Intellectual Property Rights in an Age of Electronics and Information

April 1986

NTIS order #PB87-100301 Recommended Citation: U.S. Congress, Office of Technology Assessment, lntellectual Property Rights in an Age of Electronics and Information, OTA-CIT-302 (Washington, DC: U.S. Govern- ment Printing office, April 1986).

Library of Congress Catalog Card Number 86-600522

For sale by the Superintendent of Documents U.S. Government Printing Office, Washington, DC 20402 Foreword

This report examines the impact of recent and anticipated advances in communication and information technologies on the intellectual property system. It focuses primarily on the Federal copyright system, and on the continuing effectiveness of copyright law as a policy tool in the light of technologies such as audio- and videorecorders, computer programs, electronic databases, and telecommunications networks. To obtain a comprehensive view, the study examined the intellectual property system from a number of perspectives: the constitutional basis of intellectual property policy; the system’s goals, laws, and economics; the creative environment; problems of enforcement; the international context; and the Fed- eral role in administering intellectual property rights. OTA found that technological developments are affecting all aspects of the intellectual property system. Moreover, because we are only beginning to move into the era of electronic information, the full impact of new technologies will not become fully apparent for some time. Fundamental changes are occurring in information technologies that will antiquate many of the policy mechanisms now in force, and bring new intellectual property problems requiring new solutions. Thus, even if Congress acts now in response to current problems, it will need to be prepared to act again within the next decade. The report was requested by Senator Charles McC Mathias, Jr., Chairman of the Senate Judiciary Committee, Subcommittee on Patents, Copyrights and Trademarks; and by Congressman Peter W. Rodino, Jr., Chairman of the House Judiciary Committee, Congressman Robert W. Kastenmeier, Chairman of the Sub- committee on Courts, Civil Liberties, and the Administration of Justice, Congress- man Hamilton Fish, and Congressman Carlos Moorhead. In preparing this report, OTA has drawn on working papers developed by OTA staff and contractors, the comments of participants at seven OTA workshops held to discuss issues, the results of two public opinion surveys conducted by Yankelovich, Skelly & White, and conversations between OTA staff and over 130 interested individuals. Drafts of the report were reviewed by the OTA advisory panel, officials from the Copyright Office, the Patent and Trademark Office, the Library of Congress, the Department of Commerce, the Department of State, the Office of the U.S. Trade Representative, and a broad range of individuals from law firms, public interest groups, trade associations, private industry, and academia. OTA appreciates the participation of the advisory panelists, workshop participants, Federal agency officials, and interested citizens, without whose help this report would not have been possible. The report itself, however, is the sole responsibility of OTA, not of those who ably advised and assisted us in its preparation.

Director

,.. {II Intellectual Property Rights in an Age of Electronics and Information Advisory Panel

Paul Goldstein, Chairman Professor of Law, Stanford Law School, Stanford University Jon Baumgarten Dorothy Nelkin Partner Professor of Sociology Paskus, Gordon & Hyman Cornell University Charles Benton James Nelson President of the Board State Librarian and Commissioner Benton Foundation Kentucky Department for Libraries and Archives Stanley Besen Economist John Shattuck Rand Corp. Vice President for Government Community and Public Affairs Honorable Stephen Breyer Harvard University Judge of the U.S. Court of Appeals Oliver Smoot Stan Cornyn Executive Vice President Senior Vice President Computer and Business Equipment Warner Records Manufacturers Association Oswald Ganley Patricia Sturdivant Professor and Executive Director Associate Superintendent Program on Information Resources Policy Houston Independent School District Harvard University Sherry Turkle Gustave Hauser Associate Professor of Sociology Chairman and Chief Executive Officer Massachusetts Institute of Technology Hauser Communications, Inc. Jack Valenti Mitchell Kapor President President Motion Picture Association of America, Lotus Corp. Inc. Robert Lekachman Vivian Weil Professor of Economics Senior Research Associate Lehman College Illinois Institute of Technology William Lilley, III Martha Williams Vice President for Corporate Affairs Professor of Information Science CBS, Inc. University of Illinois George Minot Senior Vice President CompuServ, Inc.

The Advisory Panel provided advice and constructive criticism throughout this project. The panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the report and the accuracy of its contents.

iv —.

Intellectual Property Rights in an Age of Electronics and Information Assessment Staff

John Andelin, Assistant Director, OTA Science, Information, and Natural Resources Division

Fred W. Weingarten, Program Manager Communication and Information Technologies Program

Project Staff D. Linda Garcia, Project Director Conceptual Framework and Societal Analysis Lauren Ackerman International and Institutional Analysis Earl Dowdy Technology and Economic Analysis Paul Goldwhite Summer Intern Robert Kost Legal Analysis Arati Prabhakar Congressional Fellow Linda G. Roberts Analysis of Creative Environment and Public Outreach Activities Susan Walton Contractor, Editorial Assistance

Administrative Staff Liz Emanuel Audrey Newman Shirley Gayheart* Renee Lloyd Patricia Keville Contractors and Consultants James Beniger Patricia Martin Department of Sociology Christopher Burns, Inc. Princeton University L. Ray Patterson Cliff Berg School of Law National Academy of Public Emory University Administration W. Curtiss Priest Stanley Besen Center for Policy Alternatives Rand Corp. Massachusetts Institute of Technology Anne Wells Branscomb Carroll Pursell Attorney Professor of History University of California, Santa Barbara Deborah Buckner Yankelovich, Skelly & White, Inc. David Richardson Yankelovich, Skelly & White, Inc. Christopher Burns Christopher Burns, Inc. David Schetter Irvine Research Corp. Herbert Dordick Department of Communications A. Allan Schmid Temple University Department of Agricultural Economics Michigan State University Jose-Marie Griffiths King Research, Inc. Harold Seidman National Academy of Public Roland Hornet Administration Communications Law and Policy Consultants Petra Shattuck Department of Political Science Donald King City University of New York King Research, Inc. Richard Solomon Kenneth L. Kraemer Massachusetts Institute of Technology Irvine Research Corp. Jane Yurow Leslie King Jane Yurow Associates Irvine Research Corp.

vi Legal Workshop Participants Eric Smith Robert Worsing Partner Vice President for Corporate Security Roy Freed Paskus, Gordon & Hyman Control Data Corp. Partner Raymond Weisbond Display, Printing, and Brown, Rudnick, Freed & Gesmer, Counsel Counselors at Law Warner Communications, Inc. Reprographic Technologies Leon Friedman Workshop Participants Attorney Technologies for Information Ifay Chang Morton Goldberg Creation Workshop Participants Manager of Exploratory:. Display Partner Ronald Erickson Technology Schwab, Goldberg, Price & Dannay Educational and Technical Advisor T.J. Watson Research Center Paul Goldstein Museum of Holography IBM Corp. Professor of Law Robert Ewald Richard Green Stanford University. Director of Education Industries Senior Vice President Henry Jones, I I I (Universities) Broadcast operations and General Counsel Cray Research, Inc. Engineering Public Broadcasting Service Ashton-Tate Harold Hosack Irwin Karp Project Director of the CCD Imager Edward McIrvine General Counsel and Camera Project Manager, R&D Planning Authors League Texas Instruments, Inc. Corporate Research Group Xerox Corp. Michael Keplinger Michael Kowalski Attorney Advisor Writer and Freelance Computer Melvin Prueitt Office of Legislative and Programmer Los Alamos National Laboratory International Affairs Post Industrial Productions, Inc. U.S. Patent and Trademark Office Information Technology and Steve Mayer Its Impact on the Creative John Lautsch Chairman Chairman Take One Partners Process Workshop Participants ABA Computer Law Division Mark Schubin Theodore Bikel Arthur Levine Freelance Technological Consultant Actor and President Emeritus Actors Equity Partner Jim St. Lawrence Levine, Lupo & Lippman Producer in Residence and Director Milton Glaser Sue Martin of the Interactive Technologies Graphic Artist Chairperson of Copyright Committee Laboratory Richard Green American Library Association New York Institute of Technology Musician Director of Milton S. Eisenhower Library Information Storage and Joyce Hakansson Johns Hopkins University Database Technologies President Hakansson Associates Christopher Meyer Workshop Participants Senior Attorney James Hammerstein Copyright office Larry Bernstein Stage Director Library of Congress Director Diagnostic Operations Systems David McCune Melville Nimmer Laboratory Writer, Software Designer, and Professor of Law AT&T Bell Labs President UCLA Law School The Proteus Group, Inc. Robert Castrignano Ron Palenski Vice President for Information Ann-Byrd Platt Staff Attorney Storage Systems Technology Author Association of Data Processing CBS Technology Center Federik Pohl Service Organizations Charles Goldstein Author Marybeth Peters Chief, Information Technology Branch Anna Sofaer Senior Attorney Lister Hill National Center for Artist and Independent Film Producer Copyright office Biomedical Research Bill Weems Library of Congress National Library of Medicine Photographer Mark Rotenberg Fred Kilgour President Founder Trustee George David Weiss Songwriter and President Public Interest Computer Association Online Computer Library Center The Songwriters Guild Pamela Samuelson Nick Roussopoulois Professor of Law Professor of Computer Science University of Pittsburgh University of Maryland Cary Sherman Christopher Weaver Attorney Vice President for Disk Research Arnold & Porter Videomagic Laboratories

vii Mini-Economic Workshop Marty White David Liebowitz 12th Grader Attorney Participants Ballou High School Wiley & Rein Stanley Besen L. Ray Patterson Economist External Reviewers Professor of Law Rand Corp. Chapter 1: Conceptual Framework Emory University Christopher Burns for Analyzing Intellectual David Peyton Consultant Property Issues Rights Director of Government Relations Christopher Burns. Inc. Information Industry Association Bernard Barber Robert Lekachman Professor of Sociology Petra Shattuck Professor of Economics Columbia University Professor of Political Science and Lehman College Public Law Jack Copeland City University of New York Patricia Martin President Consultant National Educational Media, Inc. Cary Sherman Christopher Burns. Inc. Attorney Elizabeth Eisenstein W. Curtiss Priest Arnold & Porter Professor of Social History Center for Policy Alternatives University of Michigan Daniel Toohey Massachusetts Institute of Technology Attorney Jack Golodner A. Allan Schmid Dow, Lohnes & Albertson Director Professor of Economics Department for Professional Employees Bruce H. Turnbull Michigan State University AFL-CIO Attorney Weil, Gotshaf & Manges Students’ Perceptions of the Stanley Gortikov Intellectual Property Rights President Chapter 3: The Accommodation Issue Workshop Participants Recording Industry Association of Intellectual Property Law to of America, Inc. Technological Change Lisa Feldman John Hersey 10th Grader Author Charles Boiler Magruder High School Executive Director L. Ray Patterson American Copyright Council Carl Fletcher Professor of Law 12th Grader Emory University Duncan Davidson Ballou High School Attorney David Peyton Cambridge Venture Partners Eugene Gholz Director of Government Relations 9th Grader Information Industry Association Edward Frankel Georgetown Day High School Computer Law Specialist Mike Remington Nick Landau Chief Counsel Hugh Gibbons 11th Grader House Subcommittee on Courts, Civil Professor of Law Georgetown Day High School Liberties, and the Administration Franklin Pierce Law Center Eric Martinusen of Justice John Hersey 11th Grader Daniel Toohey Author Georgetown Day High School Attorney John Lautsch Michael Meredith Dow, Lohnes & Albertson President 12th Grader Computer Law Division of the George Mason High School Chapter 2: Intellectual Property American Bar Association Robert Salsbury Goals in a Changing Melville Nimmer 9th Grader Information Environment Professor of Law George Mason High School Bernard Barber University of California-Los Angeles Elinor Scully Professor of Sociology L. Ray Patterson 11th Grader Columbia University Professor of Law George Mason High School Jack Copeland Emory University Clare Shannon President Marybeth Peters 10th Grader National Educational Media, Inc. Senior Attorney and Policy Planning George Mason High S hool Elizabeth Eisenstein Advisor U.S. Copyright Office Ron Smith Professor of Social History 10th Grader University of Michigan David Peyton Richard Montgomery High School Stanley Gortikov Director of Government Relations Information Industry Association Wyvonella Spratt President 11th Grader Recording Industry Association of Manny Pokotilow Ballou High School America, Inc. Attorney Deborah Van Lenten John Hersey Caesar, Riuse, Berstein & Cohen, Ltd. 11th Grader Author Wooten High School Mike Remington David Leibowitz David Richtman Chief Counsel Attorney Cambridge Technology Systems House Subcommittee on Courts, Civil Wiley & Rein Jim St. Lawrence Liberties, and the Administration Edward McIrvine Director of the Interactive of Justice Manager of R&D Planning Technologies Laboratory Robert Rines Xerox Corp. New York Institute of Technology Attorney L. Ray Patterson George David Weiss Rines & Rines Professor of Law Songwriter and President Pamela Samuelson Emory University The Songwriters Guild Professor of Law David Peyton University of Pittsburgh Director of Government Relations Chapter 6: Technology, Intellectual Information Industry Association Property, and the Operation Bob Shaw of Information Markets Attorney and President of the Barbara Polansky Patent, Trademark, and Copyright Copyright Administrator Marjorie Blumenthal Research Foundation American Chemical Society Economist General Electric Information Robert Stern Mike Remington Services Co. Attorney Chief Counsel Daniel Toohey House Subcommittee on Courts, Civil Duncan Davidson Attorney Liberties, and the Administration Partner Dow, Lohnes & Albertson of Justice Cambridge Venture Partners Allen Wagner Henry Geller University Counsel Chapter 5: Impact of Technology Director University of California, Berkeley on the Creative Environment Washington Center for Public Policy Research Bernard Barber Chapter 4: Impact of Technology Professor of Sociology Duncan MacRae on Enforcement of Intellectual Columbia University Professor of Political Science Property Rights University of North Carolina Theodore Bikel Fritz Attaway Actor and President Emeritus Bruce M. Owen Vice President and Counsel Actors Equity Economist Economists Inc. Motion Picture Association of Ann Byrd-Platt America, Inc. Author Curtiss Priest Ivan Bender Research Associate Jack Copeland MIT Center for Policy Alternatives Attorney President Larry Bernstein National Educational Media, Inc. Mike Remington Director Chief Counsel Susan Dooha House Subcommittee on Courts, Civil Diagnostics operations Systems Executive Director Laboratory Liberties, and the Administration Graphics Artists Guild AT&T Bell Laboratories of Justice Elizabeth Eisenstein Michael Rubin Robert Castrignano Professor of Social History Vice President Information Storage Office of the Assistant Secretary for University of Michigan Systems Technology Productivity, Technology, and CBS Inc. Richard Green Innovation Senior Vice President U.S. Department of Commerce Edward Conklin Broadcasting Operations and Vice President Fred Smith Engineering FORTH, Inc. President Public Broadcasting Service Competitive Enterprise Institute Stanley Gortikov John Hersey A. Allan Schmid President Author Recording Industry of America, Inc. Professor of Economics Nancy Marshall Michigan State University Frederick Kilgour Associate Director of University Lester C. Thurow Founder Trustee Libraries Or-dine Computer Library Center Professor of Management and University of Wisconsin-Berkeley Economics Michael Kowalski Edward McIrvine Massachusetts Institute of Technology Writer/Freelance Computer Manager for R&D Planning Anita Walgren Programmer Xerox Corp. Postindustrial Productions, Inc. National Telecommunications and Barbara Nessin Information Administration Jim St. Lawrence Professor of Law U.S. Department of Commerce Director of the Interactive Emory University Technologies Laboratory David Waterman New York Institute of Technology Barbara Nessim Professor of Communications Graphic Artist University of Southern California Bernard Lechner Staff Vice President for Advanced David Peyton Lawrence White Video Systems Research Director of Government Relations Professor of Economics RCA laboratories Information Industry Association New York University

ix Chapter 7: New Technologies and Charles Boiler John Clements the Intellectual Property Bargain Executive Director Director of Governmental Affairs American Copyright Council American Federation of Information Charles Boiler Processing Societies Robert Bruce Executive Director Attorney Roger Garcia American Copyright Council Debevoise & Plimpton Government Division Nancy Buc Congressional Research Service Marsha Carow Weil, Gotshall & Manges Library of Congress Vice President Jack Copeland Harcourt Brace Jovanovich, Inc. Judy Goans President Office of Legislation and John Clements National Educational Media, Inc. International Affairs Director of Governmental Affairs U.S. Patent and Trademark Office Roy Freed American Federation of Information U.S. Department of Commerce Attorney Processing Societies Brown, Rudnick, Freed & Gesner Ronald Moe Stanley Gorkikov Government Division Leon Friedman Recording Industry Association of Congressional Research Service Professor of Law America, Inc. Library of Congress Hofstra University Jacques Gorlin Harold Relyea Henry Geller Consultant Government Division Director Eileen Hill Congressional Research Service Washington Center for Public International Trade Administration Library of Congress Policy Research U.S. Department of Commerce Mike Remington John Hersey David Leibowitz Chief Counsel Author Attorney House Subcommittee on Courts, Civil Nancy Marshall Wiley & Rein Liberties, and the Administration of Justice Counsel Marybeth Peters National Library Association Senior Attorney and Policy Planning Petra Shattuck Maurice Mitchell Advisor Professor of Political Science and Director U.S. Copyright Office Public Law Annenberg Schools Washington City University of New York David Peyton Program Director of Government Relations Cary Sherman L. Ray Patterson Information Industry Association Attorney Professor of Law Arnold & Porter Barbara Pohansky Emory University Copyright Administrator Daniel Toohey David Peyton American Chemical Society Attorney Director of Government Relations Dow, Lohnes & Albertson Carol Risher Information Industry Association Director of Copyright and New Anita Walgren Michael Remington Technology National Telecommunications and Chief Counsel Association of American Information Agency House Committee on the Judiciary Publishers, Inc. U.S. Department of Commerce Mark Rotenburg Cary Sherman Harvey Winter Public Interest Computer Association Attorney Director Office of Business Practices Cary Sherman Arnold & Porter U.S. Department of State Attorney Gary Slaiman Arnold & Porter Attorney List of Other Contributors Daniel Toohey Weil, Gotshal & Manges Attorney Daniel Toohey Raymond Ahlberg Dow, Lohnes & Albertson Attorney Industry Specialist U.S. Department of Commerce Ray Weisbond Dow, Lohnes & Albertson Attorney Harvey Winter David Altschul Warner Communications, Inc. Director Vice President Office of Business Practices Warner Records Chapter 8: Impact of Technology on U.S. Department of State Stella Alvo the International Intellectual Alice Zalick Co-owner Property System Assistant General Counsel The Video Bus Norman Alterman Office of the United States Nicholas Arcomano Vice President and Deputy General Trade Representative Vice President and Counsel Counsel SESAC, Inc. Motion Picture Association of Chapter 9: Federal Role in the Moses Asch America, Inc. Administration of Intellectual Founder and President Fritz Attaway Property Rights Folkways Records Vice President and Counsel Robert Cassler Motion Picture Association of Chief Counsel America, Inc. Copyright Royalty Tribunal

x Russ Bach Len Cutler Steve Fluty Vice President, WEA Director of the Instruments and Editor Warner Records Photronics Lab Viewtext Magazine Hewlett Packard Donald Barr Steve Fox President Joan Desens Associate Director of Patents Barr Films Lexica Corp. and Licenses Hewlett Packard Barbara Bayah Jean Dexheimer Classroom Teacher Director, Inter-University Sarah Frank Cupertino Union Public Schools Consortium for Educational BBC-TV Co-Productions Computing Paul Bender Michael Franklin Carnegie Mellon University Dean Executive Secretary Arizona State Law School Thomas DiRenzo Director’s Guild of America Vice President, Direct Marketing Paul Bortz C.E. Gallivan and Communications Director of Marketing Managing Director Institute for Scientific Information Browne, Bortz & Coddington, Inc. Hewlett Packard Hugh Donaghue Gene Boucher Kit Galloway Vice President Executive Director President Government Programs and American Guild of Musical Artists Mobile Image International Trade Relations Robert Bramson Control Data Corp. Eugene Garfield Attorney President George Dummer Institute for Scientific Information Schnader, Harrison, Segal & Lewis Director Barry Bronson Office of Sponsored Programs Clifton H. Garrett Member of the Technical Staff Massachusetts Institute of Technology Deputy District Attorney Hewlett Packard County of Los Angeles Moria Egan Major Frauds Division Toni Carbo-Bearman Assistant to the President for Electronic Crime Section Executive Director Government Relations National Commission on Libraries New York Public Library Andrew Gerber and Information Science Student Alan Eisenberg Massachusetts Institute of Technology Charles Butts Executive Secretary, Vice President Actors Equity Association Ric Giardina Houghton Mifflin Co. General Counsel William Eldridge MicroPro International Doug Carothers Director of Research Patent Attorney Federal Judical Center Steven Gilbert Xerox Palo Alto Research Center Director, Computer Literacy Project Robert Enenstein EDUCOM Felix Chamberlain President Artists and Repetoire Educational Microcomputer Terry Gilbreth Warner Records Associates, Inc. Director Electronic and Media Publishing Robert Churchill Paul Fagan Holt, Rinehart & Winston President Chief Economist Churchill Films ASCAP Michael Glen Attorney Sandy Cohen Laurie Failes Intel Corp. Attorney Teacher Weil, Gotshal & Manges Lexington, MA, Public Schools Mel Goldberg Former Vice President Roger Cole Leonard Feist ABC Assistant Director for Harry Fox Agency Administration National Music Publishers Mary Goldscmidt Eastman-Kodak Co. Association, Inc. Vice President Lotus Corp. Howard Colson Lee Felsenstein Assistant Vice President President Jack Golodner Public Relations Golemics, Inc. Director Broadcast Music, Inc. Department for Professional Employees Eamon Fennessy AFL-CIO Edward Conklin President Vice President Copyright Clearance Center, Inc. Ed Goode FORTH, Inc. Chairman LeRoy Finkel Computer Science Department Edward Cramer Computer Coordinator Lexington, MA, High School President San Mateo County Office of Broadcast Music, Inc. Education Bobby Goodson President Bill Crowell Frank Fischer International Council on Computers Vice President for Research Urban Institute in Education MicroPro International Andrew Flugelman Karla Graue Cally Curtis President National Cable Association President Freeware Curtis Films xi Peter A. Gross David Levine Robert Nahory President Executive Director Manager Optical Properties of semiconductors Research Lexica Corp. Dramatists Guild Bell Communications Research Lyn Gubser Del Lipert Executive Director Vice President William Nix Association for Educational Digital Equipment Corp. Vice President and Deputy Communications & Technology General Attorney Beth Lewd Motion Picture Association of Marianne Hall Computers in Education Specialist America, Inc. Commissioner Lexington, MA, Public Schools Copyright Royalty Tribunal Dan Oelhsen William H. McAllister Editor-in-Chief Mel Harris Director, Patents and Licenses Electronic Publishing President Hewlett Packard Simon & Schuster Paramount Corp. Scott Mace Greg Olsen W.B. “Trip” Hawkins Reporter Founder and CEO President InfoWorld EPITAXX, Inc. Electronic Arts John Mallinson Ralph Oman Richard H. Hersh Director Chief Counsel Vice President for Research Center for Magnetic Recording Senate Subcommittee on Patents, University of Oregon University of California, La Jolla Copyrights, and Trademarks Alexander Hoffman Rick Manning Ken Orsati Vice President Executive Executive Director Doubleday & Co., Inc. Data Courier Screen Actor’s Guild Vivian Homer Andrew Manshell Don Parker Electronic Media Consultant Counsel Vice President for Research Former Vice President for Program Birch Tree Group QMS, Inc. Development Ernest R. (Bodie) Marx Warner Communications Janice Patterson Vice President Director, Computer Operations Lucy Hammer Mindscape, Inc. Wisconsin Center for Education Ambassador Dougan’s Office Gene Mater Research U.S. Department of State Vice President University of Wisconsin Dov Jacobs CBS Kenton Pattie Free-lance Software Developer International Group Vice President Nick Johnson Donald McCoy NAVA/ICIA University of Iowa Law School Vice President and General Manager Russell Pipe (formerly FCC Commissioner) CBS Technology Center Transnational Data Reporting Service Alan Kent Al McPherson Abe Polonsky Assistant Dean Engineer Screenwriter School of Library and Information Warner Records Dave Poltrack Science Gloria Messinger University of Pittsburgh Vice President for Research Managing Director Broadcast Group Daniel Klassen ASCAP CBS, Inc. President Steve Metalitz Linda Prowse Information Technology Design Staff Director and Chief Counsel Engineering Management Training Associates Senate Subcommittee on Patents, Manager Walter Koetke Copyrights, and Trademarks Hewlett Packard Director of Technology Mark Meyers Scholastic Publishing Co. Sherrie Rabinowitz Vice President for Research and Mobile Image Bernard Korman Director Webster Research Center Chief Counsel Xerox Corp. James Ratcliffe ASCAP Director of Public Affairs Timothy Miles R.R. Donnelley and Sons, Inc. Dan Lacy Industry Specialist Vice President Department of Commerce Retta Richardson McGraw Hill, Inc. Executive Director Maurice Mitchell Southern Educational Jim Lardner Director Communications Association Reporter The Washington Program in The New Yorker Communications Policy Studies Susan Rifkin Annenburg Schools U.S. Patent & Trademark Office Edith Leonian Office of Technology Assessment Philip Leonian Gerald Mossinghoff and Forecasting Advertising Photographers of America President Society of Photographer and Artist’s Pharmaceutical Manufacturers Representatives, Inc. Association Humberto Rivera Rene Tegtmeyer Charles Wood President Assistant Commissioner Consultant GeoVision, Inc. U.S. Patent and Trademark Office Information Integrity Investments Seymour Rubenstein Gail Thackery Delbert Yocam President Emeritis Assistant District Attorney Executive Vice President MicroPro International Philadelphia, PA Apple Computer, Inc. Marie Salah Victor Vyssotsky John van Raalte Teacher Executive Director for Research Senior Scientist Watertown, MA, Public Schools Information Sciences Advanced Display Technologies Carol Schele AT&T Bell Laboratories RCA Laboratories Smithsonian Institution Eric Walter Isa Zimmerman Assistant Superintendent Karen Sheingold Vice President of Operations Lexington, MA, Public Schools Director Electronic Arts Center for Children and Computers Robert Wesslund Bank Street College of Education Vice President for Technology Exchange OTA Reviewers William Skok Control Data Corp. Ben Amick, Analyst Office of Business Practices Savan Wilson Clyde Behney, Program Manager U.S. Department of State Director of Education Audrey Buyrn, Program Manager Alan Smith Mississippi Authority for Vice President, Administration Educational TV Richard Dalbello, Analyst Broadcast Music, Inc. Ethel Winant Jim Dray, Research Analyst Producer Bob Spielvogel Gretchen Kolsrud, Program Manager Lexica Corp. Metromedia Producers, Inc. Nancy Naismith, Program Manager Richard Stern Sanford I. Wolff Attorney National Executive Secretary Robert Niblock, Program Manager Stern & Roberts American Federation of Television and Radio Artists Lisa Raines, Analyst Erwin C. Surrency Law Library University of Georgia

. . X111 Contents

Chapter Page Summary ...... 3 I. Conceptual Framework for Analyzing Intellectual Property Rights Issues ...... 19 2. Intellectual Property Goals in a Changing Information Environment . . . . . 31 3. The Accommodation of Intellectual Property Law to Technological Change ...... 59 4. Impact of Technology on Enforcement of Intellectual Property Rights. . . . 97 5. Impact of Technology on the Creative Environment ...... 127 6. Technology, Intellectual Property, and the Operation of Information Markets ...... 157 7. New Technologies and the Intellectual Property Bargain ...... 187 8. Impact of New Technologies on the International Intellectual Property System ...... , ..., . 213 9. Federal Role in the Administration of Intellectual Property Rights...... 257 10. Strategic Choices for Congress ...... 285 Appendix A: List of Contractor Reports...... ,299

xiv Summary —— ..- . —

Contents

Capabilities and Problems Posed by the New Technologies ...... 6 What Are The Stakes?...... 9 Economic ...... 9 Social and Personal ...... 9 Political...... 11 Policy Uncertainties ...... 12 Agenda for Congress ...... 13 ‘What Policy Goals To Pursue ...... 13 Whether and When To Act ...... 13 What Legal Framework To Use ...... 14 How Broadly To Define the Problem ...... 14 Within What Institutional Framework Should Be Resolved ...... 14 The OTA Study ...... 15 Figures Figure No. Page S-1. Simplified Chart of Developments, Uses, and Impacts of Information Technology ...... 4 S-2. Information Industry and Its Related Industries...... 10 S-3. Trends From 1960 to 1980 Volume and Costs of Communication by Media: USA ...... 11

. Summary

Domestic intellectual property law—princi- was relatively easy to keep track of their pally the law covering patents, copyrights, and activities. trademarks–is rooted in the United States Today, however, technology is complicating Constitution. Under the law, the government this process and undermining many of the is authorized to grant intellectual property mechanisms that governed the system in the rights not as rewards but as inducements to past. This trend is likely to continue; as shown authors and inventors to create and dissemi- on figure S-1, today’s technologies are the be- nate intellectual works. The statutory nature ginning, not the end, of the information revo- and purpose of the constitutional authoriza- lution. Computers, two-way interactive cable, tion is stated explicitly in the 1909 Copyright fiber optics, optical disks, communications sat- Act: ellites, and other devices are becoming stead- The enactment of copyright legislation by ily more sophisticated and powerful, and their Congress under the terms of the Constitution uses are expanding almost daily. The great- is not based on any natural right that the est impact, however, will come not from sin- author has in his writings, for the Supreme gle technologies, but rather from their use in Court has held that such rights as he has are combination. purely statutory rights, but on the ground that the welfare of the public will be served Although Congress has always had to reckon and progress of science and useful arts will with technological change, the new informa- be promoted . . . Not primarily for the bene- tion and communications technologies avail- fit of the author, but primarily for the bene- able today are challenging the intellectual prop- fit of the public such rights are given. Not erty system in ways that may only be resolv- that any particular class of citizens, however able with substantial changes in the system worthy, may benefit, but because the policy is believed to be for the benefit of the great or with new mechanisms to allocate both rights body of people, in that it will stimulate writ- and rewards. Once a relatively slow and pon- ing and invention to give some bonus to au- derous process, technological change is now thors and inventors. outpacing the legal structure that governs the system, and is creating pressures on Congress The mechanisms by which the intellectual to adjust the law to accommodate these property system worked in the past were changes. The pressures are coming from a num- straightforward. The government granted ber of different parties, and they are motivated rights to an author or inventor. From this point by a wide range of concerns: on, the government’s role was relatively mi- nor. Rewards were determined in the market- ● Authors, publishers, film makers, and pro- place. In order to benefit from copyright, an ducers; representatives of the recording in- author had to publish his works, thus making dustry; and other copyright holders whose them available to the public. In order to ob- works can be delivered electronically: This tain a patent, the inventor had to reduce his group is concerned that technologies such ideas to useful applications. The holders of as tape recorders and videocassette re- copyrights and patents holders were respon- corders are so widely used that they un- sible for detecting infringements and prevent- dermine their ability to enforce their copying unauthorized use of a work. Enforcing one’s rights. They are calling on Congress to right was not unduly burdensome. This was adopt stronger enforcement measures. Al- particularly true in the case of copyright. Given ternatively, some group members would the expense and the organizational require- like Congress to provide new ways to pro- ments needed to reproduce works there were tect their incomes, such as imposing taxes only a limited number of printers, and thus it or royalties on blank tapes.

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SOURCE: John McHale, “The Changing Information Environment A Selective Topography, “ Information Technology: Some Critical Implications for Dee/s/on Makers, The Conference Board, New York, 1972-82, p 193, as cited in Magda Cordell McHale (Center for Investigative Studies, SUNY at Buffalo), Facts and Trends” The Changing Information Environment: An Information Chartbook (Rome: Intergovern- mental Bureau for Informatics, 1985), p 32 Summary ● 5

● Designers and producers of computer soft- tual property products to further their so- ware and other functional works that do not cial, economic, and political development. fit comfortably into existing categories of These nations believe that the United intellectual property law: This group is con- States and other industrialized nations cerned that, given the uncertainties in the should relax intellectual property protec- law, their works will be inadequately pro- tion so that they can afford to make use tected. They are calling for more explicit of these new products and services. and extensive protection under existing or under new laws. These competing interests give rise to pol- ● Database producers, information analysts, icy questions that resist quick, simple answers. and others who package existing informa- Part of the problem is that new technologies tion for specific uses: This group opposes are bringing new parties into the intellectual restrictions on the use and reuse of copy- property debate, many of whom hold values righted materials. They also want incen- and attitudes that differ from those of more tives to be reallocated so that they receive traditional players—the authors, printers, and a greater financial return for the value that publishers, for example. The extreme case of they add to information by analyzing, re- this is the so-called computer “hacker” who organizing, and packaging it. believes that software and other forms of in- ● Manufacturers of equipment capable of formation should be shared freely. Holding less copying, reproducing, or recording (paper extreme but more common views are those copiers, satellite antennas, videocassette members of the public who believe that they recorders, and audio tapes): Members of should be able to continue to use the new tech- this group oppose the imposition of taxes nologies to copy materials, at home, for their or royalties on tapes and any other actions own personal use. In addition, there are those that might increase the cost of their prod- secondary information providers-information ucts to the consumer, or that make them brokers and database producers, for example– less convenient to use. They claim that who, in contrast to the original creators of in- they aid copyright holders by creating new formation, want fewer restrictions on the use markets for products and so should not and reuse of information. be penalized by having taxes imposed. ● Complicating intellectual property issues Educators and scientists: Members of this even further is the fact that technology is also group generally oppose extensions of the changing the roles that people involved in the law, arguing that such extensions would copyright system play. In fact, taking advan- make the resources and materials they tage of the new technologies, many people now need to do their work prohibitively expen- play multiple roles, and their attitudes about sive. Some members of this group seek to intellectual property protection may vary ac- exempt educational uses from the law. cordingly. Others are calling for licensing agreements that would allow them to use copyrighted The relationship among traditional players materials at reduced rates. are also changing, breaking down old alliances, ● The general public: Many people are be- and generating some new ones. Working on coming increasingly accustomed to hav- an electronic network, for example, the author ing new technology available at low cost of a book can now edit, print, publish, and dis- to use as they please in their homes and tribute his works; tasks that were traditional- offices. They want assurance that they can ly within the purview of the publisher. Under continue to copy films, records, and other these circumstances, the author may be less information for their private use. inclined to assign his rights to the publisher. ● Developing countries: Many developing Similarly, because it provides new outlets for countries want to use American intellec- distribution such as pay-per-view cable tele- 6 ● Intellectual Property Rights in an Age of Electronics and Information vision and videocassettes, technology is also cassettes, for example, an independent film changing the relationships among film makers, maker can circumvent the major film compa- film producers, and film distributors. Trans- nies and, in the same fashion, a major film com- mitting his works directly to the user on video- pany can avoid dealing with theater chains.

CAPABILITIES AND PROBLEMS POSED BY THE NEW TECHNOLOGIES To understand the legal and political pres- ity could permit the creation of central- sures that new technologies place on the intel- ized libraries with universal access. lectual property system, one needs to under- On the other hand, these high-speed stand their unique capabilities. A few examples communications media, combined with convey the scope and pace of technological large capacity optical disk storage tech- progress and the problems that it poses: nologies, will also pose enforcement problems for the intellectual property system. A problem of identifying authorship: A They allow individuals to trade vast quan- group of authors using personal comput- tities of copyrighted materials without the ers connected by a telephone network can knowledge or permission of copyright collaborate in writing an article, a piece holders. With these technologies, the sit- of software, or a database. This work can uation is no longer simply one of an indi- exist in various forms, in different places, vidual trading or giving away a book to and can be modified by anyone having ac- someone else; rather, it is one in which in- cess to the network. This networking tech- dividuals can inexpensively and privately nology provides new opportunities to com- share the contents of an entire library. bine talents, resources, and knowledge. ● A problem of private use: At the end of Also, using satellite technology, authors, World War II, copyrighted information scholars, or other creators from all over flowed into American homes through three the world can work together simultane- channels-print publications, radios, and ously on the same project. phonograph records. And although peo- However, this same networking capa- ple could enjoy these works freely, they bility might create problems for the intel- could not copy them conveniently and at lectual property system. Copyright, for ex- low cost. Today, the situation has changed ample, is granted to “original” works of radically. Americans can now receive a ‘‘authorship. In a world where there are much greater amount and variety of copy- many authors of one work, worldwide col- righted materials via a whole host of new laboration, and ever-changing materials, media-satellite, cable and broadcast tele- a law based on the concepts of originality vision, computers, videocassette record- and authorship may become too unwieldly ers, and telephone lines, to name a few. to administer. Moreover, using computer networking tech- A problem of identifying infringements and nology, they can now easily and inexpen- enforcing rights: The increased communi- sively reproduce and transmit copyrighted cations capacity (in terms of speed, band- works. width, and distance) made possible by fi- This remarkable state of affairs raises ber optic technology will allow computer several problems for the copyright sys- users to rapidly transmit incredible amounts tem. First, if a private citizen copies in- of information at a rate of 100 average formation–a film or record, for example– length pages in a second. Such a capabil- should this be considered an infringement Summary ● 7 .— —

of copyright? At present, the law gives types of protection granted reflect the little guidance in this area; nor, until re- differences between writings and inven- cently, did it need to. Such private use was tions. Copyright prevents commercial copy- so limited it posed no threat to industry ing; patent prevents commercial use. profits. Second, if it were decided that With the development of computer soft- home copying infringed copyright, how ware and other functional works, the clear could a ban against it be enforced? Since distinction between inventions and writ- many people could be engaged in this kind ings is beginning to break down. These de- of behavior in the privacy of their own velopments raise questions about whether homes, their activities would be impos- new information-based products can be ac- sible to track. commodated within the old legal frame- • A problem of functional works: At one time work, and whether efforts to do so will un- a writer wrote solely to communicate dermine the original intent of the law. meaning to his readers. He did so in nov- ● A problem of derivative use: A major news- els, biographies, news stories, scientific paper maintains its index on computer. treatises, and even in recipes. Today, how- A user of this index takes the information ever, a writer can write for a machine in it and analyzes it for another client, giv- rather than a human audience. He does ing him up-to-date, timely information so when he writes computer software-in- that is precisely tailored to his needs. structions that tell the machine what to Using electronic technology, a research do. A computer program can also create chemist can search all bibliographic data new programs, and even control industrial on a particular chemical in a matter of processes. In the future, information it- hours, instead of the weeks it once would self will play a similar functional role. A have taken. An investor who must make piece of information entered into a data- a snap decision about whether to buy or base, for example, may automatically resell can call up a constantly updated data- tool one of several manufacturing fa- base, and use the information to pursue cilities. his profits. Writings of this kind are becoming cen- The new information technologies, tral to the economy because they can effi- which allow for this kind of customized ciently substitute for labor and mechani- information on demand, are creating a cal processes. It is, however, precisely the wide range of new opportunities to expand capability of substituting for machine the variety, scope, and sophistication of processes that causes problems for the tra- information-based products and services. ditional intellectual property system. In fact, a whole new industry has devel- Intellectual property law provides two oped to provide these services; and it is basic forms of protection–patent and now one of the fastest growing sectors in copyright. These schemes reflect a basic the economy. distinction between invention and author- As the opportunities to create deriva- ship. Inventions are essentially useful de- tive works increase and as this sector vices or processes, whereas works of au- comes to play a larger role in the economy, thorship convey information and ideas. questions arise about what kinds of infor- And although both schemes encourage the mation can legally be used to create sec- production and dissemination of ideas, ondary information products. Under ex- they do so in two different ways. Patent isting intellectual property law, copyright requires disclosure, and copyright as- holders have the right to benefit from all sumes that in order to profit from a work, subsequent works based on their original an author must publish it. Moreover, the works. If interpreted broadly, it is possi- 8 ● Intellectual Property Rights in an Age of Electronics and Information —

ble, however, that this approach will in- sold in hard copies, and because it is ques- hibit the production and use of secondary tionable whether individuals can legally materials. copy them, they do not have to compete A problem of intangible works: In their with resellers, wholesalers, or others who homes, people can now receive electroni- might drive down the price of their prod- cally a broad range of information-based ucts. As the only source of distribution, products and services—e.g., shopping, people must come to the copyright holder stock market and banking information, on his own terms. Now controlling access educational software, videogames, films, to their works, copyright holders can re- and musical works, to name a few. In the strict it in order to enhance their profits. long run, however, individual access to If they were to do this, copyright law information may be more costly and thus would no longer perform the function it more limited as intellectual work become was designed for under the Constitution. transmitted in intangible forms. Moreover, once copyright serves to limit Publication and dissemination of intel- access, it raises issues for communications lectual works were fostered under the tra- policy as well as for copyright. ditional copyright scheme because authors A problem of meeting educational goals: had to publish copies of their work in or- The intellectual property system was orig- der to profit. Although the author retained inally designed to enhance learning and the right to print and publish a work, he the useful arts. This goal is more difficult no longer controlled the copies after the to meet today because of the increasing first sale. Since public dissemination went market value of intellectual properties. hand in hand with profit-making, this sys- The technologies provide numerous op- tem promoted the interests of both the portunities for educational use. However, public and the author. because software development is often ex- As more and more works are trans- pensive, it is in the interest of the devel- mitted electronically, however, public ac- oper to concentrate on products for cus- cess to information, originally built into tomers who can pay the most—businesses, the copyright system, may in fact become not schools. The schools then have the more limited. Not only may the individ- choice of doing without software, divert- ual price of information be higher; now ing money from other equally needed ed- people may have to pay for it every time ucational materials, or developing their they wish to use it. own software, since they cannot legally When printing was the dominant tech- copy copyrighted works. The copyright nology, this was not the case. Once a per- problem in this situation is simple: Copy- son bought a copy of a book or magazine, right, designed as a policy tool to enhance he owned it. It became his personal prop- learning, fails to meet its goal. erty. He could consult it repeatedly, with- A problem of integrity: Assisted by the out additional cost. He could share it, rent computer, a film maker can create scenes it, or resell it, without the proprietor’s per- that were never actually filmed, or take mission. Copyright holders, therefore, did existing images and place them in entirely not control the market for their works. new contexts. These capabilities open new Their monopoly was limited. Booksellers avenues for creativity. But at the same competed for sales, not only with the pro- time, they may be used to misrepresent prietor, but also with one another. Infor- a work or undermine its integrity. An un- mation, therefore, was available from scrupulous artist, for example, might use many sources at a competitive price. technology to distort a well-known piece With the electronic distribution of of art for his own purposes or profit with- works, however, proprietors have more out the knowledge of the original artist. control. Because their works need not be In this electronic environment, creators Summary ● 9

may become as concerned about the in- mental information about the developing tegrity of their works as they are about world. But once it has been analyzed by their profits. To be effective, intellectual a commercial company and copyrighted, property law may need to take into ac- it may be priced too high for developing count the problem of artistic integrity, as countries to afford. A nation near the well as that of financial rewards. United States is able to pick up and un- An international problem: All of the capa- scramble satellite programming that view- bilities and problems that characterize do- ers want—and do so without paying the mestic use of the new technologies are fee charged by the company. Domestic equally prominent—sometimes more so— companies have no way to monitor use or when they are used internationally. Sat- enforce their copyright claims. These prob- ellite technology permits global commu- lems are exacerbated by considerable dis- nication, but it also beams in program- agreement among nations about intellec- ming that nations may not want. Satellites tual property issues. collect valuable agricultural and environ-

WHAT ARE THE STAKES? The new technologies are extremely power- the economy, this industry is spearheading the ful tools. For the United States, therefore, the Nation’s economic growth and enhancing its stakes of identifying the best laws and policies competitive position in the international mar- for their use are very high. These stakes fall ketplace. into three general categories: 1) economic, 2) The economic stakes raised by the new tech- social and personal, and 3) political. nologies are particularly high for the copyright industries—publishing and other industries Economic that rely on the legal protections provided by Information technologies and information- copyright law. It is estimated that in 1982, the based products and services are becoming cen- combined sales of these industries constituted tral to the economy as a whole. The new tech- approximately 5 percent of the gross national nologies and the information they embody can product. Estimates suggest that more than 2.2 be used to improve efficiency, increase produc- percent of the labor force is affected by trade tivity, and thus engender economic growth. In- in intellectual property. The amount of finan- formation is reusable, and unlike capital re- cial damage that these industries suffer due sources, such as steel or iron, it can be produced to infringements of intellectual property rights and distributed using few physical resources. is extremely hard to estimate. Very few inde- Not only is information an efficient substitute pendent, quantitative data are available, and for labor, it can also be used to improve the existing analyses often contradict each other. overall efficiency of the production process. Businesses, for example, are now applying Social and Personal computer technology to almost all of their activities: from recruiting to laying off work- Information is a dominant force in our lives. ers, from ordering raw materials to manufac- In the United States, an enormous amount of turing products, from analyzing markets to information is communicated in the form of performing strategic planning, and from in- words through electronic media. In the 1970s, venting new technologies to designing appli- for example, it was estimated that the Amer- cations for their use. To serve these needs, a ican population was exposed to about 8.7 tril- whole new industry has been spawned. (See fig- lion words each day through electronic media ure S-2. ) One of the fastest growing sectors of such as radio; television; and print media such Figure S-2.— Information Industry and Its Related Industries

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Summary ● 11 — . as newspapers, books, and magazines. This fig- ephones and tape recorders, videocassette ure is rising; each year, the number of words recorders, and other electronic devices as an communicated increases at an average rate of integral part of their lives. 1.2 percent per year. And, as is illustrated in figure S-3, the fastest growing media for trans- Political mitting and receiving information are electronic. In democratic societies, citizens must be well informed about issues, candidates for office, Information, in all forms, is essential to all and local affairs. Similarly, a democratic pol- facets of our lives. It is the principal resource ity requires a well-informed citizenry. Increas- we use to meet our personal needs: coping with ingly, information and communications tech- day-to-day problems; dealing with life’s trau- nologies serve these information needs. mas and crises; supporting religion, family life, and cultural heritage; and accommodating our The government regularly needs huge recreation, entertainment, and leisure time amounts of information to make complex leg- needs. Never in history have we had the op- al and policy decisions. Many government portunity to be so fully and currently informed agencies would find it hard to conduct their about world, national, and local affairs. daily business without resorting to customized information on demand. The Internal Revenue Given the central importance of information, Service and the Social Security Administra- the public has high stakes in decisions about tion, for example, require large automated in- intellectual property rights. Moreover, the pub- formation systems to handle the accounts of lic has high expectations about how technol- hundreds of millions of clients. And the oper- ogy can serve its information needs. A survey ation of national defense depends on the use conducted for OTA confirmed that many peo- of complex communication systems both for ple believe they have the right to use these day-to-day management of the military estab- technologies as they please, although they lishment and for the command and control of draw the line at using them for commercial sophisticated weaponry. The government’s gain. The generation now in the schools has budget for information technology has risen grown increasingly accustomed to the bene- from $9.2 billion in fiscal year 1982 to an esti- fits of technology. Many youth view their tel- mated $15.2 billion in fiscal year 1986. Citizens’ groups and political parties are also Figure S-3.— Trends From 1960 to 1980 Volume and relying more heavily on the new technologies Costs of Communication by Media: USA (plotted on log by log scales) to achieve their aims. Technology, for example, is being used to target voters and potential supporters, communicate with voters, manage information, and even to design campaign strategies. Computers are also being used as lobbying tools. To illustrate the long- term effects of population growth, one lobbying group, for example, uses a portable computer and interactive software to inform Mem- bers of Congress about its point of view. In each of these realms—economic, social, ; , , , , 1 1 )) c I,,,lc ,, ,C Ic 1,({ $’ $ 1(I SIlnl and political—the stakes in the intellectual property debate are rising as fast as the tech- SOURCE: Ithiel de Sola Pool, Hiroshi Inose, Nozomu Takasaki, and Roger Hur- nologies are becoming more technically sophis- witz, Communication Flows (Tokyo University of Tokyo Press or New York Elsevier 1984) Reprinted with permission ticated and widely used. 12 ● Intellectual Property Rights in an Age of Electronics and Information

POLICY UNCERTAINTIES In designing new laws or policies on intel- • The increased complexity of the intellectual lectual property, the government will have to property system: The new technologies are contend with a number of uncertainties. These increasing the complexity of the intellec- include: tual property system, and so creating new uncertainties for policy makers. The num- ● The peculiar characteristics of information ber and variety of information providers, as a commodity: Information has special kinds of information-based products and characteristics that distinguish it from services, ways of using information, and other economic commodities and confound types of information users are prolifer- our understanding of how information markets work. Information is, for exam- ating, giving rise to new relationships ple, simultaneously an economic commod- among the parties involved. These changes ity and a societal resource. Since it is in- are occurring in very unpredictable ways. Thus, in the future, Congress will need to herently leaky; it is hard to own or control. And although costly to produce, informa- have more information about the intellec- tion is inexpensive to copy. Given these tual property system. unique properties, economists are only be- ● The changing nature of the technology: The ginning to understand the role of informa- electronic age has just begun. Today, new tion in the market place. They have yet technologies are multiplying the kinds of to determine, for example, how to meas- media that can be used to package, store, ure value or identify when value is added deliver, and use intellectual works. Over to an information-based product or serv- the long run, however, the increased con- ice—both needed to resolve issues of de- vergence of information and communica- rivative use. Moreover, the few available tion technologies may reverse this trend. data are fragmentary, nonquantitative, Packaged, stored, and delivered electron- and often subjective. ically, text, sound, and images will all be Summary * 13

interchangeable. Our understanding of how tual property system, is replete with un- and when such changes will take place, certainty. and of how they might affect the intellec-

