyrights are available except the very basic print right. The Japan Book Publishers Association and a group of scientific authors have worked together during the last few years t o establish a reprographic rights center i n Japan. It is now hoped that the center will be established this fall and will st art licensing and collection efforts early next year. There are still many problems to be discussed and settled; however, I am optimistic that any initial problems will, in the long run, be successfully resolved. 132 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOOIES Now, the last and most important problem is home taping. Here we must discuss the possibility of revising our current law as well as developing a new system for the remuneration of authors. There are countries where royalties are collected from hardware manufacturers; where governmental taxes are levied over some types of products; and where nothing has been done at all. Up to now, there has been no royalty payment or tax levied on anything in Japan. We have discussed the problems for more than 10 years with representatives of the electronics industry as well as those of the Agency of Cultural Affairs, which is responsible for revisions of the copyright law. We hope that a solution will be found in the near future, but we are not optimistic. I will try to explain the problems we have faced as well as JASRAC's attitude at this point. There is no argument that a large number of blank cassette and audio tapes are used for home taping. According to a recent survey over 80% of Japanese between the ages of 13 and 39 years own at least one cassette of privately recorded music while the ownership of commercially produced and distributed pre-recorded products of the same age group shows lower percentages, e.g. 62.4% for standard LP records, 31.8% for CO's, and 57.6% for cassettes. A major share of such private recording falls in the category of popular hit tunes which should be enjoying the full protection of copyright. Although there are no precise figures, we estimate that billions of songs are recorded privately every year. Hardware manufacturers and manufacturers of recorders and blank tapes are well aware of this practice. To a certain extent everyone involved --- authors, hardware manufacturers, the general public --- agree that some remuneration might be necessary for creators, composers, performers, and producers. Still, we must be able to put forth a clearly reasoned and persuasive explanation stating why remuneration from home taping is necessary and how such remuneration shall be made. Often Article 9 bis of the Berne Convention is relied upon to justify remuneration for home taping. .The difficulty in applying this particular article lies in its interpretation and application by individual countries. For the practical application of the article in Japan, it is necessary to revise our copyright law so that fair remuneration would be guaranteed to the creators. As you can imagine, it is both impossible and impractical to prohibit home taping or to limit the amount of home taping. We at JASRAC are actively appealing for revision of the law, however, we must first discuss and reach an agreement on the philosophical issue then we can proceed to the practical issue. Traditionally, compensation for copyrighted material is associated with some type of economic exploitation of a work. If a publisher wishes to print and sell a book by a particular author, the publisher obtains a license from the author on the condition that a certain amount of fees or royalties be paid for the use of the work. The book publisher usually treats the fee or royalty as a cost of manufacturing his product which happens to be books in this case. Since the book purchaser must pay a price which reflects all costs including remuneration to the author of the book, it can be said that the consumer bears the actual cost of compensation to the author. MR. SHIMPEI MATSUOKA 133 However, the average person usually is unaware or does not accept the notion that he is compensating the author whenever he purchases a book. Often non-copyrighted works are sold at the same retail price as copyrighted works . The portion of the p~rchase price which the consumer is paying as remuneration to the author is unknown. This situation is typical in the traditional use of copyrighted materials and compensation for their use. In short, the traditional concept of remuneration was always directly associated with the business of producing copyrighted materials for general distribution. Now that modern technology has made home taping possible for the public at large the idea of remuneration takes on a different application because such use of copyrighted materials does not involve a guest for profits in the traditional business sense. Although the electronics industry is well aware that its products may be used to infringe on copyrighted works, the industry cannot be held responsible for the current situation of home taping. The electronics industry is not engaged per se in the business of reproducing music. If the present situation regarding home taping is construed as infringement of Article 9 bis of the Berne Convention, the question arises as to how copyright owners could claim remedies. The only practical solution to the problem would be the levying of some type of royalty payment calculated on the number of machines and/or tapes sold. The general public would be exempt from infringement actions based on the act of taping a copyrighted work at home. Instead the royalty payment would be assessed on the sale of hardware used to produce homemade tapes. In order to implement this solution, we must negotiate with the electronics industry and engage their cooperation. The task will not be an easy one since, technically, tape or machine manufacturers are not users of copyrighted materials and, therefore, not infringers. At least in Japan we try to avoid naming them as contributory infringers. In theory, electronics manufacturers would be expected to assist us by including a royalty charge in the purchase price of tape recorders or blank tapes which the end user, the general public, shall pay at t he time of purchase. However, in our free market economy it is rather doubtful that manufacturers would charge the full amount of such royalties by increasing the retail price, especially in a very competitive market for tape machines and blank tapes. In practice, it is more likely that manufacturers would agree that payment of royalties be made out of manufacturers' profits. Negotiations between representatives of the electronics industry and copyright owners officially commenced in 1952. A special sub-committee was established by the Copyright Council of the Agency for· Cultural Affairs in October, 1952 . The committee met twenty-five times over a four and a half year period. In June, 1956 the committee reported to the Copyright Council that no agreement had been reached and that copyright owners and representatives of the electronics industry should continue to discuss the matter among themselves with the assistance of the Agency of Cultural Affairs. In 1958 on the initiative of JASRAC, three organizations, the Japan Phonograph Record Association, the Japan Council of Performers Organization, and JASRAC, launched joint efforts to enforce copy and neighboring rights in Japan. The most important issue on the group's agenda has been the 134 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES establishment of a system to compensate copyright owners for home taping of their works. The group has made appeals to various sectors of our society. In February 1987 a Japanese electronics manufacturer announced that his company would market digital tape recorders and blank tapes for DAT recordings. It was expected that other major electronics companies would soon follow suit. Apprehensive that this new development would further erode owners'copyrights by making available to the general public recording technology which would rival professional equipment used by the major record companies, we strongly argued for remuneration by royalties. In August of the same year, the Agency of Cultural Affairs decided to set up a new committee to address the issue of remuneration. The lOth Sub-committee of the Copyright Council was organized anew with membership consisting of the leaders of the three original associations as well as the president of the Electronics Industries Association of Japan. The group was committed to seek a mutually agreeable settlement. For the last two years almost all problems related to the introduction of the royalty system on tape recorders and blank tapes have been discussed. We expect that the committee will recommend revisions to our existing copyright law and authorize the collection of royalties from audio and video products in the near future. We know that the recommendation of the sub-committee is just the first step in revising Japanese copyright law and attempting to establish a royalty system. We must continue our efforts toward achieving these goals. By the time the remuneration issue is successfully resolved we may have to face yet another challenge brought about by another new technology. In this era of rapid and profound technological development copyright owners must remain highly sensitive to the potential impact which technology may have on copyrights and society. Copyright Law of Japan (Reproduction for private use) Article 30 - -- It shall be permissible for a use to reproduce by himseLf a work forming-the subject matter of a copyright (hereinafter in this Subsection referred to as a "work") for the purpose of his personal use, family use or other similar uses within a limited circle, except in the case where such reproduction is made by means of automatic reproducing machines ("automatic reproducing machine" means a machine having reproducing functions and in ·which all or main parts of reproducing devices are automatic) placed for the ~se of the public. Berne Convention (Paris text) Article 9 (2) --- It shall be matter for legislation in the countries of the Union to permit the reproduction of such works in certain special cases, provided that such reproduction does- not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author. MR. SHIMPEI MATSUOKA 135 1. Domestic Production of Blank Audio Tapes The domestic production of blank audio tapes in 1984 was the equivalent of 1.117 billion units of 60-minute cassette tapes, and has maintained almost same level of production for the last five years. Domestic Production of Blank Audio Tapes (Figures in ten millions) 2. Domestic Production of Blank Audiovisual Tapes The domestic production of blank audiovisual tapes in 1984 was t he equivalent of 298 million unites of 120-minute VHS tapes, and had increased to 680 million units in 1988 . Thus, the demand for them is seen increasing wi th great strides in parallel with the rapid proliferation of the hardware. Domestic Production of Blank Audiovisual Tapes (Figures in ten millions) 3. Volume of Music Recorded (Audio Home Taping) In Japan, the average per-capita number of home tapings made yearly is 10. 3 tapings, and the average number of musical works per home taping per capita is 10.1 works . Based upon these figures, the total number of musical-work recorded yearly is calculated to be 8,080 million works. 4. Comparative Study of Video Home Tapers and Audio Home Tapens in Age Groups The persons who video-recorded at home in the past 12 months from October 1982 through September 1983 total about 14 millions in number , which stands for 12.4% of Japan's total population. Study of a breakdown by age shows that about 80% of persons in the age 13-39 group engaged in video home taping. In the case of audio home taping as referred to earlier, the ratio of the tapers aged 23 and oven becomes far lower and lower with advance in their age. However, in the case of video home taping, it is shown that video taping·· at home is done by individuals in a considerably widely-spread age range. 136 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 5. Percentage of Persons, in Age Groups, Who Engaged in Audio Home Taping The number of the persons who taped at home during the past 12 months from October 1982 through September 1983 is approximately 38 millions, representing 32.8% of Japan's total population. Studying a breakdown by age of the persons who taperecorded at home, we find that more than 80% of those in the age 13-22 group engaged in home taping. 6. Rate of Audiovisual Recorders' Penetration in Households Audiovisual recorders sold 5 years ago totaled only 450,000 in quantity. As the recorders have been increasing rapidly since 1981, their sales in Japan in 1984 are estimated at 3.57 million units which represent 7.9 times thqse seen 5 years ago, in 1979. Accordingly, the rate of their penetration in households is estimated to reach 40% at the end of 1984. (Domestic Sales of Audiovisual Recorders) (Figures in millions) 7. Kinds of Television Programs Recorded (Video Home Taping) Of the persons who engaged in video home taping in Japan, 99.7% recorded from television. Predominant in their recordings are films, music and sporting events. 66.6% of them recorded films, and 54% music or sporting events. The video home tapers performed the recording act for a per-capita average of 95 times a year, 1.8 times a week, and have kept a per-capita average of 12.3 recorded tapes. 8. Remedial Steps for Economic Disadvantages Suffered by Copyright Owners from Home Taping. Copyright owners are suffering a vast economic disadvantage from audio and video home taping. The taking of a legal remedy is favored by 73.2% of audio home tapers and 68.2 of video home tapers. Of all those home tapers. favoring a legal remedy, 90% mentioned the system of imposing a levy on the hardware or blank tapes. REPRCGRAPHY AND ROCORDING by Mr . Jukka Liedes INTRODUCTION Copyright is fascinating branch of law. It takes one not only to the traditional domain of human creativity but also to the legal consequences of technological development. It is amazing what a multitude of copyright problems arise from such ordinary and widely used technologies as reprography and cassette recording. This contribution deals with reprography and recording. There is no need for going into the technological side. I'll confine my presentation to copies made for uses other than private or personal as regards facsimile reproduction and to home taping as regards recording. These reproduction techniques are in very widespread use, and the problems are particularly difficult to solve both in terms of law and practice. Representing Northern Europe, I naturally have Nordic solutions closest to my heart. This is why I'll describe to you some leading characteristics of the Nordic copyright protection and take mos t of my examples from the Finnish solutions. The onset of the boom of reprography and cassette recording equipment fall s on the sixties . The technological inventions were naturally made much earlier. Both reprographic and audiovisual reproduction technologies have truly tested the system of copyright. My presentation will concentrate on copyright proper, but as regards taping, I've seen it necessary to make some reference to neighbouring rights at some points : to the rights of performers, producers of phonogram and broadcasting organizations, all of whom taping concerns to a large extent. The problems involved both in reprography and horne taping activities have one major characteristic in common: by means of these reproduction methods, protected works become available to those who reproduce them instead of acquiring them through publication and distribution channels. This means that the authors do not receive remuneration, nor do producers receive full coverage for the products, which narrows the possibi lities for further production, and subsequently both the authors' and perfo~ers ' work opportunities. Once these technologies had been adopted into general use, the solutions, with a slight simplification, could be found on the following scale: (a) certain extent of free copying and limitation of rights, (b) prohibition of copying without the authorization of the authors, or (c) system of copying with remuneration somehow guaranteed under law, or any other solution between the extremes. In concrete drafting of bills and political decision-making these considerations lead to the fundamental questions of legal policy: what is in the interest of consumers, in the interest of scientific and other publication, in the interest of the authors and their justified welfare etc. 138 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES What is decisive in both reprography and recording is how and where we draw the line between private or personal or fair use or dealing and other reproduction. The difficulty of keeping track of private or personal use is a general problem in copyright. The present technologies do not allow keeping a record of private copying transactions either as regards reprography or taping. Individual privacy and the inviolability of the circle of home does not allow any efficient control as to what and in which extent is copied. Questions relating to facsimile reproduction and recording have been under scrutiny in the work of WIPO and Unesco on several occasions over the last two decades. From time to time, the relevant executive bodies, including the Executive Committee of the Berne Convention and the Intergovernmental Committee of the Universal Copyright Convention, have had studies made and decided on measures to be taken. I think that the most illuminating and interesting perspective into the matter and its historical evolution is to examine how various working groups and expert committees have tackled the issue over decades. In reviewing the historical development, I'll primarily refer to the reports and factual results of these conferences. The documentation of the work done within WIPO and Unesco gives an excellent picture of international development in this field. In the search for solution models, the decisive factor has been which kind of legislative solutions are in confo~ity with the conventions. International Copyright Conventions Under the Berne Convention and the Universal Copyright Convention, the author has an exclusive right to authorize the reproduction of his work. The Berne Convention is the more material copyright convention of the two and goes into greater detail. The right to reproduce a work is broad under the Paris Act of the Berne Convention. It also relates to any sound or visual recording of the work. It is not limited to reproduction for public purposes but covers reproduction for private purposes as well. The right of reproduction would not function in practice without some limitations. According to Article 9(2) of the Berne Convention, the national legislator may provide for limitations of the right of reproduction in certain special cases, provided that such reproduction does not conflict with the no~al exploitation of the work and does not unreasonably prejudice the legitimate interests of the author. 1 The full text of Article 9 of the Paris Act of the Bern Convention: (1) Authors of literary and artistic works protected by this Convention shall have the exclusive right of authorizing the reproduction of these works, in any manner or fo~. (2) It shall be a matter for legislation in the countries of the Union to pe~it the reproduction of such works in certain special cases, provided that such reproduction does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author. (3) Any sound or visual recording shall be considered as a reproduction for the purposes of this Convention." MR. JUI Under Article I of the Universal Copyright Convention, the Contracting States have an obligation to provide for an adequate and effective protection of the rights of authors. After the Paris revision, the Convention expressly mentions the right of reproduction; Article IV bis (2), any Contracting State may provide for such exceptions to the rights of the author which do not conflict with the intention and essence ("spirit and provision") of the Convention. Any State whose legislation so provides, must nevertheless accord a reasonable degree of effective protection to the rights thus limited. These references relate to copyright and the rights of authors. As regards neighbouring rights, the key text is the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations. According to Articles 7, 10 and 13 of this Convention, the right owners have certain important rights of reproduction. For the particular theme I'm discussing, it is relevant that Article 15 of the Convention allows exceptions to the protection, e . g. as regards private use. Limitations set to the neighbouring rights follow i n many cases - for practical reasons and even for reasons of principle - limitations of copyright protection. This has been formulated as a legal rule in Article 15(2) of the Rome Convention.It is significant that in the Rome Convention the use of compulsory licenses has been explicitly limited to the extent in which they are compatible with the Convention. These provisions of the Convention show that the aim has been to give effective protection to copyright and neighbouring rights as regards the relevant rights - in this case the right of reproduction. The limitation of these rights has also been restricted as explicitly as possible in general terms. As to the extent of the right of reproduction and the prospects for limiting it, Article 9 of the Berne Convention is of major relevance . As I have already noted, this right -is particularly broad, but the problem is not its scope. The essential problem relates to interpretation, (i.e.) what are the cases in which the legislator can limit the right. The need to limit the right may be due to a great number of factors : the balancing of the interests of the right owners and users; major social considerations relating, for instance, to dissemination of information, education and research; and even how copyright works in a given field. In this respect the wording of Article 9(2) of the Berne Convention: "the reproduction must not conflict with the normal exploitation of the work and must not unreasonably prejudice the legitimate interest of the author" is of utmost relevance. The formulation, which was created in the Stockholm 2 Conference in 1967, has generated a whole doctrine and literature • 2 One major axiom in the doctrine is based on the proposed interpretation included in the Records of the Stockholm Conference, 1967, p. 1145-1146 : "If it is considered that reproduction conflicts with the normal exploitation of the work, reproduction is not permitted at all. If it is considered that reproduction does not conflict with the normal exploitation of the work, the 140 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The right of reproduction under the Convention is thus extensive and capable of flexible application. It also effortlessly covers new methods of reproduction. This is generally also true of national legislation. This flexibility of essence is one of the features which qualifies copyright legislation as an adequate element of high technology legislation adapted to quick development. REPROGRAPHY General There have been attempts at estimating how many copies are made of protected material each year. According to one estimate, as many as 250 billion pages of protected works are copied yearly around the world. As a phenomenon, reprography differs from the reproduction of audiovisual works and phonograms in that photocopying devices are not in as widespread use in private homes as cassette recorders. It is not at all certain that the present type of photocopiers will become very popular in home use. It is possible that reproduction of texts and other graphic material will become more widespread in private homes when the progress in telecommunication, information technology and the technology of terminal equipment has led to more integrated systems than the present ones. Reproduction by reprographic methods for use is by no means irrelevant to copyright. But it is far more decisive how copyright is implemented as regards copying outside the circle of home: in primary and secondary schools, universities, libraries, research institutes, governmental and municipal agencies, business corporations and other corporate bodies etc. In this kind of use, the material copied by reprographic methods is clearly material necessary and useful for the activities of the organizations mentioned. In all respects, effecting some degree of control in reprography is a more realistic prospect than in private taping. This has a clear impact on legal policy as well: the need to limit the exclusive right is less pressing. 2 cont. next step would be to consider whether it does not unreasonably prejudice the legitimate interests of the author. Only if such is not the case would it be possible in certain special cases to introduce compuls0ry licence, or to provide for use without payment. A practical example might be photocopying for various purposes. If it consists of producing a very large number of copies, it may not be permitted, as it conflicts with a normal exploitation of the work. If it implies a rather large number of copies for use in industrial undertakings, it may not unreasonably prejudice the legitimate interests of the author, provided that, according to national legislation, an equitable remuneration is paid. If a small number of copies is made, photocopying may be permitted without payment, particularly for individual or scientific use". MR. JUKKA LIEDES 141 International work The copyright problems relating to reprography were identified relatively early on international level. The first stages in relevant international work in the 1960s and 1970s could be described as the era of searching and analysis. The first WIPO-Unesco expert meetings were arranged in 1968 and 1973 . In 1975 there was an attempt to draft an international recommendation concerning the copyright aspects of reprography. The work was done by subcommittees set up by the Executive Committee of the Berne Convention and the Intergovernmental Copyright Committee of the Universal Copyright Convention. The Subcommittees could not arrive at any proposals for solutions detailed enough and adopted a less ambitious document, a resolution. The Subcommittees found "that the problem does not arise in the same way for all countries and that, after a thorough study of these various aspects, it appears that a uniform solution on the international level cannot, for the time being, be found". In the operative part of the Resolution the Subcommittees recommended that the States parties to the Copyright Conventions, with a view to reconciling, where necessary, the needs of the users of reprographic reproduction with the rights and interests of the authors, seek a solution based on the following principles: 1. It rests with each State to resolve this problem by adopting any appropriate measures which, respecting the provisions of the Conventions ... , establish whatever is best adapted to their educational, cultural, social and economic development; ... 2. In those States where the use of processes of reprographic reproduction is widespread, such States could consider, among other measures, encouraging the establishment of collective systems to exercise and administer the right of remuneration." These words ended the first phase of international work on the problems relating to reprography. The 1980s saw the beginning of the second phase - the era of working solutions. Reprography had further established its position. In a number of countries the national legislators had dealt with the issues and found working solutions. WIPO and Unesco have during the last few years convened two series of expert meetings on copyright and neighbouring right matters. The first concentrated on new uses of protected works (e.g. cable television, private copying). The discussions of the other series of meetings were conducted according to the main categories of works (such as audiovisual works and phonograms, the printed word etc.). The results of the Committee of Governmental Experts on the Evaluation and Synthesis of Principles on Various Categories of Works. After this WIPO has still undertaken a special effort: to prepare a model law in copyright. The first expert meeting was held in early 1989. 142 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The purpose of the second series of meetings was to arrive at certain principles which, together with a commentary, could serve as a guideline for governments when they have to deal with various copyright issues. The results obta ined in the "Printed Word" meeting held in 1987 and the "synthesis" meeting mentioned above can be considered as significant steps forward in the international effort to solve the copyright problems involved in reprography. The Memorandum prepared by the WIPO and Unesco Secretariats for the "Printed Word" meeting The principles on reprography mainly concern printed word-which were grouped under the heading "The Printed Word" in the synthesis-gained cons i derabl e acceptance at the meetings. These principles, together with the commentary and the reports of the meetings, cover all the main aspects of the legal issues in reprography and also contain basic guidelines for the practical administration of rights. The copyright issues involved in reprography can no longer be debated internationally without reference to these recent documents. Reprographic reproduction was defined as follows: ''the facsimile reproduction of writings or graphic works, for example by photocopying". In the first general principle it is confirmed that reprographic reproduction ~s cover ed by the authors' exclusive right of reproduction; this right should not be limited except in cases and to the extent that international copyright conventions permit (Principle PW2). The principles aim at setting clear limits for the exceptions (free uses or non-voluntary licenses) to the rights (PW3). The justification of limiting the right of reproduction should be considered case by case at the national l evel on t he basis of all concrete circumstances. The logical outline has been borrowed from the Berne Convention. Limitati ons are restricted to precisely defined special cases; the cumulative effect of such limitations should not result in unreasonably wide scope of free reproductions/non-voluntary licenses. Reprographic reproduction for commercial distribution, in multiple copies, of works whose market is particularly vulnerable and of entire works would conflict with the normal exploitation of works. In considering whether a limitation might unreasonably prejudice the legiti mate interests of authors, at least the following aspects should be taken into account: (i) the purpose of the reprographic reproduction, (ii) the nature of the work copied, (iii) the number of copies, (iv) the substantiality of the portion copied and (v) the effect of the reproduction on the potential market of the work. In the manner of the Resolution of 1975, more recently formulated principles place the main emphasis on the collective administration of the right of reproduction. Non-voluntary licenses should only be introduced if no MR. Jl.JKKA LIEDES 143 appropriate individual arrangements are available and no appropriate collective administration organizations can be set up (PW5). The principles contain two important clauses concerning the operation of licensing schemes. According to the first of these, the legislators should incorporate in licensing schemes a provision according to which the collective administration organization indemnifies licensees against infrigement actions in relation to works whose copyright owners are not members of the scheme. The second clause could be called a system of "extended collective agreement" or the "Nordic solution": the legislators may consider extending, by legal provisions, the validity of the authorization given by a collective administration organization representing a large number of authors of a certain category of works to works of t he same category by authors not represented by the organization. According to the principles, the remuneration to be paid for reprographic reproduction should, as a rule, be determined in negotiations between users and collective administration organizations. The set of principles also provides for the possibility of an entirely different system of remuneration for reprographic reproduction. The introduction of a charge on equipment and/or material used for reproduction should be considered if reprographic reproduction in private homes becomes widespread. Such equipment levy and operator levy (on paper) were introduced in the Federal Republic of Germany in their 1985 revision. The possibility of this manner of remuneration is also included in the WIPO Draft Model Provisions (Section 22). I have taken all this time to explain the WIPO/Unesco principles relating to the printed word/reprography because they represent the first international document dealing with concrete elements in the legal solutions. The principles ate flexible and give room for a multitude of national solutions under a great variety of circumstances. The Finnish solution Interesting and pragmatic reprography solutions can be found in the Federal Republic of Germany, Netherlands, the Nordic countries, Unite States, Canada and United Kingdom . But my example is the Finnish solution, which is in many respects similar to the one adopted by the other Nordic countries. In Finland the copyright aspects of reprography were solved in connection with the 1980 revision after a decade of national and partly Nordic preparations. This means that we now, in 1989, have ten years' experience of the system. Copying for private use has always been permitted in Finland. In the 1980 revision, the provision concerning private use was amended in order to emphasize the personal nature of private use and its restricted scope of application. Copying for private use is only permitted for physical persons. the revised provision a·lso restricted the number of copies permitted. Reprographic reproduction of protected works beyond private use was not permitted without the consent of t he author. It was stated that it is not thinkable in practice that individual autho·rizations could be obtained in all 144 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES fields where photocopying is widely used before each act of photocopying. On the other hand, reproduction is in many fields a valuable, even indispensable aid. Nevertheless, allowing all reproduction without limitation was considered to be unthinkable. The overall objective which emerged during the rev~s~on process was to facilitate the granting of authorizations for reproduction. A pure contractual arrangement, in which an organization, authorized by its members, grants the user the permission to reproduce the works of its members would not be sufficient under the Finnish legal system. Such an agreement does not bind the copyright owners remaining outside the organization. This system would produce great difficulties in enforcing the agreement: it would be necessary to check in each case whether the agreement covers works in question. In view of this reasoning, the system of extended collective agreement licence was adopted. By a new provision in the law, an agreement between an organization controlling reproduction rights and the user of copies is granted a binding effect also in respect of those authors who are not represented by the organization. Thus the consent of these "outsider authors" is not needed for copying. They are, however, in the same position as the copyright owners directly represented by the organization in respect of the benefits accruing under the agreement. 3 An analogical solution can be found in many other countries' legislation in labour law: the general binding effect of collective bargaining agreements. When the revision was being prepared, a clear preference for individual exclusive rights was documented. The drafting committee was of the opinion that the remunerations paid for the use of the works should in all cases be distributed taking account of the type and extent of the use of the works . In evaluating the advantages of the extended agreement licence as compared with, for example, different types of non-voluntary licenses such as legal of statutory licenses, t he committee noted that the agreement licence system puts the copyright owners in a better position. In this system the right to use works is based on negotiations between the parties concerned, 1n which the remuneration and other therms are settled. Such a system allows more scope for taking into consideration the different degrees of vulnerability of the materials concerned, even to the extent that the reproduction of certain materials is not at all permitted. The full text of the provision (/ lla) taken in 1980 to the Finnish Copyright Act on the so called extended collective agreement license reads as follows : "Anyone who has received authorization, from an organization representing a large number of Finnish authors in a certain field, to reproduce published works by photocopying or analogous methods of reproduction shall also have the right to reproduce by the same methods published works of the same field the author of which is not represented by the organization. The conditions determined in the authorization shall be observed in the case of such reproduction. MR. JUI However, the Finnish solution does contain one point which resembles a non-voluntary licence. In view of the fact that reprographic reproduction is so important for educational activities, it was considered unthinkable for it to be terminated completely. It was considered necessary to provide for the reproduction of protected material also in cases in which the negotiating parties cannot arrive at an agreement regarding the terms of reproduction. It was also regarded necessary to safeguard by mens of legislation that reproduction also in such cases takes place on conditions that are fair to copyright owners. Under a provision added to the law, the authorization and the conditions are settled by arbitration in case of disagreement. This special regulation relates only to reproduction for educational purposes. There are no corresponding compulsory elements regarding any other purposes. The Finnish provision on extended collective agreement licence covers reprographic reproduction for whatever purposes. In Sweden, NoLWay and Denmark corresponding provisions relate only to reproduction in educational activities and without compulsory elements. In the preparatory work, efforts were made to draft the Finnish provision in keeping with the provisions of Article 9 of the Berne Convention. It was considered desirable that the provision could in all respects be applied to foreign works. In this licence system the organization of the copyright owners will ensure that the conditions agreed upon are fair. It was also seen important to guarantee that an author may, when he so desires, prohibit reproduction of his works. In the Finnish system the agreement may prohibit the reproduction of a specific work, works by an individual author or works of a certain category. As stated above, the extended agreement licence system has recently been adopted into the WIP0-Unesco principles as one possible way to solve copyright problems in the field of reprography. If the stipulations issued by the organization and referred to in the second paragraph do not provide, for authors represented by the organization, the right to individual compensation, an author not represented by the organization shall, however, have the right to demand such compensation. The compensation shall be paid by the organization which has given the organization referred to in the first paragraph. The right to individual compensation shall, however, have expired if a claim concerning it cannot be proved to have been presented within two years from the end of the calendar year during which the reproduction has occurred. " Whatever the organization referred to in the first paragraph may have stipulated regarding the distribution of compensations to be paid for the reproduction to authors represented by the organization, or regarding the use of such compensations for the joint purposes of the said aut hors, shall also be applied to authors who are not represented by the organization. 