AGENDA FOR CONGRESS Faced with a growing number of requests to decisions about whether to deal with prob- for action, in addition to a ubiquitous and rap- lems separately or in a comprehensive fash- idly changing technology, Congress confronts ion. In considering these choices, OTA found the problem of trying to take into account the that technological developments are, indeed, magnitude and the scope of technological affecting all aspects of the intellectual prop- change, while also balancing interests and re- erty system. Moreover, because we are only sponding to present concerns. In considering beginning to move into an electronic era, the how Congress might proceed, OTA identified full impact of the new technologies will not be- five major strategic choices: come completely apparent for some time. Fun- damental changes in technology are occurring 1. what policy goals to pursue, that will antiquate many of today’s solutions 2. whether and when to act, and bring new kinds of problems requiring new 3. what legal framework to use, kinds of solutions. Thus, even if Congress de- 4. how broadly to define the problem, and cides to act now in some areas, it will need to 5. within what institutional framework issues should be resolved. be prepared to reconsider these actions within the next decade. What Policy Goals To Pursue Some problems are particularly pressing because stakeholders are seeking immediate leg- OTA found that the intellectual property islative action, societal stakes are particularly system may no longer serve social, economic, high, or technological change is occurring so and political goals with the same ease in an rapidly that Congress must act sooner rather information age, given the enhanced value of than later if it wants to deliberately channel information in all realms of life. It is likely, its impact. OTA identified four such problems: therefore, that Congress, when designing new enforcement, private use, functional works, intellectual property laws and policies, will and the international intellectual property have to choose more explicitly among policy system. goals. Alternatively, Congress could use policy mechanisms other than the granting of in- Other problems, although equally important, tellectual property rights to foster some goals are less ripe for immediate action. Engendered not supported by the present system. In the by technologies still in their infancy, these pursuit of economic goals, for example, other problems are only now just emerging, and our economic incentives—such as subsidies or tax understanding of them is severely limited. Ex- exemptions—might be granted. Unlike the examples of such problems include assigning val- tension of intellectual property rights, such ue and distributing rewards in cases of deriva- mechanisms would have few negative conse- tive use, protecting the integrity of works in quences for learning and the creative envi- an electronic environment, and attributing and ronment. assigning authorship when works are generated by interactive or electronic processes. Whether and When To Act Although it may be too early to determine Decisions about when to act are clearly re- long-term solutions to these problems, OTA lated to decisions about whether to act, and concluded that some steps will need to be taken 14 ● Intellectual Property Rights in an Age of Electronics and Information

now if they are to be adequately dealt with in formation-based products and services, U.S. the long run. One approach might be to begin intellectual property policy is now inextrica- now to systematically collect data about, and bly tied to international affairs. Communica- enhance our understanding of, information tions policy, too, is becoming more linked to needs, information users and producers, and intellectual property policy, as more and more information-based products and services. This intellectual works are being transmitted by me- approach might require institutional changes, dia such as cable television, telephone lines, since, at present, no agency within the Gov- and communication satellites. Today, intellec- ernment is set up to carry out such a task. tual property issues also give rise to privacy concerns as copyright holders seek technical What Legal Framework To Use means to monitor use. In making decisions about intellectual property policy, therefore, The intellectual property system was care- Congress must consider a whole new range of fully designed to balance the public and the issues, and decisionmakers in all these areas private interest. OTA found, however, that be- will need to strive for greater coordination. cause the new information and communication technologies do not fit neatly within the existing framework of the law, the balance may Within What Institutional Framework be harder to achieve in the future. Should Intellectual Property Issues OTA identified functional works as a par- Be Resolved ticularly serious problem in this regard. The OTA found that intellectual property issues analysis found that the distinction between cannot be resolved without dealing with the writings and inventions is indeed breaking question of institutional capabilities and down with respect to functional works such change. In the absence of institutional change, as computer software and semiconductor chip the courts will increasingly be called on to re- masks. Because there are many works of this solve highly complex and technical issues and type, they may require their own framework to make policy in this area. The judiciary, how- for protection. If it were based on the distinc- ever, may not be suited for this role. tive characteristics of these works, the law might be more accurately targeted to achieve The pace of technological change will con- specific policy outcomes, thus serving as a tinue to put pressure on existing institutional more robust policy tool. With a new category arrangements. To the extent that Congress, of law, both producers and users would face in responding to these changes, adopts legis- less uncertainty each time a new type of work lation requiring a more active Government were introduced. OTA’s analysis suggests, too, role, new institutional arrangements will prob- that a fruitful basis for a revision along these ably be required. If this were to be the case, lines might be found in the distinctions be- Congress might want to expand the responsi- tween works of art, works of fact, and works bilities of existing agencies, or it might estab- of function. lish a new central agency to address intellectual property issues. Such an agency’s mission How Broadly To Define the Problem might include monitoring technological change and assessing how the law might deal with it, OTA found that intellectual property policy providing the necessary expertise to deal with can no longer be separated from other policy complex technological issues, and collecting concerns. Because information is, in fact, cen- and analyzing data about information markets tral to most activities, decisions about intel- and use. Such an agency might also assume lectual property law may be decisions about additional regulatory functions, such as dis- the distribution of wealth and social status. tributing rewards or adjudicating disputes. Fi- Furthermore, given the unlimited scope of the nally, it might coordinate intellectual property new technologies and the growing trade in in- policy with policy in related areas. Summary “ 15

THE OTA STUDY The request for this assessment, Intellectual necessarily have a direct effect on intellectual Property Rights in an Age of Electronics and property rights. Rather, more often than not, Information, was made by Senator Charles their influence on the law is felt indirectly, as McC. Mathias, Jr., Senate Committee on the a result of such things as technologically in- Judiciary, and by Congressmen Peter W. Rodino, duced changes in norms, values, and expecta- Jr., Robert W. Kastenmeier, Hamilton Fish, tions, as well as in the ways in which intellec- and Carlos Moorhead, House Committee on tual works are created, produced, marketed, the Judiciary. and distributed. In thinking about how the new communi- Such an approach is also useful because, given cation and information technologies might the political intensity and high economic affect intellectual property rights, OTA has stakes of the intellectual property debate adopted a broad approach, looking at the kinds today, it is extremely important to view the of stresses that technology might be placing entire situation as all one piece. Those involved on the intellectual property system as a whole, in the policy debate often define issues solely and on each of its parts. Such an approach was in terms of their own interests and world views. required because the new technologies do not Chapter 1 Conceptual Framework for Analyzing Intellectual Property Rights Issues Contents

Introduction ...... 19 The Nature of Technology...... 20 The Intellectual Property System and Its Relationship to Social and Technological Change: A Framework for Analysis ...... 21 The Intellectual Property System ...... 21 The Intellectual Property System as a Dynamic System: The Impact of Technology ...... 23 The Approached and Outline of the Report ...... 25 Emphasis on Copyright ...... 25

l-1. Characteristics of Information Technologies and the Uses of Intellectual Property...... 24 l-2. Framework of Analysis...... 26

Figure Figure No.. Page 1-1. The Intellectual System ...... 22 Chapter 1 Conceptual Framework for Analyzing Intellectual Property Rights Issues

INTRODUCTION An intellectual property system is made up fold: 1) to foster the progress of science and of laws and practices and the relationships they the useful arts, and 2) to encourage the crea- generate among individuals and institutions. tion and dissemination of information and A system of this kind reflects the larger soci- knowledge to the public. ety of which it is a part. For, although intellectual property rights have been recognized Although this framework was originally de- in natural law, historically, governments have signed to deal with the problems and opportunities afforded by the invention of printing— granted such rights to achieve a variety of policy goals. This is equally true today. Which the information technology that dominated the 18th century–it has proven flexible enough policy goals a particular intellectual property system is designed to serve depends, in large to accommodate a variety of new technologies. measure, on history, circumstances, and the Today, however, advances in technologies such as microelectronics, fiber optics, and satellites overriding needs of society. are testing the limits of this flexibility. Devel- Technological change has been one factor opments in areas such as biotechnology] are that has had an especially significant influence also influencing the system, but they are be- on both social systems and the intellectual yond the scope of this study. property systems that arise from them. Today, it is posing a formidable challenge to the in- Bringing swift changes in computers, communications, and other information technol- tellectual property system. Developments in information and communication technology ogies, these technological advances are likely to have a major social impact, carrying us fur- are threatening to outpace previous technologi- ther into a new “information age. ” The new cal advances in both speed and scope. They are stressing the intellectual property system technologies transmit information dramatical- to the point of raising fundamental questions ly faster, and they can collect, store, manipulate, and transmit larger amounts of it. With about the system itself. This chapter presents these new technologies, more people can gain a theoretical overview of the intellectual prop- access to information, which they can more erty system, and identifies how technology readily use to trace past actions and predict may influence it. It is deliberately abstract, intending to lend perspective to questions or influence future events. In the next few whose political and economic significance may decades, as these technologies continue to be make objectivity difficult to achieve. developed, they will be used for an ever-expanding number of activities and tasks. This The U.S. system of intellectual property rights and practices evolved in a way that ‘Although biotechnology has many similarities to informa- balances social, political, and economic inter- tion technologies in terms of its having a direct impact on the ests. The system has been modified, both for- intellectual property system, this report does not discuss these mally and informally, in response to events and impacts in detail. (; ii’en the magnitude of the impact that the development of biotechnology might ha~re on society’, any dis- circumstances. Its basic framework was set in cussion in this report, which focuses on information technol- Section 8, Article 1 of the Constitution, which ogies cannot do justice to this topic. For a discussion of some authorized Congress to grant exclusive own- of these issues, see [J. S. Congress, Office of Technology Assess- ment, Commercial lliotwhnoio~”.. .4n International.4 na!.~’sjs, ership rights of writings and inventions for a OTA-BA-218 (J$’ashington. 1)(’: LJ.S. (;o~ernment Printing of- limited period of time. The purpose was two- fice, ,Januar? 1984).

19 20 ● Intellectual Property Rights in an Age of Electronics and Information advance of technological frontiers will change, areas of intellectual property law, they are in equally significant ways, the structure of likely to have the most immediate and pro- the social, economic, and political orders. nounced impact on copyright, the area of intellectual property law that has been most con- Just as the technologies of the 18th century cerned with the flow and use of information shaped the intellectual property system as we in society. Moreover, to the extent that tradi- know it today, so too are the new information tional legal categories cannot accommodate and communication technologies likely to alter these technologies, new kinds of intellectual significantly how society views intellectual property law may be required. property, the mechanisms employed to protect it, and the value that society places on intel- This report examines how technological de- lectual properties, both as market goods and velopments might affect the intellectual prop- as public resources. Although information and erty system. Each chapter focuses on one part communication technologies will touch all of the system.

THE NATURE OF TECHNOLOGY Technology can be defined in many ways, laws and rules and influencing the social and both broad and narrow. Some older definitions economic conditions in which relationships limit technology to mean specific tools or ma- take place. To illustrate the potential effect of chines. Other theorists define technology more technology in both these spheres, we must broadly as know-how: ‘‘a system of knowledge broaden the focus of the analysis and include intended to have a practical bearing."2 Beyond in it the areas where physical objects and peo- this, one can also include in a definition of tech- ple meet. As Todd La Porte has said, one must nology the human processes and relationships look at “who is technology,” as well as “what required to bring a scientific idea to lifes is technology.”5 People chose their definition of technology This report defines technology broadly, in- to suit the question they are asking and the corporating relationships and transactions be- problem they must solve. Scientists and engi- tween creators, publishers, distributors, and neers, for example, may have less need to con- users of intellectual property as well as the sider human factors, and so their definitions hardware they use. To maintain this view, concentrate more on machines and physical while also allowing for independent analysis structures—roads, airports, and nuclear re- of machines, tools, and techniques, we will con- actors.4 But a purely mechanical definition of sider technology a "package’ that, to borrow technology would be inadequate for a study from Langdon Winner’s categories, comprises:6 analyzing how technology affects the intellec- apparatus: the physical devices of tech- tual property system. Technology touches this nical performance such as tools, instru- system directly and indirectly, affecting its ments, machines, etc; techniques: the technical activities, such ‘,Jay Weinstein, .%ciolog>’ Technolom’: Foundations of Post- as skills, methods, procedures, and rou- ,4 cadem”c Sciemv ( N“ew Brunswick, London: Transaction Books, tines that people engage in to accomplish 19821, p. X 1. For this view, see also J.K. Fiebleman, “Pure tasks; and Science, Applied Science, Technology Engineering: An Attempt at Definitions, ” TtJchnolog~’ and Culture, fall, 1961, pp. 305- 3 17; and C’, Susskind, [Understanding Technology (13altimore, MD: Johns Ilopkins Uni\’ersity Press, 1973). ‘I bid., p. 8. ‘For a discussion of technology understood as “a form of so- ‘) For a study that conceitres of technology as a package, see cial organization, see Todd R. La Porte, Technology’ as Social James N. Danziger, William H. Dutton, Rob Kling, and Ken- Organization, Institute of Governmental Studies, N’orking Pa- neth 1.. Kramer, Computers and Politics: Iligh Technology’ in per #84-1, (Jni\’ersit}r of California, Berkeley. American I,ocal (~o}-ernments (New York: Columbia Univer- ‘Ibid. sity Press, 1982). Ch. 1—Conceptual Framework for Analyzing intellectual Property Rights Issues ● 21

social arrangements: the relationships ered to be one of many factors influencing so- that are established and the transactions ciety, while society is viewed as affecting tech- that take place allowing people to carry out nological development through its structures, technical processes and to give physical laws, and practices. form to their ideas.7 Using this definition, this and subsequent chapters are based on a broad model of the re- Simon, and Karl Marx. In fact, it was the growing interest in lationship between technological and social technological de~’elopments that ga~’e birth to the field of soci- change. 8 In this model, technology is consid- olo~’. Interest has intensifiwl in recent ~’ears, as both scholars and policy makers have sought to anticipate and ameliorate the ‘I,angd{)n \l’innt>r, 1 utonomou.s l’echnolog}.: Technic.s-(lut- unintended consequences of the deplo~-ment of technolo~’. Once of-(’ ontrol a.~ a 7’henw c)f l)~)liti[’al ‘f’hou~rht ((’an] hridge, NI,! again, these interests ha~’e gi~’en rise to a new field of stud>’, and 1,ondon, J{nglan& the NI IT l)ress), pp. 11-12, that of technology assessment. For two accounts of the history “Th[’ study {)t t(’chnolog~ and s(xiet? has a long histor~’ g(J- of ideas about technolo~’, see Weinstein, op. cit., and W’inner, ing back two cwnt,uries to the works of Adam Smith, Henri Saint- op. cit.

THE INTELLECTUAL PROPERTY SYSTEM AND ITS RELATIONSHIP TO SOCIAL AND TECHNOLOGICAL CHANGE: A FRAMEWORK FOR ANALYSIS The Intellectual Property System 2. property rights that provide incentives and rewards, Theoretical models and actual systems often 3. operating rules, differ significantly. In the real world, the form 4. mechanisms by which policy goals are and structures of intellectual property systems achieved, and are worked out in the political arena. Seldom 5. the realm of people and activities that the is a system a well-conceived and well-designed system is designed to influence. construct; it is more likely to take shape haphazardly, reflecting the political compromises The intellectual property system can be visual- and historical events that went into its mak- ized as shown in figure 1-1. As this diagram ing. The American intellectual property sys- illustrates, the outputs of the system provide tem is a product of such compromises, and feedback about how effectively the system is strong forces are still shaping it today. Those working. involved in the debate often define issues nar- Policy goals are the ends towards which the rowly, in terms limited to their own interests intellectual property system is directed; they and world views. But, given the magnitude of mirror the goals of the society. Thus, as illus- the technological changes occurring, and their trated in chapter 2, time and social change may potential impact on the intellectual property alter intellectual property goals. As the goals system, it is extremely important to view the change, other parts of the system are likely entire situation as a whole, in terms of the to change in response. interrelationships of its parts. Property rights are granted as incentives and In looking at how technology might affect rewards. A property right might include, for the intellectual property system, it is useful example, one or any number of the following to conceive of the system as a set of incentives rights:9 and rewards designed to affect the behavior of individuals or organized groups engaged in creative or inventive activities. This system ‘These terms were borrowed from Lawrence Becker, “The is divided into five interrelated parts: Moral Basis of Property Rights,. "Property J. Roland I]envork and tJohn 11’. (’hapman (eds. ) (lNew’ York: New York Uni\rersit3T 1. policy goals that it seeks to accomplish, Press, 1980), pp. 189-190. 22 ● Intellectual Property Rights in an Age of Electronics and Information

Figure 1-1.— The Intellectual Property System

Intellectual property aystem goals

[ I System feedback mechanism

SOURCE Office of Technology Assessment

1. the right to possessor physically control property system. The rules make demands on something, everyone involved in the system. The grant- 2. the right to use or enjoy its benefits, ing of a right to one party, for example, may 3. the right to manage or decide how it is to in effect create a corresponding obligation or be used, liability on the part of another. Structuring the 4. the right to receive income from it, way the parties relate to and depend on one 5. the right to consume or destroy it, another, these rights and incentives serve as 6. the right to modify it, the rules governing the behavior of individuals 7. the right to transfer it, involved in the creation, production, distribu- 8. the right to distribute it, and tion and use of works, products, and services 9. the right to exclude others from using it. designated as intellectual properties. Rights may be granted only under certain Different intellectual property systems may conditions, or they maybe limited in their ap- define intellectual properties differently, and plication. For example, to claim a patent in the each may attach different rights, responsibil- United States, an inventor must demonstrate ities, and benefits to them. The structure of that his invention is useful, nonobvious, and rights will be determined, in part, by the pol- novel. To receive a copyright, an author’s work 10 icy goals of the system, and by the mechanisms must be original. Neither right offers perma- chosen to achieve them. Thus, a system de- nent protection. Patent rights generally last signed primarily to encourage learning and infor 17 years, and copyrights are granted to invention, as is American patent law, may re- dividuals for life plus 50 years and to corpora- quire inventors to disclose information. In tions for 75 years. contrast, a system designed principally to reg- Together, these rights, incentives, and the ulate economic relationships, such as trade conditions under which they are granted con- secret law may, in fact, prohibit disclosure. stitute the operating rules of the intellectual Similarly, a copyright system with the chief 10 _ The word “work’ is a general term referring to any intellec- goal of fostering the dissemination of informa- tual creation. It is used in the legal sense to distinguish par- tion might grant rights only in published ticular copies from what is protected by copyright. works; whereas one aiming to reward author- Ch. 1 —Conceptual Framework for Analyzing Intellectual Property Rights Issues ● 23 —. ship might protect works before they are made one cannot easily determine whether these cri- publicly available. teria are being met. Finally, evaluating and assessing the accuracy and independence of Similarly, the mechanisms used to achieve the information needed to analyze the system policy goals—the way in which the system is fraught with difficulty. At present, most of operates-can vary among and within systems, the information about such things as the ex- depending on the kind of work to be protected, tent of infringement, the potential economic the nature of the activities to be influenced, damages of infringement, or the uses made of the kinds of rights to be granted, and the pol- information-based products and services is icy goals to be achieved. For example, a sys- available only from the stakeholders them- tem that grants rights on the condition of an selves. act such as publication, or on the condition of qualities such as usefulness or novelty, might require a very different administrative appa- The Intellectual Property System ratus than a system with no such conditions. as a Dynamic System: The Impact We see, for example, that because patents are of Technology granted under more stringent conditions than copyrights, the Patent and Trademark Office The dynamic nature of the intellectual prop- historically has had more resources and admin- erty system further complicates its analysis. istrative responsibilities than the Copyright It exists within society, and shifts in response Office has had. to social, political, and economic circumstances. Thus, when society values change, The people, institutions, and activities that the so may the motives and attitudes of creators, intellectual property laws aim to influence are inventors, and users of intellectual properties. also crucial elements in the system. What ac- Similarly, changes in economic conditions can tivities these people do, as well as the socio- alter relationships and positions between and economic constraints under which they oper- among individuals and groups in the system, ate, determine whether a particular incentive redistributing their shares of financial obliga- or reward might achieve its intended policy tions and rewards. goal. To be most effective, rewards and incentives must match the motivations, needs, and Of the many factors that might affect the perceptions of the people they are designed to intellectual property system, technological influence, and they must accurately reflect the change is likely to have the greatest impact. kinds of activities that they pursue. If an in- We can see this clearly in examining the ef- centive miscalculates the economics of creat- fects of new technologies on the intellectual ing, producing, and distributing an intellectual property system. property, it will not motivate people to keep Electronic information technologies are fun- creating. In addition, because people creating damentally different from print technology in different forms of intellectual property oper- a number of ways. For example, broadcasting ate in different environments and have vary- technologies (radio, television) make a work ing concerns, they may respond best to differ- simultaneously available in the homes of so ent kinds of inducements. many users that arrangements for payments The outputs of the intellectual property sys- for the transfer of works to them is often pro- tem—such as the amount, quality, and diversity hibitively expensive. Other technological ad- of works—reveal, in part, how well it is work- vances, such as photocopiers and audio and ing. But a number of difficulties arise in any video tape machines, have so reduced the cost effort to evaluate a system’s performance. and decentralized the process of copying works First, there are problems in selecting criteria that rights holders are no longer assured that that best measure effectiveness-that is, which they have control over the production and in- results to note and which to ignore. Second, tegrity of their intellectual property. As infor- 24 ● Intellectual Property Rights in an Age of Electronics and Information

Table 1-1 .–Characteristics of Information Technologies and the Uses of Intellectual Property .— Technical characteristics Technical characteristics of works Uses of works of works Uses of works Mechanical print Digital electronic Produced in tangible “units” Publishers, printers, and Simultaneously available Many Individuals may access a (but requires expensive booksellers cooperate to publish central store of works, a “data machines and special skills work and sell units to individuals base” to copy in large quantities) or Iibraries, authors received per- Reproducible at very low Prices for magnetic and optical copy royalty on first sale of a cost storage media will continue to copy; copyright holder retains fall; media are very high in rights to print and publish “the capacity, and very fast in making work" reproductions: perfect copies can Fixed in tangible copies Individuals read, scholars quote or be made from copies (one ‘canonical” form of cite; owner of a copy may copy Versatile Many types of works (e, g , text, “the work” exists) parts of it by hand, or sell, rent, or music, video-taped or filmed destroy his copy pictures) may be stored and Analog electronic print communicated digitally “Originals” sold in tangible E g , audio recordings and Decentralized and pervasive Highly capable machines are copies videocassettes are initially becoming ubiquitous in homes manufactured and sold somewhat and offices Iike traditional, mechanically printed books Interconnected Machines may be privately Iinked by switched telephone circuits: Reproducible at moderate Small works, or parts of large works can be transfered with cost (e. g., xerograhic copies, works, are often copied privately Impunity; and joint authorship IS audio and video tapes) by users with machines, rather not restricted by the physical than by hand, copies of copies are separation of the authors poorer in quality than copies of originals Dynamic Work may be Interactive or constantly evolving; one Decentralized Many Individuals have equipment “canonical” copy may not exist and skills to make copies Processible Machines may be programmed to Technology-bounded Different media and equipment transform and manipulate works, usually needed to use and copy perhaps masking evidence of different types of works original authorship Analog electronic broadcast Autonomous Works may be functional, rather Advertisers may pay for work to Simultaneously available than only meaningful, as are (one “intangible copy”) attract potential customers to traditional copyrightable works their product, alternatively, users may pay (e g , public broadcasting, subscription television) —— —

mation technologies become computerized, the The characteristics that differentiate the new copy, transfer, and manipulation of works are technologies from the old, and that create po- becoming even more decentralized, speedy, and tential problems for the system, are summa- inexpensive. rized above in table 1-1. At a basic level, the very definitions on which Changing technology may influence each intellectual property rights are based take on part of the system directly, or it may affect new meanings, or become strained and even it indirectly by modifying the larger social envi- irrelevant, when applied to the context created ronment in which the intellectual property sys- by new technologies. They raise questions, for tem operates. New technologies, for example, example, about what constitutes a‘ ‘derivative may affect the boundaries of the system and work’ when works are made available through the nature of the rights that it provides. In intangible electronic waves or digital bits; doing so, they may change the “rules of the about what constitutes a “work”; and about game” by which it operates. As discussed in who owns the right to it when it is interactive, chapter 3, each new technology has brought and when creators have combined their efforts questions about whether and where it should to produce it. fit into the existing system. Most recently, for Ch. 1—Conceptual Framework for Analyzing Intellectual Property Rights Issues ● 25 example, Congress, borrowing from both copy- centralized reproduction and electronic trans- right and patent law, adopted a new suigeneris mission prevents identifying where and when law, I that established a separate niche for com- infringements take place. puter chip technology in the intellectual prop- Because technology brings about new kinds erty system. of interactions between people, as well as new Technological developments may also change technological apparatus and new processes and the mechanisms used to achieve intellectual techniques, it is also likely to affect the peo- property goals. Chapter 4 points out that dem- ple, institutions, and activities that are part onstrating ‘‘authorship’ or ‘‘originality as a of the realm of the intellectual property sys- condition for receiving property rights, while tem. As noted in many of the following chap- relatively straightforward in a print culture, ters, new technologies not only affect what peo- is much more complicated in an age of elec- ple do and how and why they do it, they also tronic technology. Similarly, as illustrated in may restructure the socioeconomic opportu- chapter 7, a system that assumes copyright nities available to them and the constraints holders can enforce their own rights against under which they operate. And, in creating a infringement may operate unsuccessfully if de- multitude of new opportunities for application, use, and profit-making, issues may arise among the parties in the system the resolution of which, over the long run, may prompt changes in the goals, the boundaries, and the structure of the system itself.

THE APPROACH AND OUTLINE OF THE REPORT Using the above model, this assessment ana- term that covers patent, copyright, trademark lyzes the impact of the new information and law, and the Semiconductor Chip Act, as well communications technologies on the U.S. in- as trade secrets and tort misappropriation law. tellectual property system. Table 1-2 outlines There are two major reasons for this empha- the problems to be analyzed. sis. First, since copyright is concerned primarily with the use and flow of information and In this table, six major criteria are suggested information-based products and services, it is to evaluate how well the system is function- the area of intellectual property law that will ing. Corresponding to these criteria are a num- be most affected by advances m communica- ber of research questions that might be asked tion and information technologies. Second, it to determine how well the criteria are being is to copyright rather than to other provisions met, and some possible indicators of the sys- that the creators, developers, producers, and tem’s effectiveness. The broad scope of the ta- distributors of new information technologies ble illustrates the magnitude and complexity are looking in their efforts to gain legislative of the problem. It also suggests some useful protection for their works. questions around which to build an analysis, many of which serve as starting points in the This emphasis notwithstanding, we have following chapters. tried to look broadly at the impact of technology on the entire intellectual property system. This broad perspective allows us to address The Emphasis on Copyright not only the problem and opportunities that the new technologies present for the copyright In general terms, intellectual property law system itself, but also to consider alternative includes any law that grants rights in the prod- ways, including some entirely new ones, of ad- ucts of the intellect. As such, it is a generic dressing them. 26 ● Intellectual Property Rights in an Age of Electronics and Information — —

Table 1-2.— Framework of Analysis

indicators/types of Information Evaluative criteria Questions for research that might be collected 7. Effectiveness in meeting overall systems goals A. Creation and dissemination Degree of creativity ● Evaluations of creators, critics, users of creative, informational, ● Output of works and scientific works ● Number of prizes offered in these fields ● Number of people engaged in these fields ● Interactions of members of the creative environment Availability ● Number and variety of informational resources ● Evaluations of creators, publishers, producers, users ● Diversity of works ● Price of works ● Opportunities for access Congruence of incentives ● Evaluations of creators, publishers, and producers ● Level of output B. Enhancement of Degree of scientific ● Emergence of new fields the learning and technological ● Number of scientists/technologists environment development ● Number and quality of scientific publications ● Interactions between members of the scientific/ technical community ● Patents issued Ž Awards granted ● Evaluations by members of the scientific/technical community State of the arts and ● Emergence of new fields entertainment ● Number of creators ● Condition of production/distribution industries ● Availability of resources for creation/production/ distribution ● Awards granted ● Market for creative works Overall condition of education ● Evaluations by national educators/businessmen/ parents/National Science Foundation/etc. ● Literacy rates ● Test scores ● Availability and qualifications of faculty/teachers ● Quantity and quality of educational materials/ information-based resources ● Interactions among members of the educational community C. Economic growth Growth of information-based ● Development of new industries and profit-making and development industries opportunities ● Percentage of employment ● Number of firms ● Contribution to gross national product ● Use of information-based products and services in non-information industries International competitiveness ● Balance of trade 2. Efficiency in achieving goals Costs and benefits of granting Institutional costs rights Transactional costs Social costs in terms of achieving systems goals Benefits measured in terms of achieving system goals Estimates of harm due to infringement/lack of intellectual property protection Profit margins Industry competition Estimates of economic value of intellectual property rights to proprietors Ch. 1—Conceptual Framework for Analyzing Intellectual Property Rights Issues ● 27

Table 1-2.—Framework of Analysis—Continued — Indicators/types of information Evaluative criteria Questions for research that might be collected

Costs and benefits of ● Institutional costs alternative measures for ● Transactional costs achieving system goals ● Social/economic costs/benefit in terms of achieving system goals

3. Enforceability Extent of Infringement ● Public/institutional behaviors ● Technologial capabiIities to access/reproduce/ reformat information-based products and services ● Privacy of use and decentralized access to reproductive/access/and communication technologies • Technological capabiIities to preclude authorized access/use Ease of detection ● Transaction costs ● Technological capabiIities to monitor access/use Legitimacy of the system ● Public attitudes/support for the system 4. System durability Flexibility in the face of • Frequency of legislative revision/amendment change Ž Resort to alternative forms of protection ● Consensus in cases of first impression ● Consistent/coherent application of law Legitimacy of the system • Public attitudes/support for the system ● Extent of infringement Ability to resolve conflicts/ ● Acceptance of decisions by parties in dispute—i.e., harmonize interests number of appeals Reliability/predictability as a ● Extent of unresolved issues — I.e., fair use, guide to action copyrightability of computer software Robustness of principles Ž Internal coherence/consistency of law . Resort to other forms of protection ● Overlap with other law

5. Precision as policy tool Predictability of outcome ● Quality, quantity, independence of available infor- mat ion independence/compatibility ● Number of agencies involved with respect to other policy ● Cross-cutting issues areas • Interested congressional committees . Convergence of stake holder Interests ● Intensification of issues Sensitivity to differences ● Roles of different kinds of Information-based among different kinds of products and services information-based products ● Economics of different kinds of information and services markets ● Public attitudes toward different types of information-based products and services ● Technological characteristics of different information-based products and services

- 6. Congruence with international Ability to resolve conflicts ● Enforcement mechanisms and other national systems ● Level of infringement ● International court cases ● Resort to other policies mechanisms to deter infringement— i.e., trade sanctions Harmony with other intellect ● Level and participation in International regimes al property systems ● Scope of International treaties . IncompatibiIities with international law — i.e., infor- malities Compatibility with other inter- ● Policy conflicts and inconsistencies national regimes—i.e., GATT, UNESCO — SOURCE Office of Technology Assessment Chapter 2 Intellectual Property Goals in a Changing Information Environment Introduction ...... , ...... 32 Evolution of the Concept and Practice of Granting Intellectual Property Rights. . . . 33 Emergence of the Concept of Intellectual Property Rights ...... 33 Copyright as a Mechanism for Censorship and the Regulation of Trade ...... 34 Copyrights To Prevent Monopoly Practices: The Idea of Author Rights ...... 35 Traditional Goals of the U.S. Intellectual Property System ...... 37 Opportunities and Policy Choices in an Information Age...... 39 Three Realms of opportunity . . . + ., ...... ● ...... ● ● . 40 Opportunities in the Techno-Economic Realm. , ...... 40 New Opportunities in the Political Realm ... , ...... 43 Opportunities in the Cultural Realm ...... 49 The Potential for Conflict in the Use of New Technologies ...... 53 Implications for the Intellectual Property System ...... 56

Figures Figure No. Page Z-I. The Evolution of Information Occupations ...... , ...... 41 2-2. Uses of Information Technology Within the Firm ...... 42 2-3. Information Industry and Its Related Industries ...... 44 2-4. Development of Custom Targeting Database ...... 48 2-5. Carnegie Mellon Flowchart ...... 55 Chapter 2 Intellectual Property Goals in a Changing Information Environment

FINDINGS In an information age, decisions about the taneously serve a wide variety of social and granting of intellectual property rights are economic public policy goals. Linked to other information policy decisions, The ability of intellectual property law to and in making them, we are making decisions strike such a balance was not particularly diffi- about the nature of society itself. Given the cult in the past, when the social and economic convergence of these issues, it may be necessary to establish clearer priorities about the stakes in information were lower than today and when relatively few and well-defined play- goals towards which intellectual property pol- ers were involved in the intellectual property icy is directed. process. Information-based products and serv- The new information and communication tech- ices were peripheral to the performance of nologies create, for both individuals and society many social and economic activities, and peo- as a whole, new cultural, economic, and politi- ple had lower expectations about their use and cal opportunities, as well as new information re- the level of profit that might be derived from quirements and needs. These technologies are them. As a result, issues involving the grant- capable not only of generating, storing, and ing of intellectual property rights could be processing vast amounts of information; they worked out among the major players without can also provide greater access to information, much public involvement or concern. enhance the environment for learning and crea- The resolution of these issues in an informa- tivity, generate new opportunities for profit- tion age, however, will be more problematic, re- making and economic growth, and facilitate quiring that more stakeholders be taken into ac- participation in political and social affairs. count and that decisions be made about the Insofar as they afford new socioeconomic op- distribution of incentives and rewards. Given portunities, the new information and communi- the variety of opportunities that the new tech- cation technologies will assume a greater role nologies afford, the increased value of infor- in society, and in the economy, giving rise to pub- mation, changing relationships among the tra- lic policy issues about their use. Issues will ditional participants in the intellectual emerge, for example, with respect to which in- property system, and rising expectations formation needs will be met; which opportuni- about the benefits of these technologies, the ties will be developed; and which parties will number of stakeholders with disparate inter- benefit from them. ests and competing claims on the system will be greater than ever before. In such a context, Concerned primarily with the use and flow of the granting of intellectual property rights, in- information in society, intellectual property law stead of mutually serving a variety of differ- has historically served in the United States to ent stakeholders, and equally fostering a broad decide many of these issues. In resolving them, set of diverse policy goals, may pit some stake- an effort has been made to strike a suitable holders and goals against one other. Moreover, balance between the needs of creators, produc- given the ease of access to the new technol- ers, and distributors of intellectual properties ogies, members of the public are now major and the social, economic, and political needs stakeholders in the system, and as such their of the nation as a whole. In such a fashion, in- attitudes and behavior are likely to have a tellectual property law has been able to simul- greater impact on policy choices and outcomes.

31 32 . Intellectual Property Rights in an Age of Electronics and Information

INTRODUCTION Although intellectual property rights have right can be seen as a method for the regula- been recognized in natural law, historically, tion of trade and commerce. governments have granted such rights to Copyright thus serves as a mechanism by achieve a variety of policy goals. This is equally which the law brings the world of science, art, true today. In the West, the granting of copy- and culture into relationship with the world right, for instance, is viewed primarily as a of commerce. In a social sense, copyright is an instrument for the cultural, scientific and mechanism for encouraging the dissemination technological organization of society. Copy- of information. But in Eastern bloc countries, right is thus used as a means to channel and the policy goals differ and it is regarded chiefly control flows of information in society. [em- as ‘an instrument for the management of cul- phasis added].2 tural processes.”1 The patent and trade secrets systems also Which policy goal a particular intellectual involve the flow of information. The patent sys- property system is designed to serve depends, tem is designed primarily to foster scientific in large measure, on the history, circum- and technical information. Although patent stances, and overriding needs of a society at law permits only the inventor or patent holder the time the system is first set up. Develop- to make, use, or sell his invention, it also re- ing countries, for example, which must import quires that the inventor disclose to the world most cultural and scientific materials, have the information necessary to enable others to often been unwilling to extend protection to reconstruct the invention after a 17-year period foreign works. This was true of the United of protection has elapsed. Patent law, there- States during its first 100 years, and is the case fore, seeks to encourage the distribution of in- in many Third World countries today. formation by making disclosure a condition of Despite their varying goals, however, all in- protection. The trade secrets system, in con- tellectual property systems basically concern trast to the patent system, is designed to dis- policies involving the use and flow of informa- courage the widespread flow of certain types tion. This is especially true of the copyright of information. Secrecy is maintained in order system, which was established specifically to to give the holder of the trade secret a com- deal with the social and economic changes petitive advantage in the marketplace. brought about by what, historically, has Like the printing press, the new information proved one of the most “world shaking” in- technologies also affect society. They are formation technologies-the printing press. changing the way people work and conduct Characterizing copyright role in structuring their business; how they interact and relate to information flow, Edward Plowman and L. one another; the way they learn, create, and Clark Hamilton wrote: process information, and their needs and ex- In a wider perspective, a number of basic pectations. In fact, these new technologies are altering the way man views himself and his dimensions of the nature and function of 3 copyright may be distinguished. In an over- place in the world. all, cultural perspective, the stated purpose Together, the development and widespread of copyright is to encourage intellectual cre- use of these new technologies have helped to ation by serving as the main means of recom- pensing the intellectual worker and to protect usher in what some social observers charac- his moral rights. In an economic sense, copy- terize as a “post-industrial,” or “information”

‘Puscher, “Copyright in the German Democratic Republic,” ‘Edward W. Plowman and L. Clark Hamilton, Copyright: Copyright IMZetin of the LEA, vol. 10, No. 3, 1976, as cited Inteflectmd Property in the Information Age (London: Rout- in Stephen Stewart, The Law of Internati”omd Copyright and ledge and Kegan Paul, 1980), p. 25. Neighboring ~“ghts (London: Butterworth & Co. (Publishers) ‘Sherri Turkel, The Second Self: Computers and the Human Ltd., 1983), p. 10. Spirit (New York: Simon & Schuster, 1984), Ch. 2—Intellectual Property Goals in a Changing Information Environment ● 33 society.4 In this society, the creation, use, and tual property systems and the goals that gov- communication of information plays a central ernments have sought to promote by granting role. Not only will the amount of information those rights. The connection between these fac- continue to increase, but people will also rely tors and intellectual property systems is clear- on it in more and in different circumstances. ly visible if one examines the concept of intel- The changes brought on by the new technol- lectual property as it evolved over time. In- ogies will generate new social, economic, and tellectual property rights began in a autocratic cultural opportunities and choices, which will period, as a tool of monarchs to stimulate bring with them the need for major policy invention, regulate trade, reward favorites, decisions. establish patronage, and control and censor the dissemination of ideas and information. Two Because intellectual property policy, and es- hundred years later, in a democratic context, pecially copyright policy, serve as a policy tool this tool evolved into a system designed to fos- that structures the use and flow of informa- ter freedom of expression and the creation and tion, it is likely to play a major role in an infor- dissemination of new ideas. mation age. How the intellectual property system is structured will determine not only which individuals and groups benefit from the new Emergence of the Concept of opportunities afforded by the new technol- Intellectual Property Rights ogies, but also in what ways and the extent The birth of the idea of intellectual property to which, as a society, we might take advan- itself demanded certain social conditions. It tage of them. Furthermore, if the enhanced required a centralized political authority and value of information creates conflicts between a government that intervened in economic af- economic, political, and cultural goals, the fairs; the development of trade and commerce; structure of the system will establish some of a market for literature, art, and invention; and the rules that determine whether information the growth of the idea of, and respect for, the will be treated as an economic commodity or individual as creator. Only in the late Middle a societal resource. Ages did such conditions develop, and only Given the relationship between intellectual then did the concept of intellectual property property goals and social change, and the prob- rights, as we know it today, emerge.5 able influence of the copyright system in an In addition to these societal changes, tech- information age, the question arises of whether nological change-and in particular, the devel- the policy goals of the United States intellec- opment and widespread deployment of the tual property system, established in an agrar- printing press— also created the need for in- ian society and when print technology domi- tellectual property protection. Before the de- nated, are still appropriate for today. velopment of printing, inventors, embodying their ideas within their own persons, did not Evolution of the Concept and Practice need to concern themselves with the prospect — ------of Granting Intellectual Property Rights ‘Bruce W. Bugbee, Genesis of American Patent and Copy- right Law (Washington, DC: Public Affairs Press, 1967). This Social, economic, political, and technologi- latter condition existed in Roman times where the social cli- cal factors all influence the nature of intellec- mate was supportive of individual attribution and payment for intellectual activities. In a number of texts from the period, for example, there are references to individuals as authors and to 4For discussions and characterizations of the “ Information the terms of payment for intellectual contributions. Moreover, Society. ” See, for example, U.S. Congress, Office of Technol- plagiarism was clearly considered to be unethical. There is no ogy Assessment, Computer-Based National Information Sys- evidence, however, that such attitudes and procedures were in tems, OTA-CIT-146 (Washington, DC: U.S. Government Print- any way sanctioned by law. Conditions radically changed during Office, September 198 1); Susan Artandi, “Man, Information, ing the Middle Ages, however, when monasteries and other re- and Society: New Patterns of Interaction, Journal for the Amer- ligious institutions began to assume primary responsibility for ican Society for Information Science, January 1979; and Daniel intellectual and creative pursuits. As in pre-Roman times, the Bell, The Coming of Post Industrial Society (New York: Basic idea of individual, as author, lost support. Plowman and Hamil- Books, 1973). ton, Copyright, pp. 9-11. 34 ● Intellectual Property Rights in an Age of Electronics and Information — — . of others reaping the financial rewards of their ly increasing the speed and reducing the costs work. They simply went from town to town of reproduction, printing made it much easier selling their intellectual wares. However, once to disseminate ideas. By increasing the gen- their ideas were recorded and widely distrib- eral level of literacy, it also made more people uted in print, the inventors lost this control susceptible to, and eager to partake of, such and, hence, their economic bargaining power. ideas. As a result, the market for information The problem created by the printing press was products and literary works grew, and their even greater for authors whose profits were economic value was greatly enhanced. In fact, derived not from their ideas but from what sub- one might say that printing was the growth sequently was even more easily duplicated, the industry of the time. Later, as books and written word itself. manuscripts ceased to be isolated on mones- tary shelves, and became available to many The first intellectual property rights were people simultaneously, they began to serve as granted as patents. Characterized by one au- an important forum for public discussion. thor as being “the idea of progress appearing in the law, patents were associated with tech- Occurring at the time of religious and polit- nological development from the start.6 Offered ical turmoil, printing presented the monarchs by sovereigns and local governments as part of Europe with both a political threat and an of their overall economic policies to stimulate economic opportunity. The law of copyright commerce and technological advance, they was developed to deal with this threat, as well were, essentially, monopolies designed to en- as to take advantage of this opportunity. The tice artisans and inventors into their States shape the law took reflects its dual purpose: or localities.7 censorship of the press and regulation of trade. Although copyright systems were established Copyrights-or the granting of rights in liter- across Europe, England provides the most use- ary property—did not develop in either con- ful illustration of how the system worked, since cept or practice until the 15th century. Even the American system was derived from Eng- more than patent rights, copyright can be iden- lish experience. tified with one specific technology, the printing press. Copyright as a Mechanism for The printing press brought about major so- Censorship and the Regulation of Trade cial, economic, and political changes.8 By great- As in most European countries, England’s ‘Significant inventions of the late Middle Ages included various processes that would increase the efficiency of artisans, need for copyright protection arose with the such as textile-making equipment, textile dye processes, glass invention of the printing press, and it had its manufacturing, stained glass processes, mining and metallurgy, origins in the English censorship laws. These windmills, and ship-building designs. Bruce W. Bugbee, Gene- sis of American Patent and Copyright Law (Washington, DC: acts included the Star Chamber Decrees of Public Affairs Press, 1967), pp. 12, 167. 1566, 1586, and 1637, as well as three acts ‘The city-state of Venice, with its important role in world passed in the 1640s during the Interregnum, commerce and its strong central government, became the first government to grant patents. The importance that the Vene- and the Licensing Act of 1692. Together, they tians attached to the goal of economic development is reflected provided for such things as the granting of pat- by the fact that a patent right granted in a work had to be relin- ents for specified works, the confinement of quished if it did not prove to be commercially successful. As printing to authorized presses, the licensing towns and commerce revived, technological development acceler- ated, and political centralization increased, this practice of grant- of books before publication, and the use of ing patent rights spread throughout Europe. trade organizations and special government ‘For a detailed and in-depth discussion of the social changes 9 brought about by the advent of printing, see Elizabeth L. Eisen- agencies for enforcement. stin, The Printing Press as an Agent of Change: Communica- tions and cultural transformations in early modem Europe, vol. While direct censorship was the most effec- I and 11 (Cambridge, England: Cambridge University Press, tive means of confronting the political threat 1982); For a discussion of the more general impact of communication technology on society, see Harold Innis, The Bias of Com- ‘Benjamin Kaplan, An Unhurried View of Copyright (New munication (Toronto: University of Toronto Press, 1951). York and London: Columbia University Press, 1967). Ch. 2—Intellectual Property Goals in a Changing Information Environment ● 35 . brought about by the new technology, it also of the book trade. By buying up all of the rights stifled the printing industry, and thus limited to copy books, the publishers had effectively the government economic benefits from print- limited their competition, restricted the sup- ing. Seeking to both end the dissemination of ply of books, and artificially raised prices. No heretical and seditious literature, but still longer in favor of blatant censorship,14 or sym- profit from the burgeoning printing trade, the pathetic to monopoly, the Parliament found English Government aligned itself with pub- this situation unacceptable. In 1695, it failed lishers. In exchange for an agreement to en- to renew the Licensing Act of 1692, thus al- force the censorship laws, the government lowing the Stationers copyright to lapse. granted the publishers’ guild, known as the The result was confusion in the book trade. Stationers, a monopoly right to print, publish, Piracy became commonplace. The Stationers and sell works—a copyright. ’” aggressively appealed to Parliament to re- The effectiveness of this arrangement came establish order with a new copyright law. As about, as Ithiel de Sola Pool has noted, because Lord Camden later described it: “the printing press was a bottleneck where cop- 11 They–the stationers (whose property by ies could be easily examined and controlled." that time) consisted of all the literature of the The arrangement was also beneficial to pub- Kingdom, for they had contrived to get all lishers. It not only provided them with a mon- the copies into their own hands-came up to opoly; but also, as partners with government, Parliament in the form of petitioners, with they were free to manage their own affairs,12 tears in their eyes, hopeless and forlorn, they Thus, through their bylaws, they regulated the brought with them their wives and children book trade. ’3 to excite compassion, and induce Parliament to grant them a statutory security. ’5 Copyrights To Prevent Monopoly Responsive to the Stationers’ petitions to Practices: The Idea of Author Rights reestablish order in the book trade, but opposed to excessive monopolies, the Parliament In the period following the Restoration, the passed legislation in 1709 that was supposed Government’s major concern was no longer to meet both concerns. This was the Statute press censorship. Instead, there was a grow- of Anne. Characterized as the first modern ing—. wariness — about the publishers’ monopoly copyright law, it served as the model for copy- “’The copyright was limited to members of the Stationers’ right law in the United States, and all other guild so that only registered members could print books. Once English-speaking countries. a publisher entered the title of a work, his name, and the date of publication into the company register, he obtained a perpetual Although the Statute of Anne resembled the copyright in it. With what was essentially an economic right Stationers’ copyright in some ways, it was de- designed to protect his investment from competition, the publisher could also trade in rights. He could buy copyrights, sell signed to end their monopoly of the book trade them, or assign them to any other member of the company. When and included several provisions to assure this cases of copyright infringement and disputes among publishers end. Copyright would no longer be exclusive; arose, they were decided by the company courts. The Stationers’ copyright remained in force for over 150 years, when the condi- the statute made it available to everyone. tions underlying the system changed significantly. Stephen Moreover, it was limited to a period of 14 Stewart, Law of International Copyright, and Neighboring Rights (London: Butterworths & Co. (Publishers), Ltd., 1983). ‘‘ Ithiel de Sola Pool, Technologies of Freedom (Cambridge, —-.—_.——— MA: Belknap Press, 1983), pp. 16-17. “It should be noted that the repression of the press did not “Originating as a craft guild in the early 15th century, the end in 1693. Instead of using copyright as a mechanism to con- Stationers were established as a company by Henry VIII in trol the press, the British Government used a tax policy. The 1557. They consisted of members of the book trade—printers, government imposed taxes, for example, on newsprint, ads, and book binders and booksellers. For a discussion of the history on newspapers. one newspaper The Spectator, folded in 1712, of the Stationers’ Company and its role in the development of as a result of increased publication costs due to heavy taxa- copyright, see Lyman Ray Patterson, Copyright in Historical tion. de Sola Pool, Technologies of Freedom, p. 15. Perspective (Nashville, TN: Vanderbilt University Press, 1968). “’’Donaldson v. Becket” (H.L. 1774), as reported in 17 Han- Chapter IV. sard, Parh”amentary History of England, 953, 995 (1813), as “Stewart, The Law of International Copyright, p. 18. quoted in Kaplan, Unhurried View, p. 7. 36 ● Intellectual Property Rights in an Age of Electronics and Information years. ’G As a concession to the Stationers, the too, were generally more willing to reward the act allowed them to maintain their existing author for his special contribution to society. copyrights for a period of 21 years, after which As Kaplan has pointed out, there was a grad- the works attached to them would be returned ual moving away from the Elizabethan per- to the public domain. spective that imitation was admirable and innovation dangerous, and a growing apprecia- Entitled “A Bill for the Encouragement of tion of the role of the creator.21 Learning and for Securing the Property of Cop- ies of Books to the Rightful Owners Thereof," These developments, notwithstanding, copy- the new statute stated clearly that copyright right in England remained a statutory right, should benefit authors. The law advanced the reflecting its origins as a privilege granted by idea of authors’ rights, absent from the Sta- government to achieve a particular public pol- tioners’ copyright, although authors had pre- icy purpose. The issue of authors’ common law viously been paid for their works. 17 In the new rights was tested in two major court decisions. political and economic context, however, par- In the first, Millar v. Taylor (1769), the pub- liamentary leaders viewed the granting of lishers’ and authors’ point of view prevailed: copyright to authors as a good device to break the court ruled that the author had a common the publishers’ monopoly, although not nec- law copyright in perpetuity. Five years later, essarily inherently virtuous.18 however, this position was reversed with the decision in the case of Donaldson v. Becket de- The legitimacy of the claim of authors’ rights livered by the House of Lords in 1774. While also found support within the larger society. recognizing the author’s common law right to In 1690, John Locke argued in his TWO Trea- print, publish, and sell his work, and his right tises on Civil Government that the author has to assign his copyright to another, the House a natural right in his work since he had ex- of Lords held that this right was supplanted pended his own labor in creating it. ” At the by the Statute of Ame. Thus, while the author same time, European thinkers and jurists put 20 had a right to decide whether to publish or not, forth similar views. The public and the courts, —. . -. - once he had chosen to do so, his copyright was “The statute allowed a second’ term of 14 years if the a statutory one and it was limited by the terms author was alive. Even if he had sold his copyright, the author of the statute.22 could claim it back after 14 years. “Manuscripts were generally bought from authors for some As this brief account suggests, the concept lump sum. Once the authors sold his material to the publishers, it was the publishers who had the right to make multiple co- of intellectual property rights emerged at a par- pies, Kaplan, Unhurried View, 1967. ticular time when socioeconomic conditions ‘“Ironically, in the end, the publishers were the most effec- were ripe for it. It emerged as a public policy tive and outspoken constituency in generating acceptance for the idea of authors’ natural rights in their work, and it was they device to deal with the problems and enhance who benefited most from it. The previous statutes, it should the benefits of the rash of technological inno- be remembered, provided publishers with an economic right, vations that occurred in the late Middle Ages which protected only the economic benefits derived from the publication and sale of copies. The issue of who owned the work and early Renaissance. The law of copyright, was not involved. However, with the growing acceptance of the in particular, was related to the advent of one idea that the author had a natural right in his work, the notion technology, the printing press. of what the right protected was considerably expanded. Since —-———— — authors routinely assigned their copyrights to publishers, hav- “As Kaplan notes, “From the classical writers as ex- ing no other recourse to distribute their works, it was the pub- pounded by critics of the Italian and French Renaissance, the lishers, and not the authors, who benefited over the long run Elizabethans had received the notion that artists’ excellence from this expanded right. Patterson, Historiczd Perspective, lay in imitating the best works of the past, not in attempting p. 18. free imitations. All they needed, indeed, all the possible sub- “John Locke, Two Treatises on Civil Government (Cam- jects and materials for literary production were already disclosed bridge, England: Cambridge University Press, 1967). in existing writings, the “publica materia ” to which Horace re- “’European jurists conceived of authors rights as being nat- ferred. What was required of an author was to give an expres- ural to the way things are. In France this attitude was incorpo- sion compatible with his own time. ” Kaplan, Unhurried View, rated into two basic decrees granting authors: 1) the right to p. 23, public performance (1791 ), and 2) the right to copy and repro- “Ibid., p. 14; see also discussion by Patterson, which sug- duction (1793). These two decrees served as the mainstay of gests that if the common law courts had had a role in the early French copyright law for over 160 years. Plowman and Hamil- development of copyright, the English might have adopted a ton, Copyright, p. 16. stronger position in favor of the author. Ibid., p. 16. Ch. 2—Intellectual Property Goals in a Changing Information Environment ● 37

While the structure of the laws and the goals the treadmill of human existence—seemed to to which they were put have changed with time be yielding at last to the application of criti- and historical circumstance, intellectual prop- cal intelligence. Fear of change, up to then erty law has essentially remained a mechanism nearly universal, was giving way to fear of government can use to structure and channel stagnation; the word innovation, traditionally an effective term of abuse, became a word of the societal impacts of technological change. 23 praise. In the Elizabethan era, intellectual property law was used to control the flow of informa- Looking at the concept of learning in this tion. But when transplanted to the United context it is clear that, to the Founding States, it was conceived of not only as an in- Fathers, learning was more than an end in and strument to foster the creation of new inven- of itself. It was the hope of an age, the means tions and ideas but also to encourage their dis- to achieve a whole range of goals. With knowl- semination among the public. edge and learning, virtually anything was considered to be possible. Traditional Goals of the That knowledge should be fostered and dis- U.S. Intellectual Property System seminated was also a paramount belief of the times. The age of enlightenment was, accord- Although the ruling monarchs of Europe had ing to Gay: regarded the widespread dissemination of information with considerable alarm, the oppo- ... an age of academics—academics of medi- site view prevailed in the United States. Build- cine, of agriculture, of literature, each with ing a nation required the establishment of its prizes, its journals, and its well attended communication links, the development of a uni- meetings. In the academies and outside them, fied market, the forging of a common culture, in factories and workshops and coffeehouses, intelligence, liberated from the bonds of tra- and the building of a democratic polity. The dition, often heedless of aesthetic scruples or widespread flow of information was essential religious restraints, devoted itself to practi- to accomplish these tasks, and the establish- cal results; it kept in touch with scientists and ment of an intellectual property system, they contributed to technological refinements.24 believed, would aid the creation and spread of information. Appreciative of the potential that Given this general mood of the age, it is easy information held for fostering national devel- to understand why the idea of granting intel- opment, the Founding Fathers saw the grant- lectual property rights was so popular. Cor- ing of intellectual property rights, not as a nat- rectly anticipating acceptance of such a right, ural right, but as a statutory, or positive right, James Madison, wrote in The Federalist, for in this case granted to promote learning. example, “The utility of this power will scarcely be questioned.”25 He was right. There was To understand the import attached to the practically no discussion of intellectual prop- idea of learning, one must consider the histori- erty rights at the Constitutional Convention, cal context of the times. The writers of the Con- even though provisions for granting such rights stitution were products of the enlightenment. merited a prominent place in the Constitution. Their views and attitudes reflected the increas- The convention was convened in early May ingly pervasive awareness of the power of 1787, and was adjourned in mid-September. knowledge to affect social change. As the his- The issue of intellectual property rights, how- torian Peter Gay has described it: ever, did not arise until August 18th, when In the century of the enlightenment, edu- James Madison and Charles Pinckney each put cated Europeans awoke to a new sense of life. They experienced an expansive sense of pow- ‘{Peter Gay, The Age of Enlightenment: An Interpretation. The Science of Freedom (New York: W. W. Norton & Co., 1977), er over nature and themselves; the pitiless cy- p. 3. cles of epidemics, famines, risky life and early “Gay, Age of Enlightenment, p. 9. death, devastating war and uneasy peace— ‘“As quoted in Bugbee, Genesis, p. 130. 38 ● Intellectual Property Rights in an Age of Electronics and Information forth proposals to include among Congress’ case of Wheaton v. Peters which, drawing powers the right to grant intellectual property heavily on the British case of Donaldson v. rights. And the idea was not considered again Becket, concluded that copyright was a stat- until September 5th, when the Convention utory construct to the point of requiring com- unanimously approved without discussion a pliance with the formalities of the law as a con- committee proposal to adopt a constitutional dition of protection.28 It is clearly laid out again clause empowering the Congress “To Promote in the legislative committee report on the 1909 the Progress of Sciences and Useful Arts, by Copyright Act, which describes the purpose securing for limited Times to Authors and In- of copyright as follows: ventors the Exclusive Right to their respective Writings and Discoveries.”26 The enactment of copyright legislation by Congress under the terms of the constitution That the enhancement of learning was the is not based on any natural right that the purpose of this clause–Article 1, Section 8 of author has in his writings, for the Supreme the Constitution—can be reasonably discerned Court has held that such rights as he has are despite the lack of debate at the convention. purely statutory rights, but on the ground Two intellectual property rights proposals that the welfare of the public will be served and progress of science and useful arts will were submitted, one by Madison and one by be promoted . . . Not primarily for the bene- Pinckney. Although introduced independently fit of the author, but primarily for the bene- of each other, they both were couched among fit of the public such rights are given. Not other proposals aimed at advancing the state that any particular class of citizens, however of science and learning. Both proposals also worthy, may benefit, but because the policy authorized Congress, for example, to: is believed to be for the benefit of the great body of people, in that it will stimulate writ- grant charters of incorporation in cases ing and invention to give some bonus to authors where the public good may require them; and inventors. establish a university; encourage by premiums and provisions, The Founding Fathers’ hopes for the intel- the advancement of knowledge and dis- lectual property system were well founded. In coveries; and the century and a half after its establishment, establish public institutions, rewards, and there was not only a great flourishing of crea- immunities for the promotion of agricul- tive, technological, and scientific works; but ture, commerce, trade and manufacture.27 also, many of these works were designed with the needs of society and the common man in Because all of these proposals were submitted mind. Edward Riddle noted how much Amer- jointly, one can assume that they shared a com- ican technology reflected a concern for the pub- mon intent. lic welfare in his report to the commissioner Just as it was clear from the time of the Con- of patents about the 1851 technology exhibit stitutional Convention that intellectual prop- at the Crystal Palace in London. Comparing erty law was intended to serve the goals of edu- the U.S. contribution to those of other Euro- cation and learning, so it was also plainly pean states, he said: understood that intellectual property rights The Russian exhibition was a proof of the were to be considered statutory rights, granted wealth, power, enterprise, and intelligence of to fulfill a public policy purpose. This idea is Nicholas; that of the United States an evi- apparent in the first Federal copyright act of dence of the ingenuity, industry, and capac- 1790 insofar as it excluded nonresidents from ity of a free and educated people. The one was the benefits of copyright. It was reaffirmed, the ukase of an emperor to the notabilities moreover, by the Supreme Court in the famous of Europe; the other the epistle of a people to the workingmen of the world. . . . We ———— “Ibid., 128-130. “Patterson, Historical Perspective, ch. 12. ‘HKaplan, Unhurried View, p. 26. —.

Ch. 2—Intellectua/ Property Goals In a Changing Information Environment ● 39

showed the results of pure democracy upon of scientific genious, and the more will dis- 29 the industry of men. coveries immediately applicable to productive This close association of technology with industry confer gain, fame, and even power on their authors.31 democracy was widespread throughout Amer- ica in the first 100 years of its development.30 This enthusiasm for learning and the belief A democratic polity was thought to be a pre- that it is linked to technological development requisite to advancement in applied science, and socioeconomic progress is less apparent while technological achievements were ex- today. One can particularly see this in the area pected to provide the physical means of achiev- of intellectual property law. Unlike the founding the democratic objectives of political, so- ers of the intellectual property system, who cial, and economic equality. Visiting America saw the law as mutually serving both educa- in 1831, Alexis de Tocqueville, the well-known tional and economic goals, many people now commentator on American society, observed see these goals as competing with one another. this linkage. Describing the relationship be- A number of people fear, for example, that tween technology and democracy, he wrote: widespread public access to the new technologies will limit industry’s ability to exploit . . . the extreme social mobility in America fully the economic potential of these technol- was fertile soil for progress in technology, be- ogies. Emphasizing that economic growth and cause democratic peoples were ambitious, never satisfied with their status, and-above development is to the benefit of all individuals, all—were always free to change it. . . . You they urge that the law be restructured to fa- may be sure that the more a nation is demo- vor business needs over individual ones, and cratic, enlightened, and free, the greater will economic goals over social ones. As the follow- be the number of these interested promoters ing discussion points out, conflicts such as — -. these are likely to become more prevalent in ‘Wdward Riddle, “Report on the World’s Exposition, ” Re- port of the Commissioner of Patents for the Year 1851, House an information age. Exec. Docs., 32 Cong., 1 sess., No. 102, Part 1, pp. 484-85, as cited in Hugo A. Maier, “Technology and Democracy, 1800- “Alexis de Tocqueville, Journey to America, translated by 1869, ” Journal of American History, vol. 43, p. 625. George Lawrence, J.P. Mayer (cd. ) (New York: Anchor Books, “ Meier, Technology & Democraq’, p. 618. 1971).

OPPORTUNITIES AND POLICY CHOICES IN AN INFORMATION AGE The development of new technologies creates and who will benefit from them, depends on opportunities for society as a whole, as well an array of societal variables. The direction as for individuals and groups. The new infor- technology takes, for example, might be af- mation and communication technologies will fected by such factors as the role of govern- also create such opportunities. These technol- ment and policy makers, cultural mores, the ex- ogies are capable not only of generating, stor- tent of existing technological infrastructure, ing, and processing vasts amounts of informa- or the structure of the economic system. tion; they can also provide greater access to As we have seen, one way that governments information, enhance the environment for have historically sought to structure and chan- learning and creativity, generate new oppor- nel the direction of technological change has tunities for profit-making and economic growth, been through the intellectual property system. and enhance the decisionmaking process as To understand how intellectual property pol- well as facilitate participation in political and icy might affect the development of the new social affairs. information and communication technologies Whether and how people develop technologi- and the distribution of the opportunities that cal opportunities offered by recent advances, these technologies afford, it is necessary, first, 40 . Intellectual Property Rights in an Age of Electronics and Information to briefly identify these opportunities and vidual and each group in the system carry out point out where the realization of one may com- rationally conceived, specified roles which, plement or preclude the development of when taken together, are designed to maximize another. production. The principle means of achieving this value is by economizing; decisions are Three Realms of Opportunity made on the basis of cost/benefit analyses, and technology is applied to substitute less effi- Examining how society has evolved in the cient processes with more efficient ones. De- face of technological development, the sociol- signed to further this kind of rationality and ogist, Daniel Bell, characterizes modern soci- efficiency, the techno-economic realm is struc- ety as being divided into three distinct realms: tured in a bureaucratic, and hierarchical fash- the techno-economic, the political, and the cul- ion. 34 tural.32 In preindustrial societies, these realms were relatively indistinct from one another. Today, the new information and communi- However, with the advance of technology and cation technologies provide numerous ways of the specialization that it imposes, they have enhancing the values of the techno-econom.ic become increasingly differentiated. Today, realm: they can improve efficiency, increase each has its own rhythm of change, its own productivity, and thus they can engender eco- set of values, and its own corresponding mode nomic growth. Information is, for example, re- of behavior. Moreover, because the forces that usable and, unlike capital resources such as steel or iron, it requires very few physical re- drive each of these realms are no longer com- 35 plementary, they are generating a growing sources for its production and distribution. number of conflicts between them.33 Moreover, information can now be used not only to substitute more efficiently for labor; Bell’s framework for anaylzing advanced in- it can also be used to improve the overall effi- dustrial societies is a useful tool for identify- ciency of the productive process itself. And, ing the kinds of economic, political, and cul- as productive processes become increasingly tural opportunities that the new information complex in advanced industrial societies, the technologies provide. Because it describes how largest reserve of economic opportunities will each realm operates and the values that it sup- be in organizing and coordinating productive ports, it can help to pinpoint the particular activity through the process of information needs that the new technologies might serve. handling.” Given these characteristics and ca- Moreover, insofar as it identifies the areas pabilities, information is likely to become more where there may be conflict between realms, important as a resource in the techno-economic it may suggest circumstances under which realm. there might be competition for information resources, and hence conflicts about intellectual This growing importance of information to property goals. the economy is evident from the continued growth of the information sector of the economy, a trend that, as can be seen from figure Opportunities in the Z-I, has been paralleled in other advanced in- Techno-Economic Realm dustrial societies. In fact, it was to highlight The techno-economic realm is organized pri- such changes that terms such as the “infor- marily to produce and distribute goods and mation society” and the “information age” services. The principle value underlying this “Ibid., p. 11. realm is that of ‘functional rationality’ ‘—that “Harlan Cleveland, “The Twilight of Hierarchy: Specula- is to say, according to the rule that each indi- tions on the Global Information Society, ” Bruce R. Guile (cd. ) Information Technologies and Social Transformation (Wash- ington, DC: National Academy Press, 1985), p. 56. “Daniel Bell, The Cultural Contradictions of Capitalism “Charles Johnshur, “Information Resources and Economic (New York: Basic Books, 1976). Productivity, Information Economics and Policy I (North Hol- “Ibid,, p. 10. land: Elsevier Science Publishers, 1983), pp. 13-35. Ch. 2—Intellectual Property Goals in a Changing Information Environment ● 41

Figure 2-1 .—The Evolution of Information Occupations 34 percent of the gross national product (GNP), and accounts for 41.23 percent of the national labor force.38

Information occupations as percentage of the labor force The changing economic role of information can also be seen by examining how informa- 45 tion technologies are being used by business and industry. Businesses are now applying 40 computer technology to almost all of their activities: from recruiting to laying off workers, from ordering raw materials to manufac- 35 turing products, from analyzing markets to performing strategic planning, and from inventing new technologies to designing appli- 30 cations for their use.39 These technologies, moreover, are being applied not just to tradi- 25 tional tasks; the diffusion of the new technologies is also being used to reconfigure the nature of the business process itself.40 Figure 2-2, 20 for example, identifies how new technologies might be used to rationalize all of a firms activ-

15 ities. As a result, some economists are suggesting that in the future, whether or not a businss will be competitive, will depend on the extent 10 to which it can find creative applications for these technologies.” Representatives of indus- trv agree. As Airlliam H. Gruber, President “- 5 of Research and Planning, Inc., described it: The difference between now and five years 0 ago is that then technology had a limited I I 1 1 1 1 function. You weren’t betting your company 43 1950 1955 1960 1965 1970 1975 1980 on it. Now you are. Year

NOTE Data for Finland was derived from two separate sources: aI. Pietarinen bThe central Statistical Office of Finland SOURCE: H.P. Gassman, “Is There a Fourth Economic Sector?” OECD Observ- ...... er, No 113, November 1961, PP 18-20, as cited in Magda Cordell McHale 3RMichael Roger Ruben and Mary Taylor Huber, The (Center for Integrative Studies, SUNY at Buffalo), Facts and Trends The Changing Information Environment An Information Chartbook Knowledge Industry in the United States: 1960-1980. This vol- (Rome Intergovernmental Bureau for Informatics, 1985), p 32 ume updates work done by Fritz Machlup. In their breakdown of the information sector of the economy, Rubin and Huber note were first employed.37 A recent analysis esti- that, leaving education aside the contribution of knowledge pro duction to the GNP increased from 17.9 percent in 1967 to 24.5 mates that the information sector constitutes percent in 1980. The contribution of education, on the other hand, fell from 16.6 percent to 12.0 percent during the same period, “Fritz Machlup was one of the first to note these changes a decline that accounts for the fact that knowledge production’s and to measure the information sector in his pioneering work, overall contribution remained relatively stable at about one- now a classic, entitled The Production and Distribution of Knowl- third of the GNP. edge in the United States. Others have followed this tradition. ‘Theodore J. Gordon, “Computers in Business, ” Guile, 1n- By far, one of the most ambitious efforts to date has been the forrnation Technologies ami Social Transformation, p. 154. innovative work of Marc Uri Porat for the Office of Telecom- ‘“’’Information Power: How Companies Are Using New munications in the U.S. Department of Commerce. In 1967, ac- Technologies To Gain a Competitive Edge, Business Week, Oct. cording to Porat, information activities accounted for 45.2 per- 14, 1985, p. 108. cent of the GNP—25. 1 percent in the “primary information” “Michael E. Porter, Competitiw Advantage: Creating and sector (which produces information goods and services as final Sustaim”ng Superior Performance (London: Free Press, 1985). output) and 21.1 percent in a “secondary information” sector 431bid. (the bureaucracies of non-information enterprises). 42 . Intellectual Property Rights in an Age of Electronics and Information

Figure 2.2.—Uses of Information Technology Within the Firm Procurement Technology development Human resources Imanagement Firm infrastructure

I 1 technology - 1 I Inbound Operations Outbound Marketing & Service logistics logistics sales SOURCE Michael E Porter, Competitive Advantage: Creating and Sustaining Super/or Performance (London: Free Press, 1985),

Many businesses are already successfully pital Supply Corp. gained a competitive advan- employing technology to their competive ad- tage by being the first to communicate directly vantage. Merrill Lynch & Co., for example, with its customers via computer terminals. As used computers to identify and automatically a result, it was not only able to provide services invest funds that were idle in checking, sav- at less cost than its rivals, it could also use ings, credit card, and security accounts: In so the data collected in the process to more ac- doing, it was able to attract billions of dollars curately analyze trends and customers needs.45 in assets from other places. Even though com- Because of its new economic and managerial petitors were soon to-follow suit with their own importance, information is becoming much service offerings, Merrill Lynch, with its head more commercially valuable. Businesses have start, was able to maintain almost 70 percent 44 always been willing to pay for information such of— . the. — . . market.— Similarly, the America Hos- “Ibid., p. 109. “Ibid. Ch. 2—Intellectual Property Goals in a Changing Information Environment . 43

as market research and economic forecasts. scope of which can be seen in figure 2-3. De- Today, however, they are not only buying veloping hand in hand with the new technol- more; they are willing to pay much higher ogies, this industry is relatively young. More prices for it. Consider, for example, the high than half of the companies that comprise it price that a consortium of Japanese engineer- were formed since 1970. Nevertheless, it is one ing companies was willing to pay to understand of the fastest growing industries in the econ- what went wrong on Three Mile Island. They omy. In 1984, there were nearly 2,500 online offered to contribute $18 million to assist in databases. Based on an Information Industry the clean up in exchange for access to all of Association survey of 1982, it is estimated that the pertinent documents and records related these services accounted for revenue of $3.6 to the accident.46 On a more routine basis, billion. 49 By 1985, the number of data bases American business firms might pay $800 per had grown by about 12 percent. year for a monthly professional information In addition to service providers, new indus- service, or perhaps $15,000 for a market re- tries have also been established whose sole pur- search report shared by others in the indus- 47 pose is to provide information-on-demand. try. With estimated revenues of $660 million, this Today even private information can have industry consists of small research companies commercial value. The direct mail business is and a few major libraries that have made a a good example. Packaging data about indi- business out of finding documents and copy- vidual credit ratings, security clearances, and ing them for users. In the private sector, these background checks together with demographic are called “fee-based libraries, ’ “on-demand data, this $13 billion industry sells individual companies, or sometimes ‘information brok- names to magazine publishers and local servers.” They also include 5,000 special research ice companies for prices as high as $1 per libraries in the United States supported by a name.48 few inter-library loan networks such as the On- line Computer Library Center and the British The new technologies provide new ways and 50 Lending Library. new opportunities to meet these burgeoning information needs. They allow information to Given its increased value, information will be processed in a whole variety of new ways, most likely be exchanged less freely. Instead, adding value to it from the point at which it it will be treated more and more like a com- is created or composed to the point at which modity, to be bought and sold in the market- it is assimilated or used. For example, a book place. In fact, the rush for profits in informa- may be produced with paper and ink, on audio tion products and services is so pronounced cassette, or on optical disk; its content may that it might reasonably be compared to the be adapted into a television “mini-series” or California Gold Rush, a metaphor used most an interactive game that can be distributed in effectively by the information industry as the a variety of forms. theme for its 1985 annual conference. As the opportunities for creating new information products and services have increased, New Opportunities in the so too has the number of commercial providers. Political Realm Taking advantage of the increased demand for The polity is the realm of power. It is the information, the new technologies have spawned area of social activity where disputes are re- a rapidly growing information industry, the solved and social justice is defined, and where —-——— — —— “Christopher Bums, "Three Mile Island: Information Melt- resources and values are allocated in accord- down, ” Information Management Review, May 1985. ance with the general idea of justice. The basic ‘-Christopher Burns, Inc., The Economics of Information, contract report prepared for the Office of Technology Assess- ment, U. S. Congress, 1985. “Ibid. ‘“Ibid. “’Ibid., p. II-8. Figure 2-3.—lnformation Industry and Its Related Industries

Information Industry and Its related industries ● ● I

Data supply mlservice Data processing related industries

Machine time Data service col Iectlon . I sc, v I ce I - J oh order Inquiry Educat Ion proc~sslng - Ldwyt?r - serwce service research and dccountan t development etc F,le I nformat [on - ma I n te nance dlstrbut{on 8 ,01 serwce service

, Computer Computer sales Resedrch \er/lce - Advertls ng Industry and lease

Peipheral Maintenance 6rOdCt CdSt Ing equipment Service industry Data transmission Ne.vsp~per Equipment parts and supplier Industry Personnel W ucat ton drl d pLlbl lsh I nq persor r~el c~tspatrh

I n forma! I or) processor> Information producers I n format Ion Infrastructure Information distributors ......

I n puts Th~ response may be 10 Sectors mac h I nes and tectl nol crg Ies convey! ng I n format Ion from I rl d form a pprOD nate [() d used to sup port I n format Ion the I mt Ia[or to the reclptenl the I n for rnal I or) Inputs , ...... “......

Sc I en [ I f L and tech n I ra I Ad rT) r) st r at VP d rl d !m an ag~ri a I I nfor maf IOrI rna[- h I ntc v, orkers workers lcrrmponer) ts I

Po\tal ,3 nd fe leL om (;, r, I - a I arrc ,, ~, ,3’C[; I n tormat I LJn qat herer \ Consuttatlv* servl-c ...... :.

;OtJRCE l-l P Gassman, “IS There a Fourth Economic Sector?” OECD Observer, No 113 November 1981, pp 18-20, as cited In Magda Cordell McHale (Center for Integrative Studies, SUNY at Buffalo), Facts and Trends The Changing /n format/on Environment An Information Chartbook (Rome Intergovernmental Bureau for Informatics, 1985), p 32 Ch. 2—Intellectual Property Goals in a Changing information Environment ● 45

tion. For it is through the process of communications that people first develop a sense of community and a shared set of values that le- gitimize political authority.54 By magnifying and amplifying some actions, the communications process, moreover, distinguishes between what is a private act and what is a public af- fair. It organizes what may seemingly be random activities to show how individuals and . groups are related to one another in the pursuit of power, providing individuals who want to influence the course of political events a road map to guide them.55 Citizens rely on the communications process to gather information, to identify like-minded people, to organize their forces, and to articulate their political preferences. Furthermore, because it generates a common fund of knowledge and information, Courtesy of Information Industry Association the communication system facilitates productive and rational debate. Without some knowl- value that maintains the polity is “legitimacy” edge and understanding of how others are in- —the general adherence of the people to the formed, and of what they believe, individuals conception of justice embodied in the society’s could not make reasoned and sensible argu- traditions or constitution, and acknowledge- ments and decisions. 56 The communications ment of the authority that governs on its be- process also provides guidance to political half.51 Whereas in the economic realm change leaders. Because communication channels flow takes place in a linear fashion through in- in two directions, communications serve not creased specialization and economization, in only to inform citizens about political events, the political realm change comes about more they also provide feedback to political leaders haphazardly, through the competition for about the values and attitudes of their constit- power and influence. In a democratic polity, uents. 57 the means of bringing about change is participation and persuasion; individuals and groups Given this intimate relationship between the seek to gain access to resources and values by communications and political processes, it is shaping attitudes and beliefs about what con- not surprising that, just as the new technologies afford opportunities in the economic stitutes justice. To be effective, they must have access to both the means to influence as well realm, so they create new political opportuni- as the means to be influenced. They must have ties. Capable of sending a vast amount and a the right to obtain information as well as the right to distribute it. In contrast to the bureau- 54Karl Deutsch, IVa tionalisrn and Socia) Communication cratic structure of the economic realm, the po- (New York: Free Press, 1963). litical realm in a democratic society is decen- ‘5Lucien W. Pye (cd.), Communications and Political Devel- opment, Studies in Political Development [Princeton, NJ: Prince tralized and open.” ton University Press, 1965), p. 6. 5’Ibid. Communication and information pervade po- 57Mass media communicators, for example, interpret public litical life.” Without them there can be no na- attitudes, They adjust their materials to take into account how the public reacts to their descriptions of news and events. Those “Bell, Cultural Contradictions, p. 1. in position of political power, in turn, adapt their behaviors to “’Ibid. conform to the media’s portrayal of the public’s mood at any ‘“In the discussion that follows, the term communications one time. For a discussion of this theory see, Elihu Katz, “The refers to both the information and the process by which infor- Two Step Flow of Communications: An Up-To-Date Report on mation is shared and exchanged. the Hypothesis, ” Public Opinions Quarterly, vol. 21, spring 1957. 46 . Intellectual Property Rights in an Age of Electronics and /formation

wide variety of information long distances at other hand, whether it be cable, teletext, or the unprecedented speeds, these technologies al- computer, politicians can “custom target” low entire populations to experience major pub their messages to those who are the most likely lic and political events in common, thereby to be responsive to it. In this manner, they can fostering a sense of national community. Be- more efficiently allocate their time and re- cause they are also interactive, these technol- sources, focusing them on those voters who ogies can play a greater role in helping politi- are the most likely to give them support.59 cal leaders to communicate to the public and The new technologies, moreover, have poten- to assess its mood, thus helping to reinforce tial to aid citizens in acquiring the informa- the legitimacy of the political system. More- tion about government that they need in or- over, given the decentralized distribution of der to participate effectively in political life. many of the new technologies, and their capac- A growing number of communities and govern- ity to store, copy, manipulate, retrieve, and ment agencies, for example, now allow individ- send information, they can be used to foster uals to access their computerized records using participation, helping individuals to gain ac- 60 public terminals. Moreover, some people hope cess to information and other political re- that, in the future, individuals will not only sources, to locate parties holding similar posi- be permitted to access an agency’s data but tions, to articulate and widely disseminate also the computer software used to analyze this their views, and to more effectively and effi- data. With such information, citizens would ciently organize their political involvement. Al- be able to rerun agency decisionmaking mod- ready we see evidence of the new technologies 61 els, using their own assumptions or data. In being used in several of these ways. 63 addition, cablecasting 62 and teletext provide —-.—— In the past few years, for example, a grow- 59 Kevin L. Kramer and Edward J. Schneider, “Innovations ing number of political leaders are beginning in Campaign Research: Finding the Voters in the 1980s, ” Robert to use the new technologies to communicate G. Meadow (cd.), New Commum”cation Technologies in Politics: The Papers for a Conference, The Washington Program, An- more effectively with their constituents. A nenberg School of Communications, 1985. See also William C. number of senators and representatives now Paley and Shelly Moffett, “The New Electronic Media-Instant produce their own news clips and interviews, Action and Reaction, ” (knpm”gns and Elections, C. 4, 1984, pp. 4-12. which they transmit via satellite to their local ~he idea of government databases, accessible to the pub- television stations. This technique allows them lic, has existed since the 1960s and early 1970s. At that time, to speak directly to the public, without others many people hoped that the automation of government opera- 58 tions would produce vast stores of information about the gov- commenting on, or interpreting, their remarks. ernment and community which could be made available to interested citizens through remote computer terminals. Although Computer technology also provides new the ideal of remote access never materialized, today use of pub- ways to enhance the efficiency of political com- lic terminals for access to these databases within government munications. Using the mass media, for exam- agencies is common, and becoming more so. Kenneth L. Kraemer, John Leslie King, and David G. Schetter, innovative ple, politicians have to spend considerable Use of Information Technology in Facih”tating Public Access money and effort to send a message’ that will to Agency Decisionmak”ng: An Assessment of the Experience have enough overall appeal to pay for the ef- in State and Local Governments, final report prepared for the O~~~;:;f Technology Assessment, March 1985, pp. 35-36. fort. Using the new electronic media, on the “Utilization of these channels by local government is gener- —.———— ally low. Most cities have only about two cable applications for ‘“Paul West, “The Video Connection: Beaming It Straight governmental affairs programming. These have mainly been to the Constitutents, ” Wasfu”ngton Journalism Review, June limited to a variety of one-way services that require a minimal 1985, pp. 48-50. Congressmen have always appealed to the public production effort, such as for broadcasting city council meet- directly through newsletters, questionnaires, and other franked ings, for community bulletin boards, and for calendars and short materials. However, some observers consider the use of satel- local news items. Ibid., p. 35. lite technology as a different kind of development, which may “There is considerable potential to provide public access to give cause for alarm. Unlike the previous kinds of appeals, which information related to government decisionmaking via teletext were sent to individuals and which were clearly identified as and videotex services. At present, the kinds of information pro- being politically oriented, the new video materials are often dis- vided generally are limited to such things as notification about tributed as part of local news broadcasts, and thus their origin schedules for hearings, meetings, etc., or to the posting of the and intent might be misconstrued. results of such activities. Ibid. Ch. 2—intellectual Property Goals in a Changing Information Environment ● 47 new channels for public access to governmental using a range of different assumptions. Accord- decisionmaking by increasing the levels of pub- ing to lobbyist Casy Dinges, this kind of in- lic awareness, interest, and knowledge about teraction is not only effective in informing con- governmental affairs. gressmen of an organization’s point of view; it also provides them with a memorable experi- To effectively champion one’s views, indi- ence, thereby engaging their interest in the is- viduals, however, do not just act alone; they 65 sues over the long term. act in concert. The new technologies, with their capabilities to store, manipulate, retrieve, and Because of their effectiveness as political network are optimally suited to help them in tools, the new technologies are becoming es- this regard. With a personal computer and a sential to all those who aspire to influence the modem, individuals can collect and store in- political process. For, just as these tools are formation related to their concerns; they can often the critical competitive factor in the eco- maintain lists of potential supporters and con- nomic realm, so too are they in the political tributors and target specific messages to them; realm. Thus, politicians and politically active they can match organizational resources with citizens, like their businessmen counterparts, organizational needs; and they can gain con- are hurrying to establish their own informa- stant feedback about the progress being made. tion bases. This move towards technology is Figure 2-4 below illustrates, for example, how very apparent, for example, at the level of na- the new technologies can manipulate and struc- tional politics. Trying to catch up with the ture information in a way that will improve Republican Party, which began very early to both the efficiency and effectiveness of a po- incorporate technology into its campaign oper- litical campaign. ations, the Democratic National Committee is now endeavoring to equip itself with an infor- Clearly one need not be a seasoned political mation infrastructure that will include a na- activist to take advantage of these new capa- tional bulletin board, that is capable of trad- bilities. Acting on his own, one man in Colorado ing political information between the national Springs, for example, led a successful cam- 66 paign to block a local ordinance placing restric- office and key House candidates. tions on home-based entrepreneurial activities. With the numerous possibilities that the new Surprised that he was the only citizen to at- technologies afford, attention is becoming, fo- tend the first hearing on the ordinance, he cused on the politics of information. In the in- brought the issue to the community’s atten- ternational arena, for example, Third World tion by publishing it together with a list of his countries now assert that the control over in- concerns on his computer bulletin board. A formation within their national boundaries is small notice in the local newspaper helped to vital to their economic, political, and social advertise his plan. A number of people contrib- well-being. To achieve their ends, they are call- uted their comments via the computer net- ing for a new World Information Order, that work. When, several weeks later, a second hear- would allow them to select the information that ing was held, 175 people appeared to defeat enters their nations and that would assure the ordinance.64 them access to the information they require for development.67 Information technologies can even be used to lobby. Lobbyists for the Environmental Fund, for example, carry a personal computer when visiting congressional offices. Their specially designed interactive software allows con- “Interview with Casy Dinges, Lobbyist, Environmental gressmen to look at population projections Fund, April 1985. ‘i’ David Burnham, “Democrats Chase Dollars With Com- puter Aid, ” The IVew York Times, Feb. 5, 1986, p. B6. ‘“Joge Becker, Information Technology and A New Infor- “’Dave ~ughes, “The Neighborhood ROM, Computer-Aided mation Order, Information and Society Series (Amsterdam: Local Politics, ” 45, Whole Earth Ret’iew, March 1985, p. 89. Chartwell-Bratt Ltd., 1984). 48 ● Intellectual Property Rights in an Age of Electronics and Information

Figure 2-4.— Development of Custom Targeting Database Work flow . Survey Census Election data data returns .

Derive Derive neighborhood Derive custom clusters profiles precinct profiles , ● Candidate vote ● Age ● Core republican intentions . Income ● Core democratic ● Issue orientation . Education . Ticket splitting ● Job approval . Race areas ● Turnout . Occupation

Custom targeting database

● Rank “neighborhoods” from the most to least attractive on vote intention . Select best “neighborhood” targets

● Determine appropriate message appeals

w Registered voter file

● Name and address • Carrier routes

. Phone numbers, ● Party affiliation

● Vote history ● Date of birth

Phone banks canvassing Direct mail Party building , Telephone calling Computer tape Check off lists forms Precinct walk lists Mailing labels Precinct lists Clerical needs b & SOURCE Kevin L Kramer, Edward J. Scheneider, “Innovations in Campaign Research, Finding the Voters in the 1980s, ” NewCommunications Technologies in Politics. The Washington Program, Annenberg School of Communications, Robert G. Meodans (cd.), Washington, DC, 1985, p 24 Used with permission Ch. 2—Intellectual Property Goals in a Changing Information Environment ● 49 —

Political observers in advanced industrial- identities of both individuals and societies.72 ized societies are also considering how the new This realm comprises all of those imaginative technologies might affect political life. Among and spiritual activities—such as painting, po- them, they have developed two quite distinct etry, or music, as well as litany, liturgy, and and contradictory scenarios. One of these ritual—whereby men and women seek to un- posits “the rise of the computer state."68 derstand their natures–who they are, their According to this scenario, government and relationships to others and to God.73 Although large corporations will use the centralized stor- the ways that people have dealt with these ex- age and processing capabilities of computer istential concerns have changed considerably technology to consolidate their control and to over time and in different eras, the themes that monitor and manipulate behavior. The second have preoccupied mankind–death, tragedy, scenario, in contrast, envisions the opposite love, sacrifice, heroism, obligation, and re- state of political affairs. Characterizing the new demption–have remained constant. Thus new technologies as “technologies of freedom, ” this art forms and new ideas do not replace old ones; view of the future postulates that, given their they become apart of an ever expanding source decentralized use and increased availability, on which individuals can draw to recreate and these technologies will lead to a dispersal of reinterpret aesthetic and religious experience. political power and permit enhanced participa- The cultural realm, then, is governed by the tory democracy.” principle of communal sharing and exchange.74 Evidence can be found to support both of Communication is the process by which cul- these contentions. As has already been pointed ture is developed and maintained. For it is only out, some local communities are taking steps when people develop language, and thus a way to increase the public’s access to information. of communicating, that a culture can, in fact, On the other hand, taking advantage of the emerge and be imparted.75 Information, the monitoring and processing capabilities of the content of communications, is the basic source new technologies, government is looking more of all human intercourse.7’ Over the course of favorably at the prospects of employing such human history, it has been embodied and com- devices as electronic surveillance, computer municated in an ever expanding variety of matching, and polygraph testing.70 In the long media, including among them spoken words, run, the political outcome will depend less on graphics, artifacts, music, dance, written text, the technology itself and more on the legal and film, recordings, and computer hardware and social structure that determines how the new software. Together, these media and the chan- technologies will be used. nels through which they are distributed, constitute the web of society, which determine the Opportunities in the Cultural Realm direction and pace of social development. Seen from this perspective, the communication of in- Culture is the realm of “sensibility of emo- formation permeates the cultural environment tion, moral temper, and of the intelligence and is essential to all aspects of social life.77 [that] seeks to order these feelings.’’” Provid- ing a consistent moral and aesthetic frame of Linked as they are to all social activity, the reference, it serves to develop and sustain the new information and communication technologies provide endless opportunities to enhance the cultural realm. Given their networking ca- ‘“See, for example, David Burnham, The Rise of the Com- “Without a cultural tradition, individuals interactions puter State: The Threat to Our Freedoms, Our Ethics, and Our would be meaningless. For, in order to define themselves and Democratic Process (New York: Random House, 1984). to take purposeful action in different situations and in relation- ‘‘Ilarlan Cleveland, “The Twilight of Hierarchy: Specula- ships to others, individuals need reference to a relatively stable tions on the Global Information Society, Bruce R. Guile (cd.), construct of shared symbols. Talcott Parsons, The Social Sys- Information Technologies, p. 61. tem (Glencoe. IL: Free Press, 1964), pp. 11-12. U.S. Congress, Office of Technology Assessment, Federal “Bell, Cultural Contradictions, p. 12. (;o~ernment Information Technolog~’: Electronic Sur\’eillance “’Ibid. p. 15. and (’i~rif I.iberties, OTA-C IT-293 (J1’ashington, DC: U.S. Go\r- “ Ibid. ernment Printing (Mice, October 1 985). “Pye, Political lle~’elopment. p. 4. Bell, Cultural Contradictions, p. 12. Ibid. 50 c /intellectual Property Rights in an Age of Electronics and Information pabilities, they provide an expanded infrastruc- lites, and computer bulletin boards, to name ture for information sharing and exchange. but a few. They can be used, moreover, not only to gen- The new technologies also allow people to erate greater amounts of information and new receive information specifically tailored to their kinds of cultural forms, but also to make this needs. Today many newspapers, for example, knowledge more accessible and to provide it use computer technology to create and distrib- in more convenient and suitable ways. In addi- ute special editions for different geographical tion, because they are decentralized and widely audiences .80 Similarly, community, religious, available, they open the way for many new peo- and citizen-based organizations use technol- ple to become actively involved in creative ogy to select the audience for whom their mes- activities. Finally, given their ability to store sages would be most relevant. Using home and retrieve vast quantities of information, technologies, people can also select the infor- they can serve as a storehouse of cultural re- mation they desire. They might, for example, sources, making them accessible and available choose bibliographic data or financial informa- for generations and civilizations to come. tion from on-line databases such as the Source Many of these opportunities are already be- or CompuServ. Or, they might just place a ing developed. Most prominent is the oppor- query on their electronic bulletin boards. tunity to provide more and more information. With the new technology, people can, more- Between 1960 and 1977, for example, the words over, use information at times and under con- supplied in all media grew at a rate of 8.7 per ditions that are most convenient for them. year, which is 5 percent faster than the rate With an audio or video recorder, they can lis- of growth of the the GNP (measured in con- ten to or watch programs at a time other than stant dollars). The total number of words when they were originally aired. Moreover, produced has increased from 1.07 X 109 in 1960 9 78 they can rent or buy an ever growing number to 3.36 x 10 in 1977. And individuals are of tapes and programs to enjoy at their leisure consuming, on the average, 1.2 percent more in their homes. Such flexibility not only allows words each year. As already noted in figure viewers the choice of when and what to watch; S-3, the largest proportion of this growth is because it permits them to record program- attributable to electronic media. ming for later viewing, it also allows them to Moreover, this information can now be pro- expand their repertoire of home entertainment. vided in a much greater number of forms, The power of the new technologies to en- giving people the opportunity to have more hance the cultural realm are evident not only control over, and choice about, the kinds of in- with respect to the quantity, variety, and ac- formation and cultural works that they enjoy. cessibility of the information that individuals One new technology that will increase infor- can receive in their homes. Of equal, if not mation channels, for example, is videotex. By more, significance is the fact that these tech- taking advantage of television’s full channel nologies are interactive. As such, they en- capacity, this technology can augment the 81 79 courage active, not passive, behavior. More- number of information outlets 100-fold. Other over, given their ability to copy, store, and new technologies that increase the available reprocess information, and to transmit it to sources of information are videocassette re- large audiences, they make it possible for or- corders, optical disks, direct broadcast satel- dinary individuals to carry out activities that —— 82 ‘81thiel de Sola Pool and Roger Hurwitz, “Methodological once required the skills of a specialized elite. Issues in the Measurement of Information Flows, ” Workshop Now conceivably, everyone can be a creator on Measurement of Information, Sponsored by the National Science Foundation, Research Program on Communications Pol- ‘“Anthony Smith, Goodbye Gutenberg: The Newspaper icy, Massachusetts Institute of Technology, July 1982, p. 8. Revolution in the 1980s (Oxford: Oxford University Press, 1980), “’Irving Louis Horowitz, “New Technology, Scientific Infor- pp. 51-61. mation and Democratic Choices, ” Information Age, vol. 5, No. “Horowitz, Information Age, p. 69. 2, April 1983, p. 69. “’Ibid. Ch. 2—lntellectual Property Goals in a Changing information Environment ● 51

and a publisher. Each person can actively con- ical prowess, and which can be done at home, tribute to his culture, and not just partake of it. a number of senior citizens are thinking about using their newly acquired skills to begin a sec- The ability of technologies to help individ- ond career. Recognizing this potential inter- uals reach out to the community is no where est, some communities have begun programs better illustrated than in the case of videotex. to get the elderly more involved.” The Little Although this technology has not yet taken House Senior Adults Center in San Mateo, hold in the United States, the French experi- California, for example, has been so success- ence with it provides a clue about what a na- ful with its computer programs that its direc- tional system such as this might entail. Es- tors are now thinking about building a com- tablished by the French Government in 1981, puter network for the elderly. the French system, Teletel, now consists of 1.4 million terminals—called Minitels —operating In the same way that individuals benefit in households and businesses throughout the from the new technologies, so too will cultural country.84 Using le Kiosque, Teletel’s most institutions such as libraries, schools, and popular feature, the French people can select museums. Using technology, these institutions from over 200 different kinds of information will be able not only to reach out into the com- services. Many use the system simply to “chat” munity to provide information and cultural with Minitel friends. Farmers rely on it for in works to those who would otherwise not have formation about the weather and commodity access to them, but also to help people to par- prices. In addition, the government is now be- ticipate in cultural activities. Thus they serve ginning to expand the system to provide hu- to replenish the cultural store. man services. Already, pilot programs are As documented in a previous OTA study, underway to develop networks for such groups Informational Technology and Its Impact on as diabetics, victims of AIDS, parents of 85 American Education, the computer and other epileptic children, and battered wives. information-related technologies can help Although the use of videotext has been much educational institutions play a major role in less popular in the United States than in providing people with the knowledge and skills France, Americans are also reaching out to they need to participate in and enjoy the ben- others on electronic bulletin boards. Becom- fits of an information age.88 The interactive na- ing increasingly popular among the public, ture of computer technologies allows students bulletin boards not only allow individuals to to become actively involved, and thus, more access information from their homes; they also engaged, in their own learning process. Using help them to contact others in similar situa- a videodisk to simulate laboratory experi- tions or with similar needs, to discuss and share ments, for example, students can view on a information, or even to collaborate with them monitor the explosion that would take place on-line. Groups, such as the disabled, who have if they were to mix incompatible chemicals .89 traditionally been isolated from society, have Videocassettes are also being successfully used found in networking a new way of socializing.” for educational purposes. The film company, Education and Learning, for example, has re- The new technologies also serve as catalysts for social action. Still eager to learn, many elderly people have found computing to be a “’Kathy Chin, “The Elderly Learn To Compute, ” Infoworki, very engaging past time. In fact, because com- May 7, 1984, pp. 24-29. ‘*U.S. Congress, Office of Technology Assessment, Informa- puting is an activity that does not require phys- tional Technology and Its Impact on American Education, OTA- CIT-187 (Washington. DC: U.S. Government Printing Office, November 1982). This study found that information technol- “Nadine Epstein, “Et Voila! I.e Minitel, ” The ,Vew York ogy is already beginning to play an important role in providing Times i$lagine, Mar. 9, 1986, pp. 48-49. education and training in some sectors, and that it is likely to ‘ Ibid. become a major vehicle for doing so in the next few decades. “Sherry SonLag, “For Disabled, Computers Are Creating “Jim Bartimo, “Classrooms To Utilize Videodisc Technol- New I,i\es,” The ,Vew York !l’imes, vol. 134, p. l(n) and 1(1). ogy, ” Infoworld, Mar. 12, 1984, p. 40. 52 ● Intellectual Property Rights in an Age of Electronics and Information

cently compiled a Video Encyclopedia of the portant of all, universities are now thinking 20th century, comprising 75 one hour video- about expanding their networking efforts to cassettes that cover major events from 1893 link their own systems to those that connect to 1985. Students can randomly access these researchers and research throughout the tapes to witness famous historical events, such United States.94 as the Scopes trial, or to view periodic pieces As institutions that acquire, store, manage, describing such things as the costumes of a 90 and disseminate information, libraries are also particular era. well suited to take advantage of the opportu- Universities, too, are also taking advantage nities that new technologies afford. And, in of new technologies. Over the past few years, fact, these technologies have affected all for example, many universities and colleges aspects of library services. Software is now have been experimenting with ways of in- commercially available for practically all li- tegrating computers into their course curric- brary operations: circulation, inventory, acqui- ula. At Stevens Institute of Technology, for sitions, periodicals, cataloging, and reserves. example, interactive calculus programs are Moreover, using these technologies, libraries used to assist students in learning to do math- have developed networks that can access na- ematical analysis. In chemistry, computers are tional databases, allowing users faster and used for graphic simulations and for drill and more efficient access to information. practice. In introductory computer graphics Considering all of these opportunities to- courses, computers serve as electronic draw- gether, the new technologies would appear to ing boards, and in the labs they are being used have been designed especially for a modern age to assemble data, provide interface with equip- such as ours, which seeks self-fulfillment and ment, and stimulate experiments that might self-realization. They offer convenience and otherwise be unfeasible, too expensive, or too 91 personal choice. They can promote self-discov- dangerous. ery. And with them, people can enter new Of particular benefit to universities will be realms, mental as well as physical. the development of computer networks, which Whether or not these opportunities are fully can connect students and faculty members to exploited is, of course, uncertain. For just as a wealth of information, both on and off cam- there are two opposing scenarios about politi- puses. These networks, still in their infancy, cal life in an information age, so too are there are modeled after ARPANET, the research two visions of the impact of technology on the network developed by the Department of De- individual, one more favorable than the other. fense. Carnegie Mellon University in Pitts- While acknowledging their potential, some peo- burg, Pennsylvania, has already taken major pie, for example, are concerned lest these tech- steps to develop such a network. By the end nologies serve to further divide the world be- of this year, they plan to link all of their stu- tween the information rich and the information dents’ personal computers into a time-sharing poor, reinforcing or even exacerbating exist- file system. This system will not only provide ing social and economic differences. In fact, for point-to-point communication and elec- the more powerful the technology, the wider tronic mail; it will also allow the user to browse the gap might be. through all of the databases on campus.92 Other universities such as MIT and Rensselear Poly- 93 that will allow programs available on one part of the system technic Institute are following suit. Most im- to be available on all others. Similarly, Rensselaer Polytechnic — ..—— Institute is planning a system that will not only be geared to “’Fred M. Hechinger, “Video Cassettes Bring History to problem-solving and calculations, but that will also serve to pro- I.ife, ” The IVew York Times, Jan. 14, 1986. vide electronic mail, word processing, on-line libraries, and com- “Donna Osgood, “A Computer on Every Desk, ” BJ’te, munication among faculty and students. Ibid. June 1984. “Dennis M. Jennings, Lawrench H. Landweber, Ira H. ‘“Ibid. Fuchs, David J. Farber, and W. Richards Adrion, “Computer “MIT network system is being developed through Project Networking for Scientists” Science, vol. 231, Feb. 28, 1986, Athena, a $70 million effort to create a single operating system p. 950. Ch. 2—Intellectual Property Goals In a Changing Information Environment ● 53

Those who are concerned fear that the poor They fear too that, given the growing market will be unable to afford the products of the in- value of information, information providers formation age if they are distributed primar- may increasily focus on producing high cost ily in the market.95 They worry, moreover, and highly profitable information products and about the possibility that only those who are services and cut back on their efforts to meet already skilled will be able to take advantage the information needs of the poor.97 Where, of the highly differentiated and individualized they ask, in the midst of the information revo- services offered by the new technologies.96 lution, is the information that ordinary people need to solve their everyday problems.98 “see, for example, Carol A. Tauer, “Social ,Justice and Ac- cess to Information, ” Minnesota Libraries, vol. 27, No. 2, summer 1982, pp. 39-42; see also, Stephanie Siegal, ‘‘The IIigh Cost of Information, ” Freedom of Information Center Report, No. 489, School of Journalism, University of Missouri at Colum- bia, March 1984, pp. 1-7. ‘“Ibid. ‘E;dward Plowman, “The Communications Revolution, ” ‘“b;ugene Garfield, “Societ-y’s Unmet Information Needs, ” ASI.ZB Proceedings, vol. 33, No. 10, October 1981, p. 377. .4S1S Bulletin, october No\rember 19N5, p. 6.