146 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The Finnish law provides a basis for contractual arrangements which concern large groups of authors and reproduction within entire sectors of society: authorities and business life. The first comprehensive agreement concerning reprographic reproduction was in fact signed on the same day as the prov1s1on came into force. The agreement was concluded between the State of Finland and an organization of copyright owners. Organization of collective administration Collective administration of the right to reprographic reproduction is an indispensable infrastructure for a well functioning copyright system. At the early stages of the preparations for the 1980 provisions on reprography, it was noted that a system of licensing reprographic reproduction would not function satisfactorily if the owners of the copyrights did not take appropriate measures to secure their rights through, for example, a joint organization. In Finland Kopiosto, a joint organization for the administration of copyright, was fonded in 1978 by 21 organizations representing different groups of copyright owners. National registered associations, whose members are owners of the rights referred to in the copyright legislation and whose task is to administer and control the rights based on the copyright legislation, may be members of Kopiosto. The individual owners of copyright transfer the control of the reprographic rights of his work to the respective copyright association in the form of a mandate. The association transfers the control of these rights by an agreement over to Kopiosto . For the time being, Kopiosto has received proxies from 25 , 500 copyright owners. Kopiosto was founded primarily for licensing the so called secondary use of protected material where large sectors of the society are concerned. The activities of Kopiosto are not, however, restricted to photocopying. According to the mandates, Kopiosto can also represent its members in other matters relating to the rights based on the copyright legislation. Thus the solution to copyright problems of reprography simultaneously provided for the solution of a number of other question. In August 1989 Kopiosto had 40 member organizations. These include almost all the organizations representing authors, publishers, and performing artists of the whole country: authors of teaching materials, nonfiction, fiction, and drama journalists translators graphic designers critics photographers MR. JUKKA LIEDES 147 authors of visual arts authors in the field of music directors, choreographers and scene designers newspaper, periodicals and sheet music publishers actors and dancers performing artists in the field of music. At present the agreements concluded by Kopiosto on the basis of the copyright provisions described above cover virtually all the relevant reprographic reproduction in the whole society. The agreement made in the field of education and scientific research has blazed the trail for agreements in other sectors of social life. At present the following fields are covered by and agreement: copying in educational activities and scientific research (schools, universities, research institutes) copying in municipal administration copying in church administration copying in State administration copying in the business life copying in language institutes individual licensing for organizations and corporate bodies The distribution of the remunerations collected by Kopiosto proceeds in two phases. In the first phase the remunerations are distributed between different groups on the basis of domestic and foreign information available on the materials used in copying. For instance the 1989 remunerations from educational activities will be distributed between the different groups as follow: nonfiction 64.0% press 15.0% illustration 13.0% fiction 2.5% sheet music 5.5% 148 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES In the second phase all the member organizations of Kopiosto are given a chance to joi n the aforementioned groups. During this phase they agree how to divide the remunerations within each group. The shares between authors and publishers differ within the groups as follows: nonfiction authors 35% publishers 65% press, sheet music authors 50% publishers 50% fiction authors 65% publishers 35% illustration authors 68% publishers 32% The annual remunerations collected by Kopiosto from all reprographic reproduction totals 2 million US dollars. The administration of reprographic right does not work without a follow-up on the volume of copying. There is no technique or technology which would allow logging all the copying activities. The estimates of the volume and structure of copying in different countries are based on various statistical surveys with random sampling. For instance in Finland the administration of the rights of photocopying largely rests on surveys made of copying activities in various sectors. A survey made of the extent of copying in schools during 19821984 showed that the total annual number of copies is approximately 393 million pages. About 30% of this amount, i.e. 110-120 million pages - were protected by copyright. The most frequently copied protected materials were different kinds of teaching material and periodicals. The amount of copying had doubled from a similar survey made in 1977-1978. The international implementation of copyright in the field of reprography entails a network of agreements between administration organizations in different countries. This development is taking its first steps. RECORDING General Widespread home taping is a fact, and there is nothing anyone can do about it. In the search for solutions the volume of taping activities was studied in a number of different countries. These were undertaken to show the political decision-makers that legislative measures were urgently needed. For instance surveys made in Finland in the late 1970s and early 1980s showed that the public by means of copying had access to 1.5-2.5 times more recordings that they acquired by purchasing from the ordinary commercial distribution channels. Single private taping transactions are not the problem. The problem is the enormous total volume of home taping, which produces more selfrecorded works than any factory or pressing plant. MR. JUKI The reproduction of audiovisual works and recordings for private use concentrates on entertainment and material rich in experiences, whereas photocopying concerns "useful material" as was noted earlier, such as material necessary for professional activities. International work Taking as a starting poi nt the fact that home taping cannot be controlled in real life, the international discussion has stressed other solutions than those based on traditional agreements or remunerations. The prototype for these is the system of a charge based on the sales price of recording equipment instituted in the Federal Republic of Germany (Art. 53(5 ) in their legislation of 1965. The problem of home taping was discussed in the seventies by two expert groups: the Working Group on the Legal Problems Arising from the Use of Videocassette and Audiovisual Discs (1977) and the Subcommittees set up by the. Executive Committee of the Copyright Conventions to deliberate the same issue (1978 ) . Both bodies expressed as their opinion that the best solution would be to establish system of global compensation. It was debated whether the system should cover the various material supports (tapes and cassettes) exclusively or also recording equipment. The latter body was of the op1n1on that the charge should be instituted both on recording equipment and the supports. The results of these meetings had a clear impact on some national solutions, among others the solution found in Finland, which will be dealt with later. AS in questions of reprography, discussions on home taping reached a certain stage of clarity in the 1980s. In 1984 WIPO and Unesco convened a Group of Experts on Unauthorized Private Copying of Recording, Broadcasts and Printed Matter. Some of this Group's findings were later formulated as draft principles for the Committee of Governmental Experts on Audiovisual Works and Phonograms (1986) . The latter group formed part of the series of WIPO/Unesco expert meetings on different categories of works . As the results of the former meeting on the printed word, the results of this meeting were further developed at the Synthesis meeting (1988). The principles in the documentation of the Synthesis meeting and the WIPO Draft Model Provisions represent the most recent stage in the international work aimed at drafting recommendations for the governments of the nations of the world on how to solve the problem of home taping. The principles (the Synthesis version, 1988) begin with a general statement: "widespread reproduction of works for private purpose prejudices the legitimate interests of the right owners. It is an obligation of States party t o the Berne Convention to mitigate such prejudice" (AW2 and PH3). The most appropriate way to mitigate the prejudice is considered to be the introduction of a charge on r ecording equipment and/or material supports (AW3 and PH4 ) . · The main elements of the standard laid down in the principles are the following (AW3-8 and PH4-9) : 150 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The charge should be paid by manufacturers or importers. It should be distributed by a collective administration organization. The buyers are entitled to reproduce works for private purposes by means of equipment and/or supports in respect of which the charge has been paid. Exemptions: exported equipment/supports, possibly also material used in education and by handicapped people. The amounts collected should be distributed according to the presumed frequency of the reproduction of works. In the States party to Copyright Conventions, foreign authors should enjoy the same rights as national ones. Some or all of the three categories of the beneficiaries of neighbouring rights (performers, producers of phonograms and broadcasters) should have an appropriate share of the charge. At the WIPO meeting on the Model Provisions for Legislation in the field of Copyright (1989) corresponding, but more abridged provisions (Section 22) were positively welcomed. It was held that the real alternative to this solution is a complete absence of protection. 4 The foregoing shows that the central argument in international work is whether widespread home taping prejudices the interests of the authors and other right owners. This is understandable against the background that the recompensation is made for uses which in many countries' legislation is defined as free use (private, personal or fair use). If the use prejudices unreasonably the interests of authors, the exemption would not be permitted according to the Berne Convention. I think that the decisive question in determining if remuneration for uses defined as free use is justified, is not merely whether the uses prejudice the interests of the right owners. One must examine the relevance or the use itself. Although the right owners did not incur great losses, it might be justified to recompense them for the use. It is possible that the public has access to certain phonograms and audiovisual works typically through home taping. 4 Of the regional efforts to solve the problem of home taping we could mention the Green Paper of the Commission of the European Communities (Green Paper on Copyright and the Challenge of Technology - Copyright Issues Requiring Immediate Action. Brussels 1988). The EC Commission especially studies the impact of home taping on the markets of recordings and audiovisual works. In examining the possible justification of a system of recompensation, the Commission is particularly concerned whether the tapings of television programmes are kept permanently. The Commission did not arrive at any proposals for the harmonization of the legislation. It stated only tentatively that levies could continue where the Member States feel that this is the best way to remunerate right holders, and could be introduced if the States so wish. MR . JUKKA LIEDES 151 In some countries it has been seen that a charge or royalty is acceptable on blank audio tapes but not in the case of video tapes and works. One of the main arguments has been that such works are copied mainly for "time shifting". This is ~ften countered with the argument that recompensation is justified because of the existence of home video libraries and the fact that the recordings are often kept for a longer time. Basing myself on what I have said earlier, I personally cannot agree with this. It is possible that the most typical and relevant use of audiovisual works is their viewing once or twice. If this service is not rendered to the general public at a convenient time by the television broadcaster, the programs will be recorded by the public for a later viewing. This extension of the use of the audiovisual works is realized by means of reproduction. The broadcaster is not paying any remuneration for this use and if the possibility of home taping were not available, this part of the public would not use at all the audiovisual work in question. Thus "time shifting" is in my view relevant as such and is not applicable as an argument against the remuneration of the home taping of audiovisual works. The argument of no permanent retention is consequently not a valid argument in my opinion. Since the beginning of international discussion on the issue, since the 1970s, it has also touched upon the possibility to prevent or limit private taping by technical means. These have been particularly raised in connection with copying of phonograms. In the early 1980s, when the commercial phonogram techniques became use more and more digital technology, the discussion and studies on the issued were rekindled. The simultaneous existence of CD discs and OAT tape recorders on the markets present a certain threatening picture for the recording industry and t he authors. A digital recorder can produce perfect copies. Such copies can be used as masters for next copies. The result of this chain-producing ~ffect could be an unlimited number of perfect or near-perfect copies. During the past few years various solutions have been publicized (such as CBS's COPYCODE, SOLOCOPY etc). The Green Paper of the EC contains an illuminating presentation of the technique. In the US and in Europe in discussions concerning the green Paper a question frequently raised is whether certain obligations for using some technical means should be introduced through legislative measures. The EC Commission inclined towards considering the imposition of technical specification for OAT recorders which would prevent their use for unlimited acts of audio reproduction. In their Green Paper the Commission asked for the opinion of interested parties as to whether the manufacture, importation or sale of machines which do not conform with the specification should be prohibited. The question of technical specifications was discussed also at the WIPO/Unesco Synthesis meeting, June 1988. Doubts were expressed that technical devices would not offer a workable solution to the question of home · taping. No satisfactory device existed and it was pointed out that any technical measures could be circumvented sooner or later. 152 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES In their draft model prov1s1ons for Copyright Legislation the WIPO Secretariat s uggested providing for an obligatory solution in case that a realistic technical solution could be found. This part of the Draft Model Provisions will be discussed at the Second Session of the Committee of Experts, in November 1989 . Thus no final conclusions are available either on international or regional level as regards the technical solution. The latest news was published globally in the newspapers just before this Forum. 15 equipment manufacturers (producers of OAT equipment) and the phonogram industry informed that they had found a common solution. The manufacturers announced that they will put circuitry in the equipment to prevent the machines from making a OAT copy of a DAT copy. According to the press information, OAT machines would be still able to copy an original OAT tape or a CO-disc. Practical solutions Solutions based on a charge or levy have been introduced at least in the following countries: Australia, Austri a, Congo, Finland, France, the Federal Republic of Germany, Hungary, Iceland, Netherlands, Portugal and Spain. The solutions have considerable similarities and some differences. In some countries the system is limited to cover blank cassettes only (Austria, Hungary, Congo, Finland and France). In other countries it also covers the recording equipment. In one country the system i s limited to audi o material (Australia). In some of the countries which have s ucceeded in getting the system to work properly, it produces considerable sums to be distributed to copyright owners. The degree of equivalence of these sums to the losses incurred by the authors or the volume of relevant private copying surely varies from one country to another. Regardless of the fact whether the remuneration through a levy or charge is sufficient, we have gained practical experience enough to convince us that a solution of this type is in the right lines. It goes without saying that the Finni sh solution is c l osest to my heart and therefore I'll take it as an example of a working solution. The surcharge on blank audio and video tapes was stipulated in the 1984 Amendment of the Copyright Act. As I have already noted, international discussions conducted on the matter played an essentia-l role in getting the solution accepted by political decision-makers. When proposing the amendment, the Finnish Government stat ed that making copies for private use was permitted without compensation and without the consent of the author or other right-holders. - However in the field of music the development had gone so far that taping had become the primary form of the use of the works. Music recorded onto blank tapes is in more extensive use than music on pre-recorded phonograms. Overwhelmingly the largest proportion of the blank video cassettes too is used for recording protected materials. The most important source for this taping is television. MR. JUKKA LIEDES 153 At the time the law which was in force until 1984 was drafted it was impossible to foresee the extent of private copying. The consumer obtains the works for his use, but the authors and performers fail to receive compensations. Also., the producer does not receive revenue to cover his production costs. Nevertheless, for the consumer home taping provides the same cultural service as the original product. The Finnish Government argued that home taping has detrimental effects also on the employment of authors and performers. Private recording limits the demand of pre-recorded products as well as the profitability of live performances . Recording activity impairs the preconditions for production and decreases in particular high-quality production which is susceptible to risks. Taping undermines the possibilities for a wide-ranging supply for domestic cultural products. These problems cannot be eliminated by prohibiting or restricting private copying under present legislation. Enforcing such restrictions would be an overwhelming task. - One solution in line with the basic principles of copyright would of course be that the person copying a work would pay the compensation directly. This would, however, be as impossible in practice as a prohibition of private copying. Thus, the Finnish legislator inevitably arrived at a system under which the importers and manufacturers of blank recording supports pay a copyright levy. Consequently, the users of the works, i.e. the consumers, defray the cost as the last link of the chain, by paying the surcharge included in the resale prices. The levy on blank supports was chosen because the quantities of blank materials marketed were thought to correlate best or to be in a reasonable proportion to the actual extent of taping. This system of compensation is well-founded in a situation where the blank tapes and cassettes very likely will be used for home taping of protected materials. The system entails that any tapes and cassettes which are sure to be used for purposes other than private copying shall be exempt from the charge. The proceeds from the levy are used, first of all for compensations to the holders of the right holders. - Because it is impossible to allocate the funds completely and exactly on the basis of what and in which extent has been recorded, an appropriate proportion of the proceeds from the charge is used for joint purposes of authors (indirect compensation) . This proportion is agreed upon each year. The distribution and use of money is the responsibility of the organizations of the authors, performers and producers. In addition, the following main features of the Finnish system complete t h e p1.c. t ure s : 5 The full text of the basic provJ.sJ.ons on the charge: I 26a. Whenever an audio or video tape or any other instrUment on which a sound or an image can be recorded and which is suitable for making a copy for private use of a work broadcast by radio or television or a work on an audio or video recording, is produced or imported into the country for the 154 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The charge is collected by a collective administration organization of the authors, approved by the Ministry of Education. The amount of t_he charge is decided by the Ministry after negotiations with the parties concerned. The collecting organization is entitled to obtain from customs authorities any information necessary for the collection, also regarding individual import consignments. The charge is refund for instruments which are (1) exported, (2) used for professional recording, (3) used for aurally or visually handicapped and (4) exempted for especially important reasons. On the day the provisions came into force the Ministry of Education approved the Finnish Composers' International Copyright Bureau Teosto as the collecting organization. The amount of the levy is 1989 FIM 0,03/minute for audio tapes and FIM 0,06/minute for video tapes. (The charge for a 60 min. C-cassette is about 0,4 USD). The total revenues collected from blank audio and video tapes were (in million FIM; one FIM corresponds 0,23 USD) : Audio Video Total 1984 (6,5 month) 3,0 2,4 5,4 1985 11,2 15,4 26,6 1986 14,3 30,0 44,3 1987 13,9 30,8 44,7 1988 14,3 44,2 58,5 5 (Cont.) purpose of distribution to the public, the manufacturer or the importer shall pay a levy, set on the basis of the playing time of the instrument, for the use for compensations to be paid to the authors of the said works and for joint purposes of the authors. The compensations shall be paid out to the authors through an organization representi ng a large number of Finnish authors of a certain field, entitled to compensations. The Ministry of Education shall annually set the amount of the levy after negotiations with the organizations representing the manufacturers and the importer, as well as authors, referred to in the first paragraph. The levy shall be set at such an amount that it can be regarded as fair compensation or the making of copies of works for private use. I 26b. The levy shall be collected by an organization representing a large number of Finnish authors, which the Ministry of Education has approved for this task for a fixed period of time, at maximum for five years. It shall be a prerequisite for the approval that the organization binds itself to use a proportion, annually agreed upon by the Ministry of Education and the said organization, of the proceeds of the levy for joint purposes of the authors in accordance with a plan approved by the Ministry of Education for the use of the levied funds . " MR. JUlQ(A LIEDES 155 The distribution of the direct compensation of the audio revenues, as an example, was effected in 1988 through the following organizations and in the following proportion: 51% Finnish ComP<>sers' International Copyright Bureau Teosto (composers, lyric writers, publishers of sheet music), 44% Performing Artists ' and Phonogram Producers ' Neighbouring Rights Association Gramex (musicians, readers and producers of phonograms) 5% Joint Copyright Organization Kopiosto (Kopiosto represents 40 other right owners' group) The video revenue was distributed via Kopiosto in the following way for example in 1986: actors, dancers 17.9% journalists, interpreters 17.5% authors of music (distributed via Teosto) 12.8% authors of literature and drama 10.3% performing artists and phonogram producers (distributed via Gramex) 9.2% directors and choreographers 16.4% stage designers and costume designers 7,0% directors of photography 5.9% film editors 0.6% illustration, including photographers 2.2% The ratio direct/indirect compensation was in 1984-88 one third/two thirds. The trend is towards a larger proportion for individual distribution. Indirect compensations are distributed via promotion centers which have been founded by the collective administration organizations in the field of copyright. The representatives of authors and other right owners are thus in a decisive position also as to the indirect compensations. Needless to say, in view of the size of the country, the total amount of levies, nearly 60 MFIM (almost 14 MUSD> is of utmost importance for the right owners of phonograms and audiovisual works. 156 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES IN CONCLUSION In reprography I have concentrated on licensing systems and in recording on levy. Many countries have long experience from these systems. I think the time is ripe for explicit legislative solutions in both of these difficult issues in all countries. Copyright may be cultivated and developed by strinking a balance between the different interests. In all cases where it is possible, the object in development should be either individual or collective administration of the rights based specifically on the use of different works. The progress in information technology makes this possible in an increasing number of cases. In those case in which it is impossible to maintain individual rights without limiting the rights, efforts should be taken to find solutions which are as far as possible parallel with individual right. The remunerations should in these cases correlate as far as possible with the reproduction of works by different groups of right owners. The conventions form a good and flexible basis for a variety of solutions. Working solutions may be found in a great number of countries. One solution works better in one respect and the other in other respects. For those who now embark on a quest for solutions, the experience may seem like a walk in a bazaar. A multitude of products and especially variations and ratios are available. The shopper must choose a solution that meets his needs and fits his circumstances. WIPO and partly Unesco and their member countries have done the multilateral groundwork. On national level the pioneering work was done by the legislators and the organizations in the field. BROAOCASTING AND COPYRIGHT by Mr. Walter Dillenz 1. Introduction The copyright laws of all countries have one thing in common: they reserve for the author the use of his works. It is for the author to decide whether, to whom and on what conditions he wishes to permit the exploitation of his works. Starting from this basic principle, various copyright laws subsequently differ in the way they apply the common concept of the use of works. Two main approaches may be identified: the one system of copyright includes all uses of a work in the right of the author without individually citing the various possibilities. This is referred to as a type of general statutory clause. The other main approach lists the typical acts of use (e.g. performance, reproduction, broadcasting) and includes these typical uses in the author's rights. Although the general statutory clause method is certainly more flexible where new types of use arise (the second main approach requires them to be allocated to one or other of the obligatory types of use), this does not however mean that the author automatically enjoys a right. Even in the case of the general statutory clause a difference has indeed to be made between whether the use is at all relevant to copyright or not. For instance, to look at a book that is displayed in a bookshop or the fact that a newspaper is read by people other than the purchaser of the newspaper also constitutes an act of use, but not one that is relevant to copyright. The particular attraction of studying the right of broadcasting indeed derives from this problem of allocation. The conventional right of broadcasting that has been with us since the invention of radio in 1887 and the start of regular broadcasting from about 1920, indeed continues to be developed. Aspects I may mention are cable television, satellites, interrogation of data banks, to which I will later return in detail. If we are to believe the technical forecasts - although experience has shown that this is not always advisable in the field of contemporary media - in a few years time no one will any longer buy phonograms or videograms in their material form and carry them home from the shop. The technical experts already assure us that this constitutes an altogether primitive method of physically transporting the material fixation of electronic signals. The form that is appropriate to electronic signals is said to be immaterial transport. Thus, in future, the music or film fan will no longer take home a compact disk or a videocassette, but will immaterially receive the electronic signals that are fixed on them over the air or by cable at the place where they are required. In case of need, they can be stored at that place and then be called up repeatedly. However high tech this forecast may sound, it is nevertheless a case of good old broadcasting with which copyright law has been involved for some seventy years now . 158 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES This example also serves to show the surpr~s~ng way in which a well-known form of copyright use from the past may reappear. This form, broadcasting in this event, is also given a new content following the development of new technologies. The interesting part of the right of broadcasting is that it would appear particularly predestined to support new forms of use and new contents. This factor also makes it an interesting study with a view to its usefulness for future developments in law. 2. The History of the Right of Broadcasting In the years that followed its invention, radio was mainly used to establish communication between two locations. The principle fields of use were for the armed forces and for navigation. (Thurn, Die Funkentelegraphie im Recht, 1930, 8). The essential aspect of radio is therefore that information can be transmitted between two persons, that is to say the trapsmitter and the receiver, either in one direction or backwards and forwards. However, this aim is subject to the physical fact that electromagnetic waves are freely diffused in the air. This means that between the transmitter and the receiver an indeterminate number of persons can also receive the broadcast. The desired property of place-to-place communication by radio is therefore in conflict with the practically unlimited possibility for a multiplicity of persons to participate in the reception. At a very early juncture, therefore, the way in which radio would develop became clear, making use of the ubiquity of radio waves: that is to say broadcasting. The earliest days of broadcasting are a matter of anecdotes. It is said, for instance, that sailors broke the monotony of radio service by reading stories to their equally bored counterparts on other boats or played music to them. The first actual example of entertainment broadcasting that is known was the Christmas program containing addresses, singing, a violin solo and poetry, that was diffused by R.A. Fessenden on December 24, 1906 from his transmitter in Prant Rock, Massachusetts. The first approach to a regular radio program must be assumed to be the concerts that were diffused in Belgium each Saturday afternoon as from March 28, 1914 (examples taken from Rindfleisch, Technik im Rundfunk, 1985 , 35 and 36). The First World War led to the sudden development of broadcasting technology. A completely new medium of communication had arrived. The new medium thus awaited its classification in copyright categories. There was initially general astonishment among copyright specialists: "It would seem obvious that previously accepted concepts do not apply to broadcasting since no comparable communication of a work to an undetermined number of people was previously conceivable." (Crisolli, Rundfunk- und Urheberrecht, GRUR 1926, 200). Following this "initial shock," a start was soon to be made on the copyright treatment of this new phenomenon. Thus the "story of reception" of broadcasting began in copyright law. MR. WALTER DILLENZ 159 I do not intend to set out in detail the reactions of national legislation and of the courts of the individual countries to this new phenomenon. As already mentioned in the introduction, they differed, depending on whether a general statutory cl~use already existed for previous types of uses, as in France and Britain, or whether the obligation of type prevailed, as in Germany and Austria. The perplexity caused by this new type of utilization was visible from the comparisons that were made repeatedly to the old categories: "a.n infinitely extended concert hall" or "the phonetical reproduction longissima manu" (Hoffmann, Urheberrecht und Rundfunk, Archiv fur Funkrecht, 1933, 301 (302)). However, in the first leading case, between an author and the BBC, the view of the English judge caused a new wind to blow through the debate: "Secondly, you (the BBC) stated in the lower court (and I admire your courage to make such a statement) that, although you undertook a performance with mechanical means of assistance and thereby enabled the performance to be heard by hundreds of thousands of people, it was not a public performance. As I said, I admire your courage in saying so." (Court of Appeals, January 20, 1928, Archiv fur Fundrecht 1928, 248). To conclude the reception story of the concept of broadcasting right it suffices to say that by the end of the twenties the most important countries had accepted the right of broadcasting as being reserved for the author. 3. The Right of Broadcasting and the Berne Convention The right of broadcasting was of course not contained in the Berne Convention itself since that dated from the year 1886 and the invention of radio was not made till 1887. In view of the fact that the development of radio into broadcasting did not take place until some decades later, it was not included in any of the revisions (Paris 1896, Berlin 1908, Berne 1914). The question of broadcasting right was regulated for the first time at the revision conference in Rome in 1928. It nevertheless speaks for the courage and open-mindedness of the participants that they tackled this new phenomenon and regulated it within the framework of the Berne Convention at a time at which several important States had not as yet taken any decision as to the copyright relevance of broadcasting. If we attempt to summarize the debates during the Rome Conference and those that preceded it, we shall see that the concept of broadcasting itself was hardly discussed. The main point of contention, which indeed almost brought the Rome Conference to a standstill, which was only avoided by the great mediating talents of Amadeo Giannini (Hoffmann, Die Berner Uebereinkunft zum Schutze von Werken der Literatur und Kunst, 1935, 169), was the balance between the interests of the authors and the interests· of the State since the latter wished to use this new medium unrestrictedly for its own purposes. Additionally, in the political situation of that time, broadcasting was extremely welcome as an instrument of mass propaganda and was indeed intensively used for that purpose. In view of the situation, it was almost a miracle that the Conference succeeded in incorporating the right of broadcasting within copyright. The wording of the text was as follows: 160 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES "Article llbis, (1) Authors of literary and artistic works shall enjoy the exclusive right of authorizing the communication of their works to the public by broadcasting. (2) The legislations of the countries of the Union shall determine the conditions under which the right mentioned in the preceding paragraph may be exercised, but the effect of those conditions shall apply only in the countries where they have been prescribed. This shall not in any circumstances be prejudicial to the moral rights of the author, nor to his right to obtain an equitable remuneration which, in the absence of agreement, shall be fixed by the competent authority." This wording may be considered a successful compromise between the authors' interest in obtaining protection for the broadcasting of their works and the State's interest in effecting broadcasts with a minimum of hindrance. Already in 1933, the Bureau in Berne published a whole series of contributions that presented a coherent concept for the pursuit of the rev1s1on work (Les travaux preparatoires de la Conference de Bruxelles, Droit d'Auteur 1933, 73, 90, 97, 112, 121). The assumption behi nd this preparatory work was that a follow-up conference to continue the revision work would be held in Brussels in 1935 or, at the latest, in 1936. Ratification of the Berne Convention text as revised in Rome was a slow affair (in 1933 only 20 of the 39 member States had ratified the Rome Act) and this led to reticence in respect of a further rapid revision. Just as was the case of the promising negotiations between Austria and Germany on a common text for a new copyright law, the political situation and the subsequent Second World War also meant that the proposed revision conference in Brussels did not take place until 1948. It is a remarkable fact, however, that the work of the Bureau in Berne, published in 1933, was practically identical with the program for the conference in 1948. As far a the right of broadcasting was concerned, discussions centered above all on its scope and thus on the definition of the concept of broadcasting. Three matters were up for discussion: The demarcation of the public reproduction of broadcasts as against the broadcast itself. The rebroadcasting of an initial broadcast. The regulation of ephemeral recordings. The text of Article llbis that was finally adopted at the 1948 Brussels conference of revision was worded as follows (the differences in relation to the Rome version are underlined): "Article llbis. (1) Authors of literary and artistic works shall have the exclusive right of authorizing: (i) The broadcasting of their works or the communication thereof to t he public by any other means of wireless diffusion of signs, sounds or images; this communication is made by an organization other than the original one; (iii) The public communication by a loudspeaker or any other analogous instrument transmitting, by signs, sounds or images, the broadcast of the work. (2) It shall be a matter for legislation in the countries of the Union to determine the conditions under which the rights mentioned in the preceding paragraph may be exercised, but these conditions shall apply only in the countries where they have been prescribed. They shall not in any circumstances be prejudicial to the moral rights of the author, nor to his right to obtain equitable remuneration which, in the absence of agreement, shall be fixed by competent authority. (3) In the absence of any contrary stipulation, permission granted in accordance with paragraph (1) of this Article shall not imply permission to record, by means of instruments recording sounds or images, the work broadcast. It shall, however, be a matter for legislation in the countries of the Union to deter.mine the regulations for ephemeral recordings made by a broadcasting organizati on by means of its own facilities and used for its own broadcasts. The preservation of these recordings in official archives may, on the ground of their exceptional documentary character, be authorized by such legislation." The current version of the Berne Convention, that of Paris (1971), of which Articles 1 to 20 exactly correspond with the 1967 Stockholm Act, is substantively no different from the Brussels Act. The English version was simply amended from an editorial point of view to bring it closer to the French original in some cases and in other cases to improve it linguistically (a comparison of the changes is to be found in Dittrich, Kabelfernsehen und internationales Urheberrecht, Schriftenreihe der UFITA, Band 67 (1984), 7 and 8, particularly footnotes 16 and 17). The conclusion that there were no discussions on Article llbis at the Stockholm Conference is nevertheless incorrect. Changes were indeed proposed in respect of retransmission of works across frontiers by the delegation of . the United Kingdom (Records of the Intellectual Property Conference of Stockholm, Geneva 1971, pp. 121 and 122). Further proposed changes referred to an extension of possible ephemeral recordings and to the limitation of compulsory licenses, in the case of cinematographic works, to the rights of secondary exploitation. The latter, new paragraph of Article llbis, prepared by the Working Group on Cinematographic Rights, was even adopted unanimously to begin with. However, since a stalemate clearly arose afterwards on account of the contradictory proposals that were made and in order "n0t to endanger the compromise in the matter of ephemeral recordings that had been achieved with great difficulty at the 1948 Brussels Conference" (Ulmer-Beier (editors) Die Stockholmer Konferenz fur geistiges Eigentum 1967, Sonderveroffentlichung aus GRUR Int. 1969, 20), all the proposals were withdrawn and it was decided, with five abstentions, to maintain the Brussels text unchanged. The Conference therefore returned to the proposal made in the program, in which the opinion had been expressed from the very onset that Article 11bis constituted "an acceptable compromise between conflicting interests" (Records of the Intellectual Property Conference of Stockholm, 167). 162 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 4. Cable Television and Broadcasting Right The solution reached at the Brussels Conference of Revision in respect of the rebroadcasting o~ a radio program was first to be put to the test some twenty-five years later in the face of a new phenomenon: cable television. Cable television owed its existence originally to the poor topographical situation of houses and of complete districts that prevented them from receiving normal programs in these "shadow zones." The solution was to install a reception aerial in a topographically favorable location, for instance on a neighboring mountain, from which the receivers in the shadow zone could be fed. The first such cable television system is said to have been invented by a radio and television engineer, by the name of John Walson, in a small town in Pennsylvania, USA, in 1948 (Ratzke, Handbuch der Neuen Medien 1984, 114). This technical configuration, that was originally intended to receive those programs that were normally to be had in that location, that is to say to close gaps in reception, was soon to be extended to give cable television network subscribers access to programs that were not normally to be received in that location.·· Initially, this was done with the aid of more powerful aerials and subsequently by bringing the signal over large distances by means of cable or directional radio links. The basic problem to be resolved within the Berne Convention was therefore: was it to be considered a "communication to ·the public by wire or by rebroadcasting of the broadcast of the work, when this communication is made by an organization other than the original one" (Article llbis ( l) (.i i), Berne Convention). The problem was complicated further £or the German speaking countries as the result of an unfortunate translation: the French version reads " ... par un autre organisme que celui d'origine," whereas the German translation speaks of a broadcasting organization other than the original one. Could one reall~ designate a community aerial with a few dozen connections as an "autre organisme" not to speak of "another broadcasting organization"? Was the transmission of a signal by means of a community aerial/cable television system simply an extension of the reception process, that is to say on the reception side and therefore irrelevant to copyright, or did it already constitute rebroadcasting? Naturally, the answer cannot be given in the abstract, but has to be adjusted to the material circumstances. A cable television network with several hundred thousand subscribers, as frequently exists these days, is certainly rebroadcasting that is relevant to copyright.. A community aerial supplying a few individual houses only is just as certainly a simple extension of reception that is not copyright relevant. Between these two assured points however extends a broad area of copyright twilight which, as from 1974 was progressively illuminated by court decisions in various member countries of the Berne Convention: The Austrian Supreme Court took a decision that was clearly favorable to · aut hors as regards cable television, on June 25, 1974 Since then, that decision has been somewhat watered down by the 1980 Copyright Amending Law, but the copyright relevance of cable television has not been called into question. In Switzerland, the Federal Court took two decisions in this context in 1981 (the decisions are reproduced in UFITA, volume 91 (1981) 278 et ~ and 297 et ~). Both decisions concerned the claim asserted by an author in respect of the rebroadcasting of his work via cable. In a further decision on March 20, 1984 (UFITA, volume 99 (1985), 279) the Swiss Supreme Court developed its 1981 jurisprudence and additionally held that the term broadcasting organization did not designate a specific form of organization, but simply an independent structure that existed independently of the original broadcasting organization. In Belgium, the Court of Cassation held on September 3, 1981 (decision reproduced in GRUR Int 1982, 448) that Article llbis (l)(ii) of the Berne Convention required no conditions other than the public nature of the communication and the difference in person of the first broadcaster and the rebroadcaster. It was therefore held that the rebroadcasting of a film shown on German television in the Belgian cable networks required the authorization of the owner of the film rights. In the Netherlands, the High Court likewise took a decision in 1981 already (judgment of October 30, 1981, reproduced in GRUR Int 1982, 463) that the complete rebroadcasting of programs over cable television networks was subject to the authorization of the authors. In a further decision, the High Court upheld this legal stance (decision of May 25, 1984, reproduced in GRUR Int 1955, 124). In the Federal Republic of Germany, the Federal Court held that the operation of a cable system was subject to Article llbis (1)(ii) of the Berne Convention (BGH 4.6.1987, GRUR ~988, 206). In this decision, the Federal Court departed from an earlier decision of 1980 (BGH 7.11.1980, GRUR Int 1981, 413). To conclude on the problem of the right of broadcasting in repect of cable television, the following can be said: in view of the case law and of legislative amendments that have since been adopted (eg. , in France, Britain, Denmark) it may be claimed that the question of the copyright relevance of cable television broadcasts has been clearly answered in a positive sense. Differences continue to exist in respect of the criteria used to decide whether a given technical configuration is part of the reception or of the broadcasting side. There are also differences in the way the exception is dealt with for cable rebroadcasting in areas that are either within the direct reception zone of the original broadcast or in the service area of the original broadcasting organization. However, this in no way affects the fact that the concept of right of broadcasting, particularly as specifically formulated by the Brussels Revision Conference in Article llbis (l)(ii) of the Berne Convention, has. been advantageously applied to rebroadcasting by cable. 164 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 5. The Right of Broadcasting and Satellites The problem of broadcasting right in relation to satellites is twofold: the satellite signal is further transmitted to the individual receiver over a cabl e installation the satellite program is received directly by the individual receiver using an individual aerial. In the first case, the solution is clear: if the rebroadcasting of terrestrial broadcasts via cabl e is subject to Article l l bis (l)(ii), then there can be no doubt--possibly with even mo re justificat i on since it is an intentional transport of signals--that the author's right of broadcasting is made use of. A marginal problem arises, at most, in the question of demarcation. Where i t is required by law, as in Austria or Denmark for example, that cable distribution of broadcasts be subject to a statutory license or a compulsory license, the question can arise whether the cable rebroadcasting of satellit e programs also comes within t his statutory license. In the case of Austria, the Supreme Court has twice replied in the negative (OGH 4.2.1986 "Sky-channel," GRUR Int 1986, 484 and OGH 13.12 . 1988 "RTL-Plus" Medien und Recht 1989, 19). The situation is somewhat more complicated in the second case, that is to say t he case of a satellite broadcast that can be directly received by the individual. With the emergence of satellite technology for the communication of broadcasts the problem was first dealt with similarly to that of terrestrial broadcasts. Views held in 1973, for instance "a satellite, whose transmissions will be directly receivable by the public, is fully comparable with a transmitter of a terrestrial nature and can therefore raise no additional problems of copyright. " (Scharf, Aktuelle Fragen des Satell itenrechts unter internat~onalen Aspekten, Film und Recht 1973, 205 (210 )) can be judged quite differently today as a result of the copyright debate. The debate on this problem centers above all today on the question of which law is applicable in the case of direct recepti on from a satellite. The orthodox view is that the law to be applied is that of the country alone from which the s ignal is directed towards the satellite. This corresponds to the concept of a satellite as a "high-flying aerial" and remains fully integrated in the categories of terrestrial broadcasting. A more recent view, known as the "country of reception theory" or, named after the Director General of the World Intellectual Property Organization, Dr. Arpad Bogsch, as the "Bogsch Theory," departs from these traditional categories and holds that the important factor is the country of reception, that is to say the audience that receives such broadcasts. Thus, the legislations of all those countries in which the satellite signal can be received in an adequate manner are to apply cumulatively. This view endeavors to accommodate the fact t hat in the age of satellite television the unity of place of broadcasting and place of receipt no longer exists. In earlier times a broadcast originating in one country was intended for the inhabitants of that country, but today the location for emitting the signal towards the satellite can be practically anywhere. Therefore, to apply only the law of the up-link countries is no longer adequate . . MR. WALTER DILLENZ 165 It is not my intention to enter into greater detail here on the problems of direct satellite reception. That debate is at present in full sway. It may be sufficient to note that the concept of the right of broadcasting is now approaching a new frontier, that is to say the frontier of space. 6. Conclusion and Prospects The right of broadcasting is that right of the author that, because it governs the incorporeal communication of works, is destined to assume particular significance in future. The development of the concept of broadcasting right over more than sixty years since its inclusion in the Berne Convention has shown that it can be adapted to technical necessities and that this has been adequately achieved both in the Berne Convention and also in the national legislations of its member States. Worldwide communication that is not based on the transport of physical works, but on their incorporeal electronic communication means that this continued adaptation of the concept of the right of broadcasting to technical developments will also have to be continued over the coming decades. COPYRIGHT IMPLICATIONS OF SATELLITE AND CABLE TELEVISION by Mr. Chris Creswell Distinguished delegates, ladies and gentlemen, I welcome the opportunity to address you this afternoon on Australia's experience in seeking to adapt its copyright laws to cope with the new technologies of cable and satellite television. I am informed that those present consist of not only experts in the field of copyright, but also a substantial number whose main field is communications law and regulation. I therefore shall not assume a detailed knowledge of copyright. To those of you whose countries have no cable television networks - Australia is such a country - or no satellite transmission of television, or neither, the question no doubt arises: what is it about use of these mediums to communicate to the public that is of concern to copyright owners? Copyright is the means whereby the creators of original works, ie, forms of expression of ideas, can derive commercial reward from the use by others of those works. It also covers laws allowing creators to prevent injury to their reputations through unacceptable treatment of their works, but I do not here go further into that aspect of copyright law. Creators depend on the existence and enforcement of copyright law for their livelihood. Copyright is the subject of international conventions, notably the Berne Convention administered by WIPO and to which Australia is a party. How does copyright secure reward to the creators? (I refer to creators although copyright law allows copyright to be transferred by creators to others, eg, publishers.) It fastens on uses to which works may be put. Originally they consisted only of reproducing or copying works; quite early on publication or distribution was recognised as a separate use, as was public performance. In each case copyright law vested in the creator or copyright owner the right to control - in practice to licence for reward - the exercise of these uses of reproduction, publication, performance. Technical innovations made new uses possible which threatened the return to be derived from the traditional uses. I refer of course to, successively, sound recordings, films, radio and television broadcasting, photocopying and video recording. Communications satellites are used in the transmission of television and sound signals. The main copyright interest in satellites is their use in transmitting television broadcasts. As already mentioned, in the history of copyright, broadcasting is one of the newer uses of copyright material, and television is more recent than radio. However, land-based broadcasting 168 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES predates communications satellites by some decades, and copyright law and the Berne Convention have fairly well established that broadcasting is a use attracting copyright control. As I shall demonstrate, the use of satellites in transmitting broadcasts has raised new uncertainties regarding the application of copyright. In Australia, communications laws (and with them copyright laws) have been heavily influenced by a range of geographic, demographic and cultural factors. Australia is a very large land area of 7.6 million square kilometres approximately the size of Europe, the USA or China. It is often thought of as a land of sheep farmers, cattlemen, and miners - not to mention its kangaroos and koala bears. Yet its population of 17,000,000 (not the kangaroos and koala bears) is in fact heavily concentrated in coastal cities, especially on the eastern seaboard. Although urbanisation has increased over the years there are still many individuals living in remote places 100 kms or more from the nearest settlement. Australia stretches over 3 time zones. The nation last year celebrated the bicentennial of the first European settlement - mainly people of English, Irish and Scottish extraction drawn from the British Isles. At the same time, we also reflected on the fact that we have an indigenous population of Aborigines whose presence in Australia predates European man by some 40,000 years, and who have a long-developed creati ve culture of their own. (Indeed, long before the 82 "Stealth" bomber, they developed the boomerang, which looks similar and flies at much lower cost!) Since the Second World War we have acquired substantial communities of migrants from many European countries including, notably, Italy, Yugoslavia and Greece and, more recently, from Turkey, other Middle Eastern countries and South America . There is also a sizeable community of immigrants from Asia including Chinese, Vietnamese, Filipinos and Indians. Australia remains an English- speaking country. Accordingly it shares a part of its culture with the 2 major English speaking nations: the United Kingdom and the United States. It is a net importer of copyright materials, although Australia's INXS, the television serial "Neighbours" and Kylie Minogue have gone some small way towards redressing that imbalance. As it looks to the future, Australia anticipates closer cultural and economic ties with its neighbours in the Pacific region. Traditionally publication in Australia has been largely free of government regulation. With the broadcasting media, by contrast, the community has long accepted the desirability of some regulation as regards propri etorship (ie, to prevent undersirable concentrations of ownership), as regards content (in areas such as indecency, blasphemy, violence, family and children's programming, fairness in news reporting and advertising) and to ensure orderly allocation of the airwaves. These two approaches to media regulation are sometimes described respectively as the "publishing model" and the "broadcasti ng model". MR. CHRIS CRESWELL 169 Finally·, I note that Australia is a Federation of 6 states and 2 major territories. Broadcasting and telephonic communications law and copyright law are federal matters. There is some purpose to my reciting all of the above circumstances about Australia since they have shaped our communications systems and, indirectly, our copyright laws. A number of elements of the communications infrastructure are of long standing - The Australian Broadcasting Corporation (ABC) is a Government-funded broadcaster constituted by statute. Modelled on the British Broadcasting Commission (BBC), its charter is to provide "innovative and comprehensive" radio and television services of a high standard. The national television network now covers the whole of Australia through a combination of satellite and land-based transmissions; There are about 50 commercial television stations, financed by advertising. About one third of these are in State capital cities which are typically served by 3 commercial channels. The remainder are in regional centres which hitherto have generally been served by only one commercial station. In 1987, however, the Minister for Communications announced introduction of a policy of aggregation of broadcast service areas so as to extend to regional centres the same choices available in capital cities. This will effectively lead to 3 Australia-wide commercial networks; Telecom Australia is the statutory national telecommunications carrier, operating a switched network which utilises coaxial and fibre optic cable as well as microwave radio links. Although some television relays are provided ove( the coaxial cable network, the main uses are conventional telephony and digital data transmission. The microwave network both extends and parallels the major cable routes to more remote locations. Microwave radio trunks currently carry the greater part of intercapital broadcast quality video traffic. Coaxial links are being replaced in stages by fibre optic cable which will be capable of carrying video signals to within an average of 2 kilometres from the subscribers' homes; The Overseas Telecommunications Commission (OTC) is the statutory international telecommunications carrier. International video services are provided by OTC through a combination of communication, satellites and submarine cables. In the 1980s we have seen some profound changes in communications law and infrastructure. In 1980 the Special Broadcasting Service was established as a second Government-funded national broadcaster. It provides "multicultural" television services in recognition of Australia' s ethnic mix of peoples. Programs include foreign language films with English subtitles and news and documentaries with an international perspective. 170 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The major change, however, was the inauguration of Australia's domestic satellite system, in 1985-86 . The system is operated by a Government- owned company, AUSSAT Pty Ltd. It consists of 3 geostationery communications satellites, each with 4 30-Watt transponders and 11 12-Watt transponders, and associated ground stations. A second generation of satellites is planned for launching in 1991-92. The AUSSAT system is used to provide television services for the benefit, in particular, of remote and under-served areas, ie, areas outside the service area of t he existing land-based services. For the most part AUSSAT satellite transmissions are picked up and retransmit ted by earth stations established by local communities in remote centres. The single antenna dish of a community installation needs to be 2.4 to 3.0 metres in diameter to ensure a signal strong enough for re-distribution throughout the community. Re- distribution is achieved either by cable or by low-powered broadcast transmitter for reception by conventional antennas in individual homes. For an isolated home, known in Australia as a "homestead", it is necessary to employ a receive-only earth station with a dish antenna around 1.5 - 1 . 8 metre in diameter and associated electronics. Both the ABC and commercial broadcasters broadcast programs using the AUSSAT system. The ABC employs a broad beam which blankets the entire continent. For purposes of the commercial services, however, the continent is divided i nto 4 zones each served by a single broadcaster using a narrow beam. The SBS also broadcasts into some areas. In the 1980s the system of broadcasting regulation has moved away from the licensing of particular equipment (transmitters, repeater stations, and reception equipment) and has adopted instead a so-called "service- based" approach which emphasises the area covered irrespective of the transmission means. The result of these arrangements, and the "networki ng" policy which I mentioned a moment ago, is that - in regional centres as well as in metropolitan areas, viewers will eventually be served by two national and three commercial television services, all delivered by land-based transmission means; i n remote areas, viewers have access to one (possibly two) national and one commercial service delivered with the aid of the AUSSAT system. I should mention 2 other satellite video distribution services. One category of operation permitted under Australian broadcasting law is so-called Video and Audio Entertainment and Information Services (VAEIS) - intended for non-domestic subscribers. There is currently only one operator of such services, Sky Channel Pty Ltd, which is licensed to transmit to hotels, motels, licensed clubs and betting offices throughout Australia video entertainment and information covering sporting events, racing, music, variety MR. CHRIS CRESWELL 171 programs, films and news. In the last few years satellite receiving dishes have become a common sight outside the establishments they serve. The other service I want to mention - because of its significant implications for copyright owners - is a service known as TSN-11 operated by the State Government of Queensland. It transmits educational and informative programs to specialised audiences mostly in non-domestic environments such as technical colleges, hospitals, government departments, and among business and industry circles. The feature of interest of this service is that programs can be delivered to precisely defined audiences by taking full advantage of the technical capabilities of the AUSSAT system. The system uses a transmission technology known as B-MAC. I shall not trouble you with a technical explanation. But the important point is that it is possible to set parameters - switches if you like inside the decoding electronics associated with each receiving set, so as to permit or deny access to a program. This is achieved by transmitting an appropriate signal from the originating station "addressed" to the receiver concerned. (Each receiver has a unique "identity".) The result is that the central station can control by computer - minute-by-minute - exactly which receivers have access to the "broadcast" signal. "Locked out" viewers will merely receive a message saying in effect "You are not entitled to receive this service", although information on forthcoming programs and how to subscribe is available on an AUSSAT "Teletext" channel. The TSN-11 service reaches 120 major sites and up to 3500 AUSSAT-receiving homesteads. Various methods are used to provide a voice link back to the studio so that programs can be interactive, and 2-way vision is becoming more cost-effective with time. There are already subscribers in Papua New Guinea . In September, at the request of the New Zealand Government, TSN-11 will deliver the first live trial programs to that country. Possibilities for live links and program interchange with the other countries in the region - including Hong Kong, Singapore, Malaysia and China - are being explored. There is already considerable program .interchange with the US and Canada. Programs are created largely in response to demand by users of the system, and are often produced in collaboration with them. TSN-11 provides production facilities and negotiates copyright clearances, eg, in relation to music. Major users, eg, hospitals, designate a liaison officer, who is engaged and paid part-time by TSN-11 to enrol individuals who wish to view particular programs and to collect fees and control attendances and lending of copies of programs. Some examples will help to demonstate the flexibility of the service - The Queensland electric power authorities saw a .need for a training course in a particular area of digital electronics known as program control logic. TSN-11 produced a 35-week program using expert lecturers, assisted by appropriate audiovisual aids and computer graphics. This series was certified as an accredited course through the technical college system and reached some 150 subscribers scattered throughout the State; The Australian Medical Association, in conjUnction with the manufacturer ICI, runs a regular program on medical topics for general practitioners and specialists. This series is designed to keep practitioners informed of the latest. medical advances. Some 2, 500 practitioners are enrolled mostly through hospitals. 172 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES A similar "current awareness" service is available to members of the legal profession. The TSN-11 service is a pioneering service which appears likely to be emulated throughout Australia. It offers program-makers the potential to exploit their intended market in a much more efficient way than has hitherto been possible, because programs can more specifically target their most receptive audience. Indeed it would seem that the very dichotomy between producers and users of copyright materials is blurred by the possibilities of this technology. I now turn to consider some of the more technical legal copyright issues which have arisen as a result of these developments. As mentioned earlier, broadcasting has been recognised for some time as a use of works which is subject to the control of the copyright owner, ie, his permission or licence is required for broadcasting of his book, play, film or music. A broadcast is not only a form of use of such copyright works included in it, but also a form of intellectual property in itself. That is, the effort and expense of compiling programs and emitting the signal receivable by the public is recognised as worthy of protection from certain uses, notably relay and recording, without the licence of the broadcaster. Internationally, broadcasters are protected by the Rome Convention on the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, to which Australia will shortly be acceding. Under the Berne Convention and the Rome Convention broadcasting is understood to mean communication of sounds and/or images by means of radio waves for reception by the public at large, ie, anyone with a normal radio or TV receiver may pick up the broadcast as it is emitted from the transmitter. However, where a signal is sent to a satellite and is not capable of being immediately picked up by the public the question arises: is this a broadcast - is it use of the material carried by the signal that requires the licence of the owner of copyright in the material? The uncertainty does not end there. The signal may subsequently be sent by the satellite either to a ground station for emission to the public (in which case the satellite is known as a fixed service satellite or FSS) or may be emitted directly to the public (known as direct broadcasting by satellite or DBS.) As already mentioned the AUSSAT satellite signal is intended both for receipt by land-based stations and, to a lesser extent, for direct public reception ie, it is both FSS and DBS. Then there is a possible third category of satellite signal, namely that emitted for reception by selected receivers for display to the public, eg, clubs, hotels, etc. subscribing to our Sky Channel. It could be argued that the signal going from the land-based station to the satellite (the "up-link") is not a broadcast to the public. The emission from the satellite intended only for reception by land-based stations, ie, FSS, is seemingly not a broadcast even if members of the public with the right equipment can also receive it. However, a signal that is intended to be both FSS and DBS is a broadcast insofar as regards a section of the public, namely, MR. CHRIS CRESWELL 173 the remote homesteaders i n outback Australia. While a DBS emission, being i ntended for direct reception by the public, is doubtless a broadcast, can one classify the Sky Cha~el-type emission as such? There is at least one further question in regard to DBS broadcasts, namely: from where does the broadcast take place - the satellite or the land-based station emitting the uplink (which as earlier noted does not, taken alone, have t he characteristics of a broadcast)? In 1986, the Australian Parliament confronted these questions. The Australian Copyright Act provides that copyright subsists in a broadcast "made from a place in Australia". Furthermore, owners of other copyright material are given the right to control acts, including of course broadcasting, done in relation thereto "in Australia". The difficulty in both cases is that while the uplink to a satellite does not itself have the characteristics of a broadcast, the downlink -where it is a DBS signal, ie, a broadcast - from a satellite in goestationary orbit, ie, over the equator, does not actually emanate from within Australia. Accordingly, the Act was amended so as to assimilate satellite broadcasts to land-based broadcasts by a simple device: the broadcast is deemed to be made from the point of up-link. The practical effects of this are that a broadcast made from AUSSAT and originating from Australia will have copyright protection; also copyright owners will enjoy the right to control uses of their materials in such transmissions. The second change relates to the notion of a broadcast itself. Prior to 1986 the Act provided that "broadcast" meant "broadcast by wireless telegraphy". The latter term was defined as the emission or reception of electromagnetic energy "otherwise than over a path that is provided by a material substance". Concern was expressed that this might cover essentially "in-house" video distribution processes by encoded satellite transmission or even land-based microwave links, ie, transmissions not intended for public reception. There seems no good reason why such transmissions should bear any copyright significance, whether as a use of other subject-matters, or as a subject matter of copyright in themselves. A good many alternative viewpoints were canvassed on an appropriate definition of broadcasting. In the end the solution adopted was the simplest alternative, which also accords with the Berne and Rome Conventions, namely: "broadcast" now means "transmit by wireless telegraphy to the public". The change balances two concerns: (i) the need to exclude point-to-point and point-to-multipoint transmissions, ie, purely FSS emissions within an organisation such as the ABC; and (ii) the need to cover transmissions which go to the public, or even a section of it as in the case of VAEIS services such as Sky Channel. Under this amendment Sky Channel-type emissions to clubs , hotels etc. (and probably some TSN-11 services) are therefore "broadcasts" as defined by the Act, as they are intended to be received. by a section of "the public". 