THE POTENTIAL FOR CONFLICT IN THE USE OF NEW TECHNOLOGIES The new communication and information From the perspective of the economic realm, technologies will play a greatly enhanced role the value of information is in its exclusivity in all aspects of life. In fact, as we have seen, —that is to say, in the ability of its owner to their availability and use may, in many cases, be able to exploit the difference between what be the critical factor for success. The enhanced he knows and what other people do not know.99 value of these technologies is reflected, first In a horse race, for example, the value of an of all, in the growing number of people who, accurate assessment of the horse’s chance in- from whatever realm of life, are striving to inte- creases directly with the exclusivity of that grate these technologies into their daily activ- wisdom, and the value is obviously decreased ities and operations. It is reflected, moreover, by sharing. Similarly, an important factor in in the greatly increased market for informa- encouraging investment is the presumption tion-based products and services, and the that the investor is better informed than others flourishing of new industries to provide for about the outcome of the enterprise. To the these burgeoning information needs. degree that all investors have equal access to information this potential for difference is re- Not all of these technological opportunities, duced, along with the incentive for invest- however, will be exploited. In fact, taking 100 ment. advantage of some opportunities may preclude the development of others. The potential for To be supportive of democratic values, in- conflict in the use of new technologies can be formation, on the other hand, cannot be exclu- seen most clearly by contrasting how informa- sive. It must be plentiful, varied, and the chan- tion is valued in the realms of economics, poli- nels of access to it must be open. Politicians tics, and culture. Conflicts are likely to be most and political advocates, for example, seek to pronounced when the economic value of infor- influence through persuasion. To be success- mation is very high. For it is under such cir- ful, they must disseminate their views as cumstances that the discrepancy between the widely as possible. In contrast to the business- need for exclusion, and the need for distribution, sharing, and use is the most starkly “qBurns, The Economics of Information, p. III-3, drawn. ““’Ibid. 54 ● Intellectual Property Rights in an Age of Electronics and Information

man who seeks to maintain his trade secrets, express purpose of fostering the values of the the politician benefits when his cause becomes cultural and political realms. In like fashion, the subject of widespread discussion. And if the first sale doctrine, which limits the propri- they are to be politically responsible and to etor’s control of a work once he has sold it, is hold legislators politically accountable, citizens designed to ensure public access to works. also need to become acquainted with and dis- However, neither of these doctrines are sup- cuss a wide range of political points of view. portive of the value of exclusivity. In the cultural realm too, information is In resolving these issues, policy makers have made more valuable not by its exclusion, but sought to strike a suitable balance between the rather by its perpetual use and reuse. To un- needs of creators, producers, and distributors derstand a thought or an idea, people must of intellectual property and the social, eco- process it together with the information that nomic, and political needs of the nation as a they already have. In making use of informa- whole. In such a fashion, intellectual property tion, therefore, they do not diminish it. They law has been able to simultaneously serve a enhance its value.101 Moreover, even the indi- wide variety of social and economic public pol- viduals who are involved in cultural activities icy goals. can benefit from the repetitive use of their The ability of intellectual property law to works. For a scholar’s reputation and prestige strike such a balance was not particularly dif- will be more rapidly enhanced the more often ficult in the past, when the social and economic his works are cited, and will dwindle if his stakes in information were lower than today works are ignored. Similarly, a recording art- and when relatively few and well-defined play- ist may seek to have his records broadcast as ers were involved in the intellectual property widely as possible, just to establish a wide- process. Information-based products and serv- spread reputation and a loyal following. 102 ices were peripheral to the performance of Concerned primarily with the use and flow many social and economic activities, and peo- of information in society, intellectual property ple had lower expectations about their use and law has historically served in the United States the level of profit that might be derived from to decide which technological opportunities them. As a result, issues involving the grant- would be developed, and thus which values ing of intellectual property rights could be would be served. For example, the granting worked out among the major players without of an exclusive right to the creator or provider much public involvement or concern. of an intellectual work changes the basis on The resolution of these issues in an informa- which it is made available to society. The criteria to use the work becomes the ability to tion age, however, will be more problematic, requiring that more stakeholders be taken into pay. The granting of such a right, therefore, account and that decisions be made about the can favor the values of the economic realm over distribution of incentives and rewards. Given those of the political and cultural realms. On the variety of opportunities that the new tech- the other hand, the fair use doctrine, which pro- nologies afford, the increased value of informa- vides exceptions to what would otherwise be tion, changing relationships among the tradi- considered a copyright infringement, has the —— tional participants in the intellectual property ‘(’’Harlan Cleveland, “Information as a Resource, ” The Fu- system, and rising expectations about the ben- turist, December 1982, p. 37. ““”Harlan Cleveland, “The Twilight of Hierarchy, ” pp. 186- efits of these technologies, the number of stake 187. Gossip, for example, spreads rapidly among family mem- holders with disparate interests and compet- bers, friends, and neighbors. Books and magazines, and now ing claims on the system will be greater than records, tapes, software programs, and films are commonly passed along from one person to the next. Ideas are discussed ever before. In such a context, the granting and debated at social gatherings, among scholars, and in the of intellectual property rights, instead of mutu- press. And by making information more available, and more ally serving a variety of different stakeholders easily accessible, the new technologies will foster these practices even more. may actually pit one against another. Ch. 2—Intellectual Property Goals in a Changing Information Environment ● 55

The problem is exacerbated by the fact that, Figure 2-5. —Carnegie Mellon Flowchart as the market value of information increases, so does the pressure to treat information activities in economic terms alone. Today, for example, there are a growing number of people engaged in information activities, which were once clearly considered to be outside of the realm of economics, who are now aggressively competing to economically exploit their works. And, to assure that they can do so, they are avidly seeking intellectual property rights. rd Not surprisingly, such rivalry for ownership is becoming common in institutions of higher per agreement education and research, where the potential for r, profits is high. Here the claims and counter- claims of ownership are continually multiplying: claims of students against students, students against faculty members, faculty against ,, faculty, and the university against students and faculty. ’03 A particularly contentious is- ownership sue in this regard is “work-f or-hire.” Some university administrators now argue, for example, that, just as companies automatically own the copyright on works done on company time and with company resources, so too universities should have the rights to everything created in conjunction with their facilities.104 These issues of ownership will not be easily resolved. For, as the Carnegie Mellon University flowchart illustrates, there are a , wide variety of ways in which rewards can be distributed. (See figure 2-5.)

U Has firsl c Has firs! As the rush to make a profit in information optxon to 0Pt30n to develop develop becomes increasingly prevalent, many people are less willing to share their ideas and ex- I I change their views. Some teachers report, for example, that they are unwilling to use computer software that they have developed in

‘r’’ Dorothy Nelkin, Science as Intellectual Property: Who Con.tro)s Scientific Research (New York: Macrnillian Publish- ing Co., 1984), pp. 1-8. “’’Just beginning to grapple with these issues, universities C Receives vary considerably in their work for hire policies. Brown Univer- net sity, for example, follows a relatively liberal policy, allowing faculty, students, and staff to share rewards. In contrast, at Virginia Polytechnic Institute lawyers for the university have ., recently concluded that students’ assignments are the property U Receives U Rece, ws 16°0 of C S nonexclusive of their professors. Ivars Peterson, ‘‘Bits of Ownership: Grow- net above risk hcense ing Computer Software Sales Are Forcing Universities To Re- think Their Copyright and Patent Policies, ” Science News, Sept. 21, 1985, pp. 189-190. SOURCE Richard Stern, Carnegie-Mellon University 56 ● Intellectual Property Rights in an Age of Electronics and /formation their classrooms. Because of its high market righted melody. Protesting the profit-oriented value, they fear that their local school district climate of the times, one outraged churchgoer will try to copyright it.105 Similarly, many peo- protested saying: ple who participate in joint projects, such as Well, we do understand that the copyright electronic conferences, are becoming more hesi- law becomes involved. However, to us simple tant about what they say. Because their ideas folk, it would seem that both creator and bring a high price, they want to reserve for owners of [the tune] could very easily waive themselves the right to profit from them.106 their rights and by doing so enjoy a sense of The growing focus on protection and secur- great honor and deep gratification that their song is now a beloved hymn sung in chorus ing ownership rights is also evident in the fields by many thousands of good people during of art and entertainment. One extreme, but per- church services, rather than to threaten and haps highly illustrious, example is the recent crush their own beautiful song into near case in Seattle, Washington, where the estate oblivion. of a well-known songwriter sued a church for In these times, these fearful, unruly, ego- singing the benediction to the tune of a copy- tistical and utterly selfish times, this action to stop the singing of a hymn in our churches “’’Discussion with participants, Workshop on Educational is surely the ultimate low. Policy, National Educational Computing Conference, summer 1984. ““Ma rguerite Zientara, “Watch Your Words: Who Owns In- formation in an Electronic Conference?” Moworki, Aug. 6,1984, “]”Harry A. MacLaren, “Letter to the Editor, ” Seattle pp. 333-334. Times, July 26, 1985, p. A-20.

IMPLICATIONS FOR THE INTELLECTUAL PROPERTY SYSTEM To the Founding Fathers, the design of an tion will play in the future, its enhanced value intellectual property system appeared a rela- will give rise to a greater number of compet- tively simple matter. Building on a long tradi- ing claims on its use. tion, and on years of European experience, they Given this potential for conflict, a key as- simply followed the British model, which was sumption on which the Founding Fathers es- equally well suited to meet both countries’ tablished the intellectual property system may needs. This model assumed that, by granting no longer be valid in an information age. In- economic rights to the creator of intellectual stead of equally fostering a number of diverse works, information would be created and dis- political, economic, and cultural goals, the seminated, and thus a number of other social granting of economic incentives may, under and economic objectives would be achieved. some circumstances, pit one kind of goal, or In this model, not only were other societal goals one societal purpose, against another. In an understood to be furthered by fostering the environment such as this, it is more essential learning environment, these goals were also than ever to remember that in making deci- seen to be mutually compatible and self-en- sions about the intellectual property system, forcing. we are making decisions about the nature of In an information age, the situation is more society itself. Therefore, in addressing the complex. Information is central to all aspects question of what are the most appropriate of society. Moreover, the new information tech- goals for the intellectual property system in nologies provide new opportunities to move an age of information, we must ask ourselves ahead in almost all areas of activity. With these first, given all of the opportunities that the new opportunities, however, will also come new con- technologies afford, what kind of a society flicts. For, given the pivotal role that informa- would we like to live in. Chapter 3 The Accommodation of Intellectual Property Law to Technological Change Contents

Page Findings ...... 59 Introduction: The Law’s Race With Technology ...... 59 Part I: Some Basic Intellectual Property Concepts ...... 60 The Nature of Intellectual ...... 60 Intellectual Property Boundaries and Policy Objectives ...... 61 Idea and Expression-The Boundary Between Mine and Yours ...... 62 “Clear Distinction” Test ...... 62 "Abstractions" Test ...... 63 Some Related Concepts ...... 63 Part II: The Impact of Technology on Three Varieties of Information- Based Products ...... 64 An Open-Ended Protection Scheme ...... 64 Three Categories of Works ...... 65 Computer Programs and Trade Secrets ...... 87 Part III: Implications for Policy ...... 88 Option #l: Rely on the Marketplace...... 89 Option #2: Judicial Accommodation...... 90 Option #3: Amendment...... 91 Option #4: Sui Generis Legislation ...... 91 Option #5: Revision ...... 92 Option #6: Alternatives to Copyright and Patent...... 93 Table Table No. Page 3-1. Who Should be Responsible for Solving Intellectual Property Problems?...... 89

Figures Figure No. Page 3-1. Property Rights in Information...... 64 3-2. Types of Information-Based Products ...... 67 3-3. Flowchart for the ’’Minstrel’’ Program...... 71 3-4. Computer Programs- "What Is Protected?"...... 82 Chapter 3 The Accommodation of Intellectual Property Law to Technological Change

FINDINGS

● The application of a uniform system of intel- Some of these technological impacts may only lectual property principles, such as that em- appear in the long term, when technologies bodied in copyright and patent law, to diver- for creating and disseminating information be gent types of information-based products may come more widely used. Many of the techno longer be possible. Modern technologies nologies, such as computer networks and are exaggerating dissimilarities between in- digital editing, are still in the developmen- formation products that were once protec- tal stage, and the intellectual property is- table under a single system of law, and are, sues they raise are only just emerging. in some cases, giving rise to new products Some of the effects of technology on the ade- that strain the applicability of old principles quacy of intellectual property law, however, of law. Under these new circumstances, in- have already begun to undermine its useful- formation-based products can be grouped ness as a policy tool, In particular, neither into three large categories—works of art, copyright nor patent law has successfully fact, and function, which are subject to accommodated works of function, such as different principles of intellectual property computer programs. Copyright law may pro- protection. vide either too much or too little protection ● The assumption of intellectual property law for them, and patent law, while available for that intellectual property rights-can be deter- some novel processes that utilize computer mined and remain stable over time is less and programs, may be unavailable or too cum- less valid. Copyright law, in particular, as- bersome to protect many types of computer sumes that the works it protects have a fixed programs. form, and that ownership can be determined ● Alternatives to Federal intellectual property by protecting particular expressions of in- protection are available, but these too have formation. Today, however, computer and their drawbacks. State trade secrets law, al- communication technologies are changing though widely used for specially designed the nature of information-based products in products, is ineffective in protecting mass- a fundamental way, making them dynamic, marketed products. Moreover, it may entail interactive, and functional components of foregoing uniform Federal and international processes. The present system of copyright protections, and, in some cases, it may be law, which evolved under the model of print preempted by Federal law. publication, may no longer serve to determine the boundaries of ownership in computer-based methods of creation and dissemination.

INTRODUCTION: THE LAW’S RACE WITH TECHNOLOGY Ten years after the general revision of the have raised a new set of questions about the United States copyright law, new technologies law’s ability to accommodate technological for creating and disseminating information change. This uncertainty comes from many

59 60 ● Intellectual Property Rights in an Age of Electronics and Information quarters: the judiciary, the legal community, fundamental implications for intellectual prop- academia, and the creators whose work the law erty law. Typical of this perspective is a state- is designed to protect. Such doubts are not ment in a recent report by The President’s limited to copyright law; they extend to other Commission on Industrial Competitiveness: areas of intellectual property law where infor- Although the application of our intellectual mation technologies have also left their mark. * property rules has been adjusted over time Although most observers agree that tech- in response to changing commercial practice nology is changing the way in which intellec- and evolving technologies, the continuing tual property law operates, many disagree over stream of the new scientific advances calls for just how sweeping these technological changes rethinking the very concepts derived from earlier centuries on which those rules are are, and what ought to be done in response to based. New concepts of what intellectual them. Some suggest that the changes are property is and how it should be protected– occurring primarily at the margins of intellec- beyond patents, trademarks, trade secrets, tual property law, and can be dealt with in- and copyrights—may well be needed, as well crementally by the courts or through specific as sweeping changes in intellectual property amendments to the law.2 Proponents of this laws and the ways they are administered and view argue that new technological develop- enforced. 4 ments are in many ways like “old wine in new Advocates of this position argue that the wineskins. Some observers believe that, concepts employed in intellectual property where problems are specific, they can be dealt law–” authorship, ‘‘ “invention," “writing"— with in a specific fashion, without the need to and related notions, are increasingly the ob- completely rethink or revise intellectual prop- solete products of a bygone age of print. erty law.3 The Semiconductor Chip Protection Act is an example of a measured, specific con- Participants in this ongoing debate often gressional response to such a problem. confuse the issue of whether intellectual property, as presently conceived, should survive Others, however, believe that recent techno- with the issue of whether it can survive. This logical changes are revolutionary, and have ——- -..——.——. chapter does not attempt to evaluate the first ‘See e.g.: {~ottschafk i. Benson. 409 U.S. 63,73 (1972): of these questions, but considers the viability If programs ar[~ to be patentable, considerable problems of the present system in the light of vast tech- are raised which only commit tees of Congress can manage. ‘l’[I]n the main, it seems to me, the Copyright Act is work- nological change. The question of viability can ing pretty well. There are some gaps, some parts of it that don’t be separated into two distinct issues: enforce- address current needs, but I don’t think it is working all that ment, which is dealt within chapter 4, and the badly right now. ” Testimony of David Lange before the Subcom- mittee on Courts, Civil Liberties, and the Administration of Jus- law, which is the subject of this chapter. tice of the Committee on the Judiciary, House of Representa- tives, 98th Cong., 1st sess. on Copyright and Technological Change, July 20-21, 1983, p. 73. “’Some specifics of copyright law may change–some may ‘Global Competition: The New Reality, The President’s have to change–but the basic principles of copyright . . . will, Commission on Industrial Competitiveness, January 1985; Ap- I think, bear retention. ” Jon Baumgarten, “Copyright at the pendix D, “A Special Report on the Protection of Intellectual Crossroads, ” Billboard, Nov. 12, 1983, p. 1. Property Rights, ” p. 305.

PART I: SOME BASIC INTELLECTUAL PROPERTY CONCEPTS The Nature of Intellectual Property While personal property law determines ownership over things, intellectual property law se- Intellectual property can be distinguished cures ownership in the particular form or ex- from other forms of property in that it is a bun- pression embodied in things. A comparison of dle of rights attached to the intangible form two types of property rights in the same item of an intellectual, scientific, or artistic creation. illustrates this distinction: Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 61

intellectual property. Civil War, just as patent rights in a particular ● ● The circuit design for all Brand thermostat design could extend to all devices X television sets ● ● The pictoral work embodied in that performed similar functions. all copies of the photograph ‘‘Trees In the United States, however, policy makers s A phonorecord with ● The musical composition “Misty" recorded on it embodied in all phonorecords have set far more limited boundaries for copy- with "Misty" on them rights and patents. As stated in the U.S. Con- ● A copy of the local ● The particular arrangemcnt of telephone hook names in the literary work stitution, ownership in writings and inventions known as the local telephone is bounded by policies that will ‘‘promote the book 5 ● A bottle of chemical Z ● A method of manufacturing progress of science and useful arts." Mark- chemical Z ing off boundaries in intellectual property is 9 A microbe containing ● The process of engineering gene Y essentially a policy choice which has major im- . . . . . plications for innovation. Boundaries that are An intellectual property right is the exclu- ‘marked too broadly may impair the ability of sive prerogative to make tangible objects in individuals to create, innovate, or improve particular forms. At its simplest, a copyright upon the works of others. Boundaries that are is the exclusive right to make copies of partic- set too narrowly, or that fail to protect the most ular tangible expressions of information, and socially valuable aspects of writings or inven- a patent is the exclusive right to make, use, tions, may diminish the incentive to create or or sell a particular application of an idea. innovate. To promote science and useful arts, policy makers must strike an optimal balance Intellectual Property Boundaries between what belongs to a creator and what and Policy Objectives belongs to the public domain. Any property right, whether tangible or in- For patents, the boundaries of ownership in tangible, must have boundaries. Property is an invention encompass only the novel features by definition exclusive; what one owns must of that invention. Patent ownership is estab- be distinguished from what is owned by others. lished by the “claims’ made in the patent ap- Boundaries of tangible property are relatively plication and accepted by the Patent and Trade- easy to establish. A property right in a parcel mark Office, and patent law requires that the of real estate, for example, refers to a specific, claimed invention be distinct from previous in- measurable terrain. ventions, which are known as the ‘‘prior art. However, because ownership in intellectual In contrast, copyright protection attaches property attaches to the intangible character- to a work at the moment of its creation, and istics of tangible objects, the boundaries of the law requires only that the work be origi- ownership must be established in terms of nal-that is, not a copy of another author’s those intangible characteristics. For example, work. Copyright law does not require that an to extend a property right to the author of a author claim some aspect of a writing as his book on auto mechanics, one must specify own, or that a writing be distinguished from which features of the book are subject to the the prior art. Because copyright does not have property right: the precise wording of the book; a threshold determination of ownership, the the structure of paragraphs; the style of writ- boundaries of ownership in a work are, of ne- ing; the organization of topics; the information conveyed to a reader; or the practice of auto “Article 1, Section 8, clause 8 of the Constitution, authoriz- mechanics as described by the book. The bound- ing the Congress to establish intellectual property, law, reads: aries of intellectual property are ultimately Congress shall have Power To promote the Progress of Sci- ence and useful Art c., h? ~wwrlng for hrmte(i “1’Imes t o A ut hor~ agreed on by convention, and require that pol- and I n~entors the exclusII’e Right to their respect I\e \\’rtt ]ng~ icy makers choose where and why they are es- and I)isco\.cries The term “Science, as it was used h~’ the authors of the Con- tablished. In theory, copyright in a book on stitution, was derived from the Latin ‘‘scientia, meaning knowl- the Civil War could extend to all books on the edge, or to know. 62 . Intellectual Property Rights in an Age of Electronics and Information cessity, established by limiting ownership duced. Instead, we have available a vast and rights to the particular manifestation or ex- varied range of musical drama. pression of information. Copyright does not Despite its importance, the distinction be- protect abstract ideas, concepts, systems, and tween an idea and an expression is difficult to themes. draw with certainty. Through the years, courts This assessment is concerned exclusively have developed at least two different theories with the effects of technology on proprietary of what the idea/expression dichotomy means. rights in information-based products and serv- We will refer to these theories as the “clear ices. Since copyright law has been the tradi- distinction” test and the “abstractions” test. tional system of protecting these works, the boundaries most germane to this chapter are “Clear Distinction” Test those established by copyright. For this reason, copyright law’s method of defining bound- Copyright scholars generally regard the case 7 aries-the “idea/expression dichotomy" —mer- of Baker v. Selden as the wellspring of mod- its a detailed discussion. ern thought on the doctrine of idea and expression. This case concerned an alleged infringe- Idea and Expression—The Boundary ment of Selden's Condensed Ledger, or Book- keeping Simplified, a book that consisted of Between Mine and Yours a series of blank ledger sheets and an introduc- The distinction between idea and expression tory essay explaining their use. The unique fea- is one of the most fundamental yet elusive con- ture of Selden’s ledger was that, “by a pecu- cepts in intellectual property law. Ideas, as liar arrangement of columns and headings, [it] such, are neither patentable nor copyrightable. presents the entire operation, of a day, a week To obtain a patent, the inventor must reduce or a month, on a single page, or on two pages the principles on which an invention is based facing each other in an account book. ” In his to a concrete application. The photoelectric ef- own account book, the defendant in this case fect is not patentable, although the design for accomplished a result very similar to Selden’s, a particular photovoltaic cell may be. Similarly, using a different arrangement of columns and copyright does not protect “[i]deas, abstract headings. conceptions and similar matters, but rather The Supreme Court, although agreeing that the “manner of treatment, expression, inci- 6 the plaintiff book might be copyrighted, nev- " The distinction is cru- dents and details . . . ertheless drew “a clear distinction between the cial, since a monopoly on ideas might impair book, as such, and the art that it is intended the very goals that intellectual property law to illustrate. ” “[N]o one, ” said the court, seeks to promote. If, for example, the idea of ‘‘would contend that the copyright of the trea- combining music and drama were protected tise would give the exclusive right to the art by copyright, Gilbert and Sullivan’s plays or manufacture described therein. ” A copy- might well have been the last musicals pro- right in books on medicine, art, or mathematics gives the author an exclusive right to print and ‘ Loew's, Inc. v. Columbia Broadcasting System, 131 publish those books, but the systems, ideas, F. Supp. 165 (D.C. Cal. 1955); aff’d 239 F.2d 532; aff’d 356 U.S. 43, reh, den. 356 U.S. 934, The idea/expression dichotomy was or methods described in them “are the com- codified in the 1976 CopJ’right Act as follows: mon property of the whole world” and any In no case does copyright protection for an original work of author has the right to express or explain them au t horshlp extend to any idea, procedure, process, s.},stem, method of opera t]on, concept, principle, or disco~wr.),, regardless in his own way. Moreover, since copyright, un- of the form In which it is descrl})ed, explained, illus~rated, or em- like patent, requires no novelty, the grant of hodled in such work. 17 [J. S.C. § 102(b) (emphasis addedl. None of these terms are an exclusive right in the art described in a book, defined, and the legislative commentary on the subject says ‘‘when no examination of its novelty has ever only that section 102(b) “in no way enlarges or contracts the been officially made, would be a surprise and scope of copyright protection. S.Rep. No, 94-473, supra at 54; H.R. Rep. No. 94-1476, supra at 57. 101 Us. 841 (1880). Ch. 3— The Accommodation of Intellectual Property Law to Technological Change . 63 a fraud upon the public. . . That is the prov- roles, and the dialog. The principle articulated ince of letters patent, not of copyright.”8 in Baker v. Selden, however, concerns the kind of protection afforded a writing, drawing a line “Abstractions” Test at the the manner of expression, and extending to neither the underlying concepts or in- Courts have interpreted “idea and expres- formation expressed, nor to the activities or sion in other ways. The “clear distinction’ techniques described. These two analyses— test distinguished copyright from patent pro- the ‘‘abstractions’ test and the ‘clear distinc- tection, but did not define the scope of copy- tion” test—are often combined into the term right protection. If copyright protects only the ‘‘idea/expression, but they are essentially dif- literal expression adopted by an author, it al- ferent, Although both limit the boundaries of lows others to escape claims of infringement copyright, each sets that limit in a different by changing the original in only trivial or in- way. As we shall see in Part Two of this chap- significant ways. The courts have avoided this ter, neither of these two fundamental copyright result by treating idea and expression as a con- principles is particularly applicable to comput- tinuum of similarity. Thus, in Nichols v. er processable information. Universal Pictures Corp.,’ Judge Learned Hand articulated what is now known as the Some Related Concepts “abstractions test”: A number of closely related, but distinct Upon any work . . . a great number of pat- copyright principles can be derived from the terns of increasing generality will fit equally idea/expression dichotomy (see figure 3-I). For well, as more and more of the incident is left example, in order to be copyrighted, a work out. . . . [T]here is a point in this series of ab- must be original, which simply means that it stractions where they are no longer protected, cannot have the same expression as another since otherwise the playwright could prevent the use of his “ideas, ” to which, apart from work. The boundaries of a given original ex- their expression, his property is never expression also include the right to build upon 11 tended. Nobody has ever been able to fix that it by creating a derivative work. A given copy- boundary, and nobody ever can . . . As re- right is infringed when there is substantial sim- spects plays, the controversy chiefly centers ilarity of expression between the original and upon the characters and sequence of incident, another work. The notion of a copyrighted these being the substance. work emphasizes that the boundary of a given The abstractions test differs subtly from the expression is intangible, and is distinct from the actual physical object–the copy–in which holding of Baker v. Selden, and points to a con- 12 fusion in the meaning of idea/expression. The it is embodied. The work is the subject of in- abstractions test relies on general similarities tellectual property ownership; the copy is ordinarily the private property of the purchaser. between works that are largely a matter of de- — gree. If, for example, it was alleged that My ‘However, an identical, but independently created work, is Fair Lady infringed Pygmalion, one would look not an infringement, The ‘‘originality necessary to support a to the degree of similarity of expression in the copyright merely calls for independent creation, not novelty, 1 Nimmer on Cop~right, Y2,01 [A] ( 1982), originality} is, how- two stories—the plot, the characters and their ever. subject to a de minirnus standard, and works ent~rely lacking in creativity or substance cannot be copjrrighted. Simple ‘Id. pp 842-44, The ruling in Baker is more subtle than it phrases, such as “apply hook to wall, ’ for example, maj not appears at first glance. The work in question was of an explana- meet this standard. tory, functional sort (see discussion below under works of func- ‘derivative work is defined in section 101 of the act as: tion), Unlike Furely artistic or factual works (see discussion be- . . a work t)ased upon one or more preexist Ing works, such as low under works of art and works of fact). the accounting book a translation, musical arrangement, drama tiTat lon, Slct Ion ali~ a- explained a method or procedure, which thus raised the specter tlon, mot Ion picture version, sound recording. art reproduction, of patent-like protection not present in the case of art or fact. at)ridgment, condensation. or an}. ot her form in which a work For artistic works in particular, “expression ‘‘ i.~ not limited to may be recast, transformed, or adapted. the Iiteral expression of a u’ork, ‘‘else a plagiarist would escape ‘Section 202 of the act says that “[ownership of a cop~T- by immaterial \’ariations. ,Vichols t’. Unii’ersal Pictures Corp., right, or of any of the exclusive rights under a copyright, IS 45 F.2d 119 (2d C’ir. 1930). distinct from ownership of an} material object in which the work ’45 F.2d 119, 121 {2d Cir. 1930), cert. denied, 282 ~J, S. 902 is embodied, The material object, or copy, is usually the pri - (1931). \’ate property of its purchaser. 17 U.S.C, §109. 64 . lntellectual Property Rights in an Age of Electronics and Information

Figure 3-l.— Property Rights in Information

Public domain Private property

Ideas Copies

\ Infringement through Infringement through substantial similarity copying \ (“Abstractions” and “Clear Distinction ” theories)

(including derivative works)

SOURCE Office of Technology Assessment

PART II: THE IMPACT OF TECHNOLOGY ON THREE VARIETIES OF INFORMATION-BASED PRODUCTS The variety of intellectual and artistic works sorbed each new type of creation with very lit- protected by copyright law in the United States tle change to its underlying concepts, distin- has grown steadily since Congress enacted the guishing only slightly between the types of first copyright statute in 1790.13 As technol- works that it protects. ogy introduced new and unprecedented forms of expression into the commercial, artistic, and scholarly worlds, copyright law has taken each An Open-Ended Protection Scheme into its protective system of rights. Although Copyright protects a vast range of works, the forms of expression, media, and economics many of which bear little similarity to each of creation, distribution, and use varied widely other. Through the years, copyright has come among new types of works, copyright law ab- —. to protect virtually all artifacts of communi- 13Ch. 15, §1, 1 Stat. 12 cation: piggy banks and doctoral theses, tele- Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 65 vision programs and restaurant menus, ash some exceptions, all works are protected un- trays and news documentaries, bread wrappers der the same basic bundle of rights. ” and sound effects recordings, artistic photo- Given the broad and pliable language of the graphs and tablecloth designs, road maps and act, with its emphasis on technological accom- stock market reports, toilet paper designs and modation, the question is how technology can movies, computer programs and greeting affect its continuing viability. The answer to cards. Prior to the Copyright Act of 1976, a this lies in the very broadness of the concept work had to fall under a category of work de- of “works of authorship, ” and in the legacy fined by statute to be copyrightable. Thus, of copyright principles carried forward in the each time technology created a new form of expression—photography, for example—Con- 1976 Act. The 1976 Copyright Act assumes that, by making “works of authorship’ a com- gress had to amend the copyright law. prehensive category, the copyright system The drafters of the Copyright Act of 1976 could successfully assimilate unforeseeable sought to avoid the need for constant amend- technologically based works. However, as il- ment by making the subject matter of copy- lustrated below, because it continues to use right open ended and “technology neutral."14 concepts fashioned over the previous 200 Instead of listing types of works, the act de- years, the new copyright law is, like its fines the attributes a work must possess to be predecessors, encountering some familiar prob- protected: lems now placed in relief by modern technology. Copyright protection subsists . . . in original works of authorship fixed in any tangible The central problem of copyright law’s con- medium of expression, now known or later de- tinued accommodation to new technologies lies veloped, from which they can be perceived, in the indiscriminate application of the doc- reproduced, or otherwise communicated, ei- trine of idea and expression to three fundamen- ther directly or with the aid of a machine or device. 15 tally different categories of works: works of art, works of fact, and works of function. Un- The act, therefore, treats all information- less the law recognizes the inherent differences based products and services the same for pur- among these types of works, technology may poses of copyrightability. By making the cri- make the boundaries of intellectual property teria of copyrightability nonspecific and purely ownership difficult or impossible to establish, formal, the act gives the necessary and suffi- and less relevant to the policy goals the law cient conditions of statutory protection appli- seeks to further. cable to any conceivable work, regardless of the technologies involved in its creation, dis- Three Categories of Works tribution, or use. Although the copyright law adopts a uni- Since a work can be fixed in any tangible form approach to protected works, not all types medium ‘‘now known or later developed, ” all of information-based products are the same, works fixed after 1978 are automatically copy- nor can they be treated as if they were. A list righted, without the earlier requirement that 16 of stock and bond prices, for example, differs they be published or disseminated; and, with from the musical score of a motion picture, and “’Authors are continually finding new ways of expressing both of these are distinct from a computer pro- themselves, but it is impossible to foresee th~~ forms that these gram. In the case of stock prices, the value is new expressi~’e methods will take, The bill does not intend ei- t her to freeze the scope of copyrightable subject matter at the in the information itself—the number of shares present stage of communication technology or to aIlmv unlim- traded and the daily fluctuation in prices. The lted expansion into areas completely outside the present congressional intent. Section 102 implies neither that that subject value of a musical score, in contrast, lies in the matter is unlimited nor that new forms of expression within that general area of sub]ect matter would necessaril}r be unprotected. 1 I. R. Rep. No, 94-1476. ‘-17 U.S.C. §106. All works are subject to reproduction. der- 17 U.S.C. §102(a), ivation, and dissemination rights; some are subject to perfor- ‘ 17 U.S.C. § 302(a). mance eights: others to display rights. 66 ● Intellectual Property Rights in an Age of Electronics and Information way it sounds to an audience—the appeal of ily on the particular expression adopted. The its melody, rhythm, and harmony. And com- intrinsic value of Duchamp’s ‘Nude Descend- puter programs are valued for what they do– ing a Staircase, for example, lies in the over- their effectiveness at performing a given task all style and manner of execution, the use of in a computer. lines and solids, and the colors chosen. It is these values that copyright protects when pro- This analysis has identified three types of tection is limited to the painting’s expression. copyrightable works: works of art, works of fact, and works of function. Figure 3-2 shows Furthermore, works of art have always had one way of conceptualizing this trichotomy, a fixity and completeness to them. Although and gives examples of the types of information- their creation involved preliminary steps such based products and services that might fall as drafting, sketching, and revision, they did into each category. Although dividing lines be- not change in appearance or structure, and re- tween each categories are not absolutely dis- tained a distinct and perpetual identity. Par- tinct, major differences between the catego- ticular works were distinguishable from one ries do exist. It is these differences that pose another because the expression was complete problems for the uniform application of copy- and final once the work was fixed. Moreover, right principles to all three categories. the fixation of a work in a tangible copy allowed its preservation over time. Works of Art and Interactive Technologies It is this static, individuated, and localiza- The phrase works of art, as used in this dis- ble quality of works of art that allows copy- cussion, denotes works that are created for right law to speak in terms of the work21 cre- their own intrinsic value-whether that value ated by an author or authors22 belonging to him is primarily aesthetic, entertaining, or educa- from the moment of creation,23 subject to the tional in nature. This definition implies no ap- laws of the country in which the work was cre- praisal of qualitative or artistic merit; labels ated.24 As we have seen in chapter 2, printing for soup cans and recordings of symphonies made copyright both possible and necessary, are both works of art. Although it is impossi- since it permitted the existence of many iden- ble to fix firm boundaries on what constitutes tical copies of a work and so shifted the pri- a work of art, this category includes such tradi- mary economic value in writings from the tionally copyrightable items as fiction, paint- ownership of a particular manuscript to the ings and other graphic works, sculpture, music, ownership of a right to make copies of that drama, film, and choreography. Other works, manuscript, while it simultaneously created such as sculpture used as bases for lamps19 or markets for unauthorized copies. The very no- film documentaries20 also fall within this cate- tion of a particular “expression” as the prod- gory, but contain factual or functional ele- uct of a particular author was to a large de- ments as well. gree enabled by the invention of the printing Traditionally, works of art have been amen- press. Evidence for the proprietary boundaries able to an analysis of idea and expression un- of a work relied on the existence of a single, der the “abstractions test, ” since very often unchanging artifact-the book, the painting, the intrinsic value of the work depends heav- the sculpture. This model of the static work of art may no ‘“Copyright does not concern itself with the qualitative as- longer apply to works involving certain new pects of a work. See: Bleistein v. Donaldson Lithographic Co., technologies. In particular, digital computing 188 U.S. 239 (1903). ‘“AS in the case of Mazer IF. Stein, 347 U.S. 201 (1954), and communication technologies pose both where a statuette used as the base of a lamp, was found copyrightable insofar as its utilitarian aspects could be separatsd from its aesthetic aspects. “17 U.S.C. §20. ‘(’Such as the documentary of the Hindenberg disaster in ’ 2 17 U.s.c. §20. Heeling v. Um”versa.1 Cit&V Stud”os, Inc., 618 F.2d 972 (2nd Cir.), ‘ [ 17 U.s.c. §30. cert. denied, 449 U.S. 841 (1980), “17 U. S. C., ch. 6, infra. Ch. 3—The Accommodation of Intellectual Property Law to Technological Change ● 67

Figure 3-2.— Types of Information-Based Products

Works of art

Copyrightable works

(shaded area) Drama Inspirational Sculpture literature Film Painting (abstract)

Photographs Biography \ Recorded music drawings Clocks Computer music, Historical Recipes graphics literature Computer Computer programs and databases (applications) charts (text) / Computer Patients’ Code books Instructions z circuitry Raw x-rays Photographs (as news-footage) Computer programs satelIite (operating systems) data I News stories Computer databases (compilations) Circuit Circuits Uncompiled Telephone diagrams directories I statistics DNA nucleotide Gears Stock market quotes sequence? Microcode? A \ I Phone Semiconductor Computer Semlconductor bills algorithms chips The chip masks calendar A Cam shaft

/\ /

Works of fact Works of function SOURCE Office of Technology Assessment conceptual and legal problems for copyright publishing, on-line conferencing and editing, law in this regard. If print technologies” per- and interactive computing, these technologies mitted stasis, electronic technologies permit have reasonably clear implications for the prin- a new dynamism that makes proprietary bound- ciples of ownership: aries for many works of art indistinct, elusive, In short, the process of computer commu- and subject to constant change. Although nication produces multitudinous versions of opinions vary widely on the viability and com- texts, which are partially authored by peo- mercial deployment of such things as electronic ple and partly automatic. The receivers may ——.——— be individuals, or they maybe other machines ‘r’’ Print technologies”’ is used here in a very broad sense, and would include not only the methods of printing books and that never print the words in visible form but magazines, but photographs, records, and motion pictures as use the information to produce something else well. again. So some of the text that is used exists 68 ● Intellectual Property Rights in an Age of Electronics and Information

electronically but is never apparent; some is in such a network can gain remote access to flashed briefly on a screen; and some is printed supercomputers to do advanced graphics, chip out in hard copy, What starts out as one text design (and remote fabrication), or scientific varies and changes by degrees to a new one. or economic computer simulation. Networks Totally new concepts will have to be invented to compensate creative work in this environ- also allow users to access remote databases. ment. The print-based notion of copyright Finally, communications, such as computer simply will not work.26 conferencing, allow collaboration among users of the network. z” Some have suggested that, for art and scholarship, the new technology has created an envi- The capacities of computer networks for on- ronment more like that of the Middle Ages line creation and worldwide collaboration will than of the post-Gutenberg era, resembling the demand rethinking several key aspects of copy- 29 oral tradition rather than the print culture. The right law. First, concepts dealing with the cre- ramifications of such a change can be explored ation of a work will have to take into account by considering two particular embodiments of several novel features of networks. A network, information technology as they apply to works for example, allows an author to collaborate of art: computer networks and interactive com- with others in ways that are different from the puting. past. Collaboration may occur in a very hap- hazard and informal fashion, and each contrib- Computer Networks. The advent of computer utor may be anonymous and his contributions networks may mean the loss of the identifia- unrecorded. Some may be independent authors, ble boundaries of works on which copyright while others may be creating works for hire.30 has relied to distinguish yours’ from “mine. Imagine, for example, a network “magazine” In this fluid environment, works of art may in which the readers are also contributors, re- lose the singular thing-like quality that made ceiving and perhaps modifying a different ver- copyright protection possible. The extent of sion of the text or graphics in the magazine. the problem is hard to estimate given our lim- Under these circumstances, who has a right ited understanding of the full impact of elec- to claim ownership of a work if it becomes com- tronic networks on the creative environment. mercially valuable? To which of the multitude A computer network is a collection of com- of different versions of the work did this per- puters, called hosts, that communicate with son contribute? What share of the contribu- each other. The host computers may be micro- tion was his? What rights does this person pos- computers, commonly used in homes and busi- sess to insure the integrity of his work? nesses, or they may be larger mini-, mainframe, or supercomputers. With connections between hosts ranging from local area networks to satellite-mediated long-haul networks, data in the form of text, voice, and, in principle, video, can be stored, modified, and —— —— . exchanged by anyone anywhere on the planet.27 ‘“’’The experience of the ARPANET, which is being recon- firmed in CSNET and other networks, is that collaboration, of~n Computer networks offer a variety of advan- envisioned as the least of the three (applications), is in fact the most important. ” Peter Denning, “The Science of Computing: tages over centralized computing. They per- Computer Networks, ” American Scientist, vol. 73, 1985, pp. mit remote processing, which allows any host 127-129. in the network to use computer programs “Many of the difficulties alluded to here apply with equal force to works of fact and works of function, discussed below. stored on another host in the network. Users This analysis of the impact of networks and interactive programs on works of art is therefore cumulative. It is confined ‘hlthiel de Sola Pool, Technologies of Freedom (Cambridge, to works of art for the sake of clarity. MA: Belknap Press, 1983), p. 215. “’Some textbooks have already been written (although not “For a detailed description of computer networks, see: An- published) “on-line.” See, for example, C. Mead and L. Conway, drew S. Tannenbaum, Computer Networks (Fjnglewood Cliffs, Introduction to VLSI Systems (Reading, MA: Addison-Wesley, NJ: Prentice-Hall, 1981). 1980), which was written over the ARPANET. Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 69

Although copyright law allows for the possi- such “sharing” occurred in simple exponen- bility of collaborative and anonymous works,31 tial fashion at 15 minute intervals, it would the application of copyright law to on-line cre- take approximately 8 hours to blanket the en- ation may become forced and arcane. Ques- tire world’s population with copies. ” tions will arise, in this regard, over what ‘‘the’ copyrightable work is. If, for example, a pic- The problems of administering copyright for ture, a musical composition, or a story is be- on-line works also occur internationally, but ing constantly embellished, and separate ver- with an added twist. Under U.S. law, copyright protection of published works hinges upon the sions are being culled from an original and reworked over time, issues of ownership and nationality of the author or the location of first 38 But satellite data transmissions identification of the work become exceedingly publication. intricate. As with on-line computer databases and submarine optical fiber links may muddle the concept of a work’s “national origin, ” and (described below), the perpetual creation and modification of works of art raises questions international collaborative efforts and the about when copyright protection begins and simultaneous existence of numerous versions ends. 32 The deposit and registration of fre- of a work worldwide will preclude its easy iden- quently changing works is likewise compli- tification with a particular nation. Thus, pub- cated. 33 lication and location many no longer be workable criteria when numerous versions of a work Networks also pose immense practical diffi- are simultaneously appearing throughout the culties for administering the copyright system. world .39 Once in a host computer, a work can be easily and quickly transferred to any other host in Interactive Computing. Interactive computing refers to any creative process in which a the network. Even if the work is confined to 34 preliminary or final version of a work is the one ‘‘closed network, it can be entered into other networks by a given host, at which point result of interactions between a person and a 35 programmed machine. The proportion of the control over the work is lost. Copyrighted work that is the product of the machine, and works, such as photographs, that exist in a the proportion that is the product of a human closed database library, which is itself part of may vary. In many cases, as with word proc- a network, may be downloaded onto one host in the network and transferred to another net- essing programs, the machine contributes lit- work, where they may be excerpted or modi- tle to the creation of a work; it is ‘ ‘transpar- fied by others with access to the network.” If ent’ to the writer’s creativity. But with some .——— programs, such as those that summarize (ab- “17 U.S.C. §§§ 101,201, and 101, Joint works require that stract) written articles, the processing done by the authors intend that their contributions be merged insepa- the computer could constitute “an original rably into one work, but collective works are separate and inde- work of authorship’ if it were done by a hu- pendent elements of the whole (like the individual stories which 40 comprise an anthology). In the case of joint works, the inten- man being. Indeed, the machine itself is at tion of the authors may have to be inferred or constructed by once a series of processes, concepts and syn- a court. ‘ 17 (J, S.(’. i 1102,302, erty rights attach to works which are intended to be modifiable See page 7’7 of this chapter for a discussion of the applica- components of an interactive process? This question will be dealt tion administrative formalities for works of fact, with presentl~’ under “ Interactive Technologies. ” ‘Closed networks usually ha~.e proprietary access equip- ‘-232 is approximately 4.29 billion. ment, which permit only those with the right equipment to ac- ‘“In general, a work is protected under (J. S. law if: 1 ) one or cess the information in the network. I.EX IS, the legal database more of its authors is a national or domiciliary of the United network, and airline reservation systems are examples of closed States or any nation which is a member of a copyright treaty networks. Solomon, ‘‘I ntellectual Property and New Computer- to which the United States is a party, or if 21 the work is first hased Media, ” OTA contract report, Aug. 1, 1984. published in the United States or in a country which is party of course, these acti~ities may be illegal under copyright to the Universal Copyright Convention. 17 U.S.C. § 104. law, but lacking an “audit trail, ” and an awareness of the “leak” “’Publication is the distribution of copies to the public, 17 on the part of the copyright holder, the possibility of enforce- U.S.C. \ 101; is transmission of digitized information to thou- ment is practicall~’ nonexistent, See ch. 4 on enforcement. sands of host computers a ‘‘distribution of copies?’

“Questions concerning modification and deri~ation are per- 4’ Originality is the sina qua non of copyrightability, but re- haps the most perplexing of all. How, for example, can prop- fers only to the fact that a work is not a copy of another. 70 . Intellectual Property Rights in an Age of Electronics and Information — .— theses of human intelligence-so mixed that sometimes costly preexisting works in the it is difficult, if not impossible, to separate its production of new works. Music can be parts from the whole.” Interactive computing sampled and manipulated in a process takes many forms, and cuts across many dis- known as digital editing, and the notes and ciplines. Some examples of interactive comput- even the work itself can be rearranged and ing are: manipulated to create entirely new works. ● Interactive fiction is a computer-mediated The interactive capability of computers form of storytelling/writing that permits poses unique problems for the category of the user of a program to “co-author” a works of art. The problem is in determining story by making choices about details of where the programmer’s expression ends and the plot as the story unfolds on the where the user’s contribution to the final form computer. of the expression begins. This problem stems ● Computer-aided design (CAD) is a technol- from the fact that computers often mediate be- ogy that is widely used in science and engi- tween programmer and user, and intermingle neering. Using CAD systems, engineers the creative efforts of both. Indeed, the pro- may design new products, invent new gram itself may contribute substantially to a processes, or even create other software creator’s final artwork, and in ways that could programs that are based on interactions be considered an autonomous or creative activ- between their own experience and exper- ity if done by a human being.43 Because the tise with a CAD system. A program called programmer’s, the user’s, and even the com- SYNGEN, for example, suggests poten- puter’s expressions are intermingled in the tially useful chemical reactions based on process of creation, separating rights in the chemical reaction-mechanism theory. Using products of interaction with a program from SYNGEN, some completely new reactions those in the program itself will become increas- are “invented” that may prove important ingly difficult. Consequently, many interactive enough to be further developed in the lab- computer-based applications may generate en- oratory. ’z tirely new questions of ownership and origi- 44 ● Interactive computer graphics permits a nality. Figure 3-3, which describes a hypothet- creator to use another’s images as the ical interactive program called “MINSTREL,” “grist” for computer-assisted manipula- illustrates the difficulties that can arise in sort- tion in the production of further works. ing out the contributions of the various par- Creators using this technology cannot ties to interactively produced works. only generate images of nature that have The problems of interactive computing and never existed in reality; they can also take machine-generated works were considered by images from existing photographs or the National Commission on New Technologi- films, “map” them into a computer mem- cal Uses (hereafter CONTU) in its 1976 Re- ory, and bring them back to life in totally new settings, with new movement and “Computer programs may modify themselves based on an dialog. interaction with the environment, and then alter the environ- ● Computer-processed music permits the ment itself. Programs now exist, for example, that permit a com- processing, editing, and resynthesis of puter to “learn, ‘‘ in some sense, from its environment. A number of rules for producing a given result are compared with an . environment; generalizations are formed as a result of the com- “Richard Solomon, “Intellectual Property and the New parison; and these generalizations are then incorporated into Computer-Based Media, OTA contractor report, Aug. 1, 1985. the rules of production. See “Learning” in Proceedings of the p. 2. National Conference on Artificial Intelligence (Los Altos, CA: ‘“James Hendrickson, “Synthesizing Chemicals by Comput- American Association for Artificial Intelligence, 1983), and Slee- er, ” Technology’ Review, April 1984, pp. 24-27: see also R.K. man & Brown (cd.), intelligent Tutoring Systems (London: Aca- I,indsay, et al., ,4pplications of Artificial Intelligence for Or- demic Press, 1982), Part IV “Self-Improving Teaching Systems. ” gw”c Chemistry: The DEIVDRAL Project (New York: McGraw- “There are disputes today, for example, over ownership in Iiill, 1980). In this example, similar questions might be raised the output of programs that automatically route signals through of patent law: who is the “inventor? ’’-the programmer, the gate-arrays, and in code that is compiled by a proprietary com- operator, or the machine’? piler program. Conversation with Richard Stern, Nov. 11, 1985. Ch. 3—The Accommodation of Intellectual Property Law to Technological Change ● 71

Figure 3-3.— Flowchart for the “Minstrel” Program

Minstrel selects random notes

Minstrel arranges notes into piece I Update algorithm I per algorithm 1 I I

Pieces stored in RAM

1 Tone generator I I

T i Composer selects a piece

I ~ No Composer modifies piece

* -f Yes Synthesizer generates 4 analog etude b

, * I t 4 t

A Composer uses a software program. named “Minstrel” which was rithm. This process is reiterated so that the program in effect “learns’” written and developed by a Programmer One of the results of this from the composer’s judgment program, Etudes for Unaccompanied Computer, a collection of the- Etudes for Unaccompanied Computer was recorded in the follow- matic musical pieces, Is the subject of a Iawsuit between Program- ing media: 1 ) the final object code (digital) version was downloaded mer and Corn poser from RAM onto a floppy disk; 2) a final audio (anal`ogue) version was The Programmer had made no Iicense or sale agreements with the prepared using a commercially available music synthesizer and re- Composer for either the use or the purchase of “Minstrel. ” He ex- corded on magnetic tape; 3) a sheet music version was printed using pected to receive no remuneration fort he Composer’s use of the pro- a special printer designed by the Programmer gram or for the computer time Indeed. the Programmer had given per- When the Composer left the Programmer’s laboratory, he took with mission to the Composer to use “ Minstrel ” and the computer simply him the floppy disk, the magnetic tape. and the paper upon which “to see what It could do “ the sheet music to Etudes was printed—all of which were his person- The software program “Minstrel” randomly selects “notes” from al property. The Composer Iicensed the audio recording to the Rec- the standard twelve tone scale These notes are represented as varia- ord Company, and the sheet music to a Publishing House. This raises bles in the program On the basis of rules embodied in a music com- some questions: posing algorithm developed by the Programmer, these notes are com- 1, Who is the author of the “Minstrel” Program after it has been bined into melodies and chords, and processed into pleasing modified by Composer? harmonic, rhythmic, and thematic structures A number of pieces are 2. Who IS the author of ‘