174 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Picking up a broadcast and rebroadcasting it has been recognised as use of the broadcaster's right. I mentioned earlier that the Rome Convention established this internationally. Likewise, the Brussels "Satellites" Convention (more fully: the "Convention Relating to the Distribution of Program-carrying Signals Transmitted by Satellite") requires member States to take "adequate measures" to prevent piracy of satellite transmissions, ie, their reception and re-distribution by persons for whom the signal is not intended. The Convention does not apply to emissions to the general public (ie, DBS signals) but only emissions to land-based stations (FSS transmissions). It does not specify the means, eg, copyright, trade practices legislation, by which control of signal poaching might be achieved. Australia has announced its intention to adhere to the Brussels Convention; the means of complying will be prohibition on signal poaching in the licensing of telecommunications systems. Advances in satellite technology have increased the capacity of the latest satellites to emit signals which the public can receive with ever cheaper receiving apparatus. A headache for copyright owners is that such emissions are not country-specific. A DBS signal originating in an uplink from one country may be receivable in not only that country, as intended, but also in neigbouring countries. The question then arises: which country' s copyright law should apply to the transmission? This is of particular importance if the protection in one country is not matched by an equal level of protection (or perhaps any protection at all) in the other country. As I have stated, the Australian approach is to regard the broadcast as taking place in the country from which the "uplink" to the satellite occurs. An alternative approach would regard the broadcast as occurring in each of the "reception" countries. (I refer to the so-called "Bogsch Theory" which has been ably summarised in the paper by Mr Walter Dillenz and which is dealt with at length by Michael Freegard in (1988) Vol. 13 No. 1- Columbia-VLA Journal of Law and the Arts . ) However the issue is perhaps somewhat less crucial in Australia's case -owing to its geography (ie, it is an island continent). Although AUSSAT transmissions can be received in Papua New Guinea and New Zealand, BMAC system capabilities can be exploited, if desired, to deny use of the signal by non-subscribers. There is a further consequence of the service area or "footprint" of a satellite extending beyond the boundary of the country from which the broadcast is made and for which it is intended. In another country within the footprint, a cable TV network can pick up the satellite signal received and retransmit it by cable in the country of reception. That brings me to the consideration of the copyright issues raised by cable television. Whereas the issues raised by satellites in Australia, have, we hope, been satisfactorily dealt with, those arising from the possible introduction of cable television, as we will see, have not yet been addressed. Indeed they cannot even be fully identified until the "shape" of any future cable system in Australia is known. Cable television at first glance seems to present no particular copyright problem. The Berne Convention allows the owners of copyright in dramatic and musical works to control the "communication to the public of the performance of their works" (Art. 11). Owners of literary works can likewise control MR . CHRIS CRESWELL 175 communication to the public of recitations of their works (Art. llter) . In both cases, this is understood to include diffusion by cable. Owners of copyright in all works covered by the Convention can control "communication to the public by wire" of films of those works (Art. 14(1)); owners of copyright in films also have the right to control such communication of their films (Art. 14 bis(l)). Owners of copyright in all works, including films, control any "communication to the public by wire" of broadcasts of their works by organisations other than the broadcaster (Art. llbis). Cable television began as a means of improving reception of broadcasts by persons on the edge of, or just outside, the area served by the broadcaster (the "service area"). However, because of the capacity of coaxial cables, and the much greater capacity of fibre optic cables, cable television has found another use in delivering a wider range of programs originated by the cablecaster, eg, movies, reruns of old TV programs, local community presentations, religious programs, being programs not broadcast by the local broadcaster. Further, since the introduction of satellite transmission of signals, cablecasters have been able to augment the range of program material to subscribers even further by picking up from satellite and diffusing to subscribers signals not intended at all for the area containing the subscribers, ie, distant broadcast signals. Finally, most recently the "interactive" capacity of cable television has been recognised, that is, the opportunity it provides for subscribers to call up entertainment or services, eg, dial-a-disk, horne banking and so on. Product information supplied by cable on request may even help abate the nuisance of unwanted advertising brochures which clutter letterboxes throughout Australia. All this is a far cry from improving reception of the local TV station! Before proceeding to the copyright problems posed by these new uses of cable television, I should mention the position in Australia. Australia has never had cable television on any substantial scale, although the possibility of introducing it has been considered from time to time. In 1982 a Government advisory body recommended the introduction of pay television services by way of cable television and radiated subscription (ie, encoded broadcasting) television (RSTV). After long consideration the Government decided in 1986 to impose a minimum 4-year moratorium on the introduction of such services. It did so largely out of a desire to protect the investments then required of commercial television licences under the networking policy which I mentioned earlier. In anticipation of the expiry of that moratorium the Department of Transport and Communications has produced a 2-volume options paper entitled "Future Directions for Pay Television in Australia". The Report identifies major advantages of pay television, chiefly flowing out of the more direct relationship which exists between the service provider or cablecaster and the subscriber, including a greater diversity of programming and the opportunity to cater for niche audiences such as Aboriginal people, various community groups etc. A range of new interactive services such as audience-participation shows, electronic banking, home shopping, etc. would be possible. There are, however, commercial concerns - eg, the possible "siphoning" of program material (and hence advertising revenue) from. conventional broadcasting, and social concerns such as 176 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES the possible swamping of Australian culture by a flood of imported material; declining community morals due to easier access to pornographic material; possible creation of a class of "information poor" citizens who cannot afford subsciption to pay television. Introduction of pay television presents substantial opportunities for the creation of new industries, estimated at up to A$6 billion in infrastructure investment spread over 7 years and tens of millions annually in operation. Costs and timing will, however, depend upon the nature of the systems used to deliver pay television. The report identifies several delivery systems options- Ultra high frequency (UHF) RSTV (ie, encoded television) could be established within a year or so at a cost of around A$500 million. However, there is only capacity in the spectrum to provide 1 channel in any one location; Satellite services providing up to 6 channels could be established from early 1992 at a cost of around A$2000 million; Construction of a hybrid fibre optic-coaxial cable system offering up to 40 channels could commence in a similar time frame at a cost of up to A$6000 million. (A full fibre optic system could commence construction from the mid-1990s and would cost more) . There would seem to be no reason why a combination of technologies cannot be used for delivery of pay television services. It is often argued that th~ infrastructure used for delivery of a pay television service, particularly a cable network as opposed to RSTV, constitutes a "natural monopoly". The economies of scale in having a single cable delivery system per area are certainly substantial . In the United States, which has the most developed pay television industry, a single operator generally selects, arranges and sells all the program material in an area, and delivers it over the only delivery system. In consequence, ownership and some aspects of content of pay television in that country are subject to a considerable level of government control, as is broadcasting. Australia may elect not to follow the US model. While there may be arguments for allowing monopoly ownership of infrastructure, they would not seem to apply to the provision of program material and the operation of the actual pay television service (including scheduling and origination of transmissions and marketing of subscriptions) which could be shared among 2 or more cablecasters in any one area. Indeed if the object of pay television is to provide a diversity of programming, it would seem desirable to encourage competition at this level. It is accordingly suggested that "carriage" and "content" be separated, ie, a single common carrier delivery system would be operated (probably by Telecom or AUSSAT) in a particular area but used by several competing pay television service providers (not including the common MR. CHRIS CRESWELL 177 carrier). This approach would make possible a "light touch" regulation more on the (relatively liberal) publishing model, rather than the (relatively restrictive) broadcas~ing model. On the assumption that cable delivery systems are used, even in part, to provide pay television services in Australia it will be necessary to overhaul substantially the relevant copyright rules. Under the Australian Copyright Act, in conformity with the Berne Convention, copyright owners have the right to control transmission of their works to subscribers to a "diffusion service". Diffusion service is defined to mean in effect transmission by wire to subscribers, in contrast to broadcasting which is by wireless means and indiscriminate as regards receivers. One can see in this echoes of the distinction drawn in the Berne Convention between broadcasting and "communication to the public by wire" Unlike the case of broadcasts, there is, under the Australian Act, currently no copyright in a cable transmission as such. Nor does the Rome Convention, which governs protection of broadcasts, require protection of cable transmissions. The first issue that arises, therefore, is whether the class of subject-matter in which copyright subsists should be extended to include cable transmissions. Most opinion would seem to favour extending protection in this way, provided that the transmission originates in the cablecaster's studio and is not merely a retransmission of a broadcast. It would seem invidious for the cablecaster to have to rely upon the action of officials or other copyright owners (ie, the owners of the works, films, etc. comprising the transmission) to protect his program from being retransmitted without consent. The copyright would presumably need to include rights similar to those granted to a broadcaster, namely (at a minimum) the right to control copying and retransmission. Also, in Australia works which may not be transmitted by cable without the copyright owner ' s consent do not include sound recordings and broadcasts. These are not protected by the Berne Convention, being "neighbouring rights" covered by the Rome Convention. That Convention does not require protection of broadcasts from unauthorised cable diffusion, and cable diffusion of recordings attracts, at most, a mere right to equitable remuneration. The majority viewpoint in the Australian debate on cable TV would appear to be that all copyright materials should enjoy a "cablecasting" right, just as they do a broadcasting right . Undoubtedly the most difficult issue to be faced is: What rules should govern cable retransmission of broadcast programs? The current provisions of the Australian Act governing this situation are complex, but they can be broadly described as follows: once a copyright owner authorises a broadcast of his material, he forfeits the right to control cable re-diffusion of that broadcast. The cablecaster need not seek permission of the copyright owner, and has no liability to pay any royalties to him. This rule originated in provisions of the UK Copyright Act 1956 which appeared to assume cable diffusion of broadcasts would be confined to augmentation of local broadcast signals by simple community antenna television 17 8 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES (CATV) systems in pockets of poor reception. (I noted earlier that this was the original purpose of cable systems.) In other words, cable diffusion of broadcast material is treated as a "viewer" function, ie, no more than a minor extension of the broadcasting service (already licensed by the copyright owner) to people unable to receive it for technical reasons. It was presumably thought unreasonable to require thousands of small relay system operators to negotiate separately for copyright licences. Because of the fundamentally new and expanded role now envisaged for cable TV, if introduced in Australia, options being considered for reform include Replacing the exemption by a "compulsory licence" scheme . That would mean allowing cablecasters to retransmit broadcasts; broadcasters, and the underlying copyright owners, would not retain the right to give or withhold consent but would be able to claim royalties as agreed, or as determined in the absence of agreement, by the Copyright Tribunal; Retaining a limited free right to retransmit broadcasts (and the copyright works included in them) by cable. While the second alternative has wider support, it will not be a simple matter to design an amendment to give effect to either alternative. Among factors which would need to be considered are Whether the retransmission is made by a "genuine" CATV system, or by a fully equipped cable studio with the capacity to originate program material. (There may be a difference in terms of the licensing machinery giving effect to the Government's broadcasting and communications policy); Whether or not the cabl~caster is required (either by law or by the terms of his operating licence) to carry the broadcast signal (so-called "must carry" rule); Whether the retransmission is simultaneous with the originating broadcast, or delayed; Whether the material is retransmitted unaltered, or is edited, for instance by the deletion of advertisements and perhaps the substitution of new ones; Whether the original broadcast signal is local, distant or imported from another country, ie, whether a new market for the copyright material carried by the signal is reached by the retransmission; Whether the initial transmission is a "free" broadcast, or RSTV (ie, encoded, and intended for reception only by subscribers); Whether the retransrussion is made by the same organisation as the original broadcast, or by a third party; Whether the cable operation is conducted with or without charge to subscribers; and MR. CHRIS CRESWELL 179 The category of broadcasting or radiocommunications l icence held by the broadcaster and/or the cablecaster. It shoul d be apparent from the list that resolution of this copyright i ssue is likely to be heavily dependent upon choices that the Government has yet to make regarding the nature of any cable television service in Australia, the relationship of broadcast and cable "service areas", the nature of the regulatory model chosen and the form and degree of competition which the system allows. In the debate in Australia on possible introduction of cable TV, potential cablecasters offer the following arguments in support of a broad exemption or a compulsory licence facilitating their re-use of broadcasting - Cable diffusion is a mere extension of broadcasting. Copyright owners can be remunerated adequately through the broadcaster. Matter which is broadcast should be regarded as in the public domain, particularly once the introduction of cable television makes it possible for the copyright owners to originate material through the cabl e system and thus refrain from broadcasting it. Copyright owners have not suffered, or at least cannot prove that they have suffered, economic damage as a result of retransmission of their material. There are practical difficulties in negotiating retransmission licences from broadcasters and other (underlying) rights owners, eg, the copyright owner may demand an unreasonable price, or worse, he may withhold consent for unethical reasons. A statutory system would be more equitable and efficient. The cable industry needs to be fostered and protected. In reply copyright owners argue as follows - Cable retransmission is not necessarily a mere extension of broadcasting, because of the wide range of ways in which the signal can be dealt with by a cablecaster, eg, introduction of the signal into a new geographic market. Broadcast authorisation should not be treated as "constructive" consent to communication of a work (generally) to the public within a defined area. Cable television reaches a different public, which pays separately for it. Advertising revenue, and the ultimate return for the copyright owner, can be best maximised by making each distribution the subject of a separate negotiation. The paramount consideration is the copyright owner's right to remuneration for each new use of his. material. It should not be necessary for him to prove a loss. 180 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES It is inappropriate for copyright protection to depend upon the broadcast licensing machinery. Compulsory licensing would not work equitably. Copyright owners can manage their rights efficiently through collecting societies. Cablecasters would get retransmission consents easily and cheaply in practice. The Australian program production industry should be protected. There is no reason why any public policy favouring the development of a cable industry should be financed involuntarily by copyright owners. Free retransmission rights would give originating cable systems an unfair advantage over broadcasters in competing for program material. Copyright owners would demand higher fees from broadcasters, knowing that the program would be carried into additional markets. It must not be forgotten that the weighing of all these arguments must take place within the framework of Australia ' s treaty obli gations, in particular Art. 11 bis of the Berne Convention. The Copyright Amendment Act 1989 creates a new compulsory licence for educational copying of television and radio broadcasts. If cable television is introduced it is likely that educational institutions will press for this scheme to be extended to copying from cable transmissions . Under the scheme, instit utions which choose to participate may copy radi o and TV broadcasts without infringing copyright in the broadcast or any subject matter contained in it. They may pay for copying through a per- student annual levy set after sampling of copying patterns, or by full record- keeping and payment for actual materi al copied. Payment i s made to a single collecting society, representing copyright owners, approved by the Attorney-General. Failing agreement, the level of payment will be determ~ned by the Copyright Tribunal. The motivations for introduction of the licence were on the one hand, the increasing avail ability of videorecording as a very convenient means of copying TV broadcasts and, on the other, the extreme practical difficulty for educational institutions in finding the relevant copyright owners and negotiating permission to copy before programs go to air. The new licence still leaves the publication market to the copyright owner to exploit in the conventional way; so he may elect not to authorise broadcast and to set a price for sale or hire of his material which reflects costs of production. In the light of this it is not clear whether it would be appropriate to extend the statutory licence to cable transmissions. While cable transmission resembles broadcasting in its ephemeral nature, it also bears some resemblance to publication in that it is largely confined to known paying subscribers (it extends of course to other viewers invited by subscribers). If interactive services become a reality and video recorders are universally possessed by subscribers, cable transmission of video and other materials could take the place of publishing (including rental in the case of videos) as we know it MR. CHRIS CRESWELL 181 today. Like the TSN-11 satellite service discussed above, cable television may well provi de a more efficient solution to the problems of educational use of copyri ght materials, ~y allowing an exact accounting for each access or use . The final cable issue I wish to identify is simply: How should the concept of cable diffusion be defined? As already mentioned, the Australian Act presently speaks of the transmission of a work or other subject matter to the premises of subscribers over wires, or over other paths provided by a material substance. It may be considered that the references to "subscribers" and to "premises" are unduly limiting, in that they raise doubts whether cable transmission is communication to the public. On the analogy that Sky Channel' s emissions to subscribing clubs, hotels, etc. are broadcasting to the public, there is a case for redefining diffusion or cable transmission as "transmission by wire or other waveguide to the public". This would neatly complement the definition of broadcast which I discussed earlier. A related group of questions applies both to cable and satellite transmissions: should the originator of the transmission (broadcaster via satellite or cablecaster) alone be regarded as making a transmission for purposes of subsistence of copyright in the transmission? Also, should that person/body alone be regarded as making, authorising, or contributing to the transmission for purposes of infrigement of copyright in materials included without licence? Should the common carrier have any responsibility at all if programming is licensed separately from the operation of the cable delivery network? Should the broadcaster or cablecaster have any responsibility if control of a channel is given over to a community access group? I express no final view on these matters although we should be cautious about extending to any class of persons an absolute statutory immunity. There seems much to be said for leaving it to the courts to decide particular cases on general notions of what constitutes authorisation ie, contributory infr ingement. To conclude I should like to draw together the main threads in my remarks. First, the familiar copyright pigeonholes, tied as they are to particular modes of "delivery" (eg, broadcasting, cable diffusion, public performance, publication) may be inappropriate to deal with a pay television service delivered by a mixture of means which may vary with such factors as distance, cost, time and the state of technological development. I refer here to what my colleague Mr Dillenz has called the "problem of allocation". The new technologies may dissolve the validity of the categories we are used to, and force substitution in Australian law of the more general concept preferred in the Berne Convention, that is "communication to the public". And in the distant future even the distinction between "communication to the public" and publication may dissolve. Second, in the exercise of copyright, territorial divisions will also become less practicable, reinforcing the tendency for copyright to be exercised globally in an international market, rather than by separate national proprietors. Cable and satellite television will add to the variety of technical modes available by which works can be communicated to their intended public. Used both serially and in parallel with other modes, they will necessitate new answers to the question: which communications or uses should be "counted" for copyright purposes, and which should be regarded 182 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES purely as preparation for, or extensions of, other uses. In sum, they will change the points at which copyright control is exerted, and will affect which individuals in which countries are affected. Third, cable television and (as implemented in Australia) satellite television encoded for subscribers (ie, RSTV) offer scope for greatly improved flexibility in the exercise of the copyright owner's rights. When generally available, they promise, in essence, to bring producers and consumers of copyright materials into a closer and better relationship. By allowing the copyright owner to monitor each individual use of his material, and to seek payment accordingly, they may well render unnecessary the "rough justice" of statutory licensing. And they may avoid the "lowest common denominator" character of conventional broadcasting by providing more finely-tuned incentives for the production of material adapted for particular audiences - some of which might not otherwise have a market. In short, cable and satellite television provide the opportunity to adapt copyright laws to better achieve the fundamental objective of encouraging the production of new creative material, to the benefit of producers and consumers alike. In concluding my remarks, I record my great indebtedness to Mr Philip Crisp, a colleague in the Attorney-General's Department, for his major contribution to the preparation of this paper. CABLE AND SATELLITE TELEVISION IN KOREA: ASPECTS OF COPYRIGHT LAW by Mr. Kyon Su Choe 1. In this paper, I would not dare to discuss, in great detail, major copyright problems on this subject but to overview current situations in Korea and further illustrate some general points which may be raised in respect of copyright and neighbouring rights. In the major developed countries, service industries account for two thirds of national income, and world trade in services amount to one third of the total. Copyright industries have shown a healthy growth in the second half of this century, since they have been involved in such areas as video, computer software, cable television and satellite broadcasting which in the past had never been dreamt of. Moreover, they will be more larger and more important, as copyright laws adapt themselves to rapidly developing technologies. Major big trading economies are now concerned more with trade in services than trade in goods. Some developed countries, to name but a few, now urge other trading partners to open up their service markets with a threat of retaliatory measures. Copyright industries cannot escape from this pressure. Korea is a middle-sized economy. Given the potentials of its satellite and cable television industries, it would be a showcase for these industries. 2. The copyright regime has, sl.nce its inception, kept pace with newly-developed technologies. For more than 100 years of changing circumstances, it covers business activities of various kinds. Satellite and cable services mark a new era in copyright industries. Yet, on account of hesitant or cautious attitudes on the part of national governments or due to the lack of international cooperation, we do not have well-established rules and principles of law applicable to those fields of activities. Some may argue that satellite and cable services are in the early stage of development, leaving a lot of legal questions unsettled. Many governments, most of them industrialized countries, take it that they have to cle~r up any doubts which may be raised in applying copyright laws to satellite and cable television broadcasting. Some countries already made provisions for such broadcasting in their domestic laws. The programme-carrying signals can be taped, picked up off the air or reproduced in a variety of other ways. However, there is no precise definition of broadcasting through direct broadcasting satellites and fixed service satellites. Some countries regard cable transmission as a kind of public performance, while others as a kind of broadcasting. Non-voluntary licensing would become more important in copyright laws. In a sense, interpretation of the rules. embodied in qomestic laws and international treaties plays an essential part in filling the gaps. 184 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 3. Satellite services, as they stand, reach, in respect of television coverage, not only newscasts but also entertainment. They certainly change things in all walks of life. In the long run, I cannot imagine further consequences of satellite communications. Direct broadcasting by satellite is brought home to us, as Japanese-made programmes are beamed through a direct broadcast satellite with its footprint being most part of the Korean territory. The Korean government has issued a timetable for telecommunications satellites, according to which a direct broadcast satellite will be launched in a few years. 4. The first cable operator was given permission from the government in 1971. The cable system shows remarkable development in Korean television history. It is reported that in 1973 there were 87 cable operators with 10,203 subscribers. The number of cable operators in October 1984 amounted to 389 with 345,229 subscribers. The recent surveys indicate that in June 1988 there were 1 ,250 operators and in July 1988 there were 1 ,566,654 subcribers representing 19.9 per cent of the total households. During the 24th Olympiad held in Seoul, cable televisions were installed in 2,500 places such as major stadiums, broadasting centres and hotels, which heralded the day of cable television in Korea . Cable operators are engaged mainly in relaying major television networks and in transmitting commercial phonograms. Current media law does not permit the operator to transmit its own programmes. The Cable Broadcasting Reception Act of 1961 was originally intended to relay the broadcast programmes produced by the State-owned broadcaster and to inform rural residents of the latest news. On the other hand, the Public Performance Act of 1961 was amended in 1966 in order to allow cable operators to transmit by wire music which was incorporated in phonograms. It was pointed out that uniform legislation applicable to cable transmission was required. However, it was not until the Cable Broadcasting Administration Act was enacted in 1986 that cable transmission is governed by single legislation. Nonetheless, government permission is still limited to the relay of the broadcast programmes, transmission of music published for commercial purposes and transmission of cable-originated programmes within a premise and by the person who is responsible for its administration, provided that the cable transmission originates in the same premise and takes place for the convenience of its occupants of visitors. It is still being given consideration in the government circles that cable broadcasters are to be authorized to produce their own programmes, intended to be received by subscribers or at least by a. particular group of people. 5. Now, it is pertinent to define the meaning of broadcasting under Korea's Copyright Act, since authors and other rights holders enjoy certain rights resulting from the broadcast. Article 2 of the Copyright Act defines broadcasting: 'Broadcasting' means transmission, intended for reception by the general public, of sounds or images by wire or by means of wireless diffusion. This definition of broadcasting excludes the case of transmission of amplified sounds in the open area of the same premise in which the sounds originate. The concept of broadcasting, as defined, is so broad as to cover the communication to the public both by wire and by means of wireless diffusion. MR. KYON SU CHOE 185 No reference is made to satellite transmission in Article 2, nor in any other part of the Copyright Act. Nor does the Copyright Act make any distinction between transmission of cable-originated programmes and retransmission by cable of broadcast prOgrammes. Two types of satellites - distribution satellite (fixed service satellite) and direct broadcast satellite differ from the legal point of view, although there is a possibility of convergence on account of technical evolution in satellite transmission. It is generally agreed that broadcasting through direct broadcasting satellites is broadcasting in the sence of Article 11 bis of the Berne Convention. Article 2 of the Copyright Act would embrace this conception. In the case of distribution satellites, the definition is not that clear. Some maintain that the whole process of transmission from the emitting point to aerials of home- viewers is one single utilization, if there are two separate organizations involved, thus falling within the meaning of broadcasting or communication to the public in accordance with the provision of the Berne Convention. Others do not agree to this view. 6. Satellite television broadcasting does not differ from ordinary terrestrial broadcasting in terms of copyright and neighbouring rights. Satellite broadcasters are responsible for their uses of works and entitled to any remuneration for their broadcast programmes. The same applies to cable-originated programmes. Cable programmes originated by cable operators are subject to copyright liability. When it comes to retransmission by cable of original broadcasts, no definitive answer can be found, in theory or in business practice. Are transmission of original broadcasts by wireless means and retransmission of those broadcasts by cable considered two separate forms of exploitation? Should cable operators other than original broadcasters pay royalties for retransmission of those broadca~ts? 7. When two countries are involved in transmission by direct broadcasting satellites or fixed service satellites, the conflict of laws comes into play. Different approches to the protection of copyright or neighbouring rights make difficult and, in some cases, impossible to give the rightful owner a fair return. According to the provision of the Copyright Act, foreign authors enjoy the same copyright as Korean authors on account of the national treatment principle, while foreign owners of neighbouring rights may not be entitled to certain categories of rights. The foreign broadcasting organization, for instance, cannot overcome the legal barrior to its claim for rebroadcasting or reproduction right, since the Copyright Act requires that the broadcasting organization should be a Korean national or have a radio station in Korea for the protection of its rights. The right of performers too is restricted in that they cannot prohibit others from transmitting phonograms produced for commercial purposes incorporating their performances. Payments of remuneration should be made out to the association of performers which is subject to government designation. Any performers who are not a member of the association should request his remuneration through the association. Phonograms producers are also entitled to remuneration for the uses by the broadcasting organization of their phonograms made for commercial purposes. 186 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 8. Satellite broadcasters and cable operators may make use of the non-voluntary license referred to in general terms in the Copyright Act, if the circumstances permit. The Copyright Act allows 3 cases of non-voluntary license. First, educational institutions can broadcast, for the purpose of teaching, a disclosed work(Article 23(2) ). Although not referred to expressly in this provision, it would be reasonable to say that educational institutions may broadcast the work only to the extent that the broadcasting does not prejudice the legitimate interests of the copyright owner who may utilize further the same work in the other way. Commercial institutions cannot invoke this provision with a view to obtaining a statutory license, since their broadcasts would certainly affect the copyright owner's interests. In this case, a payment to the copyright owner or a deposit to the competent authority is necessary (Article 23(3)). Second, anyone who has tried to contact the copyright owner in vain may be granted a legal license with respect to a disclosed work. A deposit with the permission of the Minister of Culture and Information is required to make use of the work (Article 47). Third, if a broadcasting organization which intends to broadcast for the public interest cannot come to an agreement with a copyright owner, it may do so, provided that it has to pay compensation to the copyright owner or put a deposit, with the permission of the Minister of Culture and Information (Article 48). Cable distributors, however, can tell a different story. They may insist that a more liberal non-voluntary license is to be introduced, since free negotiation would restrict or, in certain instances, prohibit their distribution of broadcast programmes. Although not heard yet in public meetings in Korea, this voice wquld gain strength in the foreseeable future. 9 . Let me close with a few international aspects of satellite and cable transmission, which would be relate l to copyright and neighbouring rights . Satellite and cable television will have a great impact on copyright industries. Authors and other owners of copyright and neighbouring rights seem to benifit a lot. However, the future is not so rosy as may be expected. Government regulation on telecommunications, in particular on television broadcasting, is very strict. Even if deregulation continues to take effect bit by bit, obscene or provocative programmes through any medium of communications would not be seen or heard at home, as long as they are in conflict with public order. Language is another hurdle. Northeast Asian peoples speak different languages. Only a limited number of intellectuals understand a language or two. It is noted further that direct satellite broadcasting or cable transmission through fixed service satellites give rise to transnational problems. Rules of the conflict of laws applicable to this case make the matter more complicated. The countries involved in this region have never considered regional arrangements in this regard. Authors and other rights holders will certainly welcome these arrangements, however. BIOTECHNOLOGY IN DEVELOPING COUNTRIES: THE INDONESIAN EXPERIENCE by Professor Didin S. Sastrapradja First of all it is indeed my distinct pleasure to express my deep gratitude and appreciation to the World Intellectual Property Organization (WIPO) and the Government of the Republic of Korea for the opportunity bestown upon me to highlight my view and personal experience concerning the efforts to make the potentials of biotechnology to contribute significantly for the development of developing countries. Understandably my thinking of this subject is mainly based on the experience in helping to formulate the policy adopted by the Government of Indonesia in harnessing the many sided benefits promised by this new development in a branch of science and technology for the welfare of the people. I hope that our experience will be useful to other developing countries, at least in preventing them from repeating our mistakes and failures. Like many other developing countries in South East Asia which patiently wait with great expectation for the miracle to be unravelled by this highly promising new technology, from the very beginning Indonesia has been very enthusiastic in joining international movement to build up the capability and utilize biotechnology. The main underlaying reason for this attitude is because the practices and products of biotechnology as generally interpreted today are already familiar to our people. Traditional drinks such as arak (the palm wine) and brem (the rice wine) as well as fermented food such as terasi (bacteria fermented prawn) peuyeum (yeast fermented glutinous rice or cassava) tempe and oncom (mould fermented soybean) are common sights in Indonesian daily markets from time immemorial. As a matter of fact they were already mentioned in our many ancient lontar or palm leaf writings . As may have been expected the bulks of these products have been prepared for home consumption or at the most in numerous home based industries . However, in recent years many modern factories have been springing up to meet the even increasing demands both in quantity as we l l as in quality. Consequently these microbially assisted food and beverage productions have a major opportunity for continuous improvement through the traditional approaches (such as simple selection cross breeding of starter strains) as well as through modern techniques made available by biotechnological breakthrough. To a limited extend the Indonesians have been using the benefits provides by tissue culture techniques in plant propagations, especially in palm oil and orchid industries run by the bigger firms. Mericlones of valued hybrids have been popular among orchid lovers and growers alike and they are available in the markets thank to these useful newly invented techniques. Other imported biotechnological techniques new widely used in the country include the artificial insemination of cattles and the artificial inoculation of legumes by their respective Rhizobium symbionts. Needless to say that we have enjoyed also ready used products directly imported from abroad and 188 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES commercially available in the markets such as marmite (the single cell protein) various kinds or growth hormones, vaccines, insulins, antibiotics, and other pharmaceutical substances produced by the activity of microbes used in biotechnological industries. Based on these happenings, the general Indonesian public and the stage are, therefore, considered ready to accept serious activity of biotechnological development. A working committee was therefore set up by the Indonesian Institute of Sciences in 1982 to study the most efficient and effective ways to be taken. This Committee came up with some recommendations, among others that research capability should be the first to be strengthened, particularly the manpower development should be given first priority. The working committee also recommended the setting up of a close cooperative network among scientists already working on various aspects of biotechnology in many universities, government or private institutions, and at the same time to initiate the formation of a kind of clearing house to act as focal point and secretariat of this network. It was also strongly argued by this working committee that this secretariat should be the nucleus of the future biotechnology centre to be set up at the appropriate time. The working group also strongly recommended that a modern and multi-purpose biotechnological laboratory be established which should be opened to visitors and collaborating scientists to do research and development. With regards to the scope of activity the working committee suggested that the programme should be limited to those which directly support the current programme priorities of the national development plan being pursued by the country. The Indonesian Government reacted favourably to these recommendations. For this purpose the State Minister for Research and Technology formed a national biotechnological committee by appointing its members from various government departments, research institutes, universities and private industries. To identify the state of the art of biotechnology at national level,a foreign consultant bureau was then invited. This assistance is needed to define the development plan considered feasible for immediate implimentation especially with regards to the detail of research programmes to be undertaken. The government also took the necessary steps in establishing the Biotechnology Research and Development Centre under the aegis of the Indonesian Institute of Sciences. The laboratory of this newly established Centre has been partly built in Cibinong, a new Science Centre satellite town located about 30 km south of Jakarta. A skeleton of researchers indicated their willingness to work in biotechnology were appointed to man this new Centre. Rigorous attempts have been made to scout talented young university graduates as well as highly gifted Senior High School students to be recruited. Those successful in passing the selection committee have been sent abroad to various universities in the United Kingdom, Japan, Federal Republic of Germany, United States of America and Australia. A number of them have already returned with advanced degrees. It was unfortunate that the oil crisis made it impossible for the Indonesian Government to provide the necessary funds (which admittedly rather high) to cover the expenses to complete the laboratories and other facilities needed to perform research and developmental activities adequately, so that at the moment their activities are somewhat curtailed. Efforts to obtain external financial support, therefore, are being pursued. PROFESSOR DIDIN S. SASTRAPRADJA 189 Nevertheless the national committee continued to provide guidance to streamline the development as desired, especially because several ventures were being pursued by various insti tutions in the country. Notable among these have been the establishment of inter-university centres specializing in biotechnology annexed to major Indonesian universities, i.e. Bogar Agricultural Universities CIPB), Bandung Institute of Technology CITE), Gadjah Mada University CUGM), in Yogyakarta and the University of Indonesia CUI) in Jakarta. This educational programme is supported by the World Bank. In the laboratories of these Universities various new approaches of biotechnological researchers have been performed, i.e. micropropagation techniques of potato as well as valuable timber plantlet productions (IPB), improved microbial starters in food fermentation CITB), Rhizobium inoculant CUGM) and monoclonal antibodies CUI ) . Similarly the Agency for Agricultural Research and Development of the Department of Agriculture has been active also i n setting up units or laboratories to cater for her special needs, among others in estate crops for sugarcane and oil palm micropropagation techniques and in cattle for embryo transfer studies. The pharmaceutical industries run by private sectors have been active as well in preparing themselves to enter the challenge of biotechnology especially in producing vaccines, insulins and hormones needed for medicinal purposes. Closely related to this is the chemical industry which has been attempting to produce secondary metabolites and other essential fine chemicals which so far have been always imported to meet the local demand. All these new developments as far as possible have been monitored by the National Committee which encourages the formation of cooperative link among biotechnological researchers. Successful research results have been encouraged to be published in the scientific journal Annales Bogorienses, a wellknown tropical biological journal which recently has been reserved for biotechnological papers only. Nevertheless the Committee also urged the Indonesian researchers to limit their activities only to biotechnological fields which definitely promise .direct benefit in agriculture (biological nitrogen fixation, tissue culture, embryo transfer and ultimately DNA recombinant for creating new cultivars), medicine (growth hormone, vaccines, monoclonal antibodies), chemical industries and the related environmental hazards . At this point it may be worth mentioning that the Indonesian Government commit herself to this new and admittedly expensive venture because of her belief in the optimistic view hold by most scientists today in dealing with biotechnology. There is no need to stress that biotechnology in the long run will minimi ze the cost of production of agriculture, especially because it offers unlimited possibilities in producing pest and disease resistant crops . through genetic manipulations, or in producing biological pesticides (derris, pyrethrum, neem through in vitro culture) and natural enemies of pests and diseases. On the other hand the government has been fully aware of the fact that achievements in biotechnological breakthroughs are as yet scare and costly because of the prolonged time lag needed from bringing the laborat ory research results into the industry. For a developing country like Indonesia, where the tradition of scaling up the bench studies into pl ant operation has not yet represent an established fashion because of the poor link between the research institutions and the industry, this time lag is even more acutely felt. Moreover biotechnology is highly depended on and dominated by private 190 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES companies which tend to concentrate only on certain product which assured maximum profits for their share holders . Therefore until now bio-enginered crop plants or cattle~ are not yet dominating the Indonesian markets. On top of this, research and development efforts in Indonesia - and I believe also in other developing countries - so far are being performed in government laboratories, by government employed researchers and fully financed by government exchequer. Very few industries in Indonesia have their own research and development units, and if they have these units are mostly charged with the task of undertaking the quality control of their products only. To make the matter worse, bioindustry in modern sense, which is expected to become the partner of research institutes, is hardly developed in Indonesia. The lack of demand from this non-existant bioindustry means also the lack of financial support from the private sectors to share the burden of research and development requires . Since the government has only a limited funds for research in pioneering field like biotechnology, it is understandable if studies in this highly promising discipline have been done only sporadically as can be witnessed from the scarcity of good quality manuscripts submitted for publications. It follows that expertise in biotechnology also represents a scarce commodity. That is why we have to send our students who want to major in biotechnology abroad because it is not yet possible to educate them in the country in the absence of genuine biotechnological "atmosphere". All these handicaps have not deter the government from adopting the present policy in view of the challenge of biotechnology. We believe that we have all the ingredients to continue in preparing ourselves to enter the biotechnological era which is already in our doorsteps . As is wellknown we in South East Asia represents one of the major of centre of genetic diversity of economically highly valuable species of plants and animals. This means that we have very rich genetic resources as an important asset to start with. It has been frequently stated that rich genetic resources are very important for the future of development biotechnology. Plants propagated through vegetative methods do no receive any resistant characters and therefore become easily susceptible to newly developed strains of pests and diseases. DNA recombinant technique cannot improve genetic diversity through the exchange or transfer of ge:1es. In this respect it is worth mentioning that our theme for environmental day of 1989 is "To develop the country through the continued utilization of biological diversity", which we hope will be beneficial in conserving the rich genetic resources we have. It is also noticed of the general enthusiasms in many research and high learning establishments throughout the country in trying to master biotechnology to be used in catching up with the advanced development achieved by other countries abroad. Hence it is expected that the present slow development of biotechnology will receive its appropriate momentum when all the prerequisites for vigorous growths are already in hand. Being highly traditional in outlook, the community will have to be prepared socially and culturally to accept sudden changes which may be resulted from the adoption or introduction of biotechnological breakthroughs. PROFESSOR DIDIN S. SASTRAPRADJA 191 Another important asset which we have at our disposal is the potential captive markets, due to the fact that Indonesian is the largest country in South East Asia with more than 170 million populations. Any products massedly produced could be absorbed rapidly by this huge market, hence our programmes have been directed for local consumption. This is not to say that we neglect the international market because we realize that biotechnological products represent an important foreign currency earner. Having said all that it will be proper for me to present the likely action to be taken by the country after accumulating the experiences in trying to strengthen her capability in the field of biotechnology. We are now doing our utmost to consolidate all our expertise into a strong unit capable of producing a useful research result. The network alluded to the above is one of the vehicle we are using to achieve this end. In consolidating these scarce manpower, we pay due emphasis on manpower development. This is a slow process but we believe that the money invested in this respect will be worth spending. In due course the contents of our university curricula and syllabi will be scrutinized by the respective inter-university centres to be put in line with the demand of modern biotechnology. As has been mentioned above we are trying to concentrate our biotechnological programme to a few well selected areas of activities only to ensure that the results achieved are readily useful. In this respect research and development endeavours will be correlated closely with the production lines attempted by the industries. But most important action which the Indonesian scientific community highly appreciates is the continued commitment of the government at least they have stated their political will for endorsing the development of biotechnology in Indonesia. It is expected that this political will shall be followed by sincere commitment and generous financial support as well. As this stage I would like .to say something about intellectual property law: Since our activity in this highly sophisticated modern technology has been low, as is also experienced by many other developing countries, the results in terms of intellectual property or patents have been very minimal as well. Our parliament is still debating the appropriate patent l aw to safeguard these small research and development achievements for the benefit of both the inventor and the public. The government of Indonesia takes the stand of inducing the healthy growth of intellectual achievements of her scientists and therefore the government strongly promotes any activities which will produce results in this line. The government already gave out incentives to successful breeders, promote their careers or decorate them with appropriate recognition and sometimes make the necessary intervention to enhance their works. The law to be enacted should therefore be encouraging for them to protect their achievement, but the need of the public ar large is uppermost in the government mind. Be that as it may the impact of these newly emerging and highly sophisticated technology is far reaching, sometimes beyoud the comprehension of average citizens. Without doubt the agroindustry will be able to produce superior cultivars which are exceptionally high yielding and very uniform. Since mass production of plantlets can be easily put into effect to satisfy any requested, modern farming involving large tracts of lands will become 192 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES fasionable. This new development will put millions of small farmers residing in developing countries who at pr esent are still practicing subsistence level agriculture in limbo. These sma l l people will not be able to afford of buying patented seeds without the helping hand of the government. Consequently the intellectual property rights will do them more harm than good. Viewed from this angle you will understand the stand taken by the Government in this respect. Perhaps it is about time to start making a mid course maneuver by preparing a kind of law that will make it possible and highly profitable for small farmers to reorganize and revolutionize the agricultural system through cooperatives. In this way each small farmer will represent a part of a modern and properly managed large farm so that every one of them will be able to share fully the joy of benefits of biotechnology. I will close my presentation with remarking that the emphasis of our discussion should be on the biotechnology in the developing countries". In this way the intellectual property law to be developed is expected to consider also the protection of those rights developed in the developing countries themselves, beside those to be transfered from advanced countries. It is not quite correct to say "biotechnology for the developing countries" because it gives the impression that developing countries are not aware of the importance of biotechnology in their development efforts. If a country like Indonesia, which so many other more pressing problems facing her, is still willing to set aside some of her limited assets to j oi n the bandwagon in developing biotechnology to meet her special need and requirement, you will realize that we do mean business is this respect. However I should like to emphasize once again that although biotechnology gives promises to developing countries, the road is still a long way to go before they can reach the posi tion of biotechnologically capable countries. Traditional biotechnology and non-biotechnol ogical processes will rema i n with us in the years to come to play their important role in producing the bioproducts we need. Thank you very much for all your patience and kind attention. THE COMMERCIAL TRANSFER OF BI OTOCHNOL03Y CONSIDERATIONS IN TECHNOLOGY LICENSING by Mr . John H. Woodley INTRODUCTION The quest of mankind is simple - to live! This quest can be readily satisfied by an abundant supply of food and quality health care. Biotechnology holds the promise of satisfying this demand. BACKGROUND Biotechnology has been exploited to the benefit of mankind for thousands of years. Some of the earliest and most enjoyable exploits involve the production of wines and beer. Other, no doubt more significant exploits involve improved animal husbandry by selective breeding; improved crop varieties and more recently the production of medicines from fungi and the development of vaccines. Why is there now a sudden interest in the transfer of this technology when it has been with us for so many years? The answer is simple. In man ' s desire to solve the "riddles of life", he discovered in the early 1970s that a living cell's function can be altered significantly in a controlled and reproducible manner. Significant features of the immune response system are now understood and the production of monoclonal antibodies for use in diagnostics is a commercial reality. These recent discoveries have resulted in significant improvements in the production of foods and health care. A thumbnail sketch of the benefits of biotechnology in recent times include the manufacture of: (i) human proteins, such as Interferons; human insulin; human growth hormone; tissue plasminogen activator, (t-PA); (ii) improved biological production of valuable medicines such as cephalosporins; sanguinarine (plaque fighter); (iii) new and effective diagnostic agents based on monoclonal antibody technology and DNA probe technology, for example, those used in the early detection of certain types of cancer, viral and bacterial infections and heart disease . Other areas include improved waste disposal and treatment of effluent from industries and the leaching of minerals from ores, all involving the use of specially developed microorganisms. In agriculture, examples include the development of new strains of grain; new strains . of vegetables; nitrogen fixation in corn; frost resistance in vegetable crops; improvements in livestock management . The potential for these developments in the marketplace is truly unlimited. 194 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES WHERE IS THE TECHNOLOGY DEVELOPED? Biotechnology is derived from the research efforts in four primary centres: 1 Universities 2 Industry 3 Joint ventures of industry and/or universities 4 Research centres sponsored by local or federal governments. Only two of the above are in a position to commercialize the fruits of their research; namely, industry and joint ventures. Hence universities and research centres find themselves in predominantly a licensing-out position and industry and joint venture groups find themselves in both licensing-out and licensing-in positions. Industries do, however, enjoy the luxurious position of being able to commercialize what they develop. Hence industry may decide from time to time to retain an exclusive position sometimes worldwide for the particular area of biotechnology they have developed. A recent example of this approach is by Genentech developing and marketing the enzyme t-PA for dissolving blood clots, as sold under the trade mark ACTIVASE. However, there are always the exceptions to the rule. Generally significant developments in the area of biotechnology are licensed out by any one of the above concerns, either on the basis of entirely developing and commercializing the discovered biotechnology or developing in regions which are not competitive with the commercial interests of the industry which has developed the technology. Developments in biotechnology are providing a fertile region for technology transfer normally by way of license agreements which includes transfer amongst groups in a particular community, region or country and also amongst countries. HOW IS THE TECHNOLOGY TRANSFERRED? There is a wide divergence in the manner in which biotechnology is transferred by the various above noted groups. It is usually in the university's interests to license technology on a non-exclusive basis for one or more territories based on one or more uses of the developed technology. For industry, if it is large, it is normally in its best interest to license the technology in areas which are not competitive with its own exploitation of the technology. For smaller companies , it can sometimes be a vital function of the business to license the technology to gain the necessary large investment to commercialize the product and gain a market position. Witness Genentech with their development of human insulin now marketed by the pharmaceutical giant Eli Lilly. There is one common consideration for all of these groups when a decision is made to license the technology - A MARKETING PROGRAM. "If a man can write a better book, preach a better sermon, or make a better mousetrap than his neighbors, though he builds his house in the woods, the world will make a beaten path to this door" - Ralph Waldo Emerson MR. JOHN H. WOODLEY 195 This is wrong! The development must be advertised in order to be exploited. The best form of publicity is scientific publication, either in journals, published P?tents or patent applications. These venues suit the needs of all of the above entities. Universities and government sponsored groups survive by publication in journals. Industry normally survives by way of patent protection on their developments . Other forms of promotion of t he technology, of course, include presentations at technology forums and meetings, advertising in trade journals and personal contact with selected companies which are thought to be interested in the particular development. Another significant form of advertising of the technology is commercial success. However, this is normally a luxury only enjoyed by industry which has the depth and capabilities to commercialize the developed technology. PROTECTION OF THE TECHNOLOGY It is important to decide before any transfer of the technology on the manner in which the technology will be protected. Biotechnology is protectable by utility patents, plant variety patents and trade secrets. The protection of technology by trade secrets, if closely supervised and controlled, can be the longest form of protection available. However, the control aspects must be rigorously enforced. It is clear that biological inventions are protectable by trade secrets. Such inventions may involved newly discovered or engineered microorganisms, cell lines or their progeny, and newly created strands of DNA embodied in vectors or hosts. It is appreciated, however, that once the technology relating to any one of these embodiments of the biological invention becomes public, protection by way of trade secrets is immediately lost. There are, of course, many steps which can be taken in controlling trade secrets to ensure against their misappropriation and disclosure to the public. For example: i) highly secure areas can be developed in research and manufacturing areas; ii) only certain employees are made aware of the trade secrets and are bound to secrecy by appropriate agreements; iii) all publications by the group who are aware of the trade secrets are reviewed before release to ensure that none of the company's proprietary information is disclosed. However, should there be a slip or loss of control and the trade secret becomes public, then trade secret protection is automatically lost . If the trade secret becomes public through misappropriation, fraud or other criminal act, the persons responsible are liable; however, the group which is liable may only be able to provide minimal compensation to the owner of the trade secret. 196 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES In the field of biotechnology, the critical information in terms of technical material can be carried in a single microorganism. Since there may be billions of microorganisms in a fermentation system, it is almost impossible for a company to maintain control over what happens to those microorganisms. For example, if a scheme is properly devised, microorganisms could be salvaged from the waste materials of the fermentation process and grown by the unauthorized party to achieve all the benefits of the trade secrets. A significant drawback with the trade secret approach is that it does not advance the technology in a particular area. Trade secrets automatically exclude publication of important data. This prevents others learning about the technology and improving on same for the benefit of every one. The transfer of technology is predicated on protection of such technology. That is, if the party receiving the technology has no competitive advantage over its competitors, then the technology is not worth buying. However, competitive advantage can be obtained by receiving know- how and trade secrets from the owner of the technology and/or the promise of market exclusi vity due to patents in the particular country. These principles apply to any technology being transferred, but more so to biotechnology. In the particular area of biotechnology involving plant propagation, an alternative to trade secrets is protecting plants by way of various plant variety protection patents. There are several countries which offer, in one form or another, a type of plant patent. The Union for the Protection of New Varieties of Plants (UPOV) is an international convention respecting plant protection. Several countries belong to this organization, including Belgium, Denmark, France, West Germany, Israel, Italy, the Netherlands, South Africa, Sweden, Switzerland, the United Kingdom and the United States. The convention is directed at protecting plants developed by sexual reproduction. This should be compared to the Plant .Patent Ac t of the United States which is directed a protecting plants reproduced asexually. The Plant Patent Acts in the various countries, therefore, offer an alternative form of protection compared to trade secrets which enable the licensing of new plant varieties. Another form of protection is by utility patents. Some countries have extended patent protection to cover plants, such as, the United States and Australia. This results in publication of the technology which can be constructive in developing new technology. However, it is appreciated that with patent protection there are many significant drawbacks on the scope and strengths of patent protection available on biological materials. Conformity in the laws protecting biological materials is developing in several European countries. Similarities in the law have also been developed in Canada, the United States, Japan, South Korea, Australia and New Zealand. However, there are many countries which still do not recognize the patentability of biological materials in any form, including microorganisms or other biological systems. There are several stumbling blocks on the road to gaining solid patent protection on biological materials. There is the prevailing thought that patents on life are not socially acceptable and this has affected the decision-making in many jurisdictions regarding the patentability of biological materials as they exist in various types of lifeforms ranging from microorganisms right through to human cells. MR. JOHN H. WOODLEY 197 There is one important consideration which is unique to the field of patenting biotechnology. As is generally understood in order for a patent to be valid, it mus t disclose the invention in terms which will enable those skilled in the art to work the invention when the patent has expired. In biotechnology, there are many developments which may happen by chance mutation; chance isolation of a useful monoclonal antibody and chance isolation of a valuable piece of DNA to produce a valuable protein or act as a medical probe. Quite often these discoveries cannot be replicated even though t he starting materials are known. The discovery may well be patentable; however, how does the inventor satisfy the sufficiency of disclosure requirement. This hurdle has been overcome by developing procedures in various countries which provide for deposition of the microorganism containing the valuable information in a depositorium recognized by the Budapest Treaty. Providing the deposit is made in accordance with the procedures of the various countries, valid protection can be obtained on the basis that the deposits are freely available to the public after the patents have issued or the applicati ons have been published. Hence the public has access to the invention even though the disclosure may be insufficient in fully describing the characteristics of the lifeforms, or other types of biological materials to enable replication of the claimed invention. The key thing often overlooked, however, is that the deposit should usually be made before the patent application is filed. As a general rule of t humb, I always advocate that deposits of the claimed microorganisms or r elated material should be arranged and their viability be established in the recognized depositorium before the first patent application is filed. In this manner, all rights of the inventor are preserved and patents for invention can be safely filed in all countries in the world which recognize patents on various forms of biotechnology. CANADA - COMPULSORY LICENSING Before we look at the various aspects of a voluntary transfer of technology from the willing owner to a licensee, there are situations, such as in Canada, where compulsory licensing of a medicine is available. Under the Canadian Patent Act as recently revised by Bill C-22, it is acceptable to apply and routinely receive a license issued by the Commissioner of Patents to use the patented technology for making a patented medicine and to sell the medicine. The revised Patent Act has set a delay time before one can use the patented technology in Canada, providing the invention was made outside Canada. Depending on t he circumstances, there is a delay of seven to 10 years after t he notice of compliance. All new medicines that receive a notice of compliance after June 27, 1986 are not subject to compulsory licensing until ten years from the date of the first notice of compliance. If the invention was invented in Canada and is made in Canada, the patent is not subject to compulsory l i censing. The patentee has exclusivity for the full twenty years. Rest assured, under the compulsory licensing provisions in Canada, the licensor will not be transferring any know- how to the licensee ! 