● Ought protection of the program to extend Works of fact have long been copyrightable, to its output? Where, for public policy but copyright protection in works of fact is lim- purposes, ought expression in a program ited to the way in which facts are expressed. leave off? What are the appropriate bound- It does not extend to the underlying informa- aries necessary to insure that both pro- tion or facts expressed. In a map, for exam- grams and their creative interactions are ple, protection is limited to the details, colors, given incentive? and symbols chosen by the author, and does ● How are legal distinctions to be applied not extend to the terrain that is represented to this new-creative environment? Does by the map. In a statistical table, copyright expression include all of the ways in which protects the arrangement and labeling of col- a program may literally express itself? umns and variables, but not the numbers or Does the user’s interaction result in the statistical values represented. In a news story, production of a derivative work, and to copyright protects the wording and the way whom does the derivative work belong?51 in which the information is expressed and pre- What of originality in works that are sented, but does not protect the information predominately automated? Who is the about events that are the subject of the news author? story. Providing answers to these questions will Works of fact have always caused problems become more urgent as creative activities con- for copyright law because, unlike works of art, tinue to fuse with machine intelligence. One their economic value is often in the underlying effect of computer-mediated works of art on information, rather than in the manner in which copyright may be the blurring of the distinc- that information is expressed. Copyright, tion between the copyrighted work and its therefore, does not necessarily protect the val- product. It may no longer be possible to ascer- ue of a work of fact. This discrepancy will likely tain the ownership of a particular expression. be exaggerated by information technologies, Both the creators and users of a program may because computers can easily manipulate the have some claim to its output. Similarly, the expression of a work of fact, and communica- line between the creator and the user of a work tion systems can quickly transfer the work. of art may be less clear, and distinctions may The problems with copyright protection for have to be made between the creation, use, and works of fact stem from two otherwise com- appropriation of an expression. plementary concerns of copyright: the provi- Works of Fact and Computer Databases sion of incentives to stimulate the production and dissemination of original works, and the The category works of fact, as used here, en- policy goal of sharing information and ideas compasses any work whose value lies in the and making them widely available. accurate representation of reality. As with works of art, works of fact is an amorphous Works of fact often take much time and ef- category, and may include biographies and fort to produce, and some economic incentive dramatized or fictionalized accounts of events, is necessary to encourage their production. which are also works of art. Maps, nautical Tabulating price data, covering news stories, charts, news programs, documentaries, and sci- and drafting maps, for example, require in- entific and scholarly literature are examples dependent research and investigation. If an of works of fact. Compilations, such as tele- author knows that a competitor may reproduce phone directories, stock market quotations, his work with impunity at little or no cost, he statistical tables, and bibliographies, may also may have less incentive to create the work in fall into this category. the first place. Recognizing that the ostensi- —— bly copyrightable component of such works of ‘‘A derivative work is a work “based upon one or more pre- fact–the wording, selection, arrangement, and existing works. ” 17 U.s.c. ~\lo2, 106, presentation of information—is of little bene- 74 . Intellectual Property Rights in an Age of Electronics and Information

fit to a proprietor whose competitors can eas- There is a tension, therefore, in copyright ily change the appearance of facts and infor- protection for works of fact. The tension is be- mation, some courts have sought to expand tween incentives and the public access to in- copyright protection well beyond the particu- formation,” and this tension is likely to be lar form that the work takes: heightened by modern information and communication technology. A good example is . . . the test is whether the one charged with infringement has made an independent pro- computer database technology. duction, or made a substantial and unfair use 52 Computer Database Technology.–A com- of the complainant’s work. puter database is a compilation of stored com- Despite the judiciary’s tendency to expand puter-readable information. A database ven- copyright protection in works of fact to “un- dor frequently sells both the data and the fair” appropriation by competitors, copyright means of accessing, searching, and assembling in these works is still severely limited: the in- that data through use of a computer program. formation or data within the work is not copy- Computerized database technology has a num- rightable. 53 Given the imperative that copy- ber of characteristics that set it apart from right should “promote broad public avail- traditional methods of compiling information. ability" 54 of the ideas and information latent These characteristics have to do with the way in any expression, the protection of informa- that information is stored, input, searched, and tion is anathema to copyright philosophy. Early distributed: in this century, the Supreme Court recognized • Storage: The storage medium may take the inadequacies of copyright protection for many forms: punch card, magnetic tape, works of fact, and sought to get around them hard or floppy disk, microelectronic com- by constructing a “quasi-property right” in ponents within the computer, and the news stories to address an underlying wrong- 55 laser-read optical disk. Electronic storage doing. media greatly concentrate the amount of information that can be stored in one loca- “Toskvig v. Bruce Pub. Co., 181 F.2d 664 (7th Cir. 1950) a case that concerned a compilation, which is a work formed by tion. One 5-inch optical disk, for example, the collection and assembling of preexisting materials, or data is capable of storing over 10,000 pages of that is selected, coordinated, or arranged in an original way, printed information.57 The information 17 U,S.C. § 101, and are particularly vulnerable to this proh- lem, See also: Leon v. Pacific Telephone & Telegraph Co,, 91 may be stored in any fashion: serially, F.2d 484 (9th Cir. 1937), Triangle Publications ~r. New ~jng~and chronologically, or as a hierarchy of infor- Newspaper Publishing Co., 46 F, Supp. 198 (I). Mass. 1942), and mation types. The type of information Quinto v. Legal Times of Nrashington, Inc., 506 F.Supp 554 stored may be print, audio, or still or mo- (D. D.C. 198 1). As one court has said, if “protection (for compilations) is limited solely to the form of expression, the economic tion audiovideo. Anything that can be rep- incentives underlying the copyright law are largely swept away. resented digitally can be stored and ac- National Business Z~ists, Inc. v. Dun & Bradstreet, Inc., 552 —— — . — — F. SUpp, 99 (N. D, 111. 1982). Parenthesis added. ever, remain. A recent Supreme Court decision, Harper & Row “’This statement is truer of compilations of data, such as v. Nation Enterprises, No. 83-1632, May 20, 1985, also dealt airline schedules or telephone numbers, but also extends to com- with the appropriation of a work of fact, but since the defen- pilations in which the compiled material is itself copyrightable, dant copied some of the plaintiff’s work verbatim, the court as in the case of NEXIS, a computerized database of news sto- did not have to reach the issue of idea and expression. ries. In the latter, both the format of the compilation and the “’’The tension is most acute in the case of factual compila- compiled material is protectable by copyright. However, in no tions which document information compiled by the government, case does copyright extend to the information conveyed by ei- or information that is already in the public domain, since pro- ther the compilation or the material compiled. prietary rights in the information would have the public pay “FOX Film Corp. v. Doyal, 286 U.S. 123 (1967). twice for the same data. see, e.g., Dow Jones & Co., Inc. I. Board ‘hInternational New Service v. The Associated Press, 248 of Trade, 546 F. Supp. 113 (S. D.N. Y 1982). U.S. 215 (1918), in which the Court said that “the news ele- ‘ ‘The optical disk, which is presently in use in some comput- ment— the information respecting current events contained in er systems and in home stereo systems, is also capable of stor- the literary production—is not the creation of the writer, but ing, in digital form, roughl~~ two hours of music or audiovisual is a report of matters that ordinarily are publicijuris; it is the material, or thousands of stall pictures, The Library of Congress’ history of the day. ” Id. at 234. This case was based on the Copy- current project utilizes all of these capabilities. At present, com- right Act of 1909, and was implicitly overruled by the Copy- mercially available optical disks are strictly for playback, but right Act of 1976. The difficulties that the court faced, how- ‘‘write/erase’ versions will be available shortly. Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 75

cessed by computer. 58 The types of works it may, in turn, be searched by, distrib- stored on present-day databases include uted to, and processed in other computers. full text literary and legal works, biblio- These unique characteristics of computer graphic information, scientific, financial, database technology may severely curtail the legal, criminal, demographic, and defense usefulness of copyright protection for works information. However, since a computer of fact that are distributed on-line, since copy- is indifferent to the nature of the informa- right protection extends to only the work’s ex- tion stored, computer programs are also 59 pression. This expression may be easily and accessible as ‘‘data’ on a database. systematically changed by a person with ac- ● Input: Information may be input into a cess to the database and the ability to ‘down- database in a number of ways: it may be load’ and copy information from it with all evi- typed in by a person at a computer termi- dence of copying erased.’” Once the information nal; it may be fed in automatically from is modified, the user may no longer be liable a sensing device, such as a heat sensor or for infringement, since the information, as a pressure gauge; it may be read in from such, is not protected. The downloading and a typed or written document by an opti- the subsequent rearrangement of the informa- cal character reader; systems are coming tion may be entirely legal, especially if the into use that accept input from the human downloading onto disk is permitted under con- voice. ● tract. Since information that is rearranged and Search: Information is accessed in a data- 61 copied by hand may be legally appropriated, base by the use of a computer program, the same rearrangement might easily be done through which users can instruct the com- by the computer in real time as it is being puter to search for keywords or catego- received.62 ries (fields) of information such as article titles or authors’ names. Artificial-intelli- Even if copying onto disk were illegal and gence-based programs are becoming avail- did infringe the owner’s reproduction, publica- able that allow searches in natural lan- tion, or display rights, the copyright owner guages, such as English, based on the could not possibly monitor and enforce all such syntax or semantics of a query. Telecom- uses.63 Given the relatively low cost of down- munications links allow users to search for 60A computer must, in some fashion, download the informa- information stored in computers in many tion in order to use it. The downloading may not be into perma- different locations throughout the world. nent disk storage, but memories within the computer all pos- ● Distribution: Once accessed, the informa- sess some degree of permanence. Indeed, the information must be stored in some way in order for a user to access it. Informa- tion is typically fed to a user’s terminal tion that is accessible for only transient durations is very often and may be copied on a local storage de- of little use, since the information must in some wa~’ be sur- vice, such as a magnetic disk. This infor- veyed, compared, and selected. At least one industry representative cautions that: “(copyright is) a rock-bottom starting mation may be processed in the user’s point. . . If nothing else, the copyright enables the negotiation computer such that it may no longer re- of contracts providing for anticipated, and remunerated down- semble the “original’ information. And loading. ” Letter from David Peyton to OTA, Information In- dustry Association, Aug. 8, 1985. Copyright, in this view, may ‘Information theory implies that anything seen, heard, be necessary, but not sufficient for the protection of databases. smelled, or felt can be represented, encoded, and replicated by “The status of hand copying under copyright law is uncer- a series of 0s and 1s, although putting theory into practice has tain. See Chapter 7: New Technologies and the Intellectual Prop- required over 40 years and billions of dollars. Solomon, op. cit.. erty Bargain. For works of fact, such as demographic tables p, 14. I+~\’en smells maybe represented digitallv. “Robot Noses, ” or phone listings, the rearrangement of the information is not Business J1’eek, Ma? 13, 1985, p. 57. an infringement—otherwise, cop~’right would step be~’ond ex- ‘Indeed, the de fimtion of “database’ can get quite confus- pression and protect information. ing. For example, a current trend in the design of computer chip ‘It might be argued that, in order to transform the infor- manufacturing for \’ery large scale integration (VI.SI ) is through mation, the computer must first cop?’ into RAM before proceed- the use of a ‘‘design’ database that, when guided by various ing with the transformation. This 1s a strained application of algorithms, can integrate database components in the design law, since the copy in RAM may be too ephemeral to constitute of a chip. Thus, to say that databases store information is to a‘ ‘fixation, or it may be an ‘‘essential step’ under section 117 simplify the dynamic uses to which this information may auto- to an otherwise legal procedure. matically be applied. ‘ ‘See ch. 4 on enforcement. 76 ● Intellectual Property Rights in an Age of Electronics and Information loading, and the continuing expansion of com- under way on natural language processing sys- puter storage capabilities, a user might easily tems, which may enable computer systems to compete with his provider, and secure copy- ‘‘understand’ documents within a database, right in his ‘‘new’” database. Although many and then produce written abstracts of the doc- database services prohibit such activities by ument in response to queries from a database contract, these contracts, as a practical mat- user. Similar research is being conducted on ter, may be unenforceable. The copyright hold- machine-generated translations of documents er may find it extremely cumbersome, if not from one language to another.” When the ele- impossible, to detect and prove infringement, ment of human labor involved in the process- unless the contract itself provides for moni- ing of information is replaced by automation, toring. the incentive of copyright protection may become entirely disconnected from the author- Beyond these questions about the scope of ship that it seeks to inspire. Information that copyright in works of fact, computer databases is automatically generated by a computer is also raise a number of separate, but related pol- ‘‘authored, if at all, by a program that is in- icy questions. The first is whether databases different to legal incentives.” generated by computers, such as Landsat Earth resources data, can and should receive If copyright is to be granted to machine- copyright protection. A second is whether produced works, it would signal a new role for copyright should extend to all contributors to copyright, and a departure from its traditional a database. Finally, there is the question of how role as an incentive for authors. This raises the to best administer copyright in works on a com- issue of whether copyright, in addition to pro- puter database. viding incentives for authorship, skill, or diligence, should also serve as a method of pro- The question of computer authorship has to tecting a return on capital investment in an do with a legal requirement that the item to information-conversion business. In the infor- be copyrighted be an ‘original work of author- 64 mation age, copyright may increasingly be ship. " Although “originality’ requires only called upon to serve as an economic regulatory that the work not be a copy of another work, device that establishes proprietary rights in questions still exist over whether information the products of automated processes. Accom- that is automatically written or compiled by panying such sweeping policy changes would a computer is a ‘‘work of authorship’ within be changes in the law. Congress would have the meaning of the law.” As discussed at the to consider whether computer input, process- beginning of this section, in the absence of the ing, and output are legally sufficient to con- creative activity normally associated with writ- stitute an original work of authorship. ing a novel or composing a song, copyright in works of fact often serves to protect the labor Works of fact stored in computer databases or diligence of a researcher or compiler of facts. also pose the question of who should receive However, machines are increasingly replacing copyright protection for the individual contri- human labor involving the recognition, orga- butions to the database. Many databases con- nization, and compilation of facts and infor- sist of thousands of short records or entries mation. Electronic compilers and assemblers, on a particular subject, which are typically for example, have taken over the process of produced by many contributors. Very often, compiling computer code from high-level lan- none of these contributors can copyright their guages to machine-readable form. Work is also — 6417 U.S.C. § 102(a). *U.S. Congress, Office of Technology Assessment, informa- “’’For example, oil production, electricity usage, or credit in- tion Technology Ii&D: Critical Trends and Issues, OTA-CIT- formation may be automatically measured and compiled as 268 (Washington, DC: U.S. Government Printing Office, Feb- transactions occur. Even in cases of full text databases, the ele- Illmy 1985). ment of authorship may consist of little more than entering in- ‘“The issue of whether the author of a program can claim formation at a keyboard, or using an optical character reader copyright in the output of the program is discussed in the pre- to scan the material and enter it into the computer. vious section on works of art. Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 77 — — — contributions, because the individual contri- copyright deposit is required in order to ac- butions are often “de minimus’’ –that is, so quire copies “for the use and disposition of the lacking in quantity or originality as to make Library of Congress."71 Indeed, much of the them uncopyrightable, or containing expression Library of Congress’ collection is a product of that admits of so little variation as to merge many years of copyright deposits. with the idea. An individual bibliographic ci- Databases, like any other work, may be de- tation, for example, typically contains the posited for the Library’s use and disposition. name of an author, the name of a book or arti- ‘Many databases, however, are “dynamic”- cle, the time and place of publication, and other they-are constantly updated, expanded, and facts. This citation is probably not copyright- modified, so that the “work’ is never in a fixed able, since the author of the citation contrib- or final form. Dynamic databases, therefore, uted insufficient original expression to consti- raise a question of whether and how copies are tute authorship or originality. The database to be deposited with the Copyright Office, and itself, however, is a copyrightable compilation 68 whether the objectives of the deposit require- or collective work, and the proprietor or the ments can be met. database owner would own the copyright. Yet, the database owner might not be the one who To get around the difficulties of depositing exercised the skill, industry, and diligence that dynamic databases, industry representatives copyright in works of fact is meant to protect. from the American Association of Publishers Instead, countless field agents or government and the Information Industry Association employees perform the labor of researching and have proposed “group registration” and the assembling the information, and they do not deposit of “identifying materials’ of dynamic receive copyright. As with machine-produced databases, which would represent portions or works, the incentive of copyright in databases samples of the copyrighted database.72 Al- is disconnected from the authorship it seeks though the industry proposal may prove work- to promote.” Copyright in many computer able for administrative purposes, questions re- databases may increasingly play a role as secu- main over whether the objectives of the deposit rity for investments, rather than simply pro- requirement will be met. If, in the future, more viding an incentive for authorship. and more information is stored in computer databases, and is subject to perpetual modifi- Finally, there is a question of how copyright cation, policy makers may need to reexamine in computer databases that are continuously the rationale for deposit in light of the needs modified should be administered. Copyright of the Library of Congress and the burdens on law requires that the copyright owner comply copyright owners. - with a number of administrative formalities. In general, the copyright owner must deposit or modify deposit requirements. Only the first and last 25 pages two copies of any published work bearing no- of “identifying material’ of computer programs, for example, need be deposited. 37 CFR !202.20. tice of copyright protection in the Copyright “] 17 U.S.C. $407, Notes of the Committee on the tJudiciary, 70 Office within 3 months of publication. The H.R. No. 94-1476. The fundamental criteria gmerning exceptions to the deposit requirements are the needs and wants of 68 17 U.S.C.§§ 103, 101. the Library, balanced against the hardship of deposit on the “qThis issue was central to a controversy surrounding the copyright owner. or-dine Computer Library Center’s (OCLC’S) bibliographic data- 250 Federal Register, 24240 (June 10, 1985), W’hile such a base. The contributors to the OCLC database are member solution is perhaps plausible for databases which rely on a more libraries, some of whom objected to what they saw as an un- or less constant and overarching "selection and arrangement’ deserved windfall for the OCLC database proprietor. In a letter of information (see discussion below), it is less plausible for works from one of the member libraries to the Copyright Office, a ques- of art. The protectable expression in many works of fact is often tion was asked “whether it is legally or morally legitimate to the format or arrangement of data—the formal “receptacle” into copyright a database comprising records where both the intel- which new content can be added. In works of art, however, the lectual content, the physical record creation, and the input of protectable expression is the content itself–the way the pic- a great bulk of the records are funded with taxpayer’s dollars. ture looks or the way that the story reads. When the protecta- Cop>’right Notices, vol. 32, May 1984. ble expression is itself in flux and exists in many different ver- 17 U.S.C. ~407. Failure to deposit these copies may result sions in many different places, it may not do to register the in a fine of the copyright owner. The Register of Copyrights creation in the categorical way envisioned the proposals of the may exempt categories of materials from deposit requirements, AAP and the 11A, 78 . Intellectual Property Rights in an Age of Electronics and Information

Works of Function and Computer Programs A recipe, for example, is useless without the necessary ingredients and utensils. Similarly, The category “works of function, ” as used in this discussion, denotes those works that a step-by-step instruction manual for a nonexistent machine, or a computer program with- use information to describe or implement a process, procedure or algorithm.73 They may out a computer has no value. Works of func- be physical objects which embody procedural tion also differ from works of fact. The value information, such as cams or cogs in a machine, of a work of fact lies in its accurate representation of reality-maps and news stories, for thermostatic controls, or punch cards for a loom. In general, physically embodied works example, are reports about what is. Works of function, in contrast, are descriptions of what of function implement a procedure, process, or can be if a given procedure is followed. algorithm directly by being incorporated into the intrinsic design of the mechanism.74 How- Although copyright protection is available ever, not all works of function are physical em- for works of function, it is subject to a very bodiments of information. They maybe written important limitation: Copyright does not pro- works, such as recipes or instruction manuals, tect the functional aspect of functional works.76 which merely describe a procedure or algorithm Copyright in a recipe, for example, does not that must be implemented by a human being. grant the copyright holder rights in the pro- Modern technology has created a new class cedure described in the recipe. Others are free of functional works. They are hybrids of those to bake the cake, and infringe no copyright in doing so. The functional aspects of a recipe are works of function that physically implement processes and those that describe processes. separated from its descriptive aspects, which alone are protectable. Computer programs are hybrid functional works insofar as they employ words and sym- For computer programs, the difficulty is pro- bols to implement and control a process. Al- tecting their descriptive aspect—the symbols though understandable by humans, computer used in the program-without at the same time programs also initiate and control processes protecting their functional aspect–what the or procedures by operating electronic switches symbols do in a computer. Because programs in a computer. These switches may, in turn, possess both a symbolic and functional nature, control other machines or devices.75 copyright may either protect too little if the Important differences exist between works copyrightable expression is limited to the literal program code, or too much if the copyright- of function and works of art and fact. Unlike works of art, works of function are seldom val- able expression extends beyond the program code. ued for their intrinsic or aesthetic qualities. ———. .-— .— . Computer Programs.77 On the basis of the rec- “’rrhe Dictionary of New Information Technology (New York: Vintage Books, 1982) defines an algorithm as “a proce- ommendations of the CONTU Commission, dure, or rule, for the solution of a problem in a finite number and without legislative debate, Congress de- of steps. termined that computer programs could be “For example, a cam in a machine is a physical embodiment of the logical operation: “if there is a 3600 turn, push rod X. copyrighted as “literary works” under Section It implements this procedure directly when the camshaft is turned 360 . Similarly, a thermostat physically embodies the logical operation “if the temperature rises above 70°, turn off “This is the law under Baker v. Seldon, which was dis- switch Z.” [n each case, the design of the object embodies in- cussed above. formation to a surrounding physical system. “The words “program” and “software” are often used inter- 7’Recombinant DNA may also be thought of as a hybrid changeably, but software has, in recent years, broadened to in- functional work; encoded genetic information can be used to clude the supporting materials which accompany the sale of com- control the production of proteins in a living, physical organ- puter programs, and even the the content of technologically ism. This section focuses principally on computer programs as based communications (e.g., prerecorded videocassettes are often functional works, and considers recombinant DNA only brief- referred to as software). This chapter adopts the terminology ly, and by way of contrast with computer software. One reason of the Copyright Act, and speaks in terms of computerprognwns, for this is that, while both are arguably works of function, they which are sets of “statements or instructions to be used directly raise separate social, economic, and ethical issues which are be- or indirectly in a computer in order to bring about a certain yond the scope of this report. result. ” 17 U.S.C. § 101. Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 79

102 of the 1976 Copyright Act. 78 Although the Any Form: The program may be “source issue of whether computer programs could or code, i.e., the form in which a programmer should be either copyrighted or patented was writes the program in a particular language the subject of considerable legal controversy, (such as BASIC or PASCAL or FORTRAN); or “object code, ” which is the source code it is now dormant. translated into a form directly processed by In the nearly 10 years since CONTU’s rec- the computer. ” Any program, whether used ommendations, the types of litigation over to govern the internal operations of a computer or used to interact with the user, may computer software have evolved through what 83 one lawyer has called ‘two generations."79 The be considered copyrightable. Any Computer: The term “computer” is first generation concerned the issue of whether quite broad, encompassing everything from computer soft ware is or should be protectable fast, specially designed Cray supercomput- by copyright. Except for certain details, the ers, which may be constructed out of thou- courts have resolved these questions in favor sands of integrated circuits, to a single of copyright protection for programs. microprocessor chip. The second generation of computer program Computers are commonly described in terms litigation, still in progress, concerns what kind of hardware, which is the physical machine and how much protection will be afforded. The components, and software, the term for com- questions emerging during this generation puter programs. In modern computer design, point to strains within the conceptual fabric however, hardware and software functions are of copyright, which have existed ever since its largely interchangeable. The allocation of func- inception. This chapter will focus on the issues likely to arise in this second generation litigation. “’This ‘(breakdown” is usually accomplished automatically! by the computer through the use of an “interpreter,” “compiler, The 1980 amendment to Section 101 of the or ‘‘assembler’ (which is itself a programl. An?’ computer pro- Copyright Act defines a computer program as gram in a given language may be used as the source code for an object code in another language. ‘‘1 I igh le~rel languages, ‘‘a set of statements or instructions to be used such as ‘‘1.1 SP, in their machine code form, ma~’ sertre as the directly or indirectly in a computer in order object code for a source code written in another language, such to bring about a certain result."80 The courts as FORTRAN. The FORTRAN“ program can in turn function in the presence of a “ PI, 1“ interpreter as the source code for have interpreted this definition in a very com- source code written in the language PI. 1. In this fashion, pro- prehensive fashion: grams may be layered upon programs. Object code and source code are merely relational terms, designating which language Any Medium: The set of statements or in- the programmer may be working in, and which language the structions can be embedded in any medium, machine operates in, Indeed, the so-called htwdwrm-e in a given from paper to magnetic tape to disks to Read- machine may itself be configured in 1. I SP (or any otherl ‘‘soft- 81 ware language; the hardware software distinction is not abso- Only Memory (ROM) silicon chips. lutely distinct. “’’Microcode,” also know as ‘‘firmware, is the most primi- “1 980 Computer Software Copyright Act; Dec. 12, 1980; tive level of programming, and embodies the sequence of paths Public I.aw No, 96-517, \ 10; 94 Stat. 3028. The amendment af- that a given electrical signal is to follow between the arithmetic fected only $ ]101 and 117 of the code, which, respectively, con- and logic units of the computer. Its function is to replace a "hard- cerned the definition of ‘‘computer program and ‘‘ I,imitations wired control system that ‘‘ mediate[s] the transfer of infor- on h; xclusive Rights. mation between the central processor, the main memor~’ units, ‘Jon Haumgarten, “(’copyright and Computer Software: L)ata- and the various input and output devices. David Patterson, bases and Chip Technology, ” an unpublished bibliography, 1985. “ Microprogramming, Scientific American, \’ol. 248, March “’Title 17 ~ 101, as amended Public I.aw 96-517, $ IOia}, I)ec. 1983, p, 50. The copJ’rightability of microcode remains unest ab- 12, 1980, 94 Stat, 3028. Note that “computer software’ is used lished, but it seems in principle no less “a set of statements differently than “computer program” here and elsewhere in the or instructions’ than any other form of program, although it literature; the former includes such ancillary material as writ- is not usually changed, or even seen, once it is etnbedded in a ten instruction manuals, books, and supporting documentation. microprocessor. Microcode has been held patentable, in re Brad- M .See Apple Computer Inc.}, Franklin Computer (’orp., 714 IPJT, 600 F.2d 807 (C. C,P.A, 1979), tiff”d, by an equallJ cfi~icfed F.2d 1240 {3d Cir. 1983), cert. dismissed per stipulation, 104 court, sub nom. Diamond ~’. Diehr, 450 U.S. 381 { 19811, and S. Ct. 690; and Apple Computer, Inc. ~’. Formula International, a case is pending on the issue of its copy. rightability, ,N-EC ~. Inc., 724 F.2d 521 (9th Cir. 1984), By implication, copyright Intel, Ci\r. Action No. 84-20799, A motion for summar~ judg- would also extend to programs in Programmable-ROMs ment in the N F~C case has been denied, and is scheduled for (PROMS) and Erasable-Programmable ROMs (E; PROMS). trial in April 1986. 80 ● Intellectual Property Rights in an Age of Electronics and Information tions between them is the result of design de- These traditional works either describe a proc- cisions that balance such factors as the speed, ess to a person, who then intervenes to lend cost, and flexibility required in the final prod- the words or phrases their utility, or they im- uct. The symbols in any computer program, plement a process without describing it. Com- therefore, are ultimately substitutes for hard puter programs, as hybrid functional works, wiring. This interchangeability between soft- describe and implement processes. They cause ware (symbols) and hardware (circuitry) make physical changes to occur in a machine, and programs a paradoxical sort of “writing, since can interact with other programs or with an they are symbols expressed as components of environment. A recipe encoded in a program machines. language cannot only tell a programmer how to bake a cake, it can “tell’ the computer, too. Like other copyrightable works, programs With the appropriate robotic apparatus, the symbolize information to human beings, and recipe can cause the cake to be baked. can be read and understood by programmers. The CONTU Report stressed that programs, The hybrid character of computer programs like other copyrightable works, communicate raises some very difficult problems for the law to those who can read them.84 Because com- of copyright, and has prompted commentators puter programs are symbolic, they appear to to point to inconsistencies in copyright pro- be at least as eligible for copyright as sound tection for programs: recordings, which require a record player to 85 No one would ever advise you that the copy- be understood by human beings. But, com- right on a schematic diagram of a diode ma- puter programs unlike previous “literary trix would extend to the diode matrix, yet works, are both writings in the traditional that is exactly what is being done by extend- sense and tools for accomplishing particular ing copyright on 1s and 0s to a diode matrix results. All traditional forms of writings are which it represents. Thus the same diode ma- inert and purely representational. Books, mov- trix could be covered by copyright on one ies, musical compositions, paintings, or statu- form of work and not the other. This is obvi- 87 ary do nothing that a user does not do with ously wrong. them. They simply convey information or en- These inconsistencies grow out of the basic tertain a reader, viewer, or listener. But, as one copyright distinction between unprotectable expert in artificial intelligence says: ideas and protectable expressions, and they are . . .. [t]here is a qualitative difference between symptoms of a very fundamental problem with the computer as a medium of expression and copyright protection for computer programs. clay or paper. Like the genetic apparatus of The problem is whether copyright protection a living cell, the computer can read, write and can be limited to the “expression” of a com- follow its own markings to levels of self-in- puter program, without also protecting the terpretation whose intellectual limits are still “idea, procedure, process, system, method of 86 not understood. operation, concept, principle, or discovery. ’88 Computer programs also differ not only from Although both CONTU and Congress made works of art and fact, but also from traditional works of function such as cams, thermostats, instruction manuals, code books, or recipes. ““Letter to OTA from Manny D. Pokotilow, Esq., Cesar, Ri- vise, Bernstein & Cohen, Ltd., Philadelphia, PA, Aug. 5, 1985. See also: Richard Stem, “The Case of the Purloined Object Code: “CONTU Final Report, p. 21. Can It Be Solved?” BYTE, September 1982; and Pam Samuel- ‘“TO accommodate the way in which technology mediates in- son, “CONTU Revisited: The Case Against Copyright Protec- formation between human beings, a provision in the Copyright tion for Computer Programs in Machine-Readable Form, ” 1984 Act says that all original works of authorship are copyrighta- Duke Law Journal, 663 (1984). ble so long as they can be perceived, reproduced, or communi- “The quoted language is from 17 U.S.C. \102(b). The cated, “either directly or indirectly with the aid of a machine ‘‘idea/expression dichotomy codified therein is a broader for- or device. ” 17 U.S.C. §102(a), mulation than “ideas,” per se. It comprehends the distinction “Alan Kay, “Computer Software, ” Scientific American vol. made in Baker v. Selden between the expression and the ‘‘art 251 September 1984, p. 53. expressed, rather than just the abstract manner of presentation. Ch. 3— The Accommodation of Intellectual Property Law to Technological Change S 81 clear that “the expression adopted by the to the strict line-by-line program code, in which programmer is the copyrightable element in case the unscrupulous might easily escape lia- a computer program, and that the actual proc- bility for infringement by simply varying the esses or methods embodied in the program are code in a trivial way, or 2) the copyrightable not within the scope of the copyright law,"89 expression will be extended to the logic, de- the question still remains. What is the expres- sign, structure, performance or even the out- sion in a computer program? put of the computer program, in which case one has copyrighted a “procedure, process, sys- Part of the problem is that the scope of the tem, or method of operation, ” The cases that expression of a computer program can vary have been decided thus far indicate that the widely, depending on how the word expression courts are adopting the latter alternative, and is interpreted. As figure 3-4 illustrates, com- have extended the meaning of expression in puter programs can be described in many computer programs to include the processes ways, ranging from those descriptions that fo- that the programs implement. One opinion, for cus on the precise code used to those that gen- example, suggests that a program that achieves erally describe the procedure or algorithm to results similar to other programs, or even to be implemented by the program. The bounda- other works of function—such as a commodi- ries of copyright protection in programs will ties trading manual— will constitute an appro- depend on what is considered an expression priation of a copyrighted expression. ” The and what is considered an idea.%’ Opinions vary court in this case emphasized a similarity in on where the protectable expression should “overall structure’ between one work and the stop and where unprotectable ideas begin, One other. In another case, a court found that 44 author believes that ‘the expression in the soft- out of 186,000 lines of code constituted sub- ware does not consist of the exact written 94 stantial similarity of expression. Yet another source code, but the specific logic and design 91 court ruled that ‘‘the protectable expression of the program." others take an opposing view, and argue that copyright protection in in a computer program is the manner in which the program operates, controls, and regulates a computer program, ‘‘is limited to the literal the computer in receiving, assembling, calcu- code and does not extend to the structure or lating, retaining, correlating, and producing other nonliteral elements of the computer pro- 92 useful information either on a screen, print-out, gram." 95 or by audio communication." Regardless of how legal scholars resolve the In theory, none of these rulings is permitted issue of idea and expression, the Federal courts, under traditional copyright principles. This is in interpreting copyright law, will eventually not because the courts have misinterpreted face a dilemma; either: 1) the copyrightable ex- copyright law, but because copyright law can- pression in a computer program will be limited not be successfully applied to computer programs. Unlike artistic or factual works, which “‘{ l{c~~ Yfj. :144T:] , 94th (’ong., 1st sess. 1975, p. 54; and 11 R Rep A() 91- 14’76, 94th (’ong., 2d sess. 1976, p. 57 (empha- si~ added). I n k(wping with this notion, the circuit court in ,A\p- 44’i4’illiams \v. .4rndt, F. Supp. (1) hftlSS., 198S1, ~(). pl(~ ( ‘omputt’r. In(,. \ b’ranklin Computer Corp., 714 F.2d 1240 83-3397. In this case, the plaintiff’s work was a s~ep-hy-step ~tld (’ir. 19H:;), said t haL ‘‘ .IIpplp does not seek to copyright the method for trading in various commodities. The defendant, with- met hcd which in+t ructs the computer to perform it~ operating out authorization, translated the plaintiff work into a com- fun(tif)n< hut {~nl} t ht instructions thcmsel~cs.’ puter program that achie~’ed similar results, and was found ‘ SWI [’art 1 of t hls chapter for a discussion of idea and ex- ~ilt~ of infringement. pr(’s

Figure 3-4.—Computer Programs - “What Is Protected?”

Each of items (a) through (g) represents a (b) different, but equivalent expression of a procedure for computing an average. Each of these expressions could act as a program for computing an average, depending on the sophistication of the computer operating system handling the information. (c) If copyright protection in one of these expressions is broadened to include any or Get a data item all of the equivalent expressions, then add item to total copyright protection has been extended to increment index ideas or processes, and assumed patent- if no more items, continue: Iike status without stringent patent else go to get requirements (such as novelty and divide total by index nonobviousness).

If copyright protection in one of these (d) expressions is limited only to that expression, then copyright protection is almost 10 data 10, 12, 17, 22, 6, – 1 useless, because it allows others to escape infringement by insignificant variation of 20 read X, the expression. 30 If x = – 1 goto 70 40 let X = X +X, The scope of patent protection in programs t t IS also hard to ascertain. The distinction 50 n = n + 1

between mathematical formulae, 70 average= Xt/n algorithms, and computer programs, is not 80 print average clear. In theory, one cannot patent mathematical formulae or laws of nature, but how is this distinction between (e) discoveries and inventions to be drawn in the context of computer programs? Get item x( Intellectual property protection for such fundamental procedures as computing an average is problematic. Proprietary rights in the “building blocks” of computer science may impede, rather than further, its progress. If rights are to be granted in functional works such as programs, at least one question is: what is so basic as to constitute a “staple” item in the trade?

As computers become more sophisticated in their ability to process natural language (conversational English, for example), the = X +x, x t line between what counts as a protectable I t program and what constitutes user input will begin to blur. As this illustration shows, “program” and “algorithm” have no fixed meanings. n=n+1 (a) I To compute an average, sum the numbers (f) in the set to be averaged, and divide by the Call average number of items in the set 10, 12, 17, 22, 8

(9) 01100100110101010 10010011011001110 01110101001100100 110100110, ., . SOURCE Off Ice of Technology Assessment Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 83

are subject to the ‘‘abstractions test between If, on the other hand, courts continue to in- idea and expression, copyright in computer terpret the expression in computer programs software is an either/or choice. Either one pro- as broadly as they have in recent cases, devel- tects the words or variables as they are liter- opers of computer programs may also be ad- ally represented by the programmer, or one is versely affected, If copyright in computer pro- forced to interpret those words or variables in grams is held to extend to the “useful terms of the procedure they implement in a knowledge’ ‘–the method of achieving certain computer system; thus protecting a procedure, results—embodied in the program structure process, or method of operation. ’G The “clear or algorithms, copyright may block software distinction” made in Baker v. Selden, “between innovators by precluding the creation of pro- the book, as such, and the art it is intended grams that differ in detail, but implement and to illustrate, collapses in a computer program, perhaps improve on copyrighted programs.’” because the program embodies both “the book” The patent system was designed to have this and “the art. ” one cannot arrive at a “clear effect, but it is inappropriate for the copyright distinction” between idea and expression in system, which was neither doctrinally nor ad- a computer program by using traditional copy- ministratively designed to protect functional right analyses. information. Overly broad copyright protec- Policy Implications, The practical import of tion would give the owner patent-like protection over processes for a much longer duration appropriate protection for computer programs lies in the public policy objectives of the copy- than patent law provides, and do so with no right system itself. For computer program pro- examination for the program’s novelty or nonobviousness, as is required by patent law. prietors and creators, as well as to the domes- Moreover, patent law requires that an inven- tic and international economies, it is important tion bean advance over the ‘prior art, requir- that computer programs be adequately protected. 97 If courts construe copyright protec- ing an inventor to examine previously patented claims before gaining patent protection. For tion in computer programs narrowly, creators this reason, the Patent and Trademark Office and proprietors may well find unprotected the keeps records of all patents that have been is- very thing that distinguishes their product sued. But the Copyright Office does not keep from others–its logic and design. Equally im- 99 records of “prior art, ’ which leaves no way portant, if only the precise code is considered of predetermining whether a program that per- expression, copyright protection will be of limited use, since this expression can be easi- forms similar functions or obtains similar results will infringe a previously copyrighted ly changed by competitors. program. Copyright law does not distinguish between ...— “ (’onsider the distinction logicians make between ‘‘object the types of computer programs it protects, language and ‘‘ met a 1 anKu age (or langua~e about the object which may exacerbate some of the difficulties languag[’~ in the context of t h[~ following >tatements: described above. The type of computer pro- Ilake the cak(~ gram that is copyrighted may significantly af- Fjxecute ‘‘ Ilake the (akef The former is the object language; the latter is the meta language. This distinction collapses in computer programs, since “AS tJustice Bradley commented in Baker ~, Selden: “The propositions can be ‘ ( recursike’ i.e., they can serve as both ob- ~’er~’ object of publishing a book on science or the useful arts ject and meta statements. ‘( Bake the cake, ’ depending on the is to communicate to the world the useful knowledge it con- con t~’ x t of use within the running of a computer program. may tains. But that object would be frustrated if the knov.ledge could either be information to be displayed to the user, or a subrou- not be used without incurring the guilt of piracy of the book. tine instructing the computer to bake the cake. 101 LJ, S. 841 at 103 ( 1880). ‘‘A major, if not the chief means of in~renting toda}’ is be- “Deposit of programs in the Copyright office is required if ing done in a non-engineering liberal arts mode which is alien the program is published with notice. 17 U.S. C. \407. Howe\rer, to the historical patent-copyright paradigm, From a speech only the first and last 25 pages of a program need be deposited, given by .John I,autsch, “W7hy Be Concerned About Proprie- and these need only be sufficient to identify the program in ques- tary I%otection of Software’?’ American Bar Association Con- tion. 37 CFR $202.20 (c)(viii(A). These pages need not disclose ference. W’ashingt,on, 1)(’, tJuly 1985. any of the workings of the program, 84 ● Intellectual Property Rights in an Age of Electronics and Information feet the market power a copyright owner can Computer programs create unique concerns possess.100 For example, both operating sys- about reverse engineering because, unlike other tems and applications programs are generically copyrightable works, their expression is not computer programs, but crucial distinctions disclosed when they are published. ’03 While a exist between the two. Operating systems gov- journalist can learn his craft without copying, ern the internal operation of a computer, and by reading the others’ published works, a pro- allow it to communicate with a range of appli- grammer cannot. He must copy the program cations programs (e.g., spreadsheets, graphics, from its original storage medium–probably and word processing programs). The operat- by decompiling it into source code form–in ing system will, therefore, determine which ap- order to read and learn from the works of his plications programs can run on a particular predecessors. This copying may give rise to computer. Thus, copyright on an operating sys- copyright liability, even though it may in no tem may be a far more powerful right than a way interfere with the market value of the cop- copyright on an applications package, and may ied software.104 The copy that is made in the govern the market for applications packages. course of reverse engineering may have rela- Indeed, this desire to make one’s applications tively little financial value. It may bear little, program marketable may have been at the if any, resemblance to the work that is allegedly heart of the Apple v. Franklin case, since it infringed, and may even be destroyed after use. was unlikely that the 15,000 applications pro- Instead of examining the work, the court looks grams written for Apple’s operative system to the “paper trail” left by the defendant in would be rewritten to run on the Franklin Com- the research and development process. The in- puter’s machines. ’”’ fringement often occurs in the process of copying a program to create a new one. However, Reverse Engineering. The trend of interpreting expression broadly in copyright for com- courts have used this initial copying as the basis for finding that the final work produced by puter programs may also pose problems for reverse engineering. Reverse engineering refers a defendant was an infringement, even though it resembled the copied program only slight- to the unauthorized, although not necessarily 105 ly. This creates uncertainty whether any illegal, reproduction of programs in their ob- copying, even that for reverse engineering, is ject or source code form for the purpose of legal. teaching, analyzing, or evaluating the concepts, techniques, or ideas embodied in the pro- As it exists, copyright law offers two con- gram. 102 This process promotes innovation by ceivable ways of dealing with the problem of allowing programmers to build on the works reverse engineering. One possibility, Section of others in the creation of new works. It also 117 of the Copyright Act, permits copying of eliminates the need for redundant research and software as an “essential step” in the utiliza- development. Reverse engineering allows ab- tion of a computer program for “archival pur- stract knowledge and techniques to be passed on, while prohibiting the wholesale appropri- — . .— ation and sale of another’s work. ‘r’] For a discussion of the disclosure issues surrounding computer programs, see Pamela Samuelson, “CONTU Revisited: The Case Against Copyright Protection for Computer Programs in Machine-Readable Form, 1984 Duke Law Journal 665. ——-— ‘“Pamela Samuelson, “The Demise of the Right To Reverse “’”For a thorough discussion of copyright and market power, Engineer Computer Programs: Is It Appropriate?” unpublished see ch. 6. draft, Sept. 25, 1984. ‘“’ Allan Schmid, “Intellectual Property Rights in Bio- ‘(’’Indeed, the emphasis on the conduct of the defendant, as technology and Computxx Technology, ” to be published in Zeit- opposed to an assessment of the similarity in content between schrift fur die gmmrnte Staatswissenschaft, 1985. One writer works can be seen in several recent cases: e.g., SAS Institute, argues, however, that this problem has been contradicted by Inc. v. S&H Computer Systems, Znc. (1985 M.D. Term.), No. the facts. Duncan Davidson, “Software and the Wealth of Na- 82-3669, Whelan Associates, Inc. v. Jaslow Dentaf Laboratory, tions, ” to be published in Computer Law and Practice, 1985. 225 U. S.P.Q. 156 (E. D. Pa. 1985), and Hubco Data Products ‘“’The language used in this definition is adapted from the Corp. v. Management Assistance, Inc., 219 U.S.P.Q. 450 (D. Semiconductor Chip Protection Act, 17 U.S.C. f906. Idaho 1983). Ch. 3— The Accommodation of Intellectual Property Law to Technological Change “ 85 poses. "106 This provision does not explicitly ad- neering, it is impossible to say definitively dress the issue of reverse engineering. CONTU, whether fair use will allow it. which wrote section 117, interpreted ‘ ‘essential step” narrowly, to include only the copy- Computer Program and Patent Law ing done by a computer in the process of load- Given the problems of applying copyright ing a program into the machine. Likewise, the 107 protection to computer programs, patent pro- courts have followed this interpretation. A tection may be a more viable alternative than broader interpretation of “essential step” fair use. Among other things, patent law pro- might permit reverse engineering. But because tects new and useful processes,111 and computer such a broad interpretation of section 117 may programs, as works of function, use informa- also conflict with the copyright owner’s exclu- 108 tion in a process. Many patents have been is- sive right to prepare derivative works, it sued for computer programs. seems to be a slim reed on which to facilitate reverse engineering. Patent protection, however, also poses problems. Some are theoretical; not all programs Alternatively, the doctrine of fair use may that need protection will be eligible for patent provide for reverse engineering, because it per- 109 protection. Some are practical, and have to do mits copying for scholarship or research. Fair with how suitable the patent system is to the use, however, evolved in the context of print commercial environment of program engi- technology, and so several of its features make neering. it an uncertain device, at best. Two of the criteria used in determining the fairness of a use Programs and Patent Theory. Since 1966, the are: ( 1 ) the purpose and character of the use, issue of program patentability has been jug- including whether the use is of a commercial gled among the Patent Office, the Court of Cus- nature; and 2) the amount and substantiality toms and Patent Appeals (now the Court of of the work as a whole. 110 Because reverse engi- Appeals for the Federal Circuit), and the Su- 112 neering is often performed for inherently com- preme Court. Computer programs have prov- mercial reasons, the “purpose and character en to be as problematic an “invention’ for pat- criterion could weigh against a finding of fair ent law as they have been a “writing” for 113 use. Furthermore, programs must often be cop- copyright law. For, the same characteristics ied in their entirety to understand their work- that make programs acceptable subject mat- ings, or to study the relevant portions of code. ter under the copyright scheme cause problems The fair use factors concerning “amount and under the patent scheme. Whereas copyright substantiality’ not only deal with the num- has problems with the functional nature of pro- ber of copies of a work made, but also with the grams, patent law has difficulties with sym- portion of a work that is copied. Hence, the bolic nature of programs. They represent proc- fair use doctrine may not allow reverse engi- esses that have heretofore been mental, such neering. However, because there has been no ——— —— court decision on the matter of reverse engi- ]‘ ‘Section 101 of Title 35 (Patents) states that whoe~er in- vents or discovers any new and useful ~ 1 I process, (2) machine, {3) manufacture, or (4) composition of matter, or an}’ new or ‘“The relevant part of section 117 reads: useful improvement thereof, ma~’ obtain a patent on his in\ren - tion or discovery. it IS not an Infringement for the owner of a copy of a cc)n)put- ‘ “SW Duncan Da\ridson ‘‘ I’rotecting Computer Software: er program to make a cop~ or adaptation of that computer A Comprehensive Analysis, in 1983 .Arizona State I,awr Jour- pro~am pro~ided ( 1 I that-~uch a new copy or adaptation IS nal 611, 634-650. created as an csw’n tlal step in the ut]hzat Ion of the computer pro~am In conjunction with a rnachlne and that It IS used In “ ‘One writer has suggested that ‘‘[m]uch as the distinction no other manner is breaking down in copyright because of technological changes ‘ See, e.g.: Midwa~’ Alanufacturing Co I’. Strohon, 564 blurring the distinction between a product and its idea, so too- F.supp. 741 (?J. I). Ill. 1984), especially in the area of computer software— is the dichotom~. “17 U.S.C, ~ 106, losing its meaning in patent law. ” James Beniger, Information ‘qThe doctrine of fair use is codified in Section 107 of the Technolo~”es and Commodities in the De~’elopment of intellec- Copyright Act, and is discussed in ch. 7 of this report. tual Proper.\’: Changing Rights and Practices, OTA contract “17 U. SC. ~107, sections 1 and 3 report, April 1985, p. 58. 86 • Intellectual Property Rights in an Age of Electronics and /nformation as balancing a checkbook or searching for a case for a great many computerized industrial word in a text. processes, and the majority of programs written for personal computers. Strictly speaking, computer programs are not in and of themselves patentable. At The courts’ reluctance to uphold patent pro- present: tection on programs in isolation from physical processes points to a very fundamental . . . [patent protection] is available for computer programs that are intrinsically tied to a problem with patent protection for programs. device which physically and automatically ap- Programs are expressions of algorithms, which plies the results of the computer program. . . . are rules or procedures for achieving particu- The invention is not in the program: It is lar results. Algorithms, like mathematical for- merely implemented by the program (and) is mulae and laws of nature, are not patentable, actually a new method of doing something. Yet, the algorithms expressed in programs can Patentability is determined by whether the also be configured in a computer in hard-wired program implements a physical process that form. is itself the subject of invention, and meets the This equivalence between algorithms in criteria for patentable processes.115 For exam- hardware and those in software raises an is- ple, a method of typesetting,116 of timing the sue concerning the patent ‘doctrine of equiva- curing of rubber,117 of searching for oil,118 or lents.” The doctrine states that a patent proof storing and manipulating telephone signals tects equivalent configurations, even though and records in a database 119 are patented in- they may neither be disclosed nor actually ventions that include computer programs as claimed, unless the equivalent configuration components of the invention. Programs that performs the function in a substantially dif- are the only novel component of an otherwise ferent way.123 If, therefore, a program can be unpatentable process, 120 or that merely imple- described in terms of the functioning of digi- ment an algorithm or a scientific or mathemati- tal logic circuitry in the computer hardware, cal truth,121 are not patentable.122 This is the rather than in terms of algorithms embodied ‘John C. Lautsch, American Standard iiandbook of Soft- in software, patents might be issued on ma- ware Business I.aw (Reston, VA: Reston Publishing, 1985), p. 65. chines which if they were software, would be “That is, useful, novel, and nonob~ious (35 U,S.C. \\lOl, denied.124 103). Similarly, machines, methods of manufacture, and compositions of matter that employ programs and that meet the The Practical Limitations of Patent. There are statutory criteria for patentability are also patentable. ‘” In r-e Freeman, 573 F,2d 1237 (CCPA 1978). administrative and practical problems con- “ Diamond v’. Diehr, 450 U.S. 175 (1981). nected with seeking patent protection for com- “In re Taner, 681 F.2d 787 (CCPA 1982). puter programs. Many observers consider time “’I’atent No. 4,479, 196– Hyperedge E~nti~r-Relationship Data Base Systems ( 1 984), for example. and expense to be the greatest drawback. A ‘“’ Parker ~. Flook, 437 U.S. 584 ( 19781. claim may be pending for 2 to 3 years and cost “Gottschalk ~, Benson, 409 U.S. 63 { 19’72). The Supreme an inventor upwards of $10,000 to prosecute. 125 Court ruled that a program for the conversion of binary coded decimals into pure binary numerals could not be patented, since Many innovators may find the time and ex- “the patent wollld wholly pre-empt the mathematical formula pense involved in obtaining patents for com- and in practical effect would be a patent on the algorithm it- puter programs prohibitive, depending on the self. ” 409 U.S. at 71 72 (1972). ‘“’This statement is based on the caselaw that has so far de- rate at which software designs become obso- veloped. one observer, however, has pointed out that “[p]atents lete, and the amount of financial resources are now being granted every week with claims covering a series available to a given software innovator. Even of steps which can be executed completely on a computer and, it appezws, without any last-step output, that is, to turn a crank, light a light, eject a part, and so forth. Whether court (sic) will ‘“{Duncan Davidson, “Protecting Computer Software: A Com- uphold such claims in infringement proceedings remains to be prehensive Analysis, ” 1983 Arizona State Law Journal 611, seen. ” Letter to OTA from Robert Shaw, The Patent, Trade- 643, citing 4 D. Chism, Patents, $18.04 (1982) mark, and Copyright Research Foundation, Franklin Pierce Law “’Ibid. Center, Oct. 11, 1985. Many paten s have been issued for “pure” “’Larry Kahaner, “Patent Reform, Pending, ” Across the #b, programs (e.g., 4’SW’IFT-TECH” is a patented computerized Board, September 1984, p. 36; and conversations with Richard database search algorithm that runs on mainframe, mini, or Stern (see note 44) and Robert Shaw (see note 122). See ch. 9 microcomputers. U.S. Pat. No. 4,270, 182). on institutional issues. Ch 3— The Accommodation of Intellectual Property Law to Technological Change ● 87

after a patent is successfully obtained, it is right. ]28 In trade secret cases, a court is freer often found invalid when challenged in court,126 to focus on the effects of disclosure on a plain- making the value of a patent to investors high- tiff’s business, and the contractual or tortious ly uncertain. The scope of patent claims in pro- misdeeds of a defendant, rather than on strict grams, too, is uncertain, because of their sym- standards of infringement. 129 bolic nature. The actual code written by a Trade secret protection, however, has draw- programmer is seldom the subject of patent backs from both a public policy and a proprie- claims. Instead, what is claimed is the proc- tary point of view. As a matter of public pol- ess that the code implements, and the program icy, an overreliance on trade secret protection is incidental to this process. The scope of the may hinder technological growth in the com- patent claim may, therefore, be difficult to puter industry by “locking up” information delineate precisely, because it does not refer that can benefit whole sectors of the industry. to a specific embodiment or tangible item. Unlike the patent and copyright systems, trade secret does not further the goals of disclosure Computer Programs and Trade Secrets and publication. Quite the reverse: trade secret protection is lost by unrestricted or unpro- A trade secret is a form of intellectual prop- 130 erty that covers any confidential formula, pat- tected disclosure of the secret. Trade secrets tern, device, or compilation of information used are often enforced through contracts between in a business, which gives that business an op- employers and employees that restrict the em- portunity to obtain an advantage over com- ployees’ rights to enter into competitive ven- petitors who do not know or use the secret.]” tures or to subsequently become employed by Trade secret law is a viable method of protect- competitor companies. Although intended to ing computer programs, and in some cases, protect employers from unscrupulous employ- seems better suited to programs than either ees, abuses of these noncompetition agree- patent or copyright. Indeed, software devel- . -. opers rely on it heavily for protecting against ““Rather than the uniqueness, novelty, or originality of the the unauthorized disclosure of competitively program, a court ruling upon a trade secrets case will look to the unique \’alue of the program to a compan~ competitive valuable information. ad~’antage, the company’s in~’estment in the program design, or the ‘ ‘unique logic and coherence’ of the program. See, e.g.: Trade secret law differs substantially from Corn-Share, Inc. }$. Computer Complex, Inc., 338 F, Supp. 1229 both patent and copyright law. The law of each (E, D. Mich. 1971) and Computer Print S~”sterns, Znc. \’, Lewis, State, rather than Federal law, defines what 422 A.2d 148 (Pa, Super. 1980), but see: Structural 11~’namics Research Corp. L’. Engineering Afechanics Research Corp., 318 a trade secret is, and what rights the holder N. J4’.2d 691 (Minn. 1982) (“Mere \rariations in general processes of a trade secret has. Unlike copyright, trade known in the field which embod~’ no superior advances are not secret protection can extend to the ideas, al- protected.”) “qThe same can be said of man>’ other State law forms of in- gorithms, and procedures embodied in a pro- tellectual property protection. Theories such as tortious inter- gram, as well as to the expression adopted by ference with contract, interference with prospecti~’e ad~rantage, the programmer. Unlike patent, a trade secret misappropriation, and unfair competition law all focus on the conduct of defendants, rather than on the subject matter of the generally requires no compliance with formal- item that is allegedly infringed. ities, no waiting time to acquire, and no proof ‘“’The factors that go into an assessment of whether certain of novelty or nonobviousness. Perhaps most information is one’s trade secret include: 1. the extent to which the information is known outside of important, trade secret is not encumbered with his business; the problems of fitting computer programs into 2. the extent to which it is known by employees and others subject matter schemes of patent and copy- involved in his business; 3. the extend of measures taken by him to guard the secrecy of the information; 4. the value of the information to him and to his competitors; “Elstimates of holdings of in~’alidity range from 50 percent 5. the amount of effort or money expended by him in devel- (see Davidson, op. cit. ) to 70 percent (Richard Stern, “ROhl oping the information; and in Search of a Remedy: Can They Find It? 1 Computer Law 6. the ease or difficult’ with which the information could be Reporter 4, 1982). properly acquired or duplicated by others. “ Restatement of Torts, $75’7, comment B Restatement of Torts, §757, comment B. 88 ● Intellectual Property Rights in an Age of Electronics and Information

ments may also hinder technological advance vendor also faces a number of other problems by acting as a barrier to employee established with trade secret protection, including a lack startup companies.131 of uniformity in trade secret laws from State to State, and difficulties in attempting to ob- Trade secret protection is of limited useful- tain concurrent protection through patent or ness to many types of software developers and 133 copyright law. vendors. Programs that are mass marketed are not suitable candidates for trade secret protection, since the trade secret status of the software is lost through disclosure, and disclosure is often the natural consequence of mass marketing. To avoid this problem, some vendors “Secrecy may be lost through copyright registration and have licensed, rather than sold, their programs, deposit, or through a Freedom of Information Act request upon and required the licensees to keep the program the Copyright office, The Copyright Office has promulgated ‘‘secure deposit” regulations with respect to deposit of the Mul- secret .-Depending on the number of licensees, tistate Bar h~xam, 37 CFR $203.40, and see ,VationaJ Confer- however, these schemes may be neither legally ence of Bar Examiners t’. .Mult,istate Legal $tu~ies, 692 F,2d nor practically enforceable.132 The software 478 (7th Cir. 1982), and the Freedom of Information Act has —— — -. —. —. a trade secret exemption, 5 U.S, C. $552( b)(41, but neither of these “’’These (noncompetition) suits hit the startups at their provisions has been construed with respect to computer pro- most vulnerable stage, when every available dollar and minute grams. Section 301 of the Copyright Act preempts State law has to be poured into the nascent company. The suits have be- that provides 4 ‘equivalent protection. Despite the fact that come so common as to kindle suspicions that some established the Supreme Court has found that patent law does not preempt companies are using the courts more to suppress competition State trade secrets law, Kewanee OiJ Co. ~’. Bicron Corp., 416 than to right legitimate wrongs. ” “In High-Tech Industry, New U.S. 470 (1974), the situation is not entirely clear with respect Firms Often Get Fast Trip to Courtroom, ” Wall Street Jour- to preemption of State trade secrets law by Federzd copyright nal, Aug. 14, 1984. law. See e.g., Videotronics, Inc. t’. l?end Electronics, 564 F. Supp. ‘-Davidson, “Protecting Computer Software, ” op. cit. 1471 (D. Nev. 1983),