198 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Another aspect that is new under the revised Canadian Patent Act is the Prices Review Board. Its main purpose is to ensure that the patentee with the new found ten year exclusivity on medicines in Canada, will not gouge the Canadian public with excessive medicine prices. Patentees have to make yearly reports to the Board, or when otheruise requested, on the pricing policy for their patent medicines that are not yet available for compulsory licensing. If the Board finds that the patentee's prices are excessive for a protected drug, the delay period is removed and the patented medicine immediately becomes available for compulsory licensing. The Patented Medicine Prices Review Board was created under amendments to the Patent Act. The Board came into force on December 7, 1987. Its primary function is to protect Canadian consumers from excessive prices for patented medicines. The Board is also charged with monitoring and reporting to Parliament on overall pharmaceutical pricing trends and on investments in pharmaceutical research and development in Canada. The Board will be reporting on price trends of all medicines, but can only act on the prices of medicines which are patented under the provisions of Sections 41.15 and 41.16. Regulations respecting the submission of information to the Patented Medicine Prices Review Board was passed on September 15, 1988. It is our understanding that all manufacturers of medicines, especially patented medicines, have received notice of these regulations. As part of the regulations, patentees will be required to submit information identifying the medicine and the price of the medicine for the following periods: (a) the period beginning on January 1, 1986 and ending on June 30, 1986; (b) the period beginning on July 1, 1986 and ending on December 31, 1986; (c) the period beginning January l, 1987 and ending on June 30, 1987; (d) the period beginning July l, 1987 and ending on December 31, 1987; (e) the period beginning ~anuary l, 1988 and ending on June 30, 1988; (f) the period beginning J uly l, 1988 and ending on December 31, 1988; (g) each subsequent six-month period commenci ng with the six-month period beginning on January 1, 1989. It is important to note that information under paragraphs (a) through (e) was required by the Board within sixty days from September 15, 1988; that is last year on November 14, 1988. The information required under paragraphs (f) and (g) shall be submitted within thirty days after each of the noted periods . Hence, pharmaceutical manufacturers are under considerable pressure to gather quickly this information. Additional information may be required with respect to calendar years 1983 to 1985 which has to be submitted within 120 days from September 15, 1988. The information, which the Board is requiring, is summarized as follows : (a) the name and address of the patentee and the address for correspondence in Canada; (b) the generic name and the trade name of the medicine; (c) whether the medicine is for human or veterinary use; MR. JOHN H. WOODLEY 199 (d) the drug identification number (DIN) assigned to each dosage form and strength of the medicine of the patentee; (e) the quantity of the medicine sold and either the average price per package or net revenue for each dosage form, strength and package size in which the medicine was sold, in final dosage form, by the patentee during the periods and years referred to above to each class of customer in each province; (f) the quantity of the medicine sold and the average price at which the medicine was sold, in other than final dosage form, by the patentee during the period and the years referred to above to each class of customer in each province; (g) the publicly available ex- factory price for each dosage form, strength and package size in which the medicine was sold by the patentee during the periods referred to above to each class of customer in each province; (h) the publicly available ex-factory price at which the medicine was sold, in other than final dosage form, by the patentee during the periods referred to above to each class of customer in each province; ( i) where the medicine is being sold in final dosage form by the patentee in one or more of the countries set out in Schedule II, the publicly available ex-factory price for each dosage form, strength and package size in which the medicine was sold by the patentee to each class of customer in each of those countries, during the periods referred to above; and (j) where the medicine is being sold in other than final dosage form by the patentee in one or more of the countries set out in Schedule II, the publicly available ex-factory price at which the medicine was sold by the patentee to each class of customer in each of those countries during the periods referred to above. Other information which the Board requires on a different form, identifies the patented medicine. The identification information includes information of above paragraphs (a) through (d), as well as licensees, date of first notice of compliance and relevant patent numbers. This information was required by November 18, 1988 for medicines either offered for sale in Canada or on which a notice of compliance has been issued before September 15, 1988. For medicines on which a notice of compliance is issued after or offered for same after September 15, 1988, then the information is due thirty days after either the notice or first offer for sale. If the patented medicine has been invented and developed in Canada, the patentee has additional forms to fill out to establish exclusivity under the provisions of Section 41.16 of the Patent Act to obtain the full twenty year period of exclusivity in Canada. Information concerning the identification and making of the medicine i s also required, but not until sixty days after the end of each twelve month period commencing on the sixth anniversary date of first notice of compliance of the medicine. The Board is also requiring information concerning the name of any licensee in Canada of the patentee and the revenues and research and development expenditures of the patentee with regards to patented medicines. Forms are provided for submission of that information which is due sixty days after the end of each calendar year. 200 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES The regulations and forms for submission by patentees is too extensive to reproduce here. I would, however, be pleased to provide this information on request. There are many other prov~s~ons in the revised sections of the Patent Act on compulsory licensing of medicines. A detailed discussion of these many provisions are beyond the scope of this paper, but perhaps will be dealt with in more detail at a future meeting when precedents begin to develop under the new Act and Rules . HANDING OF SERIOUS ENQUIRIES ABOUT THE TECHNOLOGY Presumably if the technology owner has done a good job in marketing the technology and protecting the technology, there will be enqu~r~es from interested parties about the technology and what is its potential to satisfy mankind's quest. Normally this involves transfer of information concerning the technology which may include biological materials relating to the technology. Once the owner has identified the serious enquiries, initial steps can be taken to transfer i nformation concerning the technology. If the person receiving the technology is in the same country, the proceedings are simpler than if the transfer is to another country. Most countries already have in place government regulations controlling the flow of technology into and out of the country in question. It is therefore imperative to determine before any technology is release that: a) the technology owner has a right to transfer the technology to the foreign group and b) that the foreign group is in a position to receive and use such technology. I will not attempt, at this time, to cover various aspects on export controls and licenses required in gaining government approval concerning technology transfer. There are many detailed regulations and controls concerning the transfer of technology, much of which is dependent upon the type of technology and the country to which it is being transferred. LETTER AGREEMENTS Having determined that the technology can be transferred to another party, either for preliminary investigation or collaborative research purposes, such transfer has to be protected by way of a confidentiality agreement which is commonly referred to as a "Letter Agreement" . Depending upon the activity of your research centre, several of these letter agreements could be entered into yearly. The agreements provide an effective form of recording transfer of biological materials into and out of your research organization. It is appreciated that one should be wary of any standardized form of letter agreement. For every exchange there is always a new set of facts. MR. JOHN H. WOODLEY 201 There is, however, a sample "Letter Agreement" by Kelly and Jaworksi, in "Agreements Covering Exchanges of Biological Materials", and when considered with the following detailed issues, most of the critical areas in the transfer of biological materiais are covered. It has to be remembered that with biological materials an accidental release of just one organism containing the essential information can result in unauthorized use of the invention perhaps without the originator even knowing. Each microorganism containing the essential genetic information must be looked upon as a miniature factory all onto itself. "A turnkey operation". Hence extreme care must be exercised to maintain confidentiality on the information and materials before biological materials are released to another party. The biological material to be transferred should be sufficiently described to ensure that there is a clear understanding between the parties exactly what materials are being investigated. Another consideration is the concerns that health regulatory agencies have with regard to improper use of biological materials or inappropriate handling; i.e., biological warfare or release to the environment of a toxic microorganism. In the United States, the National Institute of Health has rigid guidelines covering the development, use and testing of genetically engineered biological materials. It is important to ensure that the group receiving the biological material agrees to use the materials in compliance with all laws and regulations of their country and as a yardstick, reference may be made to the current NationaJ. Inst.itute of Health guidelines as set down in the United States. Furthermore, the group receiving the biological materials should agree to save and hold harmless the transferer of the material in the event of improper use by the receiving group. Another consideration is that during the research investigations, improvements to the biological material and process may result. It should be appreciated that improvements to the biological material may involve modifications thereto. Therefore, the issue of "derivatives" should be addressed in the "Letter Agreement". It should be clearly understood between the parties that any development which results in deriving functional material from the biological material transferred is encompassed by the agreement and hence the group transferring the biological materials should have rights thereto. The breadth of the derivative definition will depend on the fact situation for the biological transfer. Hence the transferer should reserve at least the right to negotiate a license from the receiving group to practice any patentable improvement or other important information developed by the receiving group during their investigations or research-. Such investigations may also involve the development of subject matter which the receiving group wishes to divulge in an abstract or manuscript for publication in a scientific journal. It is important to ensure that the receiving group present all such papers to the transferer before publication to ensure that no valuable information in which the transferer may be interested is released before appropriate steps are taken to protect the information. Although I have addressed several issues regarding letter agreements, it is appreciated that considerably more detailed agreements can be entered into when several aspects of a valuable technology are being investigated by a third party. For instructional and comparison purposes, I attach as Appendix 202 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES "A" an example of a "letter agreement" for transfer of biological materials. It is appreciated that, in the transfer of detailed biotechnology for review purposes, a far more elaborate agreement is required to cover all issues relevant to the confidential transfer. LICENSE AGREEMENT Now that the biological material has been transferred and work is underway to investigate the transferred biological materials, hopefully the investigations will result in a licensing arrangement whereby the licensee desires to obtain all relevant information concerning the transferred materials so as to be in a position to commercialize the development . Although as already noted biotechnology has been with us for thousands of years, it is only of late that the licensing of biotechnology has taken on a new significance and has required special considerations in drafting of license agreements to suit the needs of the licensor and licensee. There are as many ways in approaching the drafting of a license agreement covering a biotechnology transfer as there are transfers. However, with the basic issues of licensing in hand, I believe a review of the important principles in a biotechnology transfer will provide sufficient information to deal with situations as they arise. In deciding the strategy of licensing a technology, either in the form of licensing out or licensing in, careful consideration has to be given to: ( i) whether or not it is going to be an exclusive position or non-exclusive position; (ii) fields of use and territorial restriction; and (iii) monetary rewards. For more on the issues of strategy in the negotiation of a license agreement and a check-list of license agreement provisions, please refer to Appendix "B". These issues become extremely important in the licensing of biotechnology because many developments of today might have only one form which is ready for market, yet there is a wide variety of other applications of the technology not yet developed. As a rule of thumb in the development of a "pioneer" biotechnology discovery, the licensing posture should be on the basis of a non-exclusive license with a field of use restriction and restricted to a particular territory. On the other hand, with a biotechnology which has been developed and has very specific application, an exclusive license posture should be favored without any field of use restrictions and optionally with territorial restrictions. How these basic aspects are brought together in a licensing program also depends on the source of the technology, whether it be from industry, universities, collaborative research or joint venture. Universities are in the most vulnerable position because of the ambition of the professors and MR . JOHN H. WOODLEY 203 researchers to publish their findings as developments occur. One normally has to act very quickly in protecting university technology to ensure that a position is maintained which can be licensed to others. My favorite example of how a university capitalized on a pioneer technology to result in considerable revenues was developed at Stanford University. They were in a position to license the basic Cohen and Boyer technology on recombinant DNA developed jointly at Stanford and UCLA universities. In order to encourage the licensing of this technology, a credit system was provided on the minimum yearly royalty of $10,000 providing the non-exclusive license was taken out before a specified date. Hence the "early bird" principle. After that date, the credit system was removed so that the minimum royalty of $10,000 a year was due every year . Surprisingly, this technique encouraged some 73 groups to take out a non-exclusive license under the Cohen and Boyer patent in the United States before the due date. I understand that the program is now gathering approximately nine million dollars a year in royalties which serves to exemplify a workable approach in the licensing of basic developments i n biotechnology. It will be interesting to follow Genentech's licensing position on their most recently issued United States patent 4, 704,362. This patent covers the basic concepts in use of a recombinant DNA cloning vehicle for transformation into a host. Any group i nvolved in the commercial production of proteins 0y recombinant techniques most likely infringe this patent. In comparison to this, if the patent program is directed to a specific area of the technology and it may only be used by no more than three or four licensees, then the upfront buy-in early scheme will not work, because at that point everybody would recognize the advantages of the technology and buy in immediately. The purpose of a license agreement in the transfer of biological materials is to protect and set out the rights of the licensor and licensee in an agreed to format which contains provisions beneficial to both sides . The licensor i s usually in the position of drafting the agreement for consideration and negotiation with the licensee . This is particularly important in the field of biotechnology because of the intimate familiarity the licensor has with technology about to be transferred. The major issues in biotechnology licensing are as follows: Ownership; Definitions; Derivatives; Deposit of biological materials; Type of grant; Deposit of biological materials; Type of grant; Field of use restriction; Territorial restrictions; Licensing fees and royalties payable; Multiple licensing to exploit the particular technology Royalty layering; 204 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Confidentiality with respect to trade secrets; I mprovements to the licensed biotechnology; Enforcement of licensor's patent rights and defending against third party infringements; Health and environmental approvals; Export approvals for technology; Extension of patent term; Rights of the licensee; Best efforts and due diligence; Hold harmless provisions Publicity. OWNERSHIP Biological materials can be derived from a variety of sources. With any licensing program, it is important to establish ownership in the technology being licensed. This is even more critical in biotechnology, because of the diverse origins of same. If one isolates from nature a valuable microorganism for producing an antibiotic, then unquestionably the person who uncovers the valuable microorganism is the owner of that microorganism unless it has been assigned to others. Similarly, one who genetically engineers a new microorganism to produce a new product or an old product is also clearly the owner of that development. However, the issue becomes somewhat cloudy when the biological materials are isolated from: 1 biological materials of others; 2 human or animal tissue. Biological Materials With respect to deriving an improvement from other people's biological materials, providing the materials are in the public domain and are not protected by patents, then the person developing the improvement is the owner of and has the right to use such improvement. However, if patents exist on the original biological materials which have been improved, then although the developer of the improvement is the owner, he is estopped from licensing the improvement without right under the dominant patents. Human Tissue As to isolating biological materials from human tissue, there have been developments in the United States wnich clearly point out significant problems in this area. A patient, John Moore, sued the Regents of the University of California for their use of tissue derived from his body for purposes of developing a significant biological invention. The University licensed the technology to others. Moore took the position that the University did not have ownership in his tissue and hence he should be entitled to a share of the rewards. Granted Mr. Moore is responsible for the originating tissue; however that was taken by the University and modified to produce the cell line having interesting characteristics. MR. JOHN H. WOODLEY 205 DEFINITION A critical part of any agreement is the "Definitions" section. The purpose of this sect~on is to define the scope and meaning of terms frequently used in the agreement. This avoids having to define what each term means throughout the body of the agreement and provides a quick reference glossary of the terms. This section takes on special importance in biotechnology agreements because this is the opportunity to clarify the meaning of the relevant biotechnology materials and information as they relate to this particular agreement. For example, the agreement may relate to a recombinant DNA technique for making a desired protein. The scope of the technique may be defined so that both parties know exactly what processes fall within or fall outside the agreement for purposes of paying royalties. Obviously, the same desired protein, if made by a chemical peptide synthesis technique, would not fall within the scope of this agreement. If the agreement relates to monoclonal antibody production, a d~finition of the type of hybridomas used to make the subject monoclonal antibodies is important. This helps one determine if royalties are due, for example, if hydribomas which are different than those supplied by the licensor are used. It is important for this section to define clearly what are improvements to the transferred biological material so that obligations in transferring improvements to the other party can be readily determined. Derivatives of biological materials are particularly difficult to define and this leads us to the next section. DERIVATIVE In ke,eping with the derivation of biological materials and improvements thereto, the covering of derivatives of the transferred biological materials in a license agreement is a very difficult issue to resolve. Obviously from the standpoint of the licensor, it seeks all advantages derived from subsequent work on the biological materials transferred. On the other hand, the licensee may have expended considerable effort and believed that in working with the biological materials such significant changes have been made to provide a totally new use of the material. The derived material is no longer related to the original material transferred and hence outside of the license agreement. Result no payment of royalties! The definition of derivatives is obviously going to be determined primarily by the fact situation of each licensing arrangement. It is difficult to provide any standard definition of what derivative means for a particular licensing situation. However, from the licensor's standpoint, it is hoped that the net can be thrown sufficiently broadly to cover all changes to the biological materials which may enhance overall function while retaining the function of the material originally transferred. Suggested definitions for derivatives, which have been developed by the LES USA/Canada Biotechnology Committee, are as follows: 206 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 1 Derivative means any progeny or subclones of parent; or 2 Derivative means progeny, clones, subclones or products of parent wherein such progeny and subclones include non-identical progeny and subclones of parent; and such progeny includes progeny which would not have been made but for the parent. More specific definitions of derivatives are as follows: 1 Derivative means any progeny and any genetically engineered modification which is substantially based on and incorporates an essential element of parent; or 2 Derivative means any progeny and any genetically engineered modification wherein: such progeny and genetically engineered modification is based on and incorporates all of the essential features of parent; the genetic material is substantially unchanged; the genetic material is substantially based on and incorporates an essential element of parent and is verifiably distinct from parent; the structural and/or functional characteristics are identical to or are a predictable, expected result of genetically engineered modifications of parent; the genetic material is substantially similar to the material from which it is derived and having a substantial portion of the characteristics of parent's genetic material; or any genetically engineered modification which is substantially based on and incorporates an essential element of parent without a substantial change in phenotypic expression. DEPOSIT OF BIOLOGICAL MATERIALS As addressed in the intellectual property section of this paper, it is necessary to deposit biological materials which are the subject of a patent when such biological materials defy accurate scientific description and reproducibility from known starting materials. In the licensing of the patented biological materials, ±he deposit of such biological materials presents a significant problem. The recognized depositories of the Budapest Treaty for patent related deposits, such as, the American Type Culture Collection (ATCC) are obliged to make the de_osited material available to the public, once the patent or its application is published. Hence any interested party may request of and obtain from ATCC the patented biological material and freely exploit the patented biological material in a country where patents do not exist (non-patent countries). This is due to the fact that the filing of patents in several countries around the world becomes prohibitively expensive. In a licensing context, this would not be a problem for many types of non-biological inventions; i.e, a chemical or mechanical process involving know-how and trade secrets, because the technology cannot be practiced effectively in a non-patent country i n the absence of the confidential know-how and trade secret information. As a result, there is still technology which can be licensed in the non-patent country. Contrary to this position, in the field of biological patents where an outside party can obtain the deposited material from a depository, they have all they need to reproduce and MR. JOHN H. WOODLEY 207 practice the invention. The outside party can then exploit the invention in the non-patent countries without requirement for additional confidential knowhow or trade secret information. The licensor is .then stuck in a situation where a deposit of the subject material is required for patent purposes. Do they or do they not patent? Some patentees are now taking the position that, if a deposit of biological material is required for purposes of protecting a specific invention; e.g, a hybridoma for making a particular monoclonal antibody for a specific protein, they are not patenting and thereby refrain from depositing the hybridoma . Instead the source of the hybridoma and the hybridoma itself is kept secret. It is this secret information which can be licensed. Careful consideration has to be given to this situation at the patenting stage to prevent jeopardizing future licensing considerations. EXCLUSIVE OR NON-EXCLUSIVE GRANT The type of grant will depend primarily on the type of technology being offered. As already noted, should it be a "pioneer" technology, it is to the benefit of the licensor to disseminate the technology on a non- exclusive basis and at a reduced licensing fee, but yet generate a reasonable royalty return because of the broader base for marketing of the technology. On the other hand if the technology is well developed and is of limited use, then the technology is probably better licensed on an exclusi ve basis. FIELD OF USE AND TERRITORIAL RESTRICTIONS Field of use restrictions become particularly important when a pioneer technology is being licensed. A basic technology may have a variety of applications. Such applications may include an immunotoxin; immunoassay; DNA probe; microbiological analysis; promotor; vector; animal nutrition; agricultural chemicals; energy development; petroleum products production; industrial chemicals; mineral processing; environmental controls; human and veterinary health care and human and veterinary diagnostic care. Rather than licensing all of these applications t o one company, it is cost effective from a royalty return standpoint to license each company to use the technology in a particular area. For example, if a vector is developed which is particularly useful for implanting different types of genetic information into a microorganism to produce corresponding products, such as various types of medicines, then each company licensed would only be entitled to exploit the vector in the particular field of use. Similarly, territorial restrictions can be set up to enhance royalty return. The technology can be licensed country by country to different companies providing there are identifiable markets in each country. This can be broken down further to identifiable regions within a country, for example, types of medical treatment could be controlled on this basis. 208 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES LICENSING FEES AND ROYALTIES PAYABLE In view of the varied uses to which biotechnology can be put and the manner in which the products can be sold, it is important to use ingenuity in developing royalty rates. The royalty scale will depend firstly on whether or not it is an exclusive or non-exclusive license. As already noted in the area of pioneer technology, a non-exclusive license approach is preferred because of the variety of uses to which the originating technology can be put. One should consider that the royalty scale be such that it does not encourage a potential licensee to opt for the position of attempting to invalidate the patent rights, or during the contractual period, become over burdensome to the extent that the licensee contemplates litigation to break the contract . From the university standpoint in licensing technology, neither of these options are attractive. The universities are concerned more with developing academic environment rather than becoming involved in costly, lengthy litigation. Continuing in the vein of licensing of university technol ogy, it is important that the technology be transferred in a manner to provide a source of revenue. Government grants to universities continue to be cut back. The universities must look to other areas to obtain the necessary funds to continue research. The ideal position in licensing of university technology is to have many non-exclusive licenses, each license being accompanied by a lump sum upfront payment which is non- refundable and not credited towards royalties. Then a reasonable royalty scale can be tuned to the manner in which the technology is being sold. I had already referred to the interesting approach taken by Stanford University in licensing the Cohen and Boyer technology on recombinant DNA. A credit system was provided on the minimum yearly royalty of $10,000 providing the license was taken out before a particular date. This early- bird principle was successful in encouraging some 73 groups to take out a license before the due date. With respect to the royalty scale employed on the t echnology licensed by Stanford University, reference should be made to Catherine Ku's paper entitled "Licensing DNA Cloning Technology", printed in the June, 1983 issue of LES NOUVELLES which is published by the Licensing Executive Society, Inc USA/Canada. Devel opment of a royalty scale for the technology being licensed will depend on how the technology is being commercialized in the particular field of use. Will there be end products made, or will the product as made be sold in bulk? Will the licensee use the technology to improve its own in-house processes of manufact ure, or will the licensee elect to sell the lifeform to another, or to sell the genetic ma terial to others? In each of these situations, a different royalty will apply and the licensee may be exploiting the technology in all of these areas. If the end product is sold in bulk, then understandably there would be fewer units of sales because the product may be mixed with carriers or processed into some other form before it is sold to the public. A higher royalty rate should be established with respect to bulk sales, for example, 10% to 15% . MR. JOHN H. WOODLEY 209 In the situation where the licensee uses the technology to improve their in-house processing, then the royalty rate should be scaled to reflect the cost saving and economic benefit to the licensee. The outright saie of the genetic material is obviously worth considerably more. This would normally be in the form of a lump sum payment. The dollar value affixed to that will be determined by the market demand for this type of technology, potential for its use and its viability. The results of biotechnology may find itself marketed in a variety of forms. The following are examples of suggested royalty rates for the following types of products. The suggested rates are based on information gathered from surveys conducted by various biotechnology groups: Research Reagents (e.g. expression vector, cell culture, media supplements), a royalty rate in the range of 1 to 5% of net sales. Diagnostic Products (e.g. monoclonal antibodies, DNA probes), a royalty rate in the range of 5 to 8% of net sales. Therapeutic Products (e.g. monoclonal antibodies, cloned factors), a royalty rate in the range of 5 to 10% of net sales. Vaccines, a royalty rate in the range of 5 to 10% of net sales. Animal Health Products, a royalty rate in the range of 3 to 6% of net sales. Plant/Agricultural Products, a royalty rate in the range of 3 to 5% of net sales. ROYALTY RATES - UNIVERSITY VS. . INDUSTRY In keeping wi th the discussion of licensing university and industry technology in establishing royalty rates, some interesting information can be developed by comparing a license offered by Columbia University to a license offered by an industrial concern, Hybritech Inc. Both the industry and the university are licensing basic technology in their fields. The major distinction between these different groups is with respect to the manner in which the royalty issue was handled. The university required a minimum yearly royalty 0f $30,000 even though the license is non-exclusive. The minimum yearly royalty is credited towards royalties due. The royalty rate depends upon the type of product sold, everything ranging from the final product through to new genetic material. An interesting twist to the Columbia approach with royalties is that there was an early bird special, where if you had signed up before June of 1984, a lower royalty scale applied. "Deja vu" Stanford University. Another interesting approach in the Columbia license regarding royalties is that improvements provided by Columbia University required an additional royalty due on the benefits realized from the improvements made by Columbia. 210 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Columbia University agreed to a reduction in the royalty if the licensee had to pay a further royalty because of infringement of other parties' patents. Col umbia limited the amount of reduction in the royalty up to one third of the amount of royalties due to Columbia. In other words, you could not negotiate a high royalty scale with some other group and hope to write it off against the royalties due to Columbia University. This distinction appears to indicate that the University is more prepared to accept third party infringement and compensate for this, rather than encourage someone to attempt to invalidate the patent to avoid paying royalties. Contrasted with this position is the industrial side. Hybritech requires a license issue fee which is non-refundable and not credited towards the payment of any future royalties. The license issue fee can be broken up into three annual installments. The running royalty is based upon the chosen amount of license issue fee paid. The more money paid up- front, the lower the royalty rate. For $100,000, the royalty rate is 9%; for $1 million, the royalty rate is 2% . As an enticement during the first two years of the license, the licensee can pay additional money to lower the royalty rate to the limited minimum. Non-performance by the licensee results in the licensor, Hybritech, not collecting any royalties other than the base issue fee. Hybritech agrees to the reduction in royalty if one or more of the claims of the licensed patent is invalidated. Presumably if the product or process is no longer covered by an valid claim in the Hybritech patent, there is no need to pay any further royalties. In between these areas, I am not sure how you would calculate a reduction. From this comparison, the industrial group indeed has a higher up-front charge for the technology which is related to the fact that it is or has been brought to a stage which can be marketed. On the other hand, Columbia University has a more guarded approach and ensures a m~n~mum yearly income from the licensee as long as the license is in force. The interesting result of khis comparison revealed that the University is clearly oriented in a business manner towards the dissemination of technology in a way that is going to provide a solid return to the university. Royalty Layering This can become an issue in countries where patents not only exist on the basic technology, but also protect important improvements in developing and selling a particular technology. For example, a patent may exist on the basic technology used to genetically engineer a microorganism which produces a new product. A patent would also exist on the product. A·patent may also exist on special culturing conditions for the microorganism to produce the product. This patent may be held by a different company. Furthermore, patents may exist on a newly discovered microorganism which, when modified with the basic technology, has significantly improved productivity in making the product. Hence a company desiring to make and sell the product under license in a country in which all three levels of patents exist, the patents being owned by different companies will result in paying two or perhaps three different royalties. The licensee is then faced with a MR. JOHN H. WOODLEY 211 royalty layering problem and how this is coped with will depend greatly on the ability to negotiate royalties in each instance which will permit the licensee to manufacture and sell the product at a reasonable profit. If the licensing fees become exorbitant as required by all three different licensors, then obviously the licensee will not go into business and hence the licensors have lost the potential of licensing the technology. This will become more of a problem in the field of biotechnology as basic patents continue to issue on developments in this area and also patents on improvements to these basic developments. AS this situation evolves, pressures undoubtedly will be put on the various patent holders to arrive at a fair and justifiable total royalty rate for the licensor. CONFIDENTIALITY Rigid controls are required with respect to the use of the biological materials and the disclosure of information to others. This is normally covered by way of confidentiality requirements in the license agreement . It is essential that all trade secrets be controlled and kept in confidence under the usual provisions respecting confidentiality. The biological materials are not to be released to any other parties without the permission of the licensor. Strict controls are to be enforced in the laboratories and manufacturing facilities to ensure that theft of the microorganisms cannot occur. Compliance with these controls must be subject to regular and frequent inspection by the licensor. Millions of dollars can easily be involved in the development of a biological material which has very significant commercial application. Quite often the licensor will be very specific in requiring special types of confidentiality agreements with all employees exposed to the technical information and supervise the types of controls put in place to ensure that pilfering of the technology won't happen. IMPROVEMENTS In conjunction with the issue of how derivatives of the transferred material are defined, improvements to the biotechnology must be considered. The licensee may take the position that the improved change to the biological materials renders the development completely different from the biological materials originally transferred. If that is true, then clearly the licensee is practicing outside of the license agreement and has ·no obligation to submit those improvements back to the licensor. However assuming the licensor can negotiate the proper but broad definition of (i) derivatives, and (ii) improvements to the original biological material, then the licensor should be entitled to participate in the improvements. Such participation may be in the form of a royalty free, non-exclusive license to the improvement with the right to sublicense other licensees then existing or in the future. In some countries, such as Canada, it is even permissible, assuming it can be negotiated, that the ownership of the improvements made by the licensee reside with t he licensor. 212 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES One must be careful, however, to consider that in defining the conditions under which improvements are granted back to the licensor that equal consideration be given to conditions which determine when improvements by the licensor are given b~ck to the licensee. If the term "derivative" is defined quite broadly, then the improvement clause should include the definition of derivative in determining what might constitute an improvement. The licensor, therefore, imposes upon himself an obligation to then transfer all the improvements he develops in the parent material which will fall within the scope of the broad derivative definition. This has to be weighed against the returns that the licensor will receive from improvements made by the licensee. ENFORCEMENT OF PATENTS Enforcement of licensor's patent rights requires careful consideration in. the field of biotechnol ogy. It is difficult to establish what a third party might be doing which would constitute infringement of the patent claims. It is not always easy to break down biological material to determine exactly whether or not the improvement, as contained in the genetic code of the microorganism, is new and infringes the patents in question. Similarly with the defence of third party infringement, there are many patents issued with broad claims in the various fields of technology. These patents act as traps in covering very broad uses of some basic technology needed to prepare the next phase of the biological material program. Since these areas can become difficult to resolve and involve expensive litigation due to the complexity of the subject matter, it is important to ensure that the issue of patent enforcement and patent infringement is clearly defined so that the parties understand their commitment to patent litigation if and when it arises. HEALTH AND ENVIRONMENTAL APPROVALS An area which can complicate the process of developing the technology is health and environmental approvals for use of the biotechnology. Health and/or environmental use approvals are not received overnight. They may take many months of submission, revision and interview before convincing the regulatory agencies that the biological materials are safe in the environment or safe from the standpoint of human use . Consideration has to be given to how royalty payments should be structured during this regulatory approval period which are fair to the licensor and licensee. Reasonable assurances must be obtained from the licensee that all work conducted with the biological materials will be in accordance with safety regulations of that country to ensure that no problems or liabilities are encountered. Similarly with product liabilities, particularly in the medicinal field the licensee must understand that they are totally responsible and will save and hold harmless the licensor from any suits which might be brought in this area. MR. JOHN H. WOODLEY 213 EXPORT APPROVAL FOR TECHNOLOOY The ability of the licensor to export biological materials and technical information to the licensee, should they be foreign to the licensor, must be determined. Many coUntries now have rigid guidelines on the export of technology embodied in technical information and products. The United States, for example, has a set of complex guidelines for the export of technical information. It can be very difficult to deteDmine if a particular biotechnology requires approval. It is therefore important to engage counsel in the particular country to answer the relevant questions on export of the technology. EXTENSION OF PATENT TERM Many countries provide for extension of patent term, particularly in the field of medicines which require prolonged periods to gain the necessary regulatory approvals before sale to the public. In the United States, there is the Patent Term Restoration Act which provides for extension of United States patents covering medicines and foods. It is important when drafting a license agreement which relates to medicines or foods to take this feature into consideration. Thought should be given to the rights and duties of the parties to the license agreement with respect to applying for and gaining the necessary extension. The licensee should ensure that the agreement provides the necessary assurances that the people entitled to apply for an extension are a party to the agreement should they be required at a later date to make application for extension application. The party responsible for this action should be identified. There are, of course, many other considerations in this area. Expert United States counsel should be engaged to advise on this area when negotiations involve a United States patent on a medicine or a food. THE RIGHTS OF THE LICENSEE Any license agreement should clearly define the rights of the licensee. This is particularly important in the area of biotechnology, where the licensed material is capable of self-replication. The agreement should clearly define the licensee's position vis-a-vis patent applications and maintenance, trade secrets, field of use and territorial restrictions, and abilities to sublicense, to mention a few . BEST EFFORTS AND DUE DILIGENCE License agreements obtain contain a clause to the effect that the licensee will use his "best efforts" or "due diligence'' to commercialize the licensed technology. Such phrases are difficult to define, and are generally the subject of negotiation. The licensor may wish to insert a "penalty" as a part of the "best efforts" clause giving himself a remedy such as increased royalties or the ability to grant other non-exclusive licenses if the licensee does not comply. 214 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES HOLD HARMLESS PROVISIONS A licensor, as the supplier of the licensed biological materials, could be held liable for any damages in law resulting from the use of the materials by the licensee. The license agreement, then, should contain a "hold harmless" provision, in which the licensee agrees that the licensor will not be responsible for any damages which may arise from the licensee's working of the technology, and, that if the licensor is found liable, he will be indemnified to the full extent of the damages found by the licensee. PUBLICITY New developments in the field of biotechnology are often highly publicized. Because of this, a license agreement covering biological materials should determine whether the agreement itself is to be publicized, which party is to be responsible for the costs of the publicity, and the extent to which the technology itself may be publicized. CONCLUSION Although I have itemized and discussed what are thought to be the major issues in biotechnology licensing agreements, there are many ancillary issues to be considered, most of which are considered in standard licensing agreements. The LES USA/Canada Biotechnology Transfer Committee has compiled a booklet containing biotechnology licensing agreements from several concerns, not only including the Hybritech and Columbia University license agreements, but those offered by Stanford, Salk Institute, Harvard University to name a few . Copies of these license agreements are available from the Biotechnology Transfer Committee. Unquestionably there are significant costs associated with the development of biotechnology, industry being in a better position to afford such developments. But universities usually provide the fertile ground for discovering basic break-throughs in biotechnology. Licensing offers the vehicle to acquire the technology at a reasonable cost and acquire the necessary know-how and trade secrets to commercialize products of particular interest. This is significant encouragement for universities to promote the technology they are developing in the academic search for the ''riddles of life". At the same time, it is significant encouragement for industry to support research by universities and cooperate with them in this respect. The principles in conjunction with a strong patent program will lead to increased transfer of information in the field of biotechnology to satisfy man's quest to live! MR. JOHN H. WOODLEY 215 TO BE TYPED ON LETTERHEAD OF OWNER OF BIOLOGICAL MATERIAL (Address of Recipient) RE: Confidentiality Agreement - Supply of Biological Material Dear (name of recipient) This letter agreement will confirm our understanding with you whereby (insert name of owner of biological material) agrees to supply to you a sample of (insert description of the biological material) , herein after referred to as "The Biological Material", subject to the following terms and conditions : 1. The Biological Material is supplied to you with the understanding that you will use the Biological Material to (insert description of how the recipient will use the Biological Material) . 2 . The Biological Material and any and all derivatives including progeny and mutants together with information about the Biological Material, or subsequently derived from the Biological Material and product(s) made through the use of the Biological Material or its derivatives, or t hrough the use of information derived there from will be treated as confidential information. The recipient agrees that such Biological Material and its derivatives will only be used for research purposes and not for the production of goods or products for sale. The recipient agrees not to release, sell or license the Biological Material or its derivatives to any third party without the express written consent of (the owner) . The recipient agrees not to release the Biological Material to any third party without the written consent of (the owner). The Biological Material and its derivatives together with information concerning or derived from the Biological Material or its derivatives will be disseminated as necessary only to those associated with the research within the recipient's organization and then only on a confidential basis. The recipient agrees not to submit any papers for publication containing the information respecting the Biological Material or its derivatives without firsc obtaining written authorization from (the owner) 3. The Biological Material is provided without warranty of merchantability or of fitness for a particular purpose or any other warranty, express or implied. you and your ·institution agree that (the owner) , i ts employees , agents and affiliates have no liability in connection with supplying you with the Biological Material, or your use of the Biological Ma terial. You and your institution agree to waive all claims against (the owner) , its employees, agents and affiliates and to defend, indemnify and hold harmless (the owner) , its employees, agents and affiliates from all claims and damages asserted by third parties arising from your use, storage, handling or disposal of the Biological ~ Biological Material or derived therefrom. (The Owner) makes no representation that materials or information supplied by (the Owner) methods of making such materials are free from liability to third par~ies for patent infringement. 4. In the event that any commercial developments are derived by the recipient from the Biological Material and/or its derivatives with the aid of information derived from the Biological Material or supplied herewith, where such developments may or may not constitute patentable subject matter, the recipient and its institution agrees to negotiate an agreement with (the owner) for payment of royalties based on manufacture, use or sale of commercial products derived from the Biological Material and/or its derivatives. The recipient and its institution agree to take the necessary steps to appropriately protect the developments, should they be patentable and to advise (the owner) of the necessary steps taken. In the event the recipient does not wish to pursue patent protection, (the owner) reserves the right to proceed with patent protection on the developments and in such event the recipient agrees to assign all its rights in the developments to (the owner) If you find these terms and conditions acceptable, kindly indicate your agreement to these terms and conditions by dating, signing and returning one copy of this agreement . Retain the other copy of this agreement for your files as signed. A sample of the Biological Material will be forwarded promptly upon receipt of this signed copy. Very truly yours, To be signed by an Officer of the owner) ACCEPTED: (Name of Recipient) (Title> (Date) TO BE ACKNOWLEDGED BY OFFICER OF THE INSTITUTION OF THE RECIPIENT (Name and Title) (Date> MR. JOHN H. WOODLEY 217 NEGOTIATION OF A TECHNOLOGY LICENSE A WIN-WIN STRATEGY JOHN WOODLEY & RAFAEL ESKENAZI - SIM & MCBURNEY BUSINESS DEALS Protection of the business relationship requires a degree of give and take or deference to the "other side's" needs . In this way, a significant part of what a lawyer must protect in a licensing situation is, paradoxically, the needs of the "other side". Unfortunately, in classical legal situations and conflicts, working for the other side is tantamount to professional and ethical betrayal of the client. Typically then, a lawyer who performs acts that benefit the "other side", particularly at the expense of his client, feels that he is doing his job all wrong. However, in a licensing context, a degree of concern for and concession to the needs of the "other side" should be regarded as a type of highly enlightened self interest, at least to the extent that what is conceded helps business dealings to produce a benefit greater than the cost of such concessions. Therefore, it is incumbent upon lawyers and in particular litigation lawyers negotiating patent licenses to work hard to overcome attitudes they may have which would impede negotiations. After all, if business dealings fail, there may be no rights for the lawyer to protect in his more traditional adversarial role. UNDERLYING PRINCIPLES The first order of business is to develop an attractive licencing package to facilitate implementation of the licencing agreement. All else will follow. In this context, it is wise to adopt a result orientation. If the client wants to sell or acquire a license, that should be the primary goal to which all legal considerations (and attitudes) should be subsumed. This requires a healthy and practical business approach to negotiation; a "win-win" attitude in which both the client and the other parties "win" during the license term. This will assure the long-term subsistence of the license at hand and subsequent business dealings between the parties. This is negotiation in its purest and cleanest form. The first step is not adversarial in nature. The negotiation of a license agreement is not a predominantly legal task. In such a negotiating context, a legal approach and expertise have a backseat role . They are necessary tools properly applied to focus and touch up details of a deal and to ensure that any major considerations of the deal do not violate any local laws or regulations. Legal expertise is be employed to protect rights while the deal is being worked out. In this role, lawyers must make certain that the agreement is properly structured to achieve in law what was agreed to in bargaining. 218 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES KEY FACTORS FOR DEVELOPING LICENSING STRATEGY With the underlying principles in clear view, the following key factors should always be kept in mind when developing a strategy for licensing of a technology. 1. Pioneer/non-pioneer technology 2. Exclusive/non-exclusive position 3. Territorial restrictions 4. Fields of use 5. Royalties In considering these key factors, the following remarks will be directed primarily at a licensing out position of the technology. This is primarily applicable to small and midsize businesses, universities and other research institutions. BAITING THE HOOK - MARKETING The licensor must market his invention with all the skill of any great consumer product advertising campaign. The exception to the above rule is in the development of pioneer technology. Of course, if you were the first to discover a cure for a deadly disease affecting millions of people, or discovering a means of safely disposing of nuclear waste, the commercial aspect might follow immediately with no need for marketing. But I suggest that even in those circumstances, commercial viability can still take many years and a lot of convincing of the licensee by the inventor. The critical step in developing a licensing strategy for any inventions is then MARKETING. With improper marketing, you may as well wrap up your licensing strategy. There will be no one to license or a faulty marketing program may initially attract licensees but in the process turn them off causing them to move on to an alternative technology. There are many seminars available which can teach all the critical and useful points in marketing of a technology. These may not appear to directly concern you, the lawyer. You may see them as being of concern to business types. But unless the business client is directed in this area, no marketing scheme can be developed. Here are some of what I consider to be i mportant issues in the marketing program. 1. CHARACTERIZING THE POTENTIAL LICENSEE Keeping in mind the "win-win" approach to licensi one winning criterion is the future cooperation of parties. A licensor should keep in mind the potent of cross-licensing with the licensee, that is the potential of their business views intermingling, and hence, improving not only the licensee's technology but in the future, the licensor's technology. It is important to ask if the technology is right for the targeted licensee. Even though the licensee may be keen, it is important to evaluate whether or not, in the long MR. JOHN H. WOODLEY 219 term, the technology would be a good fit for the licensee. If not, the licensor should make its concerns known in this area. It is important to evaluate the corporate direction of a potential licensee to insure that there will be a long term ~nterest in the program, and not a short term flash in the pan effort by the potential licensee. This is a critical concern when considering the key factors of exclusive position, fields of use and territorial restrictions. 2 . PROMOTION The program must sell potential targeted licensees on the viability of the system. This can be done without giving away the details of the technology . It is important to focus on the results of the technology being licensed, ie improvements in production, abilities to cure certain diseases, substantial reduction in product costs and the like. It is wise to have a professional prepare a product or technology outline which effectively markets the technology in a "glossy brochure" approach. There are many services companies available which will undertake such a task. Alternately, such outlines can be prepared by in-house marketing departments, when available. Otherwise it is important to engage an outside consultant. The money spent in developing an effective marketing program will be recovered readily in the rewards of attracting licensees who will sign on the dotted line. Such marketing techniques may be targeted at potential licensees by way of direct mail or personal contact. They may be dispersed at trade shows, advertised in trade journals and circulated amongst related industries. The choice must made between taking a "shotgun" approach that attempts to attract several licensees at once, or a direct hit approach where a single licensee is selected and all efforts are put into convincing that potential licensee of its need for the technology. In deciding these issues, the above key factors play a very important role. 3. INTELLECTUAL PROPERTY PROTECTION An important aspect in any marketing program is the protection of the intellectual property involved in the technology transfer . This should be attended to before the commencement of the marketing program. Otherwise, your marketing advances will be regarded as a "one arm · tied behind yow: back" approach. With effective intellectual property protection systems in place or at least applied for, the potential licensee has, as negotiations progress, insight to the value of the technology and the sincerity of the licensor in protecting the value of such technology. Furthe~re, having patents applied for or issued, should there be a leak in information which discloses the invention, the client's rights continue to be protected by the intellectual property protection. Hence, should there be a 220 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES need to enforce the intellectual property rights, threatened litigation can also be an ef fective marketing tool in an effort to settle costly legal action. 4. CONFIDENTIAL DISCLOSURE Once the potential licensee has nibbled at the hook, it is time to set it. This can only be only be done by allowing such a party an opportunity to inspect the technology to be licensed. However, this is an awkward situation. The licensor does not wish to disclose all to someone who may not sign up. This leads us to the sticky issue of confidential disclosure of certain aspects of the technology to the potential licensee. Some things, however, are not ever to be disclosed. In no way should any trade secrets, that is the valuable "crown jewels" of the technology be disclosed. All plant tours and prototype inspections must be carried out so that one look ing at the technology cannot gather the salient points which make the technology work efficiently. With any confidential disclosure, an agreement setting out the conditions should apply. The critical considerations in any non-disclosure agreement are: 1. Absolute confidentiality of information disclosed and infocmation gained by inspection, and; 2. Prevention of use of the information gained for personal profit by the group receiving the technology. The attached agreement of Appendix B addresses these issues in varying detail . It is suggested strictly as a guide in considering the various issues of nondisclosure in a confidential transfer. As noted, however, the confidential disclosure is an important step in setting the hook. But I cannot over emphasize the aspect that, to bog down at this point in the negotiations in a legal confroQtation over the terms and conditions of the confidential disclosure, will usually kill the deal because of the hard feelings between the parties that will develop as the opposing lawyers wrangle over the terms and conditions of the confidential disclosure agreement. It is important to remember the objective of negotiating a business deal. If the other party refuses to sign a reasonable confidentiality agreement which you deem important to have in place to negotiate the deal, then you have selected the wrong potential licensee and you should simply walk away. By advising the other party of this position, it is surprising how the other party will all of a sudden call back the next day and announce a change in position with respect to the confidential disclosure. This is far better than a legal tug of war over a confidential disclosure agreement which is only the first in several steps in negotiating the deal. LICENSE AGREEMENT STRATEGY Once the hook has been set with the potential licensee, the next step is to put together the heads of an agreement for the license. MR. JOHN H. WOODLEY 221 BOTTOM LINE-TRADEOFFS The previously referred to five key factors must be considered in advance for developing a licensing strategy. They will assist you in determining with your client where your bottom line is and what aspects may be traded off in the negotiation process. Every aspect of the key factors must be carefully considered. 1. PIONEER/NON-PIONEER TECHNOLOGY An evaluation of the technology must be conducted to determine its applicability for industry. Is it a base discovery from which many developments will flow, (pioneer technology), or is it an improvement technology which has limited application in only certain industries? If the client cannot readily answer these questions, it is important to engage outsiders capable of hanging some flesh on these bones to make a determination of the applicability of the technology. Surveys of the market place may be useful in this regard as well as discussions with colleagues in related industries. Once a determination has been made of the applicability of the technology, several conditions fall into place in considering the remaining key factors. 2. EXCLUSIVE VERSUS NON EXCLUSIVE POSITION If the technology is of a pioneer nature, a non- exclusive position is recommended. The technology will probably have a broad base application in many industries and in several counties around the world. Even in a particular industry, competition should be encouraged. This develops a club atmosphere and, in turn, improves on the technology amongst the club members over time. On the other hand, with an improvement technology, an exclusive position may be necessary to attract a potential licensee to adopt improvements and implement them in their existing industrial operations to give them a slight economic and competitive advantage . In such a situation, the potential licensee is not likely to welcome the expenses associated with developing a new technology and only having a non- exclusive position. 3. TERRITORIAL RESTRICTIONS Many licensees, particularly multinationals, prefer to operate on an international basis when acquiring a technology. However, it is in the best interests of a licensor to restrict the regions i n which each l 1censee may operate, unless the potential licensee is clearly able to properly exploit the technology on an international basis for maximum mutual benefit. With pioneer technologies, territorial restrictions should generally apply and are to be primarily determined by the availability of patent protection. This enables the licensing of key groups in each territorial region and some control for the promotion of optimal development in each area. With an improvement technology, the same considerations will apply unless the potential licensee is a multinati onal. 222 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 4 . FIELDS OF USE A pioneer technology will undoubtedly have application in a variety of industrial bases. To give a licensee exclusivity in all of the technology, regardless of its application, not only short changes the licensor, but also puts far too much pressure on the licensee to work in diverse industrial areas. Usually the licensee has expertise in one particular area or field to which the license should be directed. The licensor then has the opportunity to license the technology to others in different fields of use. Practically the opposite applies with an improvement technology. In and of itself, it is inherent that improvement technology has usually a limited field of use. One should be aware of and address that issue in case there are other applications of the improvement which could be directed to other independent licensees. 5. ROYALTIES I suggest that there are as many ways of evaluating and setting up royalty provisions as there are patent license negotiators around the world. Individual styles are applied depending upon the business circumstances, the needs of the licensor and the financial success of the licensee. With all license agreements, the following items must be considered: 1. Up front technology inspection fee 2. Up front license fee 3 . Lump sum royalty payment for term of license 4. Royalty based on sales 5. Declining scale royalties 6. Royalty grace period The royalty position will, of course, be determined in part by the choices made in the above areas as to an exclusive/non-exclusive nature, fields of use, and territorial restrictions. In setting up the strategy based on the above considerations, I believe that you are steering the licensor in the proper direction. To round out these considerations I have attached a patent agreement licensing check list which outlines many other considerations and depending upon the technology to be licensed, may become just as important as the above key factors. PIT FALLS In setting up a strategy, it is suggested that the following items should be considered just in case you are attempting to go down the wrong road. I appreciate that there may be many other pit falls depending upon the technology licensed and the region in which you are working. These are suggested as some "watch out" areas. MR. JOHN H. WOODLEY 223 VALIDITY OF PATENTS LICENSED In Canada, a licensee is prima facie estopped from disputing the validity of a licensed patent. unless there are terms allowing him to do so in the license. I should note that the case in the United States is the opposite of this. Invalidity of a licensed patent cannot be relied on to stop paying royalties unless the patent's validity has been warranted by the licensor. Unless there is fraud, the Courts will not imply such a warranty. GRANT BACKS It is a common perception that it is illegal to require a licensee to grant back to the licensor technology developed by the licensee in the context of the license. This common myth has been developed through the extensive litigation surrounding anti-trust violations in the United States. Grant backs are permissible in Canada particularly whe re the licensor gains a non-exclusive position with the right to license such improvements to other licensees of the club. It is critical to any strong licensing program that the improvements must be circulated amongst the licensees to further develop the technology, strengthen the technology and maintain a competitive edge in the technology. There may even be situations where an exclusive grant back in Canada of the technology from the licensee to the licensor is necessary to continue development of the technology and advancement in the field. This is particularly important where the licensee does not have the capability of further developing the technology for reasons of inadequate research laboratories or the like. TERM OF LICENSE/DURATION OF PATENTS LICENSED In Canada, a license, including the obligation to pay royalties, may extend beyond the term of the licensed patent. In the United States, a license extending beyond the term of the patent licensed at the same royalty cannot be upheld. TIED SELLING PROBLEMS It may be a restraint of trade to dictate conditions on the sale of end products manufactured using licensed technology. In various jurisdictions, limitations on the following may ca ~se problems: selling price; trade marks to be used; end customers; generally any limitation outside the scope of the patent monopoly. It is significant that such limitations are more suspect and likely to be a problem in the United States than in Canada, where patent licensing is largely a matter of freedom of contract and not as fettered by regulation relating to restraint of trade. 224 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Some conditions, however, are too onerous for any jurisdiction, such as tied selling of supplies not directly related to the subject matter of the license as a conditions for its grant or continued substance. NEED FOR BEST EFFORTS Licensors should seek assurances of performance from their licensees so that the licensed technology does not end up lying fallow as lazy, inept, or unmotivated licensees do not capitalize on the technology. Minimum production/sale/performance guarantees in the license will assure a minimum satisfactory return for the licensor. Conversely, licensees should beware of overly onerous best efforts clauses. RIGHT TO LITIGATE WHEN INFRINGEMENT Licensors will want to retain the right to litigate when there is infringement so that they can retain control over their asset (the patent) and preserve its value regardless of the action/inaction and interests of licensees. Licensees on the other hand may want guarantees that licensors will litigate or the option to litigate themselves to protect their rights in the face of licensor inaction. NON-cOMPETITION CLAUSE Licensors will want to prevent licensees who gain considerable know-how and expertise through a licensing agreement to compete soon after termination. As is generally true of these arrangements, term, geographical area, and field of endeavour have to be reasonable or the non- competition clause cannot be upheld. TAX/CUSTOMS/GOVERNMENT FEES Licenses should clearly indicate which of licensor or licensee will bear various costs and what the exact nature of payments under the license will be . Notable danger areas are tax and customs. Royalties and other fees and costs may be unexpectedly characterized as earnings, purchase costs, or in any number of other novel ways with disastrous and surprising financial ef fect . Therefore, tax consequences of specific licensing arrangements should be carefully canvassed, as should be customs consequences of any international movement of goods, technology, or royalties and other payments. MR. JOHN H. WOODLEY 225 TERMINATION PROBLEMS Causes for termination may be regulated or prohibited. For example, in the United States, termination of a license on bankruptcy of the licensee may be invalid. In this area, the law presently tends to be more lax in Canada and termination on bankruptcy of the licensee is probably possible. In the United States, it is probably at least necessary to make the license personal in nature and allude to this characteristic of the license to make it non-transferrable to a trustee in bankruptcy. Of course, such a procedure would not hurt in Canada where the law is uncertain in any case. IMPLEMENTATION OF STRATEGY Once the hook is set, you must be able to convince them t o sign on the dotted line. This can only be done i n a "winwin" environment where each party understands the other's problems and attempts are made to solve those problems by a cooperative approach rather than an adversarial approach. It is important to listen to the potential licensee and understand clearly the problem it is proffering and the correctness of its problem. It is important in a negotiation process to develop a trust. This can only be done through respect for each other's position. Certainly in the preliminary stages, there will be some competition for position, but this is natural in a trust development process. Once the other party learns that frivolous requests will be effectively investigated and revoked, the less likely those positions will arise in the more detailed aspects of the negotiations. I would be remiss at this stage in not mentioning the i mportance of the licensee's evaluation of the intellectual property program. At this point, the licensee has no doubt become familiar with all aspects of the technology excluding any trade secrets and has probably requested and received copies of any pending patent applications on the technology. It is very common for the potential licensee to demand that the licensor provide some form of comfort regarding the validity of the protection being sought. Do not fall for this invitation. It is important not to contest in advance of any issuance of a patent what its potential validity may be. Quite often the situation is considered because it is thought that a validity search can be conducted, an opinion rendered and the licensee will be satisfied. This is a mistake. The position in this area should be that no funds will be expended by the licensor evaluating the validity of any protection sought. No guarantees can be made i n this area and certainly any money expended by the licensor at this stage of seeking patent protection will be devoted to the prosecution charges in getting the patents issued. AS a practical matter, patent validity is never totally certain. It is always subject to judicial challenge in a counteraction. Another important consideration in implementing a negotiation strategy is that every effort should be made to get the first licensee on board as soon as possible. Once the first licensee has signed in a ground breaking ceremony, other license,: s are more willing to joint the club. Hence, it may be 226 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES attractive to offer the first licensee some benefits to sign up early, ie; an early bird principle often employed by universities in licensing a basic technology. CONCLUSION With these key considerations in mind, all effective and rational basic negotiation strategy can be developed. Properly implemented, such strategy will lead you to a successful license negotiation which will benefit both your client and the "other side", making both into true long-term winners and happy participants in a worthwhile business venture. PATENT AGREEMENT LICENSING CHECKLIST PARTIES 1. Licensor a. name b . address c. citizenship/residence d. incorporated e . jurisdiction of incorporation f. name/title of representative(s) 2. Licensee a . name b. address c. citizenship/residence d. incorporated e. jurisdiction of incorporation f. name/title of ~epresentative(s) WHEREAS 1. Licensor is the owner of and has the right to license a. Canadian Patent No. ______b. Trade Secrets in respect of c . technology X d. other 2. Licensee desires to obtain rights under/respecting to a. Canadian Patent No. b. Trade Secrets in respect------of c. technology X d. other MR. JOHN H. WOODLEY 227 DEFINITION 1. The following definitions are agreed upon by the parties a. sales b. improvements c. technology licensed d. trade secret outline (appendix) e. derivatives RIGHTS GRANTED 1. Type of license a. exclusive license b. non-exclusive license 2. Rights granted comprise right to a. make/have made b. use c. sell/have sold/rent/lease d. combinations of the above 3. Limitations on license a. term of license b. geographical restrictions c. field of use restrictions 4. Rights and limitations to extend to licensee's a. clients b. associated companies OPTION 1. Licensor grants proposed licensee option to acquire rights under/in respect of a. Canadian Patent No . b. trade Secrets in respect of c. technology X d. other 2. This option shall be open for a period of . GRANT BACK 1. To be granted back from licensee to licensor a . improvements b. related patent rights 228 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES BEST EFFORTS 1. Minimum sales a. minimum number of units b. minimum value of sales 2. Possibility of terminating if minimum sales not met PAYMENTS ROYALTIES 1. General a . currency b . mode of payment 2. Initial payment a. lump sum b . installments c . contingent 3. Royalties a . percent of profits/net sales b . fixed amount per unit sold or made c. decreasing scale d. royal free LICENSEE'S ACCOUNTING/BOOKS 1 . Licensee's reporting duties a. frequency (monthly, weekly, &c.) b. audited reports OTHER FINANCIAL CONSIDERATION 1. Licensee a. patent rights b . know-how c. stock d . other VALIDITY OF PATENTS LICENSED a. not to be contested by licensee b. contestable by licensee c . warranted by licensor MR. JOHN H. WOODLEY 229 CONFIDENTIALITY 1. know-how/information disclosed to licensee/prospective licensee to be kept confidential a. before license b. during license c. after license d. if no license TECHNICAL SUPPORT FROM LICENSOR a. start-up b. training c. ongoing technical assistance DEFENSE OF ACTIONS 1. Infringement actions a . to be litigated by licensor b. to be partly paid by licensee LITIGATION/ARBITRATION 1. Law applicable 2. Arbitration to resolve disputes RENEWAL a. at whose option; licensor/licensee b. for how long c. cost d. notice required ASSIGNMENT 1. Licensee rights to assign if any 2. Non-transferability of license TERMINATION 1. At will a. at whose option; licensor/licensee b. cost c. how much notice needed 2. On conditions a. if royalties not paid