PART III: IMPLICATIONS FOR POLICY

The application of a uniform system of in- Problems also require different degrees of tellectual property principles, such as that em- change. Copyrighting dynamic databases, for bodied in copyright and patent law, to diver- example, may call for relatively minor changes gent types of information-based products may in copyright registration and deposit regula- no longer be possible. Modern technologies are tions, but the difficulties that computer and exaggerating dissimilarities between informa- communication technologies pose for protect- tion products that were once protectable un- ing works of fact may necessitate sweeping der a single system of law, and are, in some changes in the type of protection that the law cases, giving rise to new products that strain currently offers. the application of old legal principles. The timeframe in which problems are likely There may be no one simple solution to the to arise also hinders attempts to construct one problem of accommodating intellectual prop- comprehensive solution. Protecting computer erty law to technological change. Being differ- programs is a problem that requires immedi- ent in kind, many of the problems require dif- ate attention, but other issues, such as inter- ferent types of solutions. Determining the active authorship, may not significantly affect proper form of protection for computer pro- the intellectual property system until early in grams, for example, is largely a question of the next century. which aspects of programs the law should protect; whereas determining ownership in works Given the complexities of formulating appro- distributed on-line is one of finding a feasible priate intellectual property law, it is convenient administrative mechanism. to organize Congress’ policy options accord- Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 89 ing to the type of action that might be taken. Table 3-1 .—Who Should be Responsible for Solving A choice of one option does not necessarily ex- Intellectual Property Problems? clude others, and the policy maker may choose Familiar Not familiar to exercise several options at once, or in se- with with quence over time. These options, and their Total issues issues strengths and drawbacks, are described below. Business in the Information and entertainment industries ...... 54% 54% 53% Option #l: Rely on the Marketplace The government ., 34 33 35 Both 8 11 7 Marketplace options accommodate techno- Neither ...... 1 1 1 logical change with little or no government in- Don’t Know 3 1 4 tervention. Under this kind of option, private SOURCE Yankelovich, Skelly White, Inc. Public Perceptions of the Intellec- tual Propertyi Rights Issue contract prepared for OTA February entrepreneurs, acting individually or as groups, 1985 address problems that exist in intellectual property law. Solutions to particular problems to adapt intellectual property law may create will often take the form of “technological fixes” more uncertainty than it resolves, would also or private contractual agreements. For exam- prefer that Congress pursue marketplace op- ple, ‘‘identifiers” electronically embedded in tions. In some cases, private industry has al- some works may help to solve some of the prob- ready taken a marketplace initiative by seek- 135 lems of integrity and identity associated with ing to establish technical standards, or by works of art that are produced and distributed protecting their products through contractual on-line, and technological methods of monitor- agreements with their customers. However, ing use, although expensive, are available for not all representatives of the information in- some database distributors of works of fact. dustry believe that the marketplace alone can And, where current legal protection is inade- provide adequate protection for their products. quate for works of function, proprietors might Database vendors, in particular, are uncertain try to supplement intellectual property pro- about marketing their services without ade- tection through the use of site licensing or quate and appropriate legal mechanisms. 134 ‘‘shrink wrap" licensing. The marketplace option has several advan- The marketplace approach to resolving intel- tages over others. The marketplace is more lectual property issues is favored by a majority likely to be able to respond rapidly and flexi- of the public, 54 percent of whom feel that busi- bly to rapid innovation. Contracts between ness should have the primary responsibility computer program sellers and buyers are likely for solving problems associated with intellec- to address the specific needs of each party, and tual property. (See table 3-l.) In response to can be tailored to take unique features of the a survey conducted for OTA by Yankelovich, technology into account. Technological means Skelly & White, Inc., the public responded in of protecting information or monitoring use the following way when asked “Thinking about avoid costly enforcement and litigation. And, this issue of intellectual or creative property, marketplace solutions can evolve as rapidly who would you say should have primary re- as the technology. sponsibility for solving any problems created Marketplace solutions do not solve all of the by new technologies (like computers or problems that vendors of information products videocassette recorders)?” Manufacturers of face, nor do they necessarily further the pub- computer hardware and many established soft- lic interest. Unlike intellectual property law, ware developers, fearing that legislative efforts contracts do not ordinarily bind those not

“’Shrink wrap licenses, so called because they purport to — bind the purchasers of mass market software to a license agree- “’The Association of Data Processing Service Organiza- ment rather than an outright sale, are of unproven effective- tions (ADAPSO) has recently proposed a standard method of ness and legality. See ch. 6, pp. 183-184 for further discussion copy-protecting computer software, and the proposal has met of shrink-wrap licenses. with some resistance from both software vendors and users. 90 ● Intellectual Property Rights in an Age of Electronics and Information

party to the agreement. This means that, lack- legal protection inadequate, but so too are ing adequate intellectual property protection, judges’ abilities to comprehend the subtleties a creator or purveyor of information is often of the technology and the long-range impact without legal recourse against third parties. of their decisions. Given uncertainties in applying the law to new technologies, they often Technology-based protections may also be counsel their clients to proceed conservatively unworkable. Not only are they susceptible to in order to avoid lawsuits. The clients, in turn, the diligent “hacker,’ they may also be imprac- may forego potentially profitable avenues of ticable to market or difficult to standardize. research or application. Often, there is no way Moreover, by protecting works that are pub- of knowing how the law will apply to them un- licly disseminated, copyright encourages dis- til they are haled into court–a prospect that semination. In lieu of copyright protection, in- many wish to avoid. formation providers may be inclined to “lock up’ access to information that they previously The legal profession’s opinions on judicial had incentive to keep open. This would not accommodation reveal many of the strengths serve the public interest. and weaknesses of this option. Judicial accommodation may be advantageous in some cases, Option #2: Judicial Accommodation where statutory law can be construed by the Judical accommodation is an option that al- courts so as to avoid the need for legislative lows the Federal court system to treat intel- solutions. The judiciary may, for instance, be lectual property problems on a case-by-case ba- able to clarify the meaning of the fair use and sis, by fitting existing law to the particular idea/expression doctrines in the context of com- facts before the court. By interpreting the law puter software. The courts’ role is to adapt gen- in specific circumstances, courts develop rules eral law to specific circumstances and, given that eventually have broader application. the idiosyncrasies of the situations that may Many judicially developed doctrines, such as arise, the flexibility of judicial accommodation fair use and the idea/expression dichotomy, gives it many advantages over attempting to were later codified by the legislature. anticipate future problems through legislation. In many cases, alternative causes of action— The individuals having the strongest opin- such as trade secrets, misappropriation, and ions about judicial accommodation are attor- unfair competition law—may also fill the gaps neys. Those attorneys who view existing in- left in copyright or patent law because of the tellectual property law as adequate to deal with effects of technology. technological issues also feel that the judicial forum is the most appropriate method of deal- Nevertheless, the courts, which are gener- ing with technological advance. The great vir- alists par excellence, may be ill-equipped to tue of the judicial process, according to this deal with many of the highly technical and mul- perspective, is its ability to adapt the broad tifaceted problems raised by some of the tech- outlines and fundamental principles of statu- nologies. Moreover, as this chapter suggests, tory law to circumstances that are unforesee- many of the problems in intellectual property able at the time law was written into statute. law are fundamental, and may not lend them- They also stress that many uncertainties, such selves to resolution through a case-by-case ap- as whether computer programs are copyright- plication of the law. In order to obtain results able, have already been resolved by the courts, that seem to them just, courts have recently and that a foundation therefore exists for fur- begun to render decisions that are, in essence, ther judicial development. policy choices. A growing minority of attorneys, many of In light of the Supreme Court’s consistent whom come from a background of engineer- signals to Congress that the judiciary should ing and patent law, strongly disagree. They not serve as a policymaking forum for patent argue that not only are existing methods of and copyright law, resort to the courts to re- Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 91 solve many of these technological issues may amenable to relative}’ isolated legislative be tantamount to a delegation of Congress’ pol- treatment. For example, the problems of de- icymaking authority. Even if the judiciary acts posit and registration for dynamic computer with restraint with respect to policymaking, databases, the difficulties involved with thou- the application of obsolete law to novel circum- sands of contributors to a single database, and stances may end up skewing the policy objec- the issue of the scope of protection for com- tives that the statute seeks to promote. puter programs may be soluable through amendments to appropriate sections of the Copyright Option #3: Amendment Act. Accommodation by amendment offers the Amendment is an option that allows Con- advantage of relative timeliness in the face of gress to modify portions of existing law in or- technological change. Next to judicially fash- der to accommodate changes in the way the ioned responses, amendment is perhaps most law operates brought about by technology. In flexible in meeting the rapid pace of techno- 1980, for example, the copyright law was logical change. Amendment also offers the ad- amended to include computer programs, and vantage of fitting specific technological accom- in 1985, it was amended to deal with the rental modation within a larger precedential context, of sound recordings. A bill presently before thus reducing uncertainties about whether ex- Congress would amend the copyright law to isting legal principles would apply to new pro- include the ornamental designs of utilitarian visions. items, such as semiconductor chip masks.136 However, insofar as problems affect the en- Industries and organizations that rely on, tire intellectual property system, accommoda- or are affected by copyright protection, gen- tion by amendment may be but a temporary erally favor amendment, where necessary, as solution. If, for example, computer databases an option for accommodating technology. and net works become a principal means of stor- Among these groups are the recording and mo- ing and distributing information, copyright tion picture industries, the library and educa- law, both in principle and in practice, may fail tional associations, the software and computer to protect what needs protection—algorithms industries, and a variety of authors’, publish- and information. Amendment may fail to ad- ers’, and artists organizations. Each of these dress the fundamental difficulties posed by groups tends to have specific and unique con- technological advance, since the problems lie cerns that are often best addressed by amend- at the conceptual core, rather than at the ment. These organizations view amendment periphery, of existing law. The failure of copy- as the best option for a number of reasons: mar- right law to account for the trifold nature of ketplace options may not be viable for achiev- information—works of art, fact, and func- ing many results, such as proposed royalties tion—is an example of a fundamental problem 137 that technology is exacerbating. on blank tapes; litigation may produce results that are unfavorable, as with Sony Inc. 138 Option #4: Sui Generis Legislation v. Universal studios, or not sufficiently comprehensive for the group’s particular ends; and Sui generis is a latin phrase used to describe the groups’ interests are seldom broad enough any law that is ‘‘of its own kind or class. Sui to favor more comprehensive legislative op- generis intellectual property law is legislation tions, such as revision or sui generis legislation. that stands apart from existing patent, copyright, trademark, or unfair competition law. Amendment to patentor copyright law may The Semiconductor Chip Protection Act is an bean appropriate solution to some of the prob- example of sui generis law designed to protect lems posed by technology, especially those the architecture of semiconductor chips.’” The sui generis option has also been suggested for “ 1 I. R. 1900,” also known as “Th~’ Design Protection Act of computer programs. 19~5. Introduced b~ Represent atit’e Nlooreh{’ad. S. 31 and 1{. R. 1030 “The Semiconductor Chip Protection .Act comprises Chap- “LSOnJr Corp. I’, [ ‘ni\rersa) (’it~’ ,Studio.s< 464 (1. S. 417 { 1981). ter 9 of Title 17, L1. S. Code. 92 ● Intellectual Property Rights in an Age of Electronics and Information

The identity of the parties likely to favor or build in a balance between proprietary and pub- oppose sui generis legislation will depend on lic interests, by granting appropriate proprie- what the legislation seeks to protect, and on tary rights in those aspects of the work that how it proposes to protect it. In the case of are valuable, by allowing for reverse engineer- the Semiconductor Chip Protection Act, for ex- ing, and perhaps by limiting the term and scope ample, the semiconductor industry generally of protection to reflect actual markets for func- favored protecting chips through an amend- tional works. ment to the existing copyright system, rather Works of fact might also be protected un- than sui generis law, because of the greater cer- der a sui generis scheme that recognizes the tainty that amendment offered. Other groups, importance of protecting information per se, such as the publishing and computer software while at the same time balancing such protec- business, favored the sui generis option be- tions against the rights and needs of the pub- cause of possible adverse effects that amend- lic to that information. Compulsory license ar- ment of the copyright law would have had on rangements and alternative remedies, such as protection of other types of copyrightable the imposition of “reasonable” royalties for works. In general, groups whose products sui certain types of infringement, might also be generis law is likely to affect prefer protection tailored to the specifics of the interests at under existing copyright or patent schemes be- stake. cause of the lag time involved in writing a whole new system of protection, and because Sui generis schemes of protection are not, of the uncertain way that courts will interpret however, a panacea. They are costly in terms the new law. of the political investment necessary for their creation. They may also require the creation The sui generis option offers the advantage of new administrative agencies, with appropri- of accommodating intellectual property law to ate expertise. Lacking a history of judicial the gradual introduction of new technologies. precedent, uncertainties will also exist as to Even with rapid technological change, many the meaning of terms and the applicability of of the traditional, print-based, methods of cre- the law to specific circumstances. Further- ation and distribution will continue to form a more, sui generis laws may cause great difficul- great part of the commerce in the information ties for international legal, economic, and po- industry, and traditional concepts developed litical arrangements. Computer programs, for for print culture may still work quite well. As example, have only recently been incorporated new forms of expression grow up alongside of into the the body of many of the developed na- existing ones, Congress may want to consider tions’ copyright law, and only after many years parallel forms of intellectual property protec- of contention. tion. Indeed, the Semiconductor Chip Protec- tion Act is a good example of this parallel, sui Option #5: Revision generis approach. Sui generis legislation can be specifically tailored to the idiosyncrasies of Revision would entail rewriting all or a sub- the technologies and their markets, without stantial part of the Copyright Act of 1976 to damaging the fabric of existing law. Where conform to the policy goals that Congress doubt exists over the applicability of the in- seeks to further in a new technological context. tellectual property clause of the U.S. Consti- A revision might retain the basic legal princi- tution, alternative constitutional authority can ples already developed in law, as the revision be found in the commerce clause. of 1976 did, or it might adopt wholly new principles. A sui generis law for computer programs and other works of function might be desirable for Although many observers have commented many of the above reasons, Like the Semicon- from time to time on the obsolescence of copy- ductor Chip Protection Act, a sui generis law right law, and although some have even envi- for programs and other works of function could sioned the broad outlines of a future intellec- Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 93 tual property law,140 OTA found few advocates ply with the relevant formalities of each, and of a general revision of copyright law. Indeed, receive a type of protection more closely suited most parties with whom OTA spoke indicated to the value and social function of the work. that they believed the Copyright Act of 1976 Traditional limitations on rights, such as fair is adequate for the foreseeable future. use, could be adapted to fit the particular nature of the type of work in question: for works Nevertheless, Congress will have to give con- of art, fair use might resemble its present form; sideration to the general revision of the copy- fair use in works of fact might be limited ac- right laws in the course of the next decade. In cording to the social utility of permitting non- addition to substantial and worsening enforce- 142 141 proprietors to copy or publish the work; and ment problems, copyright law is becoming for works of function, fair use might be shaped irrelevant to new technologies and more re- to meet the particular requirements of reverse moved from the policy objectives for which it engineering. Durational provisions could also was designed. Hence, many of the same pres- be designed to reflect the economic “lifetime” sures exerted by technology on the Copyright of the particular type of information product, Act of 1909, which required the 1976 revision, have already begun to undermine the Copy- Such a proposal, of course, has many draw- right Act of 1976. Congress should therefore backs. The 1976 revision of the copyright law begin now to gather the information necessary was a major political effort, requiring over 25 for the eventual revision of the copyright law. years of study and legislative bargaining. Like sui generis laws, a revision that departed sub- This chapter suggests a framework for an stantially from the existing copyright frame- eventual revision of the copyright law. The re- work might cause substantial domestic and in- vision might be modeled on the trichotomy de- ternational uncertainty. In addition, a revision veloped in this chapter for works of art, fact, would have to address concerns over enforce- and function; and it could specify rules for the ment, which would exist regardless of how care- protection of each. Under this system, works fully protection is tailored to subject matter. of art, whose value is closely tied to expression, might be protected in a traditional copy- Option #6: Alternatives to right fashion. Protection for works of fact, Copyright and Patent whose value lies in the accurate representation of reality, might be tailored to reflect this value, Congress may also wish to consider alter- while at the same time assuring adequate pub- native options that dispense with tradition- lic access to socially and politically important bound ideas of intellectual property, One information. Works of function, which rely on scheme would be essentially distributive in na- algorithms as their source of value, might be ture, Under the distributive approach, the law protected along lines of patent law, with some might limit itself to prohibiting only the un- threshold requirements of advance over prior authorized duplication of works for a period art and disclosure. of time. Issues concerning the cumbersome and increasingly obsolete definitions of intellectual The copyright proprietor could register his property, such as what constitutes the appro- work under one of these three categories, com- priation of an idea versus an expression, what ‘ SW. c’ ~ \l irhael 1)~’ndleton. ‘‘Intellectual I’roperty, I n- constitutes a derivative work, a performance, f[)rmat]f)n- Il:iwd S{)cif,t?r. :ind a TJew I nternat ional F;con[)mic display, and so on, would be jettisoned in fa- ( )rcier– The I’f)licy ( )ptions’?” 2 I+:uropean intellectual l’ropert.v R(>[rieu. ;j 1 ( 19HF)); 1 larlan (’leyeland, “ King Canute and the In- ‘“In Iiarper & ROW t’. ,Vation b:nterpri.s(, s, suprenlc~ (’ourt formation R(’\ource, 7’echnolog~r Retiew’, Januw-}’ 19H-1, pp. No. 83-1632 (1985), for example, the Supreme (’ourt decided that 12-1 h; (;arJ’ Klueck, “The Coming ,Jurisprudence of the infor- the First Amendment interests asserted b~’ iN”ation .kIagazine mation Age, ‘‘ 21 San Djt’go Z.aw ftp~rit~w 1077-111 I { 19811, R. were essential]~r spurious, since Time h! agazine would ha~e (;rant I larnrnond, “Quantum I)h}’sics, Fjconometric \lo(iels, tind shortl}r prol~ided the public with the (jm-ald Ford’s memoirs an?r- I’rf)pert~ Rights to Information, ” 27 ,Ifc(iill 1,aw ,Journal 47 wa~”. I n essencei the court was passing on the balance that a { 19X1): I thiel de Sola I’(ml, ~’echnolo~n”e.~ of f“’reedonl ((’an~hridge, works of fact pro~’ision Would strike bet wren ac(’ess and h! A, 13elknap [ :ni~’ersity. [)ress, 19X:\l, especial]] pp 212-217. remuneration. ‘ See ch. 4 94 ● Intellectual Property Rights in an Age of Electronics and Information vor of a law which looked to a desired outcome. for legal categorization of subject matter and The outcome might be specified in terms of re- rights. Such an approach is described by Judge covery of fixed costs associated with the pro- Stephen Breyer in an article, “The Uneasy duction and distribution of, and value added Case for Copyright."144 The minimal approach to, a particular work, plus rents limited to a would be particularly well suited to a techno- certain rate of return. After rate of return ob- logical environment that is fast changing, and jectives were met, the work would enter the where the economic viability of creative ven- public domain. The distributive scheme has the tures relies on the pace of innovation, rather virtues of simplicity and adaptability, making than on legal protection for works that have it resistant to technological obsolescence. already been created. One result of the minimal approach might be to speed up the pro- Although it departs substantially from ex- duction and marketing of works such as com- isting law, the distributive approach is not puter programs, since those who are first to without precedent. The regulation of public the market with the best products are most utilities is conducted in a very similar fashion. likely to recoup rewards. The minimal ap- Moreover, many aspects of current copyright proach would also ostensibly lower prices and law, such as royalties on cable television trans- eliminate the costs of copyright transactions. missions, are already moving in the direction of a distributive approach. Bills presently be- The minimal approach, like all other solu- fore Congress, which would impose a‘ ‘compul- tions, suffers severe drawbacks. Notwithstand- sory license” on the sale of blank tapes and ing its likely serious political impediments, the recording equipment, are also essentially dis- minimal scheme relies heavily on publishers’ tributive in nature.143 purported advantages in lead time and ability to retaliate in the marketplace-advantages The distributive approach would require in- that may be offset by the speed and low cost formation about information markets that is of modern communication technologies. A min- presently unavailable (see ch. 6 on the Opera- imal approach would entail many risks to au- tion of Information Markets). Moreover, the thorship and publishing as we know it, some distributive approach might be politically un- of which are detailed in chapter 2. tenable, since it would essentially impose a ceil- ing on returns for a creative work. The admin- Finally, another alternative approach would istrative mechanism necessary to make the dispense with the notion of property, per se, distributive scheme work, although presaged and instead concentrate on remuneration based in some ways by the Copyright Royalty Tri- on access. Indeed, because of the advent of elec- bunal, is nonexistent and would have to be tronically disseminated works, many publish- carefully constructed by Congress. ers are moving to an access-based system any- way. By removing concepts of property entire- Another alternative approach to the present ly, the conceptual and legal difficulties with system of copyright might be called the mini- respect to the boundaries of intellectual prop- mal scheme. The minimal approach would re- erty that are caused by technology can be move all legal protections except those abso- avoided entirely. The issues surrounding ac- lutely necessary for the production of works. cess-based systems are discussed in detail in The problems of technological obsolescence chapter 7, and will not be dealt with here. could be avoided by avoiding entirely the need

‘“iSpecifically, S. 31 and 11. R. 1030. Like the distributional approach, these bills attempt to set ‘‘fair’ rates of taxation on “’Stephen Breyer, “The Uneasy Case for Copyright: A blank tapes, and distribute the taxes to the recording and mo- Study of Copyright in Books, Photocopies, and Computer Pro- tion picture industries. grams, ” 84 Harvard Law Review 281 (1970). Chapter 4 Impact of Technology on Enforcement of Intellectual Property Rights Contents

Page Major Findings .....,...... 97 Introduction ...... 98 Trends in Storage Technologies: Impacts on the Right To Control the Reproduction of Copy righted Material ...... 99 Copyright Enforcement in the Early Print Environment ...... 99 Impact of Reprography on Enforcement of Copyright ...... 99 Impact of Audio and Video Taping on the Enforcement of Copyright ...... 100 Impact of Computers and Digital Information on the Enforcement of Copyright. . . 102 Trends in Communication Technology: Impacts on the Right To Control Publication and Performance ...... 104 Print, Live Performance, and Copyright ...... 104 Impact of Radio and Television on the Enforcement of Copyright ...... 105 Cable Television...... 105 Subscription Television...... 105 Impact of Communication Satellites on the Enforcement of Copyright ...... 106 Impact of Facsimile on the Enforcement of Copyright ...... 107 Data Communications and the Enforcement of Copyright ...... 107 Databases ...... 109 Computer Bulletin Boards ...... 110 Local Area Networks ...... 110 Integrated Services Digital Network ...... 111 Trends in Processing Technology: Impacts on the Right To Control the Making of Derivative Works ...... 111 Impact of Processing Technology on the Derivation of Text ...... 112 Impact of Processing Technology on the Derivation of Music ...... 113 Impact of Processing Technology on the Derivation of Video ...... 113 Impact of Processing Technology on the Derivation of Computer Programs ...... 114 Adjuncts and Alternatives to Traditional Enforcement Mechanisms ...... 116 Technological Protection ...... 116 Software ...... 117 Broadcast Signals ...... 118 Audio and Video Recordings ...... 118 Effectiveness ...... 119 Advantages and Disadvantages of Technological Protection ...... 119 Public Relations Strategies ...... 120 Public Attitudes and the Legitimacy of Intellectual Property Law ...... 121

Table Table No. Page 4-1. Motion Picture Association of America Film Security Office Recent Criminal and Civil Cases ...... 101

Figures Figure No. Page 4-1. Audio Recorder Sales, 1958-80...... 100 4-2. Factory Sales of Videocassette Recorders, 1977-86...... 101 4-3. The Sequence of Inventions in Telecommunications, 1840-2000 ...... 104 4-4. Trends From 1960 to 1980: Volume and Costs of Communication by Media: USA ...... ,....108 ——

Chapter 4 Impact of Technology on Enforcement of Intellectual Property Rights

MAJOR FINDINGS

Technology is making it cheaper to copy, Together, improvements in the cost, speed, transfer, and manipulate information and in- and capabilities of information technologies are tellectual property. For example, devices such making traditional proprietor-initiated (civil) as optical disk storage systems may allow the enforcement largely ineffective in securing rea- average person to collect entire libraries of sonable control over public distribution of in- copyrighted textual, musical, and visual works tellectual works. The effect might be to make in his home. Decreasing prices and increasing investors reluctant to fund the creation of in- capabilities of information systems will per- tellectual works. More likely, proprietors of in- mit more people to make use of more works. tellectual property will be more hesitant to dis- Consequently, enforcement efforts will have tribute their works in forms over which they to reckon with a much larger volume of poten- have little physical control. tial infringements than exists today. The technology itself is providing proprie- Technology is allowing the copy, transfer, tors with ways to more tightly control the dis- and manipulation of information and intellec- tribution of their works. Private, computerized, tual property to occur more quickly. For ex- electronic systems can provide them with the ample, fiber optic technology is currently ca- means to enforce control by limiting and pable, under laboratory conditions, of trans- monitoring access. Policy makers may have to ferring 100 average-length novels over a dis- weigh the benefits of such control against the tance of 100 miles in 1 second. These capabil- potential social costs of restricting public ac- ities may soon be available in offices and cess and monitoring private citizens informa- homes. As a result of this and many similar tion use. developments, owners of rights may have less As technology makes the enforcement of in- marketplace “cushion’ in which to realize a tellectual property rights more difficult, pub- return on their creative and financial invest- lic support for these rights becomes all the ments. Thus, they may have less incentive to more critical. At present, however, the public produce works. has little knowledge of intellectual property Technology is making the copying, transfer, rights as an issue. To the extent that citizens and manipulation of information and intellec- are aware of this issue, they draw clear distinc- tual works more private. For example, personal tions between proprietors’ rights to operate computers can store, process, and communi- in the marketplace and their own rights to use cate the contents of large commercial data- information as they please in their own homes bases without the knowledge or consent of the and businesses. Therefore, so long as proprie- compilers of such works. As a result, owners tors’ rights do not conflict with the public’s of rights face greater difficulty detecting, prov- sense of privacy and fairness, the public is ing, and stopping infringements. Thus, they likely to lend support to the intellectual prop- may have less incentive to make their works erty system. generally available.

97 98 ● Intellectual Property Rights in an Age of Electronics and Information

INTRODUCTION The granting of legal rights is based on the lectual property rights and their boundaries assumption that those rights can be enforced. become ambiguous. This ambiguity makes it Intellectual property law has been based on difficult to apply the law in a consistent fash- the premise that, by and large, rightholders ion and in a way that is consonant with the will enforce their own rights by monitoring the goal of promoting “science and the useful use of their works and suing infringers. To do arts. In particular, controversies arise about this, they must know of specific cases of in- which particular uses of new technology cause fringement, and they must be able to collect damage to creators and copyright owners, and enough evidence to prove in court that a par- whether such damage significantly reduces in- ticular person or corporation violated their centives to produce and disseminate works. rights. This chapter divides intellectual property Information technologies are impeding tradi- rights into three categories, which correspond tional enforcement mechanisms. They make to the kinds of rights that have traditionally the copy, transfer, and transformation of works attached to intellectual works: the right to cheaper, faster, and more private, and thus copy, the right to publish and perform, and the more prevalent and harder to detect and prove. right to make derivative works. These catego- Without effective enforcement of their rights, ries are used only to describe the new technol- intellectual property owners may have less in- ogies in terms with which policy makers are fa- centive to produce and disseminate intellec- miliar. Their use should not imply that these tual works. This, in turn, could jeopardize the rights should be extended or enforced. In fact, benefits society gains from the open dissemi- one of the challenges that policy makers face nation of intellectual works. And, insofar as is understanding whether traditional concepts there are widespread, unimpeded infringe- can be employed in new technological contexts. ments, the legitimacy of intellectual property The impact of technological change is differ- law might itself be undermined. ent for different intellectual property rights. The enforcement problem raises fundamen- This chapter examines trends in three catego- tal questions about the nature and efficacy of ries of technology, each corresponding to a par- the intellectual property system as a whole. ticular kind of right traditionally granted by Many of these issues are covered elsewhere in copyright law. Changes in storage technol- this report. This chapter focuses on: ogies, for example, affect the right of proprietors to control the copying of their works. Ad- 1. how advances in technology are reducing vances in communication technologies affect the effectiveness of the traditional means their right to control publication and perform- of enforcement; ance. And new information processing tech- 2. some of the private initiatives that propri- nologies affect the proprietors’ right to con- etors are adopting to protect their inter- trol the production of derivative works. More- ests; and over, to demonstrate the effect of advancing 3. public attitudes that bear on the enforce- technology on enforcement, this chapter will ment of intellectual property law. also look at how these technologies interact To understand how technology affects the with each other in integrated computer- and enforcement of intellectual property rights, one telecommunications-based systems. In the long must begin with a central problem: As the tech- run, it is the convergence and interaction of nologies for creating, distributing, and using these technologies that may prompt the most information change, the very concepts and defi- significant enforcement problems for the in- nitions that have traditionally defined intel- tellectual property system as a whole. . .

Ch. 4–Impact of Technology on Enforcement of Intellectual Property Rights . 99

TRENDS IN STORAGE TECHNOLOGIES: IMPACTS ON THE RIGHT TO CONTROL THE REPRODUCTION OF COPYRIGHTED MATERIAL Information storage technologies are devices controlling the reproduction of their work with and systems that fix and hold information in relative ease. Copying by hand for personal use a reusable form. Storage technologies include and scholarship was not a major problem. It paper and ink, photographs, vinyl disks for mu- did not threaten proprietors because it was not sical recordings, motion-picture film, audio and a viable means of competing with copyright videocassette tapes, semiconductor memory holders or of denying them sales revenues from chips, and optical disks, among others. their work. Two recent trends in storage technology are Although technology changed through the likely to affect the enforcement of intellectual 19th and early 20th centuries and provided new property rights. First, as storage technologies forms in which to fix expressions of informa- become cheaper and capable of holding more tion—photographs, lithographs, motion pic- information, it becomes harder to enforce pro- ture films—the capital and labor required for prietary rights; more people can use these tech- reproduction remained fairly high, and com- nologies to copy works privately. Secondly, petitive infringing activities were still hard to storage technologies are becoming less special- conceal. Thus, these technologies posed only ized to specific forms of information. They are minor problems in copyright enforcement. often part of computerized systems that handle many forms of information-e. g., text, Impact of Reprography on graphics, music, and video. Information in Enforcement of Copyright computerized, digital form is much harder to control than information in traditional for- In the mid-20th century, photocopying, mim- mats. Together, these two changes transform eograph, and xerography were developed, copying into a problem of much greater scope making it much cheaper and easier to repro- for proprietors than it has ever been before. duce printed materials. More people began to copy text and graphic images, making it harder Copyright Enforcement in the for copyright holders to monitor such activi- Early Print Environment ties. As these technologies became more common, it became too costly and impractical for When first enacted, American copyright law proprietors to try to authorize copying, collect protected expressions of information in the royalties, and enforce their rights on a case- form of printed text and graphics: books, maps by-case basis, even if users were inclined to and charts.1 Anyone seeking to fix or store seek permission and pay for use. these expressions for dissemination had to It is difficult to estimate the economic im- make a relatively large investment in capital 2 pact of this unauthorized copying. In general, goods: movable type, volumes of paper and ink, while we know that xerographic reproduction mechanical presses, and other equipment. They causes some lost sales for copyright holders, had to obtain skilled labor: typesetters, print- it does not appear to be a serious threat to the ers, draftsmen, and others. These activities economic viability of general-interest book, were difficult to conceal. They also had to of- magazine, or newspaper publishing.3 Publish- fer copies in the open marketplace. The public quality of these operations meant that copy- ‘BJ- the term “unauthorized,” this chapter means those right owners could detect and stop large-scale, uses of cop.~’righted works that have not been specificall.v per- economically damaging infringements, thus mitted b-}’ the cop~’right holder. It does not seek to imply that these uses are, or should be, illegal. ‘The number of titles published and the profits of publish- ‘Chapter 1 15. Section 1, Statute 124, Act of 1790. ers have remained high despite the introduction and spread of (continued on next page) 100 ● Intellectual Property Rights in an Age of Electronics and Information ers of very specialized periodicals with small Figure 4-1.— Audio Recorder Sales, 1958-80 circulations, such as scientific and technical journals, contend that disastrous losses of sales 14 could result if corporations and libraries replace multiple subscriptions with photocopies. 12 If such replacement were occurring on a large 10 scale, one might expect a decline in subscriptions and an eventual reduction in the range 8 of titles published. However, Copyright Office 6 data from publishers on trends in the numbers of titles and subscriptions in this category of 4 1 copyrighted works are inconclusive. They do 2 not show that specialized scientific and technical publications are significantly more af- 0. 1 I 14 I t I a 1 s 1, I t I I I I 1958 1960 1962 19641966 19681970 19721974 197619781980 fected by photocopying than are general-inter- 4 Year est periodicals. SOURCE Data compiled from Merchandising Weekly by Michael Rogers Rubin and Mary Taylor Huber, The Knowledge Industry in the United States, 1950-1980 (Princeton, NJ Princeton University Press, 1986), in press Impact of Audio and Video Taping on the Enforcement of Copyright videocassette recorders, up from 28 percent at the end of 1984.6 Just as reprography has led to unauthorized copying of text and graphics, the recent wide- Consumers use video recording machines for spread availability of audio and video taping ‘‘time shifting" — that is, recording television technologies has brought about more unautho broadcasts to enjoy at a more convenient time.’ rized reproduction of recorded music and mo- They often use audio tape machines to record tion pictures. Here, too, copyright holders are music to play in more than one location, for faced with the difficult problem of controlling instance, in a car. Some tape machine owners copying while millions of people own machines use their machines to trade music or video pro- that can reproduce their works in private, at grams with friends, and to build personal fairly low cost and with little effort. libraries. The level of use of audio and videotape tech- These machines are also used for less casual nologies is high and rising. (See figures 4-1 and purposes, such as the mass duplication of copy- 4-2.) By 1982, 52 percent of Americans over righted works to sell in direct commercial com- the age of 13 had used audio tape machines petition with copyright holders. Many proprietors contend that commercial piracy of audio within the previous 2 years to record phono- 8 graph records and other materials.5 By the end and video materials is widespread. —-— — . . — of 1985, 37 percent of American homes had 6Electronics, Jan, 6, 1986, p. 50. Some industry analysts predict that 70 percent of U.S. households will have VCR equip- ——- . . —- . - ment by the early 1990s. See Alex Ben Block, “Hard Dollars (continued from previous page) in Video Software, ” Forbes, June 17, 1985, pp. 128-131. xerograpluc bchnology, which was first commercially available ‘The recording of commercially broadcast television for in 1960. See Michael Rogers Rubin and Mary Taylor Huber, time-shift viewing was specifically found to be fair use by the The Knowledge Industry in the ?Jrited Stated J960-1980 Supreme Court. See Sony Corp. v. Universal City Studios, 464 (Princeton, NJ: Princeton University Press, 1986 (in press)). Be- U.S. 417 (1984). tween 1960 and 1980, industry sales increased from $1 to $4 “The movie industry, through its trade association, the Mo- billion. Paul M. Hirsch, “U.S. Cultural Productions: The Im- tion Picture Association of America (MPAA), established a Film pact of Ownership, ” Journal of Commuru”cation, vol. 35, no. 3, Security Office in 1975 to combat commercial piracy of films Summer 1985, p. 117. distributed by the major Hollywood studios. See table 4-1 for ‘Dennis D. McDonald and Colleen G. Bush, Libraries, Pub- some of their recent enforcement statistics. The musical record- lishers and Photocopying: Final Report of Surveys Conducted ing industry claims, on the basis of surveys conducted by the for the United States Cop~ight offi”ce, May 1982, table 4-6, International Federation of Phonogram and Videogram Pro- p. 4-16. ducers, that one out of four musical recordings sold worldwide ‘Yankelovich, Skeily & White, Inc., Why Americans Tape: is a pirate copy. In the United States, their data estimate 1 in A Survey of Home Audio Taping in the Um”ted States, Septem- 10 copies sold is illegitimate. (Reported in Variety, July 31,1985, ber 1982, p. 28. pp. 1, 92.) Ch. 4—Impact of Technology on Enforcement of Intellectual Property Rights ● 101

Figure 4-2.— Factory Sales of $1.4 billion that were attributable to home tap- Videocassette Recorders, 1977-86 ing of borrowed recordings and radio broadcasts.9 Battelle Pacific Northwest Laboratories, in a study performed for the Motion Picture 12 Association of America, estimated that, in 1982, motion picture copyright owners had lost more than $57 million in royalties because videocassette sales were displaced by home tape copying and off-air taping.10 These figures, however, are not definitive. As detailed in chapter 7, the question of whether a particular instance of copying actually dis- 2 placed a sale of a copy is often impossible to answer definitively. Moreover, to the extent 0 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986a that the data are inadequate, or that the anal- Year yses are inappropriate, these studies may either grossly overestimate or underestimate the SOURCES 1977.79: U S Department of Commerce Bureau of the Census actual harm suffered by musical recording and Statistical Abstracts 1980. 1980-83. Statistical Abstracts 1985 1984-85: 11 Electronic Industry Association Electronic Market Trends March motion picture copyright proprietors. Some 1986 1986: Electronic Industry A SSOCiation estimate. analysts have suggested that there are better methodologies for determining the economic losses from home taping. In deciding intellec- Some owners of copyright in musical record- tual property policy, policy makers will most ings and motion pictures have presented fig- ————— ures to support their claims of substantial eco- ‘%tatement of Alan Greenspan Re. S.31 Before the Subcom- nomic losses from consumers use of audio and mittee on Patents, Copyrights and Trademarks, Senate Com- video taping technologies. In testimony before mittee on the Judiciary, Oct. 25, 1983, p. 7. “’F.J. Cronin, R.J. Ness, A.R. Wusterbarth, and J. I,. Eisen- the Senate Judiciary Committee on October hauer, An Analysis of the Economic Benefits and Harm From 25, 1983, Alan Greenspan presented evidence Videocassette Recorders and Related Products, August 1983, collected for the Recording Industry Associa- as cited in Economic Issues Relating to New Technoio~”es and Intellectual Property, by Stanley M. Besen (contract prepared tion of America suggesting that in 1982 the for OTA, December 19841, p. 44, industry sustained sales losses of more than “See Besen, op. cit., pp. 47-48.

Table 4-1. —Motion Picture Association of America Film Security Office Recent Criminal and Civil Cases

a . Pending cases Cases where sentence passed ‘Through – Through ——. — 1984 June 1985 1984 June-— 1985 Criminal actions: - Seizure incidents ...... 28 39 24 1 Videocassettes seized ., ...... 1,990 24,591 6,286 647 Films seized ., ...... 500 210 100 0 Guilty pleas/convictions ...... 2 9 38 11 indict merits/arrests/information . . 10 12 30 4 Civil actions: Cases recommended ...... 34 24 Seizures ...... 7 9 Videocassettes seized ., ...... 534 2,601 Films seized ...... 0 0 — aCases pending at end of the indicated time

SOURCE: Motion Picture Association of America 102 . Intellectual Property Rights in an Age of Electronics and Information likely want to take these alternative analyti- Because of these characteristics, computers cal approaches into account.12 pose novel questions for enforcement. For example, how, aside from appeals to ethics, can Impact of Computers and Digital proprietors convince consumers to buy origi- Information on the Enforcement nals when perfect copies are probably much cheaper? How can consumers tell whether they of Copyright are purchasing originals or counterfeits? At The growing use of computers to handle and what point is the proprietor’s right to control store information could make it even harder copying violated within a user’s computer sys- 15 for copyright holders to enforce their rights. tem? Similarly, how much of the material that In the case of the right to control reproduc- resides in a computer can or should be recog- tion, the computer poses three major problems nized as part of the copyrighted work? for copyright proprietors that are distinct in These problems are emerging at a time when kind as well as in degree from other technol- monitoring and stopping the copying of works ogies used to store or copy information. is becoming harder. The proprietors’ right to First, copying digital information can be control copying may thus be severely chal- done at a fraction of the cost and in a fraction lenged by the growing scale and private na- of the time that it takes with photocopying or ture of infringement made possible by increas- analog audio or video taping. Second, the dig- ingly powerful and widely used personal it al nature of computer-mediated information computers. Also, as discussed below, comput- means that an infinite number of perfect cop- ers’ processing capabilities may pose special ies of material can be made. Possession of an problems with respect to proving infringement. original is not required to obtain subsequent Currently, users receive a relatively small copies of original quality. Thus, the informa- amount of copyrighted material in digital, com- tion content of a work can be completely sepa- puter-readable form–computer programs and rated (or unbundled) from the medium that car- 13 a small but rapidly growing amount of mate- ries it. Third, in the normal course of oper- rial made available through on-line databases. ations, a computer makes many copies of parts But this is changing with other technological of works. Some copies exist for only a few mil- advances that simplify the conversion of printed lionths of a second. Other copies may be held text and graphics into machine-readable, dig- until the machine is turned off or the material ital format. Optical character readers for text is written over. Some copies may be held in 14 input are growing in popularity in offices as permanent form on magnetic disk or tape. prices fall and capabilities rise. Some analysts expect that these machines will be widely used by the end of the decade. And if price and ca- — “See Besen, op. cit., pp. 39-40. See also Stanley M. Besen, pability trends continue in their current direc- Private Copying, Reproduction Costs, and the Suppl+y of Intel- tion, the automatic conversion of printed or lectual Propert-v (prepared for the NationaJ Science Foundation, written text and graphics into computer-read- December 1984); and I.E. Novos and M. Waldman, “The Effects able form may become a routine practice by of I ncreaseci Copyright Protection: An Analytical Approach, ’ 16 92 Journal of Political Economy 236 ( 1984), the turn of the century. ‘ ‘Users’ ability to unbundle information may have a significant impact on the alternatives that proprietors pursue to pro- Once in a computer in digital form, text can tect their economic interests in intellectual property. See ch. be reproduced with a growing array of com- 6, for further discussion on this point. “In the case of computer programs, “a user is at least puter-driven printers. These range in price and somewhat negligent if he does not make copies of his programs. [There are] two reasons [for this]: 1) one cannot see by visual ..— inspection if a program is intact; and 2) operator error or pro- “section 117 of Title 17 addresses this problem, but the lan- gram “glitches” can quickly destroy a program. Thus good pro- guage has yet to be widely tested by the courts. gramming practice and copyright regulations [may be] mutual- “Outlook for Office Automation Technologies 1985-2000, ly exclusive. ” Personal communication from Edward Conklin, report prepared for OTA by the Georgia Institute of Technol- FORTH, Inc., July 23, 1985. ogy, J.D. Roessner, principal investigator, March 1985. Ch. 4—Impact of Technology on Enforcement of Intellectual Property Rights • 103

capability from the cheap, fairly slow, and low- tical disk, currently on the market, can easily quality dot-matrix and thermal transfer de- store several hundred thousand pages of printed vices, to very fast and high-quality laser and text, 6 hours of master recording quality mu- ink-jet devices. As these technologies mature, sic, or 2 hours of full-motion, television qual- as manufacturing techniques improve, and as ity video. In some applications, many disks economies of scale are realized, consumers will are collected in an automatic playback machine most likely be able to get faster, better printers much like a jukebox. This is being done for the for lower cost.17 optical disk project at the Library of Congress in which old books, photographs, and etchings Record companies are beginning to offer mu- are being digitized and stored on optical disks. sic to consumers in digital form by way of com- Thus, a very large volume of information can pact disk players and laser-scan disks. In their be made available on-line (by computer termi- present form, compact disks are read only, nal) at very low cost for storage and access. which means that users cannot record on them, although one can record analog tapes from In their present form, optical disks can be them with cassette or reel-to-reel tape ma- written on only once, and then only using a chines. But manufacturers of laser disks are relatively expensive high-power laser device developing erasable and rerecordable media to impress digital data on the disk. But sev- similar in storage capacity and durability to eral companies, both in the United States and compact disks. With these, consumers may be abroad, are working intensively to develop op- able to reproduce the full, master recording tical media and supporting hardware that al- quality of compact disks on home equipment. low a disk to be recorded, erased, and rerecorded many times. 18 Their goal is to manufacture a Copying video in digital form is now limited by the fact that current television transmit- device that the average consumer can use with ters, receivers, and video recorders supply the his personal computer, stereo, and television equipment. This technical advance would make material in analog form. International stan- it even cheaper and easier to copy information, dards-making committees are discussing the while increasing the speed at which a computer establishment of digital television and video could access the large volume of information tape standards, so this situation could change very quickly. storable on optical disks. In summary, advances in information stor- The digital optical disk, a technology that age technology have made the process of copy- uses lasers to record and read information off ing information cheaper, easier, and available a disk that rotates at a high rate of speed, offers to more people. These trends show every indi- great. potential for storing very large volumes cation of continuing. The technologies are mak- of digitized information. A single read-only oping the old definitions of “rights, ‘‘infringe- ————-—. merits, ” and “fair use” ambiguous and largely Paper will continue to be an important temporary storage obsolete. Because of technical advances and medium because people tend to prefer the higher contrast, portability, and other characteristics of print that video screens lack, the blurring of definitions, the traditional copy- But electronic and optical media are becoming more attractive right enforcement mechanism, whereby propri- for permanent storage of information in many applications be- etors sue violators in civil proceedings, may cause storage volume is vastly reduced and cost and convenience of access can be superior to paper storage. Thus the trend, no longer be effective in protecting the crea- at least in repeated-use and interactive applications, is toward tive and economic interests of copyright owners, mass electronic and optical storage and on-demand printing. E.C. McIrvine at the OTA Workshop on Display, Printing, and ‘“B, Dumaine, “Here Comes the Erasable I.aser Disk, ’ For- Reprography, Mar, 13, 1985, tune, Mar. 5, 1985, p. 100, 104 ● Intellectual Property Rights in an Age of Electronics and Information

TRENDS IN COMMUNICATION TECHNOLOGY: IMPACTS ON THE RIGHT TO CONTROL PUBLICATION AND PERFORMANCE Communication technology is the term that Increasingly, we also receive information encompasses the many devices and systems products and services through telecommuni- used to move information from place to place. cation links that entertain, educate, and help These technologies evolved very slowly until us make decisions. Since many of these goods the 1840s, when, after electronic telegraphy and services are protected by intellectual prop- was developed, they rapidly grew in capabil- erty law, advances in communication technol- ity. Since then, innovations in telecommuni- ogies will have a major impact on enforcement cation technology have quickly advanced the of intellectual property owners’ right to con- speed, distance covered, and scope of intercon- trol the publication and performance of their nection of people and places, all of which are works over telecommunication facilities. still growing exponentially (see figure 4-3). These technologies are now part of the basic Print, Live Performance, and infrastructure of society. We have come to rely, Copyright for example, on the telephone system, broadcast radio, and television to supply us with vi- Before the 1920s, communication technolo- tal information about our family, friends, bus- gies had very little affect on the enforcement inesses, and government. of copyright, simply because copyrighted