b. by one party on default of other party c. if best efforts clause not complied with d. on insolvency of party 230 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES NON-cOMPETITION AFTER TERMINATION 1. For how long 2. In what area 3. area of endeavour GOVERNING LAW 1. Location of applicable laws by which agreement is construed NOTICES 1. Respecting parties a. effective date of notice PATENT PRO'l'OCTION OF BIOTOCHNOLOOICAL INVENTION by Dr . Moon-Hi Han and Dr. Yong-Ha Park I. INTRODUCTION Accompanying the rapid development of biotechnology, many patent applications have been filed before the Patent Office drawing attention to the need for protection of these processes under patent laws in many countries. In Korea, the number of applications for genetic engineering process patents has rapidly increased during the last few years . About 1500 applications for biotechnological invention have been filed up to the date of June 1989. Although protection of inventions in emerging new technologies has always encountered considerable difficulties, the inventions involved in biotechnology have met particular difficulties. A reason for this is that biotechnology is dealt with living matter, which poses many problems in relation to ethics as well as the traditional concepts of patent law. There are several problems specifically applied to the field of biotechnology. Firstly, the question of patentability of naturally occurring substances such as cellular constituents and metabolites can be raised, although the patentability has been applied to products produced by microorganisms, as subject matters became expanded from microorganisms to macro-organisms such as plants and animals. Secondly, the living matter is very complex and difficult to identify the subject organisms, to describe the specification, and to distinguish its characteristics of one from another. In particular, it is very difficult problems for a third person to be able to obtain and reproduce the patent disclosures dealing with living subjects. Thirdly, there is difficulties of determining the extent of rights to be granted to the patent applicants for their biotechnological inventions. In practice, it is often found that patent disclosures for biotechnological inventions are broadened by generalizati on based on the results obtained on a limited number of particular examples. As most people are aware, the patent system grants exclusive rights to inventors of new technology for a fixed period of time in return for publishing details of the invention. The details must be expressed in a specification of inventions that can accurately be reproduced by a third person. It is, however, usually impossible to reproduce specifications of an organism accidentally discovered in the nature and therefore, a deposit system has been int roduced to solve this problem. The deposit system for microorganisms gradually evolved until 1980 when an international agreement was concluded as the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure. By virtue of this agreement, the procedures of patent protection, at least, in microorganisms have operated without difficulties until now. 232 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES In the last decade, the new biotechnology has rapidly developed by the technological breakthrough in genetic engineering and become the major object of industrial interests for its economic potentiality. The new biotechnological inventions recently developed have, however, introduced new issues in patentability of genetically manipulated living organisms exemplified by Chakrabarty's "super-bug" and transgenic mice and plants. In any event, it appears that the handling of patent applications for new biotechnological inventions encounters particular difficulties for a lack of readiness, capability, and technical understanding, but not for the inadequacy of legal provisions. II. BASIC CRITERIA OF PATENT PROTECTION The principle of the patent system is for an inventor disclose publicly the details of his invention of a new product or process and in return to be granted exclusive legally enforceable right for a fixed period of time. In this way, the inventor's originality is acknowledged and recompensed, while further technical progress is simultaneously encouraged by the public distribution of information about the invention. Usually, patent laws require an invention to be new, to comprise inventive steps, and to be industrially applicable. Inventions should be repeatable since disclosures required by the current patent system must enable others to reproduce the technical procedures described in a patent. In this regard, specific problems to meet the conditions of patentability on account of the special nature of biotechnological inventions are worth for discussing in some details. General criteria of patentability have been reviewed in detail by Bousfield (1988). As long as the basic criteria of patentability are met, an invention may not be excluded from patentability by its very nature. Any possible exclusions from patentability in biotechnological inventions will be discussed specifically in the later sections. In general, however, patents cannot be obtained for mere discoveries, theories, computer programs, literary works, musical compositions, aesthetic creations, and illegal or offensive devices. A. Man-created Invention For industrial patent protection, it is to distinguish between an invention and a discovery. The use of the term of 'discovery' is not identical in different countries . The patent laws of most countries explicitly exclude 'discoveries' from patent protection, while some countries use the terms of 'invention' and 'discovery' synonymously or even provide special protection for 'discoveries'. In biotechnological inventions, one deals frequently with naturally occurring products and living organisms. Although an invention is concerned with naturally existing substances such as natural products from plants and microorganisms or new microorganisms isolated from soils, if the subject matter has not been previously discovered and requires human technical DR. MOON-HI HAN AND DR. YONG-HA PARK 233 intervention to identify and produce it in a reproducible manner, its application is considered to be an invention and not mere discovery. At present, it is yet to be clarified the distinction between inventions which is patentable and discoveries which cannot be protected in biotechnology. However, the rapid development of modern techniques has made it possible for the necessary procedures of isolation, identification, and production of naturally occurring living matters and organisms reproducibly, so that the patentability of such biotechnological inventions has become more favorable and established on the firm foot-ground. B. Novelty The invention must be new. Most countries require the test of absolute novelty. If any prior knowledge regarding an invention exists, the invention is considered to be the state of the art and is not patentable. Under most patent systems, publications made after the date when the patent application is filed do not jeopardize the protection for that particular subject matter described in the application. But, they may become a part of the prior art against which any future applications will be assessed. C. Non-obviousness The invention must show evidence of an inventive step. It means that the invention must not be obvious from the 'state of the art' to anyone 'skilled in the art'. The average expert in the field under consideration could not reasonably have predicted the invention as an obvious or logical outcome of what he already knew. D. Industrial Utility The invention must have a practical use or practicality of industrial application. The direct medical treatment of the human or animal body, however, are not susceptible to industrial application and are, therefore, not patentable in most countries. E. Reproducibility For reproducibility of the invention, the details must be disclosed by means of a patent specification. This is normally done by a written description supplemented or by drawings. In biotechnological inventions, many countries require a deposit of new microorganisms in a recognized culture collection to ensure their public availability. However, some of biotechnological inventions dealing with engineered plants and animals must solve the important problems as to how a third person obtains and reproduces the subjected matters described in a patent in prior' to its patentability is acknowledged. Such problems have become difficult issues in the expanded patent protection for biotechnological inventions. 234 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES III. KINDS OF PATENT PROTECTION IN BIOTECHNOLOGICAL INVENTIONS A. Products and Materials These inventions are regarded as a material patent dealing with inventions of tangible new materials or entities synthesized by biochemical processes including 'in vivo synthesis' in living cells and ' in vitro synthesis' by enzyme catalysis. They include organisms themselves, parts of organisms, substances produced by either of these, and substances obtained by or employed in recombinant DNA techniques. Product inventions in biotechnology, can be subjected two major kinds of patent claim; 1) the 'product per se' such as natural products where patent protection is sought for product itself, regardless of the production processes, and 2) 'product-by-process', where protection is sought for the product obtained by a particular process such as fermentation, biotransformation or cell culture. Discovery of a new natural product from plants, animals microorganisms can be considered to be patentable as a material patent as long as the disclosures specify the reproducible processes of isolation, purification, identification of the chemical structure, and characteristics of the materials or products, since all the procedures involved require man's creativity and non-obvious techniques, although such a product is not a direct invention of human being but a finding of naturally occurring substances. B. Compositions Composition inventions deal with new compositions showing a new property or effect in a mixture of substances or organisms . C. Processes Process inventions deal with methods for the manufacture of products and methods of isolation, purification, and cultivation. Some process inventions are new methods for obtaining novel or known products, while others can be related to known methods applied for new conditions or for the production of novel products. D. Use and Methods of Use These inventions generally deal with processes treating materials, non-medical treatments of humans or animals, medical methods such as diagnosis tools, and methods of testing including quality control. In some countries such as the USA and EC countries, new medical uses of a substance previously unknown is allowed for a patent. DR. MOON-HI HAN AND DR. YONG-HA PARK 235 IV. PATENTABILITY OF LIVING ORGANISMS The common goal of patent legislation emerging with recent development of technology was to promote the progress of industry and, therefore, exclusion of scientific findings without immediate practical use was a generally accepted principle of patent systems. The original limited concept of invention has become broadened to cover the field of biotechnology. Therefore, the obstacles to the protection of biotechnological inventions under industrial property law seem to result no longer from the concept of invention, but rather from policy considerations. In consideration of biotechnological inventions for a patent, one can raise questions as to whether or not living matter created by biotechnological means may become an object of a patent. Although a considerable international debate on the issue of patentability of living organisms is likely to be continued for a while, there is no good reason not to treat such living organisms as industrial products for the purpose of a patent as long as the requirements of patentability are met. A. Inventions involving Microorganisms Applied microbiology in its broad sense is a major facet of modern biotechnology and patent disclosures in biotechnological invention inevitably focus on certain problems posed on microbiological inventions. In fact, a great deal of attention has been paid to these problems of patentability of microorganisms in a number of countries and became an international issue which led to the international convention known as the Budapest Treaty entirely dealing with microorganisms. It should be pointed out that the term of microorganisms used in patent circles has been very loose and encompasses entities that are not microorganisms in a strict sense but include cell lines and plasmids. In general, microbiological processes and the intimate products obtained by them can be considered as analogous to chemical processes and products. Thus, the procedures of patent protection dealing with microbial processes is nowadays well provided in most countries when the basic criteria for patentability are fulfilled. (a) Patentability of microorganisms A naturally occurring microorganism previously unknown is generally regarded as a discovery and it is not patentable . However, the degree of human intervention considered necessary for a discovery of microorganisms to become patentable invention varies among different countries. In general, patentability of a microorganism is granted in most countries as the subject microorganism has been obtained by non-obvious inventive processes such as isolation, purification, and characterization, and proven to be novel and to carry unexpected properties. After the publicity of the Chakrabarty's case in 1980 on the issue that a genetically manipulated strain of Pseudomonas could be considered to be a human invention patentable per se, rather than a product of nature, there would be no problem in obtaining patent protection in many countries for 236 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES 'artificial' microorganisms (recombinant microbes, hybridomas, etc.) except those countries where any kinds of microorganisms are not permitted for a patent. (b) Deposit requirements In order for a third person to reproduce easily the object of a biotechnological patent, it is necessary to provide a sample of the microorganisms involved, in addition to specification of the product or process, unless otherwise, the microorganisms are readily obtainable from other sources. Therefore, the deposit of a microorganism is required for a patent and the deposit number must be included in the specification at the time of application for a patent in some countries such as Korea. However, in the case of some genetic engineering products which are possible for a third person to reproduce the process for creating the microorganism by following the description in the patent disclosures, the deposit is not required. In principle, most countries require the deposit only when repeatability of the invention cannot be ensured without it. If the microorganism is already generally available from a culture collection, the patent process is rather simplified. Some countries require an applicant to furnish a declaration signed by a culture collection stating that the organism in question is in fact available and will remain available for the period dictated by the relevant national law. In Korea, a culture of new organisms invented should be deposited no later than the filing date of patent application, since an invention should be reproducible from its description at the time when a patent application is filed. (c) Availability of patent microorganisms Microorganisms deposited f.or disclosure must become available to public at some stage of the patenting procedure. The microorganism is the physical essence of an invention itself and thus the exact conditions of release are a matter of great concern to patent practitioners. There are as yet no internationally uniform conditions of release . There are three main kinds of system operated in different countries at present (Bousefield, 1988). In Korea and Japan, patent applications are published twice; first 18 months after the filing date or priority date and before the application is examined, and second when the application has been accepted for the purpose of public notice. A microorganism deposited for the purpose of patent application must be made available at the date of second publication, when the patent office has once decided to grant a patent. Thus, under these systems an inventor can have an enforceable right at the time when his organism is required to make it available. In Korea, a further measure of protection of invented microorganisms is made by restricting the recipients of cultures not to pass them on to third parties and to use them only for experimental purposes. DR. MOON-HI HAN AND DR. YONG-HA PARK 237 In the USA, patent applications are not published until the patent is granted, and a microorganism deposited for patent purposes need not be made available until then. From the date of grant, the organism must be publicly available without an¥ restriction. A dual publication system is also operated by the EPC and by the associated countries. However, in contrast to the Korean and Japanese requirements, a microorganism deposited in connection with an EPC application must be made available at the date of first publication. B. Inventions Involving New Plants and Animals (a) Plant varieties Patents for plant inventions are available for asexually reproduced plants in Korea and USA, but the most common way of legal protection for new plant varieties is the 'plant variety right' in several countries. Some countries are now party to International Convention for the Protection of New Varieties of Plants (UPOV) which aims to harmonize national practices. In these countries, plants that are protected by plant variety rights are usually specifically excluded from patentability. Plant variety rights, in general, are intended to allow commercial plant breeders a monopoly on the production of propagating materials for the purpose of commercial marketing. Plant variety rights are easier to obtain than patent protection is, since there is no requirement for inventiveness nor for reproducible disclosures. But they are more limited in scope where neither the plant itself nor the consumables produced from it are protected. Plant variety rights have been introduced essentially to cover varieties developed by traditional breeding methods, and it is such varieties that are excluded from patentability in many countries. Straus (1985) has pointed out that current systems for the protection of plant varieties were introduced when plant breeding methods did not permit a breeder to fulfill the normal criteria of patentability. However, the advent of new technologies, particularly genetic manipulation techniques, for the production of new plant varieties has made inventors to be able to meet requirements of patentability. Therefore, there seems to be a good deal of argument in favor of allowing a developer of such varieties the right to choose between protection under a patent system or by plant variety rights (Beier et al., 1985; Straus, 1985; Bousfield, 1988). (b) Animal varieties There is in general no special system of legislation for their protection. Most of the countries that exclude plant varieties from patentability also exclude animal varieties. The position of those countries who do not have a patent system available for animal varieties appears to be quite different depending on their national interests. However, recent court decisions on transgenic mice in the USA suggest that animals may be patentable as provided that the requirements for disclosures, that is repeatability, are met (Straus, 1985; Bousfield, 1988). 238 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES (c) Processes for the Production of Animals and Plants Most patent laws specifically deny patent protection for 'essentially biological processes' for the production of plants or animals. An essentially biological process can be interpreted to be a result achieved · tth a minimum input of human technical intervention. Given this definition of 'essentially biological' and the exclusion of microbiological processes from it, the normal criteria for patentability can be applied to methods for producing new varieties of plants and animals, for instance, by means of cell or genetic manipulation such as somatic cell hybridization and transformati on of cells with recombinant DNA. V. SOME CONSIDERATION IN PATENT PROTECTION OF INVENTIONS BY GENETIC ENGINEERING TECHNOLOGY The most significant areas of new development in biotechnol ogy are recombinant DNA technology and hybridoma technology known as a general term of genetic engineering. These new technologies have paid a great deal of attention in patent circles for their enormous potential of industrial application. The basic knowledges and techniques for manipulating genes in test tubes, and fusing cells with two different characteristics have provided for biotechnological inventors to be capable of transferring useful genes from one organism to another regardless of the natural geneti c barriers. The first patent application for the basic recombinant DNA technology was filed at the US patent office by Stanley N. Cohen and Herbert W. Boyer at the Stanford University before January 1975. This patent has long been examined for its patentability, which may occur a considerable impact in biotechnological invention and further to hie-industries, and was finally approved on December 2, 1980. (US patent 4,237,224- "Process for Producing Biologically Functional Molecular Chimeras"). The reason for taking such a long period of time to grant patent rights to Stanford University for this new invention can be attributed to the difficult problems of patentability for gene manipulation - i.e. 1) Problems of "biohazard" in recombinant DNA research; 2) Novelty of patent disclosures which must not be described in any prior arts - since recombinant DNA techniques were practiced for the construction of chime ric virus or phages, the original ity of the idea for the recombinant DNA invented by Cohen and Boyer has been questioned; 3) Problems of industrial appli cabi l i ty, whi ch have been generally convinced by publics due to the fact that the technology has demonstrated to be useful for producing practically usef ul products such as insulin, growth hormones, interferon, hepatitis B vaccine, and so forth during t he last decade . It is now generally accepted concept that the materials and pr ocesses newly invented by ways of genetic engineering techniques are patentable. The possible object of patentable invention of genetic engineering can be classified into the following 3 major categories; i.e. l) materials and products, 2) processes, and 3) living organisms . DR . MOON-HI HAN AND DR. YONG-HA PARK 239 1) Materials and Products - Genomic DNA, fragments of a DNA, and their recombinant DNAs. - mRNA, and eDNA - Vectors and recombinant vectors. - Expression products of target DNA such as functional polypeptides and proteins. - Enzymes for gene cloning processes 2 ) Processes - Preparation process of recombinant DNA and vectors - Preparation mRNA and eDNA Transformation processes of host cells and microorganisms - Culture processes of transformed cells and microorganisms to produce gene products 3) Living organisms Host and transformed microorganisms - Fused cell hybrids and cell lines As described in the patentability of microorganisms, new host and transformed mi croorganisms and cells are subjected to deposit for a third person to be able to reproduce t he patent disclosures. In particular, genetic materials such as DNA, a fragment of DNA, plasmids, and their recombinant products are also considered to be natural products and thus subject to a material patent as long as it is a new product. However, one has to consider that these genetic materials by themselves do not have industrial application unless they are applied for the production of their expression products in connection with transformation and culture processes of cells and microbes involved. Therefore, invention resulted from genetic engineering technology appears to be more valuable in conjunction with a process patent of manipulation, expression, and production of a gene product rather than genetic materials and its recombinant forms as such. The important issues may be raised in describing the extent of patent claims, since there has been tendency to generalize the patent claim on the techniques or processes of gene cloning, transformation of microorganisms, and production of gene products without describing specific examples of target products or host organisms in the patent disclosures. It remains to be considered that the extent of generalization of inventive steps should be confined to the actual results exemplified in the patent disclosures rather than allowing broadened generalization of claims by extrapolation of inventions without sufficient actual experimental results. It is also proposed that the extent of patentability of DNA and peptide sequences should seriously be re-evaluated since alteration of DNA sequences is readily achieved by modern techniques of DNA synthesis and yet it should be proved if a consequent product of DNA with altered sequences, a 'mutein', retains active three dimensional conformation to provide expected activities. Without proven results for the activity of a mutein derived from the alternation of sequences of a target DNA does not seem to meet the criteria of patentability for practical applicability of the invented products . 240 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES At present, it appears to be difficult to differentiate three dimensional conformations of a native protein and that of a mutein although there are techniques of X-ray crystallography and NMR spectroscopy available for the structural analysis ~f proteins in a limited extent. The rapid development of protein engineering to predict protein structures would, however, provide technical means to differentiate conformational variations of muteins and may open a new way of exploring patentability of genetic engineering products such as proteins. VI. PATENT PROTECTION OF BIOTECHNOLOGICAL INVENTIONS IN KOREA Korea has practiced the patent system only for the process development until the patent law was amended in order to adopt the material patent including composites and methods of use as of July 1, 1987. With continued development of technology and increased international trades, Korea has begun to acknowledge internationalization of the patent system and to reinforce the patent laws regarding to biotechnological inventions. The Korean patent system newly amended appreciates inventions regarding biotechnological products and materials as defined by Article 5 which specifies an invention as "the highly advanced creation of technical ideas utilizing rules of nature." Under this philosophy of the patent system, the objects of biotechnological inventions have extended to the naturally occurring living matters and microorganisms resulted from various biotechnological techniques including genetic engineering and hybridoma technology. Although the basic material of genetic engineering products, such as DNA fragments, vectors, and host microorganisms are naturally occurring substances or organisms, in practice, those produced by chemical synthesis or artificial separation and purification processes are considered to be man-made and therefore, eligible for patenting. The patentability of microorganism has long been recognized and practiced by the patent disclosures regarding to processes for the production of either a new substance with known microorganisms or a known substance with a new microorganisms. The deposit of microorganisms described in a patent has been pre- requisite along with patent applications. Since, however, Korea joined the Budapest Treaty as of March 28, 1988, the Korean patent system for microbial invention has met the international standard. At present, 23 countries have adopted the deposit system under this Budapest Treaty. Technological developments dealing with living organisms, however, had led to a great demand for better protection for biotechnological inventions with respect to plants and animals. The present patent law in Korea may exclude patentability of such inventions regarding to plants and animals created by human being. However, new plant varieties can be protected currently by the legislation act on plant variety rights in Korea. In view of insufficient legal protection for plant breeders considering the relative high cost of biotechnological research and development, the improved legal DR. MOON-HI HAN AND DR. YONG-HA PARK 241 protection appears to be necessary. Under these circumstances, the Korea Industrial Property Office (KIPO) has taken initiative to improve the current patent system, which restricts the patentability of plants and animals created by means of modern bi~technology at present. REFERENCES 1. Beier, F.K., Crespi, R. S. & Straus, J. (1985). Biotechnology and Patent protection : An International Review. Paris : Organization for Economic Cooperation and Development. 2. Bousfield, I.J. (1988). Patent Protection for Biotechnological Inventions. In Living Resources for Biotechnology, ed. B. E. Kirsop & C.P. Kurtzman. Cambridge University Press. 3. Commission of the European Communiti es. (1988) . Proposal for a Council Directive on the Legal Protection of Biotechnological Inventions. COM (88) 496 final - SYN 159. Brussels : Commission of then European Communities. 4. Korea Industrial Property Office. (1988). Biotechnology and Patent. Seoul : Korea Industrial Property Office. 5. Straus, J. (1985). Industrial property Protect ion of Biotechnological Inventions : Analysis of Certain Basic Issues. Document BIG/281. Geneva : World Intellectual Property Organization. 6. The Committee of Experts on Biotechnological Inventions and Industrial Property. (1988). Report adopted by the Comm i ttee of Experts. BioT/CE/IV/4. Geneva : World Intellectual Property Organization. 7. The Office of Patents Administration. (1988). Laws and Enforcement Decrees of Indust rial Property. Seoul. The Korea Invention & Patent Association. LIST OF PARTICIPANTS prepared by the International Bureau of WIPO I. PARTICIPANTS DESIGNATED BY GOVERNMENTS BANGLADESH Md. Moazzam HUSSAIN, Registrar of Trademarks, Trademarks Registry, Ministry of Commerce, Dhaka CHINA Zhu BINYANG, Chief Examiner, Chinese Patent Office, Beijing Shen RENGAN, Department Director, National Copyright Administration, Beijing INDIA Jagdish SAGAR, Joint Secretary, Department of Education, Ministry of Human Resource Development, New Delhi Jayashree WATAL (Mrs.), Deputy Secretary, Department of Industrial Development, Ministry of Industry, New Delhi INDONESIA Slamet DIRHAM, Director of Patents, Directorate General of Patents, Copyrights and Trade Marks, Ministry of Justice, Jakarta Supjan SURADIMADJA, Director of Copyrights, Directorate General of Patents, Copyrights and Trade Marks, Ministry of Justice, Jakarta MALAYSIA Kalwant Singh BASSI, Deputy Secretary-General, Ministry of Justice, Kuala Lumpur Md. Adzib Bin Md. ISA, Director, Domestic Trade Division, Ministry of Trade and Industry, Kuala Lumpur Khatijah Bte Abdul SAMAD (Mrs.), Principal Assistant Director, Domestic Trade Di ~ ision, Ministry of Trade and Industry, Kuala Lumpur PAKISTAN Muhammad HASSAN, Deputy Electronics Advisor,· Ministry of Science and Technology, Islamabad 244 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES PHILIPPINES Neptali L. BULILAN, Senior Patent and Trademark Specialist, Bureau of Patents, Trademarks and Technology Transfer (BPTTT), Manila Jose M.A. DIAZ, Copyright Information Officer, the National Library, Manila REPUBLIC OF KOREA Hong Shik PARK, Commissioner, Korea Industrial Property Office (KIPO) Seung-Hwan LEE, Deputy Commissioner, KIPO Sang Yull LEE, Director General, Planning and Management Bureau, KIPO Du Hyun CHANG, Director, International Cooperation Division, KIPO Hee Chang YOON, Director, Copyright Division, Ministry of Culture and Information Hee Seoung HEO, Secretary General, Copyright Deliberation and Conciliation Committee, Byong-Kyun LEE, Dean, International Intellectual Property Training Institute (IIPTI) Kye Eun PARK, Director, Training Division, IIPTI Tae Chang CHOI, Associate Professor, IIPTI Jae Hong KIM, Assistant Director, International Cooperati on Division, KIPO Chan Woo LEE, Assistant Director, International Cooperation Division, KIPO Tae Keun RHEE, Assistant Director, International Cooperation Division, KIPO SRI LANKA Kirthisiri JAYASINGHE, Registrar of Patents and Trademarks, Registry of Patents and Trademarks, Colombo THAILAND Santi RATTANASUWAN, Head, Patent Examination Section, Department of Commercial Registration, Ministry of Commerce, Bangkok Prakob LARPKESORN (Mrs.), Director, Copyright Office, Fine Arts Department, Ministry of Education, Bangkok LIST OF PARTICIPANTS 245 VIET NAM To Xuan TUYEN, Assistant to the Director, National Office of Inventions, State Committee for Science and Technology, Hanoi II. OTHER PARTICIPANTS Frederik T. BOEHM, General Counsel, IBM Korea Inc. , Seoul Duk Kue CHOI, Patent Attorney, Shin Han Joint Patent Office J.Y. CHOI, Team Manager, Lotte R & D Center, Yong Chul CHOI, Researcher, Agro-chemicals Research Institute, Young Chun CHOI, Economic Planning Board, Seoul Young Jin CHUN, Samsung Complex Technology Institute, Seoul Jin Soo HAHN, Staff, KOTRA, Chae Gue HAN, Researcher, Korea Food Research Institute, Soo Ho HAN, Assistant Manager, Korea Explosures Co., Jae Il HONG, Patent Attorney, Seoul Joon Hyun HWAN, Senior Researcher, Doosan Research Laboratory, Won Wee JEONG, Staff, Lucky Ltd. , Bong Han KIM, Gold Star Co., Seoul Dong Chul KIM, Samsung Electronic Co., Seoul Hak Soo KIM, Patent Attorney, Shim & Kim Patent Law Office, Jong Sun KIM, Korea Moving Communication Co., Seoul Jae Hyung KIM, Hyundai Electronics Co., Seoul Ki Bok KIM, Korea Research Institute of Electronics and Communication, Seoul Kwan Hyung KIM, Training Manager, Korea Invention & Patent Association (KIPA), Kwang Ryung KIM, Patent Attorney, Kim & Chang Law Firm, Young Kil KIM, Patent Attorney, Seoul Chul LEE, Patent Attorney, C. Lee Patent Office Geun LEE, Director, Samsung Advanced Institute of Technology, 246 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Ha Jung LEE, Dae Woo Electronics Co . , Seoul Hong Woo LEE, Assistant Director, Korea Genetic Enginneering Association, Jong Chul LEE, Korea Insitute for Development, Seoul Sang Kuk LEE, Korea Institute for Economics and Technology (KIET), Seoul Soon Sil LEE, Medical Manager, Daewoo- Lilly Pharmaceuticals Co . Ltd., Chang Hwa MUN, Patent Attorney, Seoul Dae Ho PARK, Staff, Il Hwa Co . , Hae Chun PARK, Patent Attorney, Seoul G.T. PREDESTEIN, Patent Attorney, Central International Law Firm, Jae Man RYOU, Engineer, National Office of Seed Production & Distribution, Jin Chan RYOU, Senior Researcher, Agricultural Technology Research Center, Kwang Hyung SEUNG, Korea Trade Association, Seoul Suk Kyun SHIN, Head, Korea Invention Society (KIS), Myung Ho SHON, Ssang Yong Computer, Seoul In Kook SONG, Development Department, Il-Yang Pharmacy Young Chun YOO, Korea Computer, Seoul III. INTERGOVERNMENTAL ORGANIZATIONS United Nations Development Programme (UNDP) Jacob GUIJT, Resident Representative, Seoul Jack GOLDEN, Deputy Resident Representative, Seoul Vorasakdi ARORA, Assistant Resident Representative, Seoul IV. NON-GOVERNMENTAL ORGANIZATIONS International Confederation of Societies of Authors and Composers (CISAC) Ang Kwee TIANG, Asian Regional Delegate, Singapore International Federatio~ of the Phonographic Industry, (IFPI) Nicholas GARNETT, Regional Director, Asia/Pacific Region, Hong Kong LIST OF PARTICIPANTS 247 Asian Patent Attorneys Association (APAA) Myung-Shin KIM, Republic of Korea Delegate, Seoul Suk- Jae LIM, Republic of Korea Delegate, Seoul Kyung-Jae PARK, Republic of Korea Delegate, Seoul V. KEYNOTE SPEAKERS Jon BING, Manager, Norwegian Research Center for Computers and Law, Oslo University, Olso, Norway Richard G. DONNELLY, Director, Program on Management of Science, Technology and Innovation, School of Government and Business Administration, The George Washington University, Washington, D.C., United States of America Didin SASTRAPRADJA, Deputy Chairman, National Institute of Sciences, Jakarta, Indonesia VI. PANELISTS Ashok BHOJWANI, Managing Director, TSG Consultants Private Limited, New Delhi, India, Former Vice-President, Manufacturers Association of Information Technology of India Kyong Su CHOE, Member, Copyright Deliberation and Conciliation Committee, Ministry of Culture and Information, Seoul, Republic of Korea Carlos Maria CORREA, Permanent Secretary, Conference of Latin American Authorities on Information, Buenos Aires, Argentina C.C. CRESWELL, Senior Assistant Secretary, International Trade Law and Intellectual Property Branch, Business Affairs Division, Attorney- General's Department, Canberra, Australia Walter DILLENZ, Head, Legal Department, Society of Authors, Composers and Music Publishers, (AKM), Vienna, Austria Moon Hi HAN, Head of Genetic Engineering Centre, Korean Advanced Institute of Science and Technology, Seoul, Republic of Korea Robert J. HART, Intellectual Property Development Manager, the Plessey Co., Liverpool, United Kingdom Zentaro KITAGAWA, Dean and Professor, Faculty of Law, Kyoto University, Kyoto, Japan Kae Dal KWACK, Hangyang University, Seoul, Republic of Korea 248 ASIAN AND PACIFIC FORUM ON THE IMPACT OF EMERGING TECHNOLOGIES Jukka LIEDES, Special Government Adviser, Ministry of Education, Helsinki, Finland Shimpei MATSUOKA, Ma~aging Director, Japanese Society for Rights of Authors, Composers and Publishers, Tokyo, Japan Man Gi PAIK, Director, Information Industry Division, Ministry of Trade and Industry (MTI), Seoul, Republic of Korea John H. WOODLEY, Partner, Sim and McBurney, Patent and Trade Mark Agents, Toronto, Canada VII. INTERNATIONAL BUREAU OF THE WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO) Shahid ALIKHAN, Deputy Director General Ludwig BAEUMER, Director, Industrial Property Division Henry OLSSON, Director, Copyright and Public Information Department Michael BLAKENEY, Senior Program Officer, Development Cooperation and External Relations Bureau for Asia and the Pacific