Figure 4-3.—The Sequence of Inventions in Telecommunications, 1840-2000

100 billion Switched Satellites / / 10 billion Satellites. 0’ T-4 fiber 1 billion L5 coaxial cable ,... ,. .:,...::. :,. 100 million 0 ., :’,....;. .,. , .,. ,: :,.:..,,:..,,. , .’ 10 million / .... . , ..: : Cable television / 1 million ■ T-1 digital carrier Carrier telephone 100,000

10,000

1,000

100 / ‘ =Baudot multiplex telegraph 9 TWX

1 I 1 1 1 1 I 1 I 1 I I 1 1 1 1 1 I 1830 1860 1890 1920 1950 1980 2000 Year

SOURCE Richard J Solomon and John Ward, Massachusetts Institute of Technology Adapted from James Martin, Future Developments In Telecommunications, 1976 1980 Annenberg School of Communications Used with permission. Ch. 4—Irnpact of Technology on Enforcement of Intellectual Property Rights “ 105 works were communicated by physically mov- Subsequently, because of the way the courts ing printed copies or by expressing the works and Congress have intervened in the relation- in live stage performances. As the country ex- ship between copyright holders and cable broad- panded, there were undoubtedly many unau- casters, it has become a technology with sig- thorized performances of copyrighted dramatic nificant implications for copyright enforcement. and musical works, but the important markets Cable television itself does not present infor such uses were in large cities, so composers tractable problems of detecting or proving in- and dramatists found it possible to monitor fringement because most existing cable sys- enough of the uses of their work to protect their tems are public. ” But cable television systems economic rights. have had to contend with two other enforcement problems. One is theft of service, which is the deliberate unauthorized connection to Impact of Radio and Television on a cable service. The other is the high transac- the Enforcement of Copyright tions costs that multiple-channel cable companies face in identifying and negotiating royalty Broadcasting changed this. Commercial ra- payments with the many copyright holders in dio broadcasting, initiated at KDKA radio in television. Congress acknowledged the mag- Pittsburgh in 1920, complicated copyright en- nitude of the second problem by establishing forcement by dispersing a “performance” over the Copyright Royalty Tribunal to set cable a wide area. When the networks such as NBC retransmission royalty rates and to disperse were formed soon after, performances could be 20 funds collected by the Copyright Office. heard over virtually the entire nation. Thus, broadcast technology made “collecting at the 21 door” from users of a performance of copy- Subscription Television righted music virtually impossible. To continue Some over-the-air television stations scram- profiting from the use of their work, the owners ble their signals to prevent access unless the of copyright in music and the broadcasters de- consumer has rented a décoder box and paid veloped the system of advertiser support for a subscription. The direct enforcement prob- the actual broadcast, and established contracts lem with subscription television (STV) is theft with collecting societies to monitor the use of of service. Some users and commercial com- copyrighted work and to pay composers’ royal- panies build illegal decoding equipment that ties. (See ch. 9 for details on collecting societies. ) allows users to receive subscription television The advent of broadcast television presented signals without paying the station. In this similar enforcement problems for copyright event, the copyright holder may be undercom- holders. To solve them, networks made simi- pensated because his royalty payments are lar arrangements to finance the cost of present- based on the size of the paying audience for ing “free” television to the public. This sys- a subscription television broadcast. tem of advertiser support and contracting with Television is also relayed to paying sub- copyright proprietors for use of their work pro- scribers by microwave radio. This is called Mul- vided a viable and lucrative means of presenting and paying to broadcast musical enter- ‘ + There are a growing number of private cable television tainment. operations, generally called Sat-ellite Master .Antenna Tele\’ision (SMATV) that ma~’ present difficult enforcement problems. These systems will be discussed below, Cable Television “’U.S. House of Representatives, 94th (’ong., Report 94- 1476, p. 88. Cable television originated as a means of pro- - Subscription television was originally ( 19641 a term ap- viding television to remote areas by the recep- plied to cable television in California, Erik 13arnouw, Tube of f)lent~’ (New York: Oxford University’ I]ress, 19821, p. 350. Now tion of broadcasts with a tall antenna and re- it is usually applied to transmissions o\’er L’ 11 F and \J 11 F chan- transmission of them by wire to subscribers. nels that are scrambled. 106 . Intellectual Property Rights in an Age of Electronics and Information

tipoint Distribution Service (MDS). In some ing on dish size and its ability to aim the re- areas, companies have set up several micro- ceiver at more than one satellite.22 wave channels for television delivery; these Some hotels and other commercial establish- systems are called Multichannel Multipoint ments also use satellite-derived programming, Distribution Service (MMDS). To receive these signals, consumers need a special device called capturing it with roof-top dish antennas and a down converter and also a special antenna. cabling it to their customers. Some apartment complexes install satellite reception gear and Together, the converter and the antenna make small, private cable distribution systems that the higher frequency microwave signal com- compete directly with municipal cable opera- patible with a standard television set. MDS tions. These are the SMATV systems men- companies rent these devices and charge a monthly fee for the program service. But the tioned earlier. Many of these uses of copyrighted programs are authorized by contract, devices are widely available from sources other but others may not be. than MDS companies. Thus, like STV, the MDS enforcement problem generally involves Other unauthorized users are in foreign coun- theft of service. MDS is treated by the FCC tries that fortuitously fall within the “foot- as a common-carrier system; channel time is print” of one or more satellite signals. These leased to program suppliers on a tariff basis. foreign users often retransmit satellite-derived Copyright holders contract with MDS compa- material over government or privately owned nies for transmission services and revenues are cable or over-the-air broadcast facilities with- based on the size of the paying audience. Thus, out seeking the permission of, or making pay- program suppliers and transmitters are under- ment to, the copyright holders. As with other compensated to the extent that there are ‘free types of subscription-based television (STV, riders. MDS, MMDS), if copyright royalty contracts are based on the size of the paying audience, Impact of Communication Satellites these unauthorized uses deprive copyright on the Enforcement of Copyright holders of rightful compensation. When revising the Communications Act in Geosynchronous communication relay satellites affect the enforcement of copyright law 1984, Congress, recognizing the already wide- because an increasing amount of copyrighted spread use of satellite signals by home consum- material is being transmitted by these sys- ers, put the onus of enforcing property rights in these transmissions on the program provid- tems. Currently, anyone who has a proper an- ers and the satellite system operators. The re- tenna ‘dish’ and a down converter can receive visions encouraged them to establish market the material. Much of the copyrighted material transmitted by these satellites is intended mechanisms for payment, and to encrypt their for cable television “head-ends, or transmis- signals. Congress struck a compromise be- sion facilities, or for broadcast stations affili- tween the interests of copyright holders and those of owners of satellite dishes, making it ated with television networks. Many of the un- illegal for unauthorized users to intercept cer- authorized users are home consumers who live tain satellite signals. However, interception of far from VHF and UHF stations, have poor reception, and no cable service. For these peo- satellite signals is not a violation if: ple, satellite signals offer a wide selection of “’Michael Doan, “A Scramble To Break the Satellite Dish, ’ programming (more than 100 channels) with U.S. News and World Report, Sept. 30, 1985, pp. 52-53. In 1985, high signal quality for the one-time cost of the over 1.4 million homes had satellite dishes, and some believe that this number could double in 1986. Sales are quite brisk, dish and the down converter. These systems approaching 50,000 units per month. New York Times, July are currently priced as low as $1,000, depend- 8, 1985, pp. 1,C16. Ch. 4–Impact of Technology on Enforcement of Intellectual Property Rights ● 107 .— .

(1) the programming involved is not en- it with a search warrant, how can program crypted: and owners prove a farmer ripped them off?26 23 (2)(A) a marketing system is not established. . . At least one company, Home Box Office, Impact of Facsimile on the Inc., has begun to encrypt its satellite trans- Enforcement of Copyright missions to some cable companies.24 At pres- Facsimile is a communication technology ent, such encryption is expensive because all with potentially significant implications for receivers must be provided with decoding copyright enforcement. Facsimile machines equipment. It is not yet clear to what extent work by scanning a document and digitizing other program providers will see an advantage its image. This is distinct from optical charac- in employing encryption to protect satellite ter recognition (OCR), which scans a document television transmissions. and digitizes the individual characters so that A new use of satellite transmission to deliver the text can be manipulated in a computer sys- copyrighted works could further complicate en- tem. OCR can be thought of as a further proc- forcement. A number of companies are trying essing step beyond that employed in facsimile. to find a way to develop a profitable market Because the present cost of facsimile is high to satisfy the growing demand for distribution compared to mail delivery, for which it sub- of television programming by satellite. One stitutes, its current impact on copyright is possibility, direct broadcast satellite (DBS) probably small. But as seen in figure 4-4, the technology, could provide consumers with a service that offers as many channels as cable volume of information communicated by fac- television. The service would sell or rent sat- simile has risen sharply over the past two dec- ellite dishes and down converters to home vid- ades, and it is becoming more and more attractive as a means of moving documents. eo consumers, and transmit television signals directly to them. Normally, a facsimile document is transmitted over telephone lines to a facsimile de- DBS could complicate enforcement of current theft-of-service and illegal signal intercep- coder and a xerographic copier. The document tion laws if some DBS program providers of- is communicated in digital form. Therefore, fer free services, or if program providers cannot copyright problems could arise if the cost of agree to encrypt all satellite television signals. transmitting information this way drops sig- In either case, the mere possession of a back- nificantly for, as with data communications, the transmission of information by facsimile yard dish and special microwave reception equipment would not be sufficient evidence to technology is highly covert. prove unauthorized use. ” Indeed, unauthorized use could be very difficult to stop. Data Communications and the Enforcement of Copyright To demand payment from a user, program owners must prove that the user actually Data communications is the term used to de- snatched and watched a program. Short of scribe computer-to-computer transfer of digi- staking out the farmhouse with electronic tal information. The copyright enforcement eavesdropping equipment and then storming problems associated with data communications result from their growing scope, scale, “47 U, S,~.. Section 705, 318 ( 1984). L4LJ.S. News and M’orld Report, Sept. 30, 1985, p. 52. and speed combined with the covertness with “ In the case of MDS receiving equipment, the courts have which people can take advantage of these ad- found that the manufacture and sale of down converters and vances. In practical terms, this means that, antennas without authorization from program providers is a violation of the Communications Act and FCC regulations. See as more and more copyrighted material is avail- United States v. Stone, U. S. D, C., Southern District of Texas, IIouston Division, Aug. 11, 1982; and Movie Systems, Inc. v. Heller, U.S. Court of Appeals, Eight Circuit, decided June 30, “Alex Ben Block, “An Eye in the Sky, ” Forbes, November 1983. 1984, p. 196, 708 ● Intellectual Property Rights in an Age of Electronics and /formation

Figure 4-4.–Trends From 1960 to 1980: Volume and Costs of Communication by Media: USA (plotted on log by log scales) 1000.000 I

Newspapers

fl;rect mail CATV Education ~ Books = Phone Movies t 10 - Mail

1 . Data communlcation 01 -

.01 -

001 -

0001 t I 1 1 1 I 1 1 1 1 0 0.001¢ 0.01¢ 0.1¢ 1¢ 10¢ $1 $10 $100

Cost of transmitting 1,000 words (1972)

While the cost trends for print media remain steady, electronic media costs have dropped dramatically in the past two decades, SOURCE Ithiel de Sola Pool, Hiroshi Inose, Nozomu Takasaki, and Roger Hurwitz, Communication Flows (Tokyo University of Tokyo Press or New York: Elsevier, 1984) Reprinted with permission able in computer-mediated form, people will Satellite communications and fiber optic tech- be able to transfer it widely and quickly with- nology are both fruits of this progress. Sec- out the knowledge or consent of copyright ond, costs of manufacturing, installing, oper- holders. ating, and maintaining the transmitters, receivers, switching equipment, and other com- Scope, in this context, refers to the number ponents are falling as economies of scale af- of terminal points that are connected by com- fect microelectronics technology. Third, the use munication networks. For instance, the scope of computers is increasing people’s ability to of mail delivery and telephone networks are receive and handle information automatically. both very high. Data communication tech- For instance, on-line database systems can niques use devices called modems, which con- watch for information that is of particular in- vert digital computer information into analog terest to an individual, and alert that person form compatible with telephone voice trans- when new information pertaining to the sub- mission lines, to take advantage of the scope ject enters the database. of the telephone network for computer-to-computer transmissions. The development of an The scale of communications, the second fac- Integrated Services Digital Network (see be- tor in enforcement problems, refers to the vol- low) will eliminate the need for these devices ume of information that is moved. There is no and will further increase the scope of data com- precise measure of information volume that munications. can be applied across all forms of information.27

The use of data communications is expand- “The measure of information volume is complicated by the ing rapidly for several reasons. First, scientists multiplicity of forms in which information exists (words, numbers, mathematical formulae, graphics, moving pictures, etc.), and engineers have made great technical ad- as well as by the range of media that communicate information vances in moving information electronically. (e.g., printed pages, -television broadcasts, motion picture film). (continued on next page) Ch. 4—Impact of Technology on Enforcement of Intellectual Property Rights ● 109

Nevertheless, it is clear that electronic media ard cable television medium, has increased in general, and data communications in par- from 12 to 54 channels since 1975, and the ticular, are fostering an enormous increase in newer systems have potential for transmitting the volume of information transported. This 72 simultaneous full-motion television chan- increase is due to the same factors that account nels over one coaxial cable. Geosynchronous for increasing scope. But the scale of data com- communication satellites have increased in ca- munications is also growing because informa- pacity since the 240 voice channel (or one TV tion is a highly efficient means of affecting the channel) “Early Bird” Intelsat I was launched control of processes from a distance. Thus, data in 1965. The Intelsat V series, first launched communications can substitute for human ob- in 1980, averages 12,000 voice circuits and two servation and action. TV channels. The capacity of fiber optics technology has improved more than 100-fold since The volume of information that passes through its commercial introduction in 1977. Recent data communication networks is still small laboratory tests of new fiber optic systems compared with the amount of printed materi- demonstrate the ability to transmit 300,000 al distributed through traditional channels. telephone conversations, or the contents of 100 But, as seen in figure 4-4, data communication average-length novels, a distance of nearly 100 volume increased approximately 1,000-fold be- 28 miles in 1 second. tween 1960 and 1980. The personal computer and the modem will undoubtedly increase this A characteristic of data communications further, and technological advances such as op- with important implications for intellectual tical character recognition, voice recognition, property enforcement is that digital transmis- and optical disks will make data communica- sion can usually be conducted with a high de- tions an even more attractive way to transfer gree of secrecy. Thus, unless significant changes many kinds of information, some of it in copy- are made in the operation of public telecom- righted form. munication networks, the increasing volume of data communications will make it essentially The speed of electronic communications is impossible for proprietors to trace the subse- the third factor that affects copyright enforce- quent movements of their works once they are ment, and it too is increasing at a dizzying pace. captured by users’ computer and data commu- (See figure 4-3.) Not only have new inventions nication systems. This raises the issue of allowed faster communications, but R&D lab- whether proprietors should, and in practical oratories are continually advancing the speed terms can, control the transfer of their works of established communication devices and me- after users first receive them, dia. For example, the achievable speed of data communications over standard copper wire pairs, such as the wires that run to home tele- Databases phones, have increased 100-fold since 1970. The Computer databases are collections of facts, channel capacity of coaxial cable, the stand- statistics, bibliographic citations, and other information, including complete texts of some / ( f )[1 / I II ( , f ,(1 / I f I 1)1 J){ ( \ II 1{1 . )I

One unauthorized use about which proprie- used illegally to trade credit card numbers, tors are particularly concerned is when com- long-distance access codes, and the instruc- petitors employ large storage capacity com- tions to disable the copy protection of computers to download large portions of their puter software packages. In this way, the databases.” This permits unscrupulous infor- unscrupulous help others steal goods and mation service entrepreneurs to avoid risking services .31 much of the investment that is required to com- Bulletin boards are an especially thorny in- pile a database. tellectual property enforcement problem be- Advancing technology could make the prac- cause they can be used to very quickly spread tice more common. The large-scale download- copyrighted works throughout the community ing of database information is becoming cheap- of computer hobbyists. Bulletin boards are an er and easier with improvements in cost and informal publication mechanism. Because capacity of computer storage media, faster tele- access is generally not restricted, proprietors communication networks, and wider access to may monitor the contents of bulletin boards computer power. Infringers may increasingly to detect unauthorized trading of their works. use computer power to reprocess information But, as their numbers proliferate, these infor- and make it appear original. Thus, proprietors mal community communications media may may find it increasingly difficult to know when defy systematic surveillance and control. More- a competitor is using their downloaded material. over, it is not clear whether a bulletin board operator can be held liable for messages posted 32 Computer Bulletin Boards anonymously on his system.

A growing number of personal-computer en- Local Area Networks thusiasts are keeping in touch with each other and exchanging information using computer Local area networks (LANs) are data com- bulletin boards.30 As the name implies, a communication facilities that connect computers puter bulletin board is a computerized storage in a geographically restricted area, such as an space offered by a computer owner that serves office suite, a building, or an industrial park. as a place to post messages. There are two im- These networks range in size from the very portant differences between a computer bulle- small to ones that have thousands of users. tin board and the more familiar variety. First, The expanding market for office automation a computer can offer a very large space in which technology, particularly personal computers to post messages. Thus, many computer users and professional work stations for word proc- can post copies of their favorite software pro- essing, document management, and data anal- grams, such as computer games. Some of these ysis, is encouraging the development and de- programs are in the public domain; others are ployment of network facilities that allow copyrighted. Second, the telephone network workers to communicate with one another. can be employed by users of computer bulle- LANs allow users to transfer large files of in- tin boards to build a community that is not formation very quickly among personal com- confined to a physical neighborhood. Thus, puters, work stations, and large mainframe some computer enthusiasts use bulletin boards computers that can store and process corporate to keep each other informed about the latest or institutional databases. LANs can also give software releases and maintain a sense of com- many users access to computer software pro- munity of interests among widely dispersed grams from a central repository. colleagues and friends. Bulletin boards are also

“Interview with Eugene Garfield, Institute for Scientific Information, Mar. 11, 1985. 30There are thousands of computer bulletin boards now in J1 Ric M arming, “Policing the Boards, ” Popular Computing, use, A. Pollack, “Free-Speech Issues Surround Computer Bulle- July 1985, pp. 37-39. tin Board Use, ” New York Times, Nov. 12, 1984, p. 1,D4. “New York Times, Nov. 12, 1984, op. cit. Ch. 4 —Impact of Technology on Enforcement of Intellectual Property Rights ● 111

Copyright infringements can occur in these nection resembling an electric power plug-in circumstances when computer programs, in- receptical, available in virtually every building. formation downloaded from commercial data- As more and more of the telecommunications bases, or other copyrighted materials are made infrastructure is converted to digital transmis- available and shared in these systems. Many sion facilities, the issue of copyright enforce- software license agreements and database sub- ment will be contested on a much larger scale. scription contracts specifically prohibit the use On the one hand, digital transmission can be of licensed material in multiuser settings. a significant threat to enforcement because Other contracts provide for “site licenses” to scope, scale, speed, and decentralization may allow multiple uses of software. Enforcement make it very difficult to detect transfers of of such contract provisions can be difficult be- copyrighted works among private users. But cause of the private nature of local area net- because of the recordkeeping and processing works. Often, evidence of contract abrogation power of digital communications switching or copyright infringement must be obtained technology, there may be opportunity for pro- from disgruntled employees of the infringing prietors to monitor contact between data ter- institution or from paid infiltrators. minals. Telephone transaction records could provide evidence that a particular terminal ac- Integrated Services Digital Network cessed a particular store of copyrighted mate- In its present structure, much of the national rial at a particular time, and so aid enforce- and international telecommunication network ment. Alternatively, proprietors might embed uses equipment that transmits analog signals. digital “signatures” in their works to aid in This is particularly true for local “final-mile” their monitoring efforts. connections. Voice communication, still the The development of an Integrated Digital largest category of telephone usage, is efficient- Services Network raises a basic question for ly handled by analog transmission. But the vol- intellectual property: To what extent will the ume of data transmitted by telephone is grow- enforcement of intellectual property law be a ing. This growth is encouraging local and factor in the design, construction, and opera- long-distance companies to convert more and tion of future telecommunication facilities? more of the telephone network plant to digital This raises several corollary questions: Who, transmission. If efforts to set standards are in our newly deregulated telecommunication successful, the end stage of this conversion environment, will decide to what extent and process will bean Integrated Services Digital in what ways intellectual property enforcement Network or ISDN– "an integrated national will be implemented in telecommunication sys- net work that can connect any information pro- tems? What criteria will be used to decide vider with all its potential customers and any which information will be collected about users user with all the range of information resources of networks and who and under what circum- available." 33 Planners envision that users will stances access to that information can be access such a network through a standard con- obtained? 34

“The policy implications of new electronic sur~eillance tech- ‘I{ .M’. Nlc( ;raw, ,Jr,, ‘ ‘The I nforrnation 1ndustrJ: ‘1’he I’rin- nologies ha~’e been re~’iewed in a recent OTA publication, Elec- ciples That f+; ndure, (’ompufer.s and }’eople, hla}-tJune 1983, tronic Sur~’eil]ance and Ci\ril Liberties, OTA-CIT-293 (Washi- p. 10 ngton, DC: U.S. Government Printing office, october 1985).

TRENDS IN PROCESSING TECHNOLOGY: IMPACTS ON THE RIGHT TO CONTROL THE MAKING OF DERIVATIVE WORKS Information processing is the physical trans- computing machines. Information processing formation and logical manipulation of symbols. technology-computer hardware and software— It is an activity carried out by both people and has advanced rapidly since the initial devel- 112 ● lntellectual Property Rights in an Age of Electronics and Information opment of electronic computers in the late intention of making it easy for users to make 1940s and early 1950s. It has been used to au- derivations. Users construct search statements tomate many tasks, improving the efficiency that select a part of the database relevant to and speed of much of the information process- their needs. ing work that people formerly accomplished Some people use these processing capabili- mentally or with the aid of mechanical devices ties to extract portions of commercial data- such as paper and pencil. In the last 10 years, bases and resell access to the information. In computing resources have become increasingly many cases, it is unclear whether infringe- available to people in private homes and of- ments have occurred. Although containing the fices. They use this technology to transform original information in some form, the deriva- and manipulate many kinds of information, in- tion may look quite different, either because cluding some types of copyrighted works. the format or other features have been changed Increasingly, people use information proc- to add value, or because of a deliberate attempt essing technology to prepare derivatives of pro- to disguise the source of the information. In tected works—to selectively modify them or other cases it is obvious that the derivative take them apart and to reassemble the pieces database stems from the original and may be into new, or apparently new, works. To a large in clear competition with it. The volume of extent, the intellectual property enforcement both of these kinds of database derivation can problems stemming from the use of process- be expected to rise as the amount of textual ing technology are nascent, but current uses material available in computer-processible offer clues to the potential impact of these form increases, and as processing capability problems. A discussion of the current and po- becomes better, cheaper, and more widespread. tential effects of this technology on several Hence, the enforcement of copyright in data- different types of intellectual property illus- bases will become a larger problem, one de- trates the implications of information process- scribed by some observers as insurmountable. ing technology for enforcement. Integrated There are some text processing capabilities with storage and communication technologies into computerized, digital information sys- on the technological horizon that may have im- tems, processing technologies promise some portant, long-term impacts on the enforcement truly formidable problems for the enforcement of copyright. Some of these are still experimen- tal and others are merely speculative. Auto- of intellectual property rights, matic indexing, abstracting, and document preparation systems that combine optical disk Impact of Processing Technology storage, high-speed digital communications, on the Derivation of Text and perhaps novel computer architectures and intelligent text processing software may be Affecting the way that people prepare text, common by the end of the decade. Such sys- information processing technology is begin- tems will be able to search a large body of ma- ning to be used to make derivations of copy- chine-readable text, including many articles righted textual works. Word-processing hard- and books, select particular elements that are ware and software are becoming commonplace relevant to a given research question (much technologies in offices. Integrated word-proc- as current database systems do), prepare cus- essing, database-management, and on-line in- tomized indexes and abstracts of relevant doc- formation retrieval capabilities are also offered uments, and, most speculatively, prepare a rein personal computer software packages. These port in proper English of specified length that capabilities make it possible to build personal summarizes the findings of the query. Should databases derived from the copyrighted works these capabilities be realized, they may require of CompuServ, The Source, and other on-line policymakers to rethink the question of what information retrieval companies. In fact, these information processing activities are accept- companies design their databases with the able in relation to copyrighted materials. They —— .——

Ch. 4–Impact of Technology on Enforcement of Intellectual Property Rights “ 113 may also demand new approaches to monitor- computers, the Musical Instrument Digital In- ing and enjoining infringements of copyright terface (MIDI), is growing in popularity. And in textual works. personal computers are now beginning to appear that have digital sound recording capa- 37 Impact of Processing Technology bility. on the Derivation of Music Copyright enforcement problems are arising from digital music processing technologies be- Information processing technology is affect- cause people can “disassemble” music when ing the way people create music, and it is beit is in digital form. This disassembly can oc- ginning to affect the ways in which they can cur vertically-that is snippets’ of sound can prepare derivatives of copyrighted musical easily be cut from a copyrighted work and in- works. In the last 15 years, the decreasing cost corporated in a derivation that may be noth- of digital electronic processing technologies— ing more than a collage of pieces of copyrighted logic and memory-have brought music syn- works. Although it is more expensive, difficult thesizing, audio editing, and dubbing technol- to accomplish, and limited in application, dis- ogy out of the academic laboratories and so- assembly can also occur horizontally. For in- phisticated professional studios where systems stance, the bass line of a song maybe stripped were often custom designed and expensive to off and used in a second work, creating what build and maintain. Now available off the shelf, 38 is, to some extent, a derivative work. these technologies are in the hands of disk jockeys, sound engineers in small studios, and Another intellectual property problem may aspiring professional and even amateur musi- arise from the use of sound emulators that can cians. At the same time, the actual capabilities mimic complex sounds, including voices, with of these technologies have improved signifi- great precision. A question may arise about cantly. According to one OTA advisor, ‘‘There whether a singer can claim property rights in has been a quantum leap in terms of the so- the sound of his voice. phistication of the kinds of information that These capabilities pose two questions rele- you can produce on an off-the-shelf synthe- 35 vant to intellectual property rights enforce- sizer." Now, for the price of a grand piano, ment. First, how is a proprietor to recognize musicians can buy machines capable of analyz- and prove infringement in this very dynamic ing and synthesizing sound wave forms and musical environment? Second, what rights custom-designing sounds that have never been does or should an artist/copyright holder have heard before. to maintain the integrity of his work, and how Because these technologies are widely avail- can he enforce those rights? able, people are becoming accustomed to the freedom of using them to create, use, and re- Impact of Processing Technology use music. The groundwork is being laid for on the Derivation of Video digital sound editing capability in the home. As mentioned earlier, compact disks already Information processing technology is also supply consumers with music in digital form. affecting how people create visual works, and Within 3 years, digital audio tape may also be how they can use copyrighted visual works as available. 36 A standard digital communication raw material for other works. Digital, comput- connection for music synthesizers and personal er-assisted retouching of photographs has —. — — “ Michael Kowalski at the OTA Workshop on Technologies . . . . . -.——. for Information Creation, Dec. 6, 1984. ‘-Scott Mace, ‘ ‘Electronic Orchestras in Your Living “Interview with Stan Cornyn, Apr. 4, 1985. For about Room, ” Infoworld, Mar. 25, 1985, pp. 29-33. $1,000, one can now buy an adapter device that allows a videocas- ‘“Michael Kowalski, Dec. 6, 1985. Mr. Kowalski actually sette recorder to be used to record music digitally. Barry Fox, played for the workshop two pieces of commercially recorded “optical Memories for Home Computers, ” New Scientist, Apr. and released music that demonstrated the stripping and reuse 11, 1985, pp. 17-20. of a bass line. 114 ● Intellectual Property Rights in an Age of Electronics and Information

reached a level of sophistication where the im- stage of producing a master print.43 The mar- ages of people can be added or subtracted from riage of optical disk storage and video proc- pictures leaving little or no trace of tamper- essing equipment suggests the possibility of ing.” The pace of progress of video tape edit- establishing “image banks’ consisting of digi- ing technology is such that a new generation tized images and standard algorithms to ma- of equipment appears about every 4 years.40 nipulate, transform, and link together video The television technical community is study- image frames, or even parts of frames, into new ing the establishment of a worldwide digital visual works derived from older, perhaps copy- video tape standard. Such a standard would righted, works.44 The ownership management allow all studio-based production work, includ- of such image banks could be complex. ing editing, to be done in digital format.41 Thus, Standards for digital television broadcast- some early steps are being taken in the world ing and reception are being discussed in inter- of video toward the kind of disassembling ca- 45 national standards forums. Digital television pability now possible with music. Combined promises to lower the cost and improve the with communication technologies-UHF and quality of pictures produced by home television VHF broadcasting, direct broadcast satellite, receivers, and could also make it possible for cable television—and storage technologies— home users to store and reprocess television video tape, optical disk—video processing is programs. Again, the enforcement of the in- revolutionizing the way visual works are made, tellectual property right to control the produc- disseminated, and reused. Thus, equally revo- tion of derivative works would be complicated lutionary questions may be posed regarding by the private and potentially widespread tech- the enforcement of intellectual property rights nical capability to make new uses of copy- in visual works. righted works. Computer hardware and software are reaching a truly phenomenal level of sophistication Impact of Processing Technology on in the generation of graphics. Some experts the Derivation of Computer Programs suggest that, within as few as 5 years, it will be possible to use the filmed image of John Part of the research and development effort Wayne, for example, and produce a full-length in computer technology goes into the creation motion picture with a synthesized ‘‘Duke’ in of hardware and software tools that can be the starring role.42 Lucasfilm, Ltd., of San used to help create other computer programs.46 Rafael, California, has developed and is now These tools aid people in developing new and marketing a machine, the EditDroid, that uses ever more sophisticated programs. Some tools optical disk storage and computer processing can also be used to adapt existing software to to automate virtually the entire process of film new uses. Thus, if they are employed in the editing, making the actual cutting of film un- unauthorized production of derivative works, necessary, except perhaps at the very last their use may violate intellectual property rights.

‘“Some people believe that, upon challenge, photographs 4’S. Gannes, “Lights, Cameras . Computers, ” Discover, may no longer be held as admissible evidence in court, S. Brand, August 1984, pp. 76-79. K. Kelly, and J. Kenny, “Digital Retouching: The End of Pho- “Jim St. Lawrence at the OTA Workshop on Technologies tography as l:vidence of Anything, ” 14’hole Earth Reviewq JUIV for Information Creation, Dec. 6, 1984, 1985, pp. 42-49. “Richard Green, Mar. 13, 1985. “’Interview with Humberto Rivera, Apr. 18, 1985. “’Examples of such tools include workstations, program edi- “Richard Green at the OTA Workshop on Display, Print- tors, code debuggers, program generators, programming envi- ing, and Reprography, Mar. 13, 1985, ronments (integrated sets of tools), and, in the future, perhaps “Several states, including California, have recently passed libraries of standard information processing modules that can laws that would require commercial users to obtain permission be assembled to perform more complex functions and tasks. from the heirs of a deceased celebrity before they can use a like- For a discussion of these technologies-the potential future and ness, thus treating the person’s name and likeness as the prop- the current problems of software engineering-the reader is re- erty of the heirs, D. B. Moskowitz, "Celebrities' Ghosts Are ferred to the OTA report, Information 7’echnology R&D: Criti- Hanging Over Advertisers," Business Week, June 3, 1985, p. cal Trends and Issues, OTA-CIT-268 (Washington, DC: U.S. 108. Government Printing Office, February 1985), pp. 75-87. Ch. 4—Impact of Technology on Enforcement of Intellectual Property Rights ● 115

The adaptation of computer programs to Congress and the courts have not yet grap- serve new or custom uses is, in many contexts, pled with the question of what elements of com- a well-accepted and widespread activity. Some puter programs copyright should protect. This computer languages and soft ware tools are issue is examined in detail in chapter 3 of this designed specifically to aid in modifying pro- report. Here, it is important to note that much grams that they help create. In particular, of the derivative uses of computer programs operating systems software is designed to help and their underlying processes and algorithms users tailor their programs and computing sys- occurs in private, and as such presents propri- tems to serve special needs. ” Some program- etors with major obstacles in detecting and mers and computer scientists believe that, be- proving infringement of their rights, even cause software is such a valuable resource, given clear policy on what those rights include. their creations should be in the public domain There is a widespread and growing research and under no circumstances restricted in their 48 and development effort aimed at making com- use as tools. puter software production easier. One goal of The number of American homes with per- this effort is to develop extensive libraries of sonal computers rose from zero in 1975 to 8 standardized functional modules of computer million by the end of 1983.49 This technology code. Some software module libraries already has spread even more rapidly into offices. As exist. These standard modules comprise com- personal computers become more widespread puter program segments that represent the and the demand for more specialized software most efficient known formulation of how to ac- rises, the opportunity and the desire to manipu- complish a particular task, such as sorting rec- late copyrighted programs to serve particular ords alphabetically. Libraries of modules may purposes may also increase. soon be organized so that they can be automatically selected and combined into programs An especially relevant example of such ma- on the basis of functional specifications. The nipulation is the use of programs designed to use of standardized modules would help ame- disable the copy-prevention schemes of many liorate the problem of low productivity in the personal-computer programs, thereby allow- currently labor-intensive software industry. ing users to make multiple copies of these copyrighted works. Other currently available The establishment of large libraries of reus- software tools— ‘interpreters ‘— are used to able software modules raises questions about translate a program from one computer lan- ownership and the management of transac- guage to another. Other tools aid in the “re- tions in these resources. Difficulty is likely to verse engineering’ of programs. Reverse engi- arise in determining whether the copyright neering refers to the practice of analyzing a ownership of a module constitutes a restraint program to determine how it is arranged to ac- on the use of a function or an idea. complish its functions. A major goal is under- The nature of the computer is at the core of standing the underlying algorithms used by many copyright enforcement problems, includ- the program designers. A very fuzzy line sep- ing those that surround the unauthorized deri- arates legitimate reverse engineering practices vation of computer programs themselves. A and violation of the copyright owner’s right truly revolutionary machine, the computer was to control the production of derivative works. — ——.—- — recognized as such when the ideas governing ‘ Interview with Edward Conklin, FORTH, Inc., Apr. 19, its operation were first conceived. In the 1930s, 1985. Alan Turing suggested, by way of a mathe- ‘“Richard Stallman, “The GNU Manifesto,” Dr. Dobb's Journal, March 1985, pp. 30-34. matical model, that any computer can simu- ‘qWalter S. Baer, “Information Technologies in the Home, ” late the operation of any other computer, past, Information Technologies and Social Transformation (Wash- present, or future.’” The real limit on the use- ington: National Academy of Engineering, 1985), p. 124. In 1984, for the first time Americans spent more for machines in the “personal computer” category—i.e., those costing less than “’Alan Kay, “Computer Software, ” Scientific American, Sep- $10,000–than on mainframe computers or minicomputers, tember 1984, p. 53. 116 ● Intellectual Property Rights in an Age of Electronics and Information fulness of this simulation capability is the capabilities to manipulate and transform copy- speed at which a given computer operates; and righted computer programs into derivative the speed of computers is widely projected to works, to do so privately and without leaving continue to rise at a breathtaking pace, at least a trace, are well within the limits of present for the remainder of the century.” Thus, “It computer systems. These capabilities confront is clear that in shaping software [tool] kits the legislators, courts, law enforcement agencies, limitations on design are those of the creator and intellectual property owners with the ques- and the user, not those of the medium."52 The tion of what should or can be done to control — the use of rapidly proliferating computer power 52See OTA, Information Technology R&D: Critical 7’rends and Issues, op. cit., pp. 324-331. in manipulating and transforming cop-y-righted ‘Kay, “Computer Software, ’ p. 57 works.

ADJUNCTS AND ALTERNATIVES TO TRADITIONAL ENFORCEMENT MECHANISMS Faced with mounting difficulty in identify- ent challenges. Although a given form of tech- ing, detecting, and prosecuting infringements nological protection, for example, may effec- of their traditional rights, intellectual property tively reduce copying of personal-computer proprietors are pursuing three basic strategies software distributed on floppy disks, it may to protect their economic and artistic interests, be totally ineffective if the software is distrib- They are: implementing technological protec- uted over telephone lines. Appeals to peoples tions to prevent the unauthorized copy, publi- sense of “fair play’ may be quite useful in cation, and use of their works; initiating pub- educational or corporate environments, but in- lic relations campaigns that appeal for citizens’ effective, or even offensive and counterproduc- moral support and respect for property rights; tive, when applied in the context of home use. and lobbying for legislation that strengthens The collection and distribution of royalties on government enforcement efforts, or establishes the sale of blank media may be a workable so- alternative mechanisms for obtaining remun- lution when applied to cassette tapes for mu- eration. sic or movies; but such a solution may be an administrative nightmare if applied to more These strategies are not mutually exclusive, versatile media such as magnetic or optical and do not apply uniformly across all situa- disks, where many more kinds of information tions. Proprietors see different enforcement products, and thus many more and varied in- problems arising from different technologies, terests, would have to be accommodated in dis- which affect particular types of works in differ- tributing royalties. ent contexts of use. Thus, a mix of strategies may be most appropriate to meet these differ-

TECHNOLOGICAL PROTECTION Several varieties of technological protection 1) security measures such as locks, scrambling, are now used to prevent unauthorized use of and encryption; 2) technological methods to intellectual works in the forms of computer monitor information flow; and 3) proprietary software, broadcast video signals, and audio channels for the distribution of information. and video recordings. These technological ap- Each of these methods has advantages and dis- proaches for securing intellectual property advantages that make it appropriate for vari- rights may be grouped into three categories: ous uses. Ch. 4–Impacf of Technology on Enforcement of Intellectual Property Rights ● 117

Every technological approach to the protec- puter or one user. In contrast, the software- tion of intellectual property requires a trade- only protection mechanisms cannot control use off between the security of the property and of the software, only the number of copies that its accessibility, marketability, cost, and qual- exist. Software-only protection methods are ity. Furthermore, as was reiterated by every currently in use, and implementation of more technical expert with whom OTA spoke, while advanced and secure hardware-plus-software any technological barrier may work in some methods is being discussed. Some chip manu- cases by acting as a‘ ‘stop sign warning against facturers are designing computer chips with unauthorized use, no form of technological pro- machine-readable serial numbers and decryp- tection is 100 percent effective against deter- tion circuits to help software makers more ef- mined opponents. fectively control their products.’) But, in general, hardware companies have little incentive Software to help prevent copying because the availability of “free” software makes their products Many present and proposed methods of using more attractive and less expensive for the in- technology to protect intellectual property cen- dividual to use. ter on software, in part because it is the newest and most technologically sophisticated infor- There are numerous other mechanisms that mation-based product today. Further, software could prevent unauthorized copying, some re- copying has three distinctive qualities that set quiring substantial changes in hardware, and it apart from the copying of other expressions others based on modified systems of distribu- of intellectual property, making protection a tion. One of the former involves providing soft- particularly critical issue, First, it is easier to ware in read-only memory (ROM) and redesign- ing computers so they accept ROM modules copy software than other products, such as au- 54 dio records or books, because the physical ef- or cartridges. Taking the concept of software fort is minimal—as simple as pressing a sin- cartridges a step further, one can imagine com- gle key. Second, a computer can copy software puters being sold with many software pro- extremely fast compared to the length of time grams built into the machine, residing in in- required to copy other materials. Finally, un- ternal ROM chips. ” A developer of especially like a taped copy of an audio recording, the useful software, fearing lost profits due to ille- duplicate is typically an exact, perfect copy gal copying, could market his software only of the original software with no distortion of in this form—inside a computer. Such a policy quality, Thus, the same technological qualities has many drawbacks. It would severely limit that make software useful also make it vulner- users of computers, who would be forced to buy able to copying. an entire computer to get a useful piece of software. Even if computers were inexpensive, the Software protection for mass-market, per- waste would be great and the computer’s util- sonal computer programs generally falls in the first category of technological approaches “For example, ‘i Software Protection Llevices, Inc., is at- listed above: locks and encryption. Another al- tempting to incorporate its Copyrighta- software protection s~’s- ternative is the use of proprietary channels for tem into a microcomputer chip under joint development with The Western Design Center, ” a Mesa, AR, microprocessor de- the distribution of software. sign firm. Edward Warner, “Few Takers for Embedded Pro- tection, ” Computerworhi, Mar. 12, 1984, p. 109. Software embodied in disks maybe protected “Computers that accept software in ROM have thus far from copying in two basic ways. Either the pro- met with mixed success. For example, the Texas Instruments tection mechanism can be built into the soft- 99 and the IBM PCjr accept software in ROM cartridges. “The trend toward building software into computers is, by ware, or it may be divided and coordinated be- and large, currently motivated by the desire for small, light- tween software and hardware. The essential weight computers, not to prevent copying. For example, the distinction between the two methods is that Hewlett Packard Portable computer has its operating system software and two applications programs, Lotus l-2-3Thf, and the hardware-plus-software protection mech- a text editor, provided by internal ROM to eliminate the size anisms are able to limit software to one com- and weight of disk drives. 118 ● Intellectual Property Rights in an Age of Electronics and Information ity as a ‘‘universal machine, or a device that able to unauthorized pickup at many different can imitate any other device, would be lost. points, Broadcasters need to ensure that these Such computers would be special-purpose ma- transmissions are not accessed until the end chines only. of the process, after the local affiliate station has added local advertisements. Thus, the net- Another form of technological protection works may scramble the signals so that only permits developers of programs (as distinct the affiliate station, using a decoder, has ac- from suppliers of data) to keep their programs cess to the satellite transmissions.57 in their own computers, rather than distributing their software on the market. People who Monitoring techniques to verify unautho- want to use the program are required to con- rized viewing or listening have been applied nect to the developer’s computer, upload the in some cases, particularly by some subscrip- data they want processed, and pay an on-line tion television and MDS companies. So far, the use fee. The disadvantages of this scheme are courts have upheld this form of electronic sur- losses in flexibility-users are not able to link veillance, but privacy concerns remain. In any their programs to remote, protected ones eas- case, monitoring individual residences for theft ily—and communication costs for the on-line of service is very expensive and therefore of link. limited value to proprietors, except perhaps as a deterrent. One still-theoretical solution would be to link software access to a unique personal identifier. A computer terminal would be equipped with Audio and Video Recordings a hardware device that accepted sensory in- In ways similar to those used for computer put, such as a person’s appearance, finger- software, audio and video recordings may be prints, hand geometry, voiceprint, or retinal copy protected by a mechanism built into the pattern. Software could be designed to permit recording itself, or by a scheme coordinated only the person whose appearance or prints between the recording and the playback/copy- matched to log onto the computer or to use ing machine. a piece of software.56 Musical recordings have traditionally in- Broadcast Signals cluded no mechanism to prevent copying. All known copy-preventer systems tend to degrade Because broadcast signals-television and the quality of sound reproduction. Recently, radio transmissions—are not contained in a there is renewed interest in protecting musi- tangible medium or transmitted over wires, cal recordings because digital CD/ROM rec- they cannot be locked like software or distrib- ords are potentially infinitely copyable in high uted through proprietary channels. They may quality. Manufacturers of compact disk record- be protected in only two ways: directly by ings are, therefore, embedding a unique “sig- scrambling or encryption, or indirectly by mon- nature’ in their products to serve as evidence itoring techniques. of unauthorized copying or manipulation.58 Scrambling or encryption techniques alter One company now offers protection for video- the signals so that they are unintelligible un- cassette tapes in a system that “confuses the less the proper decoding device is used at the automatic gain control of VCRs, causing them reception end of the transmission. Typically, to make copies that have dim, weak pictures the signal for a network television show has that are marred by video ‘noise.’ "59 This sys- a long route to the viewer—e.g., from the net- “’interview with David Poltrack, CBS, Inc., June 10, 1985. work to a satellite to the affiliate station and 58Interview with Al McPherson, Warner Records, Inc., finally to the home viewer—and so is vulner- Apr. 19, 1985. 59’’ Homevid ‘Club’ Has Surprise for Pirates, ” Variety, Apr. 24, 1985. Consumer electronics catalogs feature devices that ‘

Ch. 4—Impact of Technology on Enforcement of Intellectual Property Rights ● 119

tern could also be used for broadcast signals, enough to reduce unauthorized use to a man- so that a work taped from an on-air perform- ageable level, but low enough so that consum- ance and protected in this fashion would yield ers would not find the protection mechanism a very poor copy. so distasteful that they would refuse to purchase and use protected materials.61 The mar- CBS Inc. recently announced a system to ketplace will tend to set an equilibrium of prevent copying of records, tapes, and com- acceptable protection. But given the uncertain- pact disks that will be coordinated between a ties of technological change and shifting con- device in consumers’ home-recording equip- sumer preferences, industry will have to mon- ment and a coded signal on the purchased re- itor the market carefully to assess the effec- cordings.”’ Record distributors would likely of- tiveness of protection and to gauge consumer fer two versions of recordings, one copy reaction to protection mechanisms. protected and the other not, and charge different prices for them. Industry spokesmen acknowledge that it will probably take decades Advantages and Disadvantages of for this scheme to significantly affect consumer Technological Protection copying, because people will be able to copy Some analysts believe that proprietors’ reli- protected recordings with their existing equip- ance on technological protection is a natural ment. Also, equipment manufacturers are like- and reasonable process. They argue that using ly to continue to offer equipment that does not such protection is like building fences to pro- include the copy-protection device, unless the tect real estate. Thus, improvements in tech- law requires such devices. nologies for copying and manipulating intellectual property will probably result in better Effectiveness technologies to prevent these activities, just as the opening of western lands was followed The ability of technological protection to pre- 62 vent illegal copying or access depends on the by the invention of barbed wire. medium and the type of protection, but a few However, from the point of view of public absolutes can be stated. Any form of techno- policy, technological protection may be a poor logical protection will prevent some unautho- way to protect intellectual property rights be- rized use; no form of technological protection cause it ignores part of the constitutional com- will stop all unauthorized use. Some systems promise between the public welfare and the are relatively easy to defeat, others more dif- profit-making of intellectual creators. Techno- ficult. And it is conceivable that new forms of logical bars may block dissemination of and technology will alter the effectiveness of these access to intellectual property. devices. One result of this loss of access could be re- Another factor is the level of technological dundancy in spending for research and devel- literacy in society. Today, many children have opment. Since technological protection by- early and frequent exposure to the new compasses intellectual property law, software puter technologies, and so will be better producers, for example, might decide not to equipped to use—or misuse—technology. The disclose the contents of their software, depriv- higher the level of society’s computing skill, ing competitors, experimenters, and research- the more difficult the job of technological pro- ers of the benefits of their work. Thus, some tection becomes-at least for computer-based software research and development would re- intellectual property. peat previous, but undisclosed, work. This duplication and waste of resources is precisel For technological protection to work on a y large scale, the challenge is to find a level high + Christopher Weaver, OTA Workshop on Storage and Database Technologies, Jan. 11, 1985. “ Martha N1. Ilamilton, “Record Industry Un\eils L)e\’ice to ‘Personal communication from Fred Smith, (’competitive Block Copying,” The Washington Post, Mar. 26, 1986, p. G3. Enterprise Institute, January 1986. 120 . Intellectual Property Rights in an Age of Electronics and Intormation -. what patent law strives to avoid. Moreover, be necessary to ensure effectiveness. This type technological protection of software does not of legislation has two drawbacks. The first is expire after a set period of time, as other intel- that there are some legal uses of duplicated lectual property rights do. The creator of soft- materials, which would make it necessary to ware could, in effect, have a perpetual monop- outlaw devices with legitimate uses. The sec- oly on his work. ond drawback, closely related to the first, is that it would be necessary to define and char- Technological protection in and of itself does acterize devices and methods used for defeat- not necessitate changes in intellectual prop- ing technological protection. Those definitions erty law, but it could precipitate changes by and characterizations would cover specific ap- weakening the distinctions between different plications of technology, and would themselves types of intellectual property—patents, trade exist in a changing technological environment. secrets, trademarks, and copyrights. If tech- The law would require making the precise technological protection were effective, intellectual nological definitions necessary to prevent de- creators would not have to observe the formal- feat of protection mechanisms, while at the ities required for legal protection, e.g., submit- same time allowing the use of related tech- ting to the lengthy and expensive patent proc- nologies. ess, or disclosing works to the Copyright Office. They might still choose to do so for additional Another kind of legislation, similar to con- protection if technological protection fails, but trol of copying methods, could be enacted that there would be less reason. Technological pro- would outlaw the intentional defeat of, or tam- tection, if applied indiscriminately to any or pering with, technological protection mecha- all kinds of intellectual property, could blur nisms, regardless of any violation of intellec- the legal distinctions among these forms of pro- tual property rights. Or, perhaps, ordinary tection. In reflecting what might become a violations of intellectual property law might widely accepted public practice, the law itself still be treated as they are now, but violations could likewise cloud the differences.63 that involved the intentional defeat of technological protection mechanisms could carry Widespread technological protection could additional penalties. make intellectual property law more effective in one important way: it would alert consumers who attempt to copy that they are breaking Public Relations Strategies the law. This would not necessarily stop them, Even with safeguards against unauthorized but by forcing them to take elaborate steps use, today’s information technologies provide to make copies, it would at least make the act users greater potential access to intellectual less convenient and emphasize its illegality. property, and the means to reproduce, store, Widespread use of technological protection transfer, and manipulate works. Responding could generate a need for new, related laws or to this probable increase in uses of technology, regulations. In addition to the potential need many proprietors have tried to inform the pub- for standards legislation, laws that proscribe lic about intellectual property rights and per- the manufacture, sale, distribution, or use of suade them to respect those rights. devices or program software intended to de- To influence public attitudes, business lead- feat technological protection mechanisms may ers have followed three basic strategies. First,

63 they have tried to alert the public to the idea John Hersey, in the final report (1978) of the National that copying is illegal and will be prosecuted. Commission on New Technological Uses of Copyrighted Works (CONTU), worries about the “subtle dehumanizing danger” of Second, they have tried to convince users that blurring the distinction between types of intellectual property. they have a stake in assuring the fair compen- He opposes extending copyright to computer programs at ‘the moment at which the program ceases to communicate with hu- sation of artists, publishers, and distributors. man beinm and is made caDable of communicating with ma- Third, they have sought to educate the public chines.” CONTU, p. 33. ‘ about copyright, appealing to them as citizens Ch. 4—Impact of Technology on Enforcement of Intellectual Property Riqhts ● 121

who will obey the law once they understand ing . . . or like Texaco. make only token pay- it. These strategies have met with varying lev- ments must under-stand that publishers will els of success. not remain silent regarding violations of their copyrights. 65 When the law clearly defines infringement, it becomes easier to inform the public and build Similarly, the computer software industry awareness about the issue. For instance, the has undertaken an aggressive public-relations campaign. Because software copying is tech- Motion Picture Association of America (MPAA) nically so difficult to prevent, many in the soft- emphasizes the protections provided by law ware industry argue that public relations is in its posters, brochures, articles, and manuals for enforcement officers. They tell the public essential to an overall strategy of copyright enforcement. Through its trade association, that video piracy is a Federal crime, and that ADAPSO, the software industry has brought offenders will be prosecuted. Newspapers and some major legal cases66 and has developed and magazines are sent press releases about suc- widely distributed a brochure that states: cessful prosecutions to spread the word that the film industry is enforcing its rights. Simi- People who would never walk into a store larly, when the recording industry uncovers and shoplift a software product think noth- large-scale piracy, the ensuing publicity alerts ing of making several copies of the same soft- the public to the problem. The industry hopes ware. The results are the same. The act is just 67 that the public, aware of counterfeit tapes and as wrong. records, will be less likely to buy them. The industry has taken out advertisements in Book publishers, too, launched a major pub- computer magazines that make the same point. lic awareness campaign after Congress passed the 1976 Copyright Act, seeking support for Public Attitudes and the Legitimacy new provisions that defined fair use. The tar- of Intellectual Property Law get audience included librarians, educators, representatives of industries that use copy- Neither the threat of legal action, nor the ed- righted works, and the general public. Book ucation of users about cop}’ right may be enough publishers distributed printed materials and to change public attitudes and behavior. Only held sessions at professional meetings and pub- if the public perceives copyright rules as fair lic forums. Many publishers believe that these and reasonable will they voluntarily respect efforts produced only very limited results. the law. Book publishers point to the inherent limi- OTA commissioned a public opinion survey tations of the copyright notices on books, arti- to identify current public attitudes on intel- 64 If the industry lectual property. The major findings were as cles, and copying machines. 68 is serious about reducing unauthorized pho- follows: tocopying, many believe that this intention • At the present time, ‘‘ Intellectual Prop- must be made clear through well-publicized liti- erty Rights’ is not an issue the public feels gation. As the President of the Association of American Publishers, Townsend Hoopes, said —— -— 65 in announcing a lawsuit against Texaco for un- Press release from the Association of American Publish- ers, Inc., Washington, DC, May 6, 1985, authorized photocopying: “(See, for example, “ADAPSO Suit Alleges Piracy, (’om- puterworid, Jan. 21, 1985; ‘( Micropro and ADA 1’S() Sue Amer- Major businesses that either make no ef- ican Brands, Allege Software Piracy, I)owrnfmxf, Februar-}’ fort to obtain clearance for their photocopy- 1985, ‘-Thou SAdt ,N’ot Dupe (Washington, DC: AI) A1)S(), 198.1) 64The 1982 King Research report on photocopying in librar- This brochure was mailed to 5,000 colleges and universities, ies found that 85 percent of photocopy machines in all libraries, 22,000 school districts, and 17,000 corporate counsels in the 93 percent of the coin-operated photocopy machines in all United States. libraries, and 100 percent of coin-operated photocopy machines ‘wFub)ic Perceptions of the Intellectual Propert~r Rights is- in academic libraries bear a copyright warning notice. I). sue (prepared for OTA by The Policy Planning Cl roup, Yankel- McDonald, Libraries, Publishers and Photocopying, pp. 2-16 ovich, Skelly & White, Inc., Februrary 1985). 122 - ● Intellectual Property Rights In an Age of Elcctronics and Information

it knows a great deal about. It is also not laws. Thus, these executives are support- an issue they perceive effects them. ers of the law. The vast majority of the public finds ac- Because of definitions used in the sample ceptable—such that they would be will- selection, the small business executives ing to do it—some form[s] of unauthorized studied are owners of, or have access to, copying of copyrighted material. computers. Their attitudes show that they Surprisingly, willingness on the part of the are technology oriented—believing that public to engage in behaviors that infringe more technology is better. They are strong on intellectual property rights is not af- supporters of actions that will promote fected by awareness of the issue or expe- and ensure the availability of future tech- rience, in general, with home technologies. nologies. Conversely, several specific attitude sets Small business executives appear less appear to be related to the acceptance of likely than the general public to find copy- copying behaviors. Among them are: ing behaviors acceptable. —a tolerance of ‘‘gray area’ behaviors, – While they find almost all copying be- –belief in the benefits of sharing infor- haviors unacceptable, they make an ex- mation, and ception for the one behavior they would –pragmatic responses such as the accept- be most likely to engage in: the making ance of copying copyrighted material of copies of computer programs. while acknowledging that it is probably –As is the case with the general public, wrong, there is consensus that any sort of copy- The public draws the line at behaviors that ing for sale is totally unacceptable, infringe on intellectual property rights whereas copying for personal use is when they involve the obvious or active more acceptable. circumvention of payment, when they are Small business executives emphasize non- done for sale or profit, or on behalf of busi- governmental solutions to intellectual ness or in a corporate setting. property rights problems. When given a At the moment, the public perceives the choice, they prefer solutions that involve intellectual property-rights-issue to be a technologies that physically prevent copy- marketplace problem whose solution should ing. Further, they believe that the clarifi- come from the industries and companies cation of ambiguities about which copy- affected. ing behaviors are or are not permissible would be helpful. OTA also commissioned a survey of the atti- –However, as is the case with the gen- tudes of small business executives toward intellectual property. The major findings were eral public, the intellectual property is- as follows:69 sue is of low salience among small business executives, and there is little ● Small business executives appear to be demand for solutions at present. more sensitive to the problem of intellec- Small business executives see themselves tual property rights than the general as potentially part of the process of find- public. ing solutions to intellectual property prob- ● They are more likely to agree with state- lems. Within their own companies, they ments that emphasize the need to preserve are willing to set rules and guidelines the proprietary nature of information. As against conduct that violates intellectual producers, many of their products are pro- property rights. However, they will only tected by copyright, patent, or trademark go as far as setting standards. They feel that they cannot and will not accept responsibility for actual enforcement of ‘The Intellectual l+opert~ Rights Issue: The Small 13usi- nessman Perspecti}’e (prepared for OTA by The Policy Plan- rules or laws designed to prevent behav- ning Group, Yankelovich, Skelly & White, Inc., August 1985). iors such as copying. —

Ch. 4–Impact of Technology on Enforcement of Intellectual Property Rights ● 123

From these surveys of the general public and the copyright holder and the users of the work. executives of small businesses, and discussions Messages about unauthorized copying may be with students and educators, OTA found that more effective if they emphasize the value of public relations strategies are likely to be most an ongoing partnership between creators and effective if they focus not on the rights of copy- users. right holders, but on the relationship between Chapter 5 Impact of Technology on the Creative Environment Contents

Page Findings, ...... 127 Introduction ...... 127 The Creative Environment ...... 128 Impact of Technology on Creators ...... 129 Self-Image and Motivations ...... 129 Tools for Creativity ...... 132 Expanding Boundaries ...... 132 New Ways of Proceeding ...... 135 Who Can Participate...... 142 Impact of Technology on Resources and Materials ...... 145 Impact of Technology on Roles, Relationships, and Rewards ...... 149 Roles and Relationships ...... 149 The System of Incentives and Rewards ...... 151 Implications for the Intellectual Property Rights System ...... 153 Changing Players in the Creative Environment ...... 153 The Emergence of New Opportunities ...... 154

Tables Table No. Page 5-1. Electronic Networking: Academic and Research Uses ...... 141 5-2. Libraries in the United States ...... 146

Figures Figure No. Page 5-1. Applications of Information Technologies to the Creation and Processing of Information ...... 138 5-2. National Magnetic Fusion Energy Network ...... 142 5-3. An Example of At-Home Publishing ...... 144 5-4. Public and Private Institutions Providing Information Products and Services . . . 147 5-5. institutional Users of Computer Readable Databases ...... 148 Chapter 5 Impact of Technology on the Creative Environment

FINDINGS

The development and widespread use of the new technological opportunities have emerged. new information and communication technolo- Not parties to previous intellectual property gies are changing the creative environment in agreements, many of the new players and even a number of ways, many of which will have sig- some of the older ones who now operate in new nificant implications for the intellectual prop- modes, have new and divergent attitudes about erty system. These technologies, for example, who should have access to works and materi- are redefining who creators are and what moti- als, and about what kinds of activities and pur- vates them, the kinds of tools and materials suits should be rewarded. Under these circum- they use, and how they gain access to these stances, controversies are likely to develop tools, the skills and knowledge they need to among players about the distribution of rewards. pursue their work, and their roles and relation- Furthermore, in the future, there may be less ships to others in their environment. consensus about the basic aims of the intellectual property system. In this new environment, the incentives and rewards provided by the intellectual property The new technologies will greatly enhance the system may no longer achieve their intended pol- creative environment, providing new and pow- icy goals, In many cases, they inadequately re- erful tools that can expand the boundaries of flect the motivations, needs, and perceptions creativity, changing the ways in which crea- of the members of the creative environment, tors and inventors carry out their work, and or the kinds of activities that they pursue. opening the way for more people to participate Moreover, they may miscalculate the econom- in the creative process and to share the prod- ics of creating, producing, and distributing ucts of scholarly and scientific research. At the intellectual properties, Under these circum- same time, these technological capabilities also stances, new kinds of inducements may be re- pose new problems for the intellectual property quired. system. Allowing users to access and manipulate creative works with unprecedented ease One of the most significant differences in to- and speed, they make it more difficult for cre- day’s creative environment is the growth in ators and inventors to identify or trace inci- the number of participants and the transfor- dents of copyright infringement or plagiarism. mation of traditional roles and relationships. New participants have entered the scene as

INTRODUCTION The American system of intellectual prop- such incentives, in the form of exclusive rights, erty rights was established to foster creativity would stimulate the development and dissem- and learning by providing economic incentives ination of ideas, discoveries and inventions, in- to individual creators, 1 It was assumed that formation, and knowledge. As a result, artists, writers, and scholars would have at their disposal the resources necessary to support their “1’hrfju~hout this chapter the t[’rm creators is used in a gen- erlc sense t o include all t hose p(’opl(” who art, i n ~rol~mi in art is- creative work. Most of what they needed was tic {Jr Int(’llettual actl\rltles. available through printed materials, 127 128 ● Intellectual Property Rights in an Age of Electronics and Information

Today, however, we have moved far beyond by examining: 1) how technology relates to the the print culture into an era where the new in- creative environment, and 2) how today’s new formation and communication technologies are technologies are affecting that environment. rapidly altering the environment for creativ- Where possible it will distinguish between the ity. This raises the question of whether incen- environments in which artists, scholars and tives of intellectual property rights, established scientists, and information entrepreneurs oper- in an era when the printing press dominated ate to determine whether technology is affect- communication technology, remain adequate ing these areas in different ways in order to in an age of information and electronics. identify where creators might require different kinds of incentives and rewards. This chapter analyzes the relationship between incentives and the creative environment

THE CREATIVE ENVIRONMENT

Artists, writers, composers, and inventors ● a formal or informal system of education do not work in a vacuum. Nor, as the social and training; historian Elizabeth Eisenstein has pointed, “do Ž a network of relationships with others, major innovations, discoveries, and artistic each constituting a set of roles; and works spring to life abruptly and full blown, ● a community of shared and supportive like Minerva from Jove’s brow."2 Rather, an values and a system of incentives and invention, discovery, or creative act is more rewards. like a complex social process than an isolated Together, these elements constitute a sys- incidents The environment in which these proc- tem in which each part affects all others. The esses occur is the ‘‘creative environment. ” creative environment can also be influenced The creative environment consists of several by external factors, such as economic devel- elements: opments, politics, or social change. Technol- ogy is one external factor that is likely to have the creators themselves—the scholars, a particular significant impact because just to poets, writers, artists, inventors, and be able employ it generally requires the restruc- others who produce intellectual works; turing of the environment in which it is to be the tools and materials that creators need 4 used. to perform their tasks; the foundation of artistic and intellectual As the following discussion shows, the in- material on which to build, which might fluence of technology on the creative environ- be as fundamental as an epic poem or as ment is likely to take several forms. It will af- sophisticated as an on-line, bibliographic fect who the creators are and what motivates database; them, what kinds of tools and materials crea- a set of skills and procedures for carrying tors use and how they get access to them; the our their work; skills they need to carry our their work; and their roles and relationships to others in their ‘Elizabeth L. Eisenstein, The Printing Press as an Agent of environment. Change: Communications and Cultural Transformations in Early Modern Europe, vol. I (Cambridge, England: Cambridge Univer- sity Press, 1979), p. 31. For two other discussions of the interrelated activities and processes leading to invention and creativity, see also, Arnold Pacey, The Maze of Igenuity, Ideas and Idealism in the Development of Technology (Cambridge, 4Langdon Winner, Autonomous Technology: Technics Out MA: MIT Press, 1980); and Daniel J. Boorstin, The Discovers: of Control as a Theme in Political Thought (Cambridge, MA: A History of Man Search to Know His World and HimseJf MIT Press, 1977), p. 100. See also Jacques Ellul, The Techno- (New York: Vintage Books, 1985). logictd Societ.v (New York: Vintage Books, Alfred A. Knopf, 3Eisenstein, op. cit., p. 31. 1964). Ch. 5—Irnpact of Technology on the Creative Environment ● 129

IMPACT OF TECHNOLOGY ON CREATORS Societies are shaped and characterized by could only be defined by considerable re- the technology that predominates in them. one search. can speak, for example, of Stone Age man or All this, as we have seen, gave a tantaliz- of the basket weavers. Today, computer tech- ing ambiguity to the name by which a medie- nology is becoming pervasive. While virtually val manuscript book might be known. A man- everyone encounters this technology daily in uscript volume of sermons identified as Sermones Bonaventurae might be so called one form or another, its power and scope en- for any one of a dozen reasons . . . . Was the sure that it will have an especially pronounced original author the famous .Saint Bonaven - effect on those involved in creative, scientific, tura of Fidanza? Or was there another author and scholarly pursuits. In particular, it will af- called Bonaventura ? Or was it copies by fect how artists, inventors, and scholars see someone of that name? Or by someone in a themselves–their self-image, and what moti- monastery of that name? Or preached by vates them. some Bonaventura, even though not composed by him. Or had the volume once been Self-Image and Motivations owned by a Friar Bonaventura, or by a monastery called Bonaventury? Or was this a col- The historical case of the printing press il- lection of sermons by different preachers, of lustrates how technology can affect creators’ which the first was a Bonaventura? or were self-images and motivation. In fact, the con- these simply in honor of Saint Bonaventura? cept of individual authorship, which definitive- The printing press not only gave rise to the ly changed authors’ self images, emerged from concept of the individual author, it also af- this new technology.5 Before the printing press fected how creative people were motitated. manuscripts were treated more or less as sa- With the enhanced economic value of printed cred texts whose authorship was as irrelevant books fostered by the new technology, crea- as it was difficult to ascertain. Daniel Boor- tors encountered conflict concerning whether stin captures how difficult it was to trace they were—or should be— ‘serving the muses authorship before the establishment of a or mechanic printers, [or were] engaged in a printed, title page:6 ‘divine art’ or a ‘mercenary metier. ’ "7 Just as the printing press affected the self-image and There were special problems of nomencla- ture when books were commonly composed motivations of 17th and 18th century creators, as well as transcribed by men in holy orders. so too are the new information technologies In each religious house it was customary for already changing contemporary creators’ atti- generation after generation of monks to use tudes and perceptions about themselves and the same names. When a man took his vows, their work. he abandoned the name by which he had been known in the secular world, and he took a In many fields, the convergence of audio, name of one of the monastic brothers who had video, and computer technologies now allows recently died. As a result, every Franciscan the creator to express his/her art in multiple house would always have its Bonaventura, modes and media, changing the way he/she de- but the identity of 'Bonaventura’ at any time fines his role. Basing her art on a variety of technologies, the entertainer, Laurie Anderson, 5As Einsenstein has pointed out for example, defines herself at one and the same F’rr)rn t h{, flrqt, authorship was closely Ilnked to t ht. new tech nolt)~~, ,As F’eh\’re and kf artln sugge~t, It IS a ‘ neolc+p qm to u w, time as a musician, a composer, a video maker, the term “man of let ~erq’ I){’ fort> the advent of prlntlng [’art 1> a writer, an inventor, and a pop stars The same t)ecause copyists had, after all, rre; er paid thosr who~r works they rop]ed, partly becauqe new hooks were a ~mall port Ion of technologies turn audio engineers into stage tht~ earl} t)(x)k trade, an{i partl~ because dl~l~rons of Ilterarv la hor remained blurred, the author retained a quasi-ameteur st a- tus until the elght[wnth century F:isenstein, op. cit., p. 5~1. ~:isenstein, op cit., pp 15;1- 154 ‘tJ. IIoberman, “The New .Avant-(; arde I’rorn Anderson to ‘ Boorstin, op. cit., p 530 H?rne,” Dial hfagaine, ,Jul~’ 1985, pp. 5-6. 130 ● Intellectual Property Rights in an Age of Electronics and Information performers, sound-mixers into composers and she succeeded in finding a niche for herself and performers on records,’ and computer scien- her creativity. tists into film artists. Many artists are also Technology, may also change how society software designers, many composers are tech- perceives creators and their work. For exam- nicians, and many biologists are information ple, while most people have always recognized scientists. As technology becomes more inte- that the stage director imparts a unique con- gral to the arts, artists have to become techni- tribution to the performance of a play or mu- cians before they can create. sical, the director was unable to claim ‘author- Beyond changing perceptions of their roles, ship’ of his work, because his contribution the new technologies may actually affect how could not be written down or expressed unam- creators think, how they become aware of who biguously. Today, however, video-recording they are and what they do, and how they de- technology, can ‘fix’ the unique way in which fine their relationship to the rest of the world. actors, props, motion, and scenery are arrayed After analyzing people’s experiences with the in each director’s interpretation of a work. By computer, Sherry Turkle observes:10 thus establishing his authorship, the stage director has greater credence in his claim to copy- The computer becomes part of everyday right. 12 life. It is a constructive as well as a projec- tive medium. When you create in a pro- Technology has also affected the motiva- grammed world, you work in it, you experi- tions of artists and scientists. Changes in atti- ment in it, you live in it. The computer’s tude seem to be most pronounced in those areas chameleon like quality, the fact that when you where the new technologies have helped to en- program it, it becomes your creature, makes hance the market value of creative and scien- it an ideal medium for the construction of a wide variety of private worlds and, through tific works. Again, as in the age of the print- them, for self-exploration. Computers are ing press, many creators are wrestling with more than screens onto which personality is choices about whether to focus on intrinsic or projected. They have already become a part monetary rewards. of how a new generation is growing up. Traditionally, artists have been inspired to By firing creators’ imaginations, the new create and scientists driven to invent and dis- technologies are also widening the scope of cover for reasons that can be clearly set apart creative activity itself and opening new oppor- from monetary rewards. The graphic artist Mil- tunities. The interactive fiction writer, Ann ton Glaser succinctly characterized these kinds Byrd-Platt, for example, was discouraged from of motivations when he said: becoming a novelist, believing she could not I would suspect that a good many people distinguish herself from “the hundreds and would say that the basic reason they do their hundreds of writers just like her.’’” She found work is that it pleases them, because they love that an understanding of computers and tech- it, because they are obsessed by it, and be- nology gave her new areas in which to exercise cause they don’t feel that they have any her creativity. In writing interactive fiction— choice. 13 an art form impossible without computers— Underlying motivations and the sense of purpose for creators remains strong. Explains The- — odore Bikel: ‘.See for example Ken Emerson, “David Byrne: Thinking Man’s Rock Star, ” 7’he New }’ork ~“mes Magazine, May 5, 1985, The arts are about risk taking. More often pp. ~~-~~. In creating “once in a I,ifet,ime ” teams of technical and artistic indi~’iduals create together, working out their sense than not [they are] about endangerment. You of structure, relying on intuition, improvisation, and technol- endanger your soul each time you put some OW’. Thus the creator maJ’ be both musician and engineer. ———— Sherrv Turkel, The Second Se~f: Computers and the ]lu- ‘James Hammerstein, OTA Workshop on the Impact of mtm Spi~it (New York: Simon & Schuster, 1984), p. 15. Technology on the Creative Environment, Apr. 24, 1985. ‘Ann Byrd- Platt, OTA Workshop on the Impact of Tech- ‘Milton Glaser, OTA Workshop on the Impact of Technol- nology on the Creative Environment, Apr. 24, 1985. ogy on the Creative Environment, Apr. 24, 1985. Ch. 5—Irnpact of Technology on the Creative Environment ● 131

pen to paper each time you try to interpret was typical. Although he himself estimated somebody else’s words. We are about poetry-. that the use of his method would save 100 mil- We are about the gossamer fabric of hopes, lion francs per year, he was not interested in of dreams. We finally in the last analysis hope profiting financially from his discoveries. As that what we do create will furnish the na- he explained to Napoleon III: tion laughter, the nation’s tears, certainly the nation’s memory of what today. was like In France scientists would consider they 14 19 and what yesterday was like. lowered themselves by doing s0. Scientists, too, have been fueled chiefly by While many of these traditional motives are nonmonetary concerns. One major force driv- still in force, recent technological developments ing them to pursue their work has been the de- have noticeably affected how scientists and cre- sire to be the first to solve a problem, to be ators feel about their work, the reasons they the discoverer, or the inventor. It was, in fact, pursue it, and the rewards they expect to gain the originality of a finding that served as “tes- from it. In particular, the enhanced commer- timony that one had successfully lived up to cial value attributed to many information prod- the most exacting requirements of one’s role ucts and services has brought about both con- as a scientist."15 This desire to be first gave flict and change. rise to numerous battles over originality in the scientific community during the 18th and 19th Changing motivations are probably the great- centuries. 16 est in fields of science where the commercialization of research results has proved highly Equally important has been the scientist’s profitable. Industry representatives are now desire to contribute to the advancement of actively courting the traditional scholar-scien- knowledge in his field. Traditionally, once a tist. As one professor of biological science at scientist made an original contribution, he did Harvard University described it, not try to maintain the right of exclusive access to it. Rather, scientists’ discoveries and At this point, it’s mind boggling. I’m courted every day. Yesterday, some guy offered me lit- inventions became part of the public domain available for all to use and build on.17 erally millions of dollars to go direct a research outfit on the west coast . . . He said any price.’” Benjamin Franklin exemplified this ethic. Such offers have placed many scholars in Explaining why he had turned down an offer conflict about their roles. While some respond from the Governor of Pennsylvania to patent favorably to these developments–even to the the Franklin stove. he wrote to a friend: point of creating their own firms to exploit I declined from a Principle which has weighed their discoveries for profits—others have op- with me on such occasions, vis. That as we posed them as unsuitable for academic science. enjoy great Advantages from the Invention Trying to sort out what is appropriate behavior of others, we should be glad of an opportu- for academics and academia, a number of ma- nity to serve others by an invention of ours, jor universities have themselves begun work- and this we should do freely and generously. ing together to develop policy guidelines for z} Nor did scientists traditionally seek to mar- university-industry relationships. ket their discoveries. Louis Pasteur’s attitude ‘As quoted in J.D. Bernal, Science and lndustry in the — Nineteenth C~nt~r (Ixmdon: Routeledge and Kegan Paul, 1953), ‘Theodore Bike], OTA W’orkshop on the Impact of Technol- p. 86. OW’ on the (’reati\e ~~n~’ironment, Apr. 24, 1985. ‘ ‘As quoted in l~enry Etzkowitz, ‘‘kjntrepreneurial Scien- Robert K, Merton, The .%ciolo~ of Science: Theoretical tists and Entrepreneurial IJniversities in American Academic and Empirica] ln~’(].~tig[]ticlz?.s [Chicago, 11.: The Uni~.ersit~ of .Science, ” kfiner~w vol. XXI, Nos. 23, summerautumn 1985, p. 199. (’hicago I)r-ess, 1973) “ “Academe and Industry Debate Partnership, ” Science. ‘ Ibid, vol. 219, No. 4481, January 1983, pp. 150-151, See also U.S. I bid. Congress, Office of Technology Assessment, Information Tech- “As quoted i n Ilruce M’illis Ilugbeel (;ene.si.s of ,4 merican nolo~’ Research and De~’elopment: Critical Trends and issues, l’atent and (’op~’right l,a w (M’ashington. 1)(’, I)ublic Affairs OTA-CIT-268 (Washington, DC: U.S. Govemrnent Printing Of- I)ress, 19761, p. 72. fice, February 1985), 132 . Intellectual Property Rights in an Age of Electronics and Information

Creators in the arts and entertainment face ment to it, , . . [then you need to recognize similar choices. With the development of a that] the control of the movie business essen- mass media marketplace, these fields have be- tially is in the hand of the people who think of it as a business, invest the money, and are come big businesses where intellectual works 24 are often treated purely as economic commodi- in it to make money and do. ties. The development and proliferation of new The choice a creator makes depends on his channels of distribution has promoted fierce fundamental motives and on his relationship competition for entertainent products, which to others within the creative environment. For has greatly increased its commerical value.22 software developer David McCune, for exam- Under these circumstances, authors, artists, ple, there really is no choice. As he says: musicians and other creators may be faced with I'm going to program computers no mat- difficult choices about whether to develop their ter what. 1‘m concerned that I make enough art in response to the market or to their own money to pay the rent and buy myself a com- internal forces. 23 As Milton Glaser described puter, basically. Other than that I don’t really this dilemma: care much.25 If you begin with the idea that the movie Some artists are supported by government business is a business that has an artistic ele- grants or endowments from private foundations. Few are successful enough to attain both 22Tom Whiteside, “onward and Upward With the Arts,” Cable I, II, and I I I [three-part article seriesl, The New l’orker, the desired economic independence and artis- May 1985, tic freedom. Most, however, choose to work ‘ ‘Just such a phenomenon occurred, as has already been within the existing system and, when they can, noted, with the growth of the book market after the development and widespread deployment of the printing press. Such to finds ways to express their creativity. In an occurrence happened again in late 19th century America, effect, they work in both worlds, the world of when the book market was expanded to meet the needs of an art and the world of business. increasingly literate population. To profit from this literate, although generally less educated audience, it was common for publishers, for example, to press authors to lower their artistic — standard for the sake of increasing sales, See for example, Lewis 24Milton Glaser, OTA Workshop on the Impact of Technol- A. Coser, Charles Kadushin, and Walter Powell, Books: 7’he ogy on the Creative Environment, Apr. 24, 1985. (’u}ture and Commerce of Publishing [New York: Basic Books, 25David McCune, OTA Workshop on the Impact of Technol- Inc, 1982), pp. 226-227. ogy on the Creative Environment, Apr. 24, 1985.

TOOLS FOR CREATIVITY Machine tools enhanced man’s ability to per- 1. expand the boundaries of the fields as we form physical tasks. Similarly, the new infor- know them, mation technology will enhance his ability to 2. change the ways in which creators and in- carry out intellectual pursuits. 26 ventors carry our their work, and 3. allow more people to participate in the Because these technologies are primarily in- creative process and to share the products tellectual tools, they are likely to be used of scholarly and scientific research. extensively in science, scholarship, and the creative and performing arts. In these areas, technologies may: Expanding Boundaries . History offers many instances in which new 26For a discussion of how information and communication technology can extend man’s creative process of knowing, see technological tools have advanced the bound- Marshall McLuhan, Understanding Media: The Extensions of aries of science and scholarship, also expanded Man (New York: Signet, 1964). For a more recent and specula- the domains of art and entertainment. The in- tive discussion about the impact of the computer on the mind, see Robert Jastrow, The Enchanted Loom: Mind in the Uni- vention of the clock and the lens, for example, verse (New York: Simon & Schuster, 1981). greatly facilitated the development of the Ch. 5—Impact of Technology on the Creative Environment . 133 sciences of mechanics and astronomy.27 Simi- A growing number of authors, for example, larly, technologies expanded the domains of write on word processors because the new de- art and communication. With the substitution vices make it easier to edit, store, and trans- of oil paint for egg tempera, the course of paint- mit their documents. For these authors, word ing was dramatically changed, giving rise to processing has not produced a new form of lit- the Renaissance style of art. ” The development erary expression; it has simply facilitated the of the camera, too, brought entirely new forms mechanics of creating literary works. Similarly, of art and entertainment. As the art critic John film makers use sophisticated and intelligent Berger notes in his analysis of the impact of tools to capture or create images and sounds the camera on our perception of the visual arts: with greater ease and dazzling speed. The art oft he past no longer exists as it once Beyond facilitating the creative process, did. Its authority is lost. In its place there is some technological advances have actually a language of images. What matters now is opened new channels for the expression of who uses this language and for what pur- creativity, thereby expanding the very nature poses .’” of science and art, Using these new computer- Like their earlier counterparts, the new com- ized channels to generate graphics and synthe- munication technologies are exerting a wide- size music, artists, film makers, and composers ranging influence on the arts and sciences and are creating new kinds of images. These new on the development of other information prod- pictures and sounds are born of equations, al- ucts and services. They offer new tools. By tak- gorithims, and mathematical models. Using ing advantage of computers’ high-speed data- computer programs and mathematical values processing abilities, computer graphics can to represent color, shape curvatures, shading, represent many types of information and art, and even randomness, teams of engineers, ar- from mathematical formulae to cartoons. Com- tists, and film makers “produce extraordinar- puters facilitate the manipulation and re- ily complex and lifelike graphic simulations arrangement of anything that can be expressed that rival and sometimes exceed those born in computer-readable form—images, data files, of traditional animation."30 Whether used to text. The new techniques for inexpensive re- “draw” a seaside landscape (see box 5-l), to production–xerography, audio and video dup- generate special effects, or make motion pic- lication, computer copying–also allow crea- tures, the power for creation lies in the soft- tors and other users to gain access more easily ware and the imagination of the team. For cre- to a much broader range of intellectual prop- ators at Lucasfilms, today’s tools represent erties than ever before, only the beginning of what will later be possible: In the future, “the computer will allow These technologies have varying effects on Hollywood to tell stories that could not have the actual substance of creation. For some peo- been told any other way.’’” ple, new technological capabilities enhance the creative process by making it faster, cheaper, Like their counterparts in the arts, scientists or easier to produce a work. For others, they use increasingly powerful computers to carry actually change the boundaries of their art. out more and more complex calculations, and to represent and to simulate experiments, processes, and phenomena. The use of supercom- 27John P. McKelvey, “Science and Technology: The Driven and the Driver, ” Technology Review, January 1985, p. 42. As puters and color imaging techniques for nu- McKelvey points out, the casual relationship works both ways, merical computation in fields such as physics with pure science often given rise to new technologies. enables scientists to solve increasingly com- ‘“Milton Glaser, OTA W’orkshop on the Impact of Technol- ogy on the Creative Environment, Apr. 24. 1985, ‘“John Berger, British Broadcasting Corp., U’a.vs of Seeing “’Stuart Gannes, “1.ights, Cameras Computers. ” DISCOlrER, (London: Penguin Books, 1972), p. 21, as cited in Edward M’. August 1984, pp. 76-79, Plowman and L. Clark Hamilton, Cop~’right: Intellectual Prop- “I+ld Catmull, Head of the Computer Development Group, ert~’ in the Information Age (Imndon: Routledge & Kegan Paul, Lucasfilms, as quoted by Stuart Gannes, “Lights, Cameras 1980). .,, Computers,” DISCOVER, August 1984, p. 79. 134 • Intellectual Property Rights in an Age of Electronics and Information

Box 5-1.-Using Computer Generated Imagery to “Draw” a Seaside Landscape

Photo credit: Lucasfilm, Ltd., © 1985 This composite image, titled “Road to Point Reyes” was produced by a team of creators working in the Computer Graphics Project at Lucasfilm. Under the direction of Robert Cook, the landscape was defined using patches, polygons, fractals, particle systems and a variety of procedural models. Each of the elements of the landscape were rendered separately and later composite. Rob Cook designed the picture and did the texturing and shading, including the road, hills, fence, rainbow, shadows, and reflections. Loren Carpenter used fractals for the mountains, rock, and lake, and a special atmosphere program for the sky and haze. Tom Porter provided the procedurally drawn texture for the hills and wrote the software by combining the elements. Bill Reeves defined the grass by means of a moving particle system he developed. He also wrote the modeling software. David Salesin put the ripples in the puddles. Alvy Ray Smith rendered the flowering forsythia plants using a procedural model. The visible surface software was written by Loren Carpenter. Robert Cook wrote the antialiasing software, a program to prevent unauthorized access. The picture was rendered using an Ikonas graphics processor and frame buffers, and was scanned on FIRE 240, courtesy of MacDonald Dettwiler & Associates Ltd. The resolution is 4K x 4K, 24 bits/pixel. plex problems—problems with so many vari- A typical experiment makes use of at least ables that the true visualization requires a nu- 10,000 time steps. Thus, the finite-difference merical solution. For example, modeling gas solution is a set of five variables on a space flowing in black holes, where the actual mani- time lattice of 250 million points, that is, the solution of 1.25 billion numbers of nonlinear festations of the gas dynamics around them 32 partial differential equations. are too small to be observed, requires numeri- 32 cal experiments of a new order of magnitude. Larry L. Smarr, “An Approach to Complexity: Numerical Computations, ” Science, vol. 228, No. 4698, Apr. 26, 1985, pp. Explains Larry Smarr: 403-405. Ch. 5—Impact of Technology on the Creative Environment • 135

Participants at OTA workshops convened and analyzing physical phenomena such as for this study,” described the multiple ways the behavior of a molecule or the evolution in which the new technologies are expanding of a galaxy. the boundaries of science, music, art, dance, The power of the new technologies is not photography, film, and television: limited to science and the arts, it cuts across In musical composition and performance, virtually all information-related fields. New in- new sounds and arrangements result from formation technologies have expanded the va- computer synthesizers, digital sound ana- riety, scope, and sophistication of information lyzers, and electronic editors. Although mu- products and services. Described by some ob- sical notation can begin on paper, it may also servers as being in the very process of ‘‘self- be “drawn” electronically. The technology creation,"34 the information industry—from not only provides tools to generate sounds, database businesses, software and hardware but also the means to store and manipulate providers, publishers, cable television, infor- them as well. Thus composition and perform- mation analysis centers and clearinghouses— ance can result from revision, expansion, or continues to grow. In the U.S. software indus- recombination of unending variety of chords, try alone, there are an estimated 1,200 com- melodies, rhythms, or pitch. panies and thousands of individual free-lancers A dance sequence blends the performance creating and producing software and provid- of a live dancer with that of computer-gener- ing services worth $40 billion annually. ated images and information. Intricate and complex sequences of movement and dance The new technologies can both enhance ex- are developed by the choreographer and per- isting information products and services and formed by the computer. While early comput- generate new ones. Figure 5- I lays out the mul- er representations of dance were rudimentary tidimensional and multifaceted technological representations, computer images are now capabilities that play a role in developing in- essential elements of the performance itself. In some instances, the computer-generated formation products and services to meet a wide dance sets out new steps, followed in turn by range of information-related functions. At the the live dancer. For some choreographers and same time, the technologies enhance the value dancers, the boundaries between technology of information products and services by mak- and dance cross in the generation of new art ing them more accurate, timely, and accessible. forms. (See box 5-2. ) The new technologies not only affect per- New Ways of Proceeding formance in dance directly, as adjunct art forms; they also provide new ways to perma- The development and use of new tools also nently record dance. In turn, once stored, influences the way people perform creative these computer records not only become activities. Historically we can see, for exam- choreographical records, when broken down ple, that the technology of mass printing and into their elements, they can also become publishing changed the process of conducting sources for new steps and sequences. scientific research and scholarship by impos- Technological changes in cameras, film, ing precision and standards for publication. lighting equipment, laser separators, print Books were reviewed, examined, and marked publishing, and computer processing of elec- up in ways they had never been before. For tronic images are all affecting photography. the first time, images could be printed with Computing power display technologies en- text. A system for organizing books was de- hance capacity that they expand science into veloped; titles were systematically arranged new horizons. (See box 5-3. ) This expanded with bibliographies compiled, making it eas- capacity allows for new ways of visualizing

“OTA Workshops: Technologies for Information (Treat) on, “Charles W’. Nlor]tz, I’resident and Chief operating office, I)ec 6, 1984, I)lsplay, 1+-inting, and Reprography}, Ma] 1 ~1, 1985. I)un & Hradstreet (’orp., Ke~’note Address, 15th Annual Con- 1 mpact {}f Technolo~ on the (’reati~e F;n\ironment, Apr 24, ven tion and 1’; xhihi t ion, The J nformat ion I ndust ~, A ssw,lati{)n, 1985). Nov. 7, 1983. New York City. 136 . Intellectual Property Rights in an Age of Electronics and Information

Box 5-2.-Dance and Computer Technology

“And who can tell the dancer from the dance?” –William Bulter Yeats Computer graphic images depicting dancers and dance sequences were created at the New York Institute of Technology’s Computer Graphics Laboratory by Robert McDermott, Rebecca Allen, Paul Heckbert, Lance Williams, and Jim St. Lawrence. The computer-generated figures are “roto- scoped” to mimic the steps of a videotaped human dancer’s performance. They can then be combined with live action film or video as in Twyla Tharpe’s “Catherine Wheel,” a co-production between Dance in America and the British Broadcasting Corp. ier to use the growing volume of written works. scattered readers constituted a kind of com- These changes, in turn, facilitated the devel- munications revolution itself.36 35 opment of the scientific method. Just as technology affects the tools used by Printing and the widespread distribution of creators and enhances and expands the crea- books also fostered new relationships among tive process, so too it will lead to new ways scientists, artists, intellectuals, and their geo- of operating. With computers’ increased capac- graphically distant counterparts. As Eisen- ity to store, retrieve, and manipulate informa- stein has pointed out: tion and images, the process of creativity and research is becoming more interactive. Two The fact that identical images, maps, and phenomena illustrate this: electronic snipping diagrams could be viewed simultaneously by and pasting and computer networking. 35Eisenstein, op. cit., pp. 80-111. “Ibid., p. 56. —

Ch. 5—Impact of Technology on the Creative Environment ● 137

Box 5-3.-Using Computer Graphics as a Tool To Explore New Surface Structures

Minimal surfaces are mathematical idealizations of membranes which are stretched in such a way as to attempt to make their surface area as small as possible. They occur as soap films, as interfaces in liquid crystals, and have been used theoretically in physics and general relativity. In 1984, David Hoffman, a mathematician at the University of Massachusetts at Amherst and William H. Meeks III, then at Rice University, were able to prove the existence of a new minimal surface, the first of its type to be discovered in 200 years. By using numerical methods to approxi- mate a possible example, and then computer graphics developed by James T. Hoffman to view portions of it, they were able to discern that the surface was highly symmetric. According to David Hoffman, “This provided qualitative information and insight which led to a new general theory and the construction of infinitely many examples.” Moreover, he notes, “The ability to process and condense large amount of information by means of computer graphics is well known in other fields, but has only recently been used in mathematics.” Pictured below, is a computer-generated view of the new minimal surface. 138 ● Intellectual Property Rights in an Age of Electronics and Information

Figure 5-1 .—Applications of Information Technologies to the Creation and Processing of Information

Description & synthesis Logical access

Cataloging utilities Circulation systems Catalogs Automatic indexing Online retrieval systems / Automatic synopsis Database management lnstru- mentation Computer. generation systems / Management 0 ‘aided 3 translation information systems Computers Graphics systems Decision and terminals / Telephone lines support systems Satellites Cable networks \ Knowledge bases

Word processors

Photocomposition Microwave” Local area Microcomputers Decision support Computers -0 Microcomputers systems Television sets z CAD/CAM CAD/CAM w—. Printers C-I Graphics Synthesizers —w Photocopiers

Printing presses Microform readers/printers Compact disk \ Holographs / Facsimile terminals \ Physical transformation Storage & preservation

SOURCE King Research, Inc., July 1985

Electronic Snipping and Pasting ess, a film artist can rearrange footage in the Even when done with scissors and paste, same way a writer rearranges words on his snipping and pasting consists of a process of word processor: inserting and deleting images storing, retrieving, and manipulating informa- frame by frame; taking whole sequences from tion. The computer, with its unique capacity one place and shifting them to another; and scrolling through sequences again and again. to perform these tasks, is the ultimate editing 38 tool. With this technology readily available, All this is done in a matter of seconds. As the creator is now as prone to re-create as to in creating texts or developing on-line data- create in the first place. bases and information services, films can also be edited, merged, and reformed. In the same Computer and video technologies are hav- fashion, old films, stored tape footage, and ing such an effect on film editing. With tools other archival material can all serve as the ba- such as EditDroid, developed by Lucasfilms, sis for new derivative products and creative the arduous task of editing thousands of feet works. of film is37 simplified by electronic snipping and- pasting. By computerizing the editing Proc Electronic snipping and pasting has also al- —.—. tered the world of the still image photographer. “Experts point out that film editing is a major component in the making of a film. It can take as long as the shooting it- Using laser and computer technologies to scan self. A typical finished feature film consits of 10,000 feet of film, original photographs and convert them into on six reels, the result of as many as 2,000 splices from the original footage. See Gannes, op. cit. 38Ibid, Ch. 5 Impact of Technology on the Creative Environment ● 139 digital data, one can manipulate the ‘no-longer The same images and sounds that the artist, photographic’ image in very sophisticated photographer, or musician has stored to use, ways.39 Color, texture, figures, and so on can manipulate, revise, and reproduce can also be be varied slightly or totally. (See box 5-4, “NOW manipulated, revised, copied, and used in a you see them, now you don’t. The same tech- multitude of ways by others, with or without nologies can also transmit photographs elec- permission. Some creators worry that a “cav- tronically to printers in remote locations. alier attitude will develop toward taking whatever you want and doing whatever you want These capabilities can alter both the way a with it. "42 This attitude has already surfaced photographer works and his control over his within the artistic community itself, as well work. Before digitized photography, for exam- as in the worlds of advertising and publish- ple, the photographer could control his images ing.” Although many of these innovative tools by controlling the film negatives. Today, how- for cutting and pasting are still relatively ex- ever, the commerical photographer must ne- pensive and unavailable, they may be more ac- gotiate in advance, in exact detail, how the im- cessible in the future. With wider deployment age will be used, for what length of time, and of such techniques, artists, photographers, and Explains Bill under what circumstances. musicians may find it increasingly difficult to Weems: “The human relationships of the whole track or trace the uses of their work. Notes industry have changed dramatically now. . . . Joyce Hakansson: You have a whole new world to deal with here. Images are not only stored and retrieved, but Now, talent, creativity, works of art are also are digitized and re-created.”40 To work out in an intangible fashion being transmitted these relationships, additional time must be and we are not aware of the fact that we are spent dealing with administrative and trans- stealing; that we are, in fact, impinging. We action issues. And the photographer wonders are encroaching on somebody’s rights. That has to be transmitted. The new technology if it is only a matter of time before it will be is now putting things in a new format and we literally impossible to track all of the uses of have to be taught to look at it in a new way.44 one’s images. Thus one question for the creative commu- The production of music and sound is equally nity is: How do you proceed? amenable to electronic snipping and pasting. Using the ability to store recorded sound dig- Computer Networking itally and gain increased digital control of that sound, the musician can mix and match not Computer networking makes it possible to only sounds, but also rhythms and pitch. Ac- use distant computing power to analyze data cording to composer Michael Kowalski, these or generate new images; to consult with one’s new tools allow for: colleagues and jointly write papers; and to exchange ideas or reports. However, such shifts . . . unprecedented access to reproducing, in the way information and knowledge are cre- copying and editing sound— an ability to take .—— tiny snippets of sound, anywhere from a twenty- “Ibid. thousandth of a second of a sound to the whole “Interview with Lauretta Jones and Bonnie Sullivan, piece of music, and manipulate it to your graphic artists in New York City, March 1985, For example, heart’s content.” Jones worried about continued reuse of her images, done easily without her permission, once her client has a copy of her disk, These technological advances have the po- on which the image was fixed. Sullivan found that using a very sophisticated computer graphics system that required that she tential to damage creators’ interests as well. store her images on hard disk, placed her image files in a com- —— — puter system in which she had no control. Finding that other ‘Steward Brand, Kevin Kelly, and Jay Kinney. “Digital users had access to her files without her knowledge or acquies- Retouching,” Whole Earth Review, No. 47, July 1985, pp. 42-47. cence, Sullivan chose not to work on the system until users could ‘ Hill W’eems, OTA Workshop on the Impact of Technology agree to control and respect controlled access to one another’s on the Creative E:n\’ironment, Apr. 24, 1985, work. 44 4’ Michael Kowalski, OTA W’orkshop on Technologies for In- Jovce Hakansson, OTA Workshop on Technology and the formation Creation, Dec. 6, 1984. Creative Environment, Apr. 24, 1985. 140 ● Intellectual Property Rights in an Age of Electronics and Information

Box 5-4 Art of Digital Retouching

Photo credit: Pacific Lithograph Co., San Francisco, CA

This demonstration of digital retouching was put together by Pacific Lithograph Co. What appears to be two separate photographs is actually only one. By digitizing the photograph of the four hikers, it becomes possible to capture and then manipulate information about color, patterns, and texture.With a Chromacom machine, a computer-driven device, it becomes a simple matter to copy the color texture at one point and slide it over to another. Distinctive patterns are copied exactly. Thus the three people standing in the top-me were not remooved instead they were “washed over” with sky and mountain bits, taken from the scene. Each mow of the cursors brings the seams of the changes closer and closer together. While requiring skill, the digitizing process appears to be almost a routine operation. Ch. 5 —Impact of Technology on the Creative Environment “ 141 ated and distributed can have a tremendous Table 5-1 .—Electronic Networking: Academic impact on the worlds of scholarship and crea- and Research Uses tivity. For just as the centralization of book- “1 have found the network to be extremely useful thus far making and publishing led to the development In furthering my collaborative efforts with researchers in other of authorship and standardized texts, so might cities The ability to transmit both raw and transformed data and computer printouts of analyses rapidly between lo- electronic networking speed the decentraliza- cations greatly facilitated the collaborative efforts. It was pos- tion of information distribution, which, in turn, sible, indeed in cases easier than if we’d been in the same may to lead changes in the processes by which city, to receive data, run an analysis, ship results, discuss the results, and plot next strategies for analysis with col- research is conducted and art is created. leagues in Boston and New York . Further, I am actively collaborating in a research grant at --– with – -- – These changes are already becoming visible and we both have found the ability to send copies of meas- in the academic world, where scientists are ures, initial data, and other forms rapidly to each other has using computers and telecommunication links greatly facilitated our work to conduct research and communicate with one ., “We use BITNET for electronic mail dialogues with another on networks supported by the Depart- authors in all stages of publishing business, Including the ment of Defense (ARPANET), the National shipment of complete book manuscripts to our editors Two encyclopedia projects are underway at remote locations. Science Foundation (NSFNet), and the Depart- We currently carry on conversations with the authors and edi- 45 ment of Energy (MFENET). The number of tors of the projects, but when they move into the copy-editing networks and users are growing rapidly, not stage we plan to have a constant flow of articles, back and forth project editors to our in-house manuscript editors, and only for scientific communities, but also in vice versa" other academic disciplines. “Last summer,... I moved shop from – to BITNET, for example, used by scientists I was able to ship the majority of files from both and other scholars, provides linkages to more the CS/SOM DEC-20 and the IBM 4341 quickly and effortless- than 175 institutions of research and higher ly to ––– via BITNET “ education in the United States and has direct ... “I have used BITNET on several occasions to send data links to networks in Canada and Europe. Users to and receive data from users at [several different universities]. [It] has made the scientific interactions with research- of BITNET and other networks send each ers at these institutions much easier than it would be without other messages, text files, and computer pro- the network. Unfortunately several institutions with which I grams. ” Those who use computer networking regularly communicate are not on the network.” describe it as an essential tool in their work. Other faculty members used the network while they were (See table 5-l.) on academic leave to advise graduate students who were working on their dissertations. “Using BITNET, question and Some networks serve not only as mecha- answer exchange or draft approval could take place within nisms for exchange of data and information, the same day. ” they also provide the means to access distant SOURCE BITNET Network lnformation Center. EDUCOM Princeton, NJ computing power for conducting research. One such example is the National Magnetic Fusion tions, all of whom are involved in multi-insti- Energy Network (see figure 5-2), which con- tutional research efforts.47 nects a total of 4,000 users in 100 separate loca- Electronic networks can also provide access to vast electronic libraries. Although few re- — searchers today report using their time on elec- ‘“For a description of the operation and scope of those net- tronic networks to search on-line bibliographic works see, Dennis M. Jennings, I.awrence H. I.andweber, I ra and content databases, more are likely to do H. Fuchs, David ,J. Farber, and W. Richards Adrion, 1’Comput- er Networking for Scientists, Science, vol. 231, No. 4741, pp. so in the future. Eventually, researchers con- 943-950. ceivably might acquire all they need—people, ~, Files, for example, can include any type of machine-reada- research tools, current data and information, ble document, such as memoranda, research proposals, manuscripts, and letters. Just as networks transmit messages from one computer to another, networks also transmit information ‘-Figures provided by the Office of Fusion Energy, U.S. De- from one computer to another, in the form of data or computer partment of Energy, and the National Magnetic Fusion Energy programs. See Ira H. Fuchs and Daniel J. Obserst, Report orI Computer Center, Lawrence Livermore National Laboratory, .Vetworking, OTA contractor report, June 1985. University of California. 142 ● Intellectual Property Rights in an Age of Electronics and Information

Figure 5-2.— National Magnetic Fusion Energy Network Hanford Engineering University of Development Laboratory Wisconsin 1 \ Argonne Grumman Aerospace University of Nat, Lab Washington I University of Illinois \ \ New York I University Columbia University

Cornell Lawrence Berkeley \ University Massachusetts Laboratory Institute of \ / / Technology

University of California Berkeley

PLASMA ORATORY NMFECC

LAWRENCE Y LIVERMORE A NATIONAL LABORATORY /\ / University of NATIONAL California LABORATORY Los Angeles GENERAL Fusion Engineering ATOMIC / TRW Inc

- Science LOS ALAMOS ‘ University of Texas Auburn University Applications SCIENTIFIC- Inc. LABORATORY — Dual 56 kilobit satellite Iinks

— Medium speed land Iine SOURCE National Magnetic Fusion Energy Computing Center, Lawrence Livermore National Laboratory and published literature-via these electronic ship. As Ithiel de Sola Pool has noted, “The networks. proliferation of texts in multiple forms, with no clear line between early drafts and final In such a fluid, interactive system, the pos- printed versions, will overwhelm any identifi- sibility of discovery or invention on-line, once cation of what is the world’s literature. “48 As a vision of the future, is now a reality. As scien- in the days prior to the printing press, origi- tists and researchers work in this environment, nality will be hard to verify and authorship intellectual property concerns are likely to arise hard to establish. on such issues as determining originality and assigning patents. International transmission of data, software, and other information may Who Can Participate further complicate this situation. The new information and communication It should be noted, however, the information technologies and networks may determine, in distributed on networks differs in one key way part, who can participate in the creative proc- from information published in technical and ess. These tools, like their earlier counterparts, scientific journals. Works transmitted elec- can increase the need for some skills and re- tronically are likely to be still in progress, with duce the need for others. In the past, for ex- multiple authors, each at a different stage of ample, the invention of letters and the devel- revising the work. Eventually, scientific re- opment of written language increased the need search may actually be published on such net- 48 Ithiel de Sola Pool Technologies of Freedom (Cambridge, works instead of on paper. This practice would MA, and London, England: The Belknap Press of Harvard have far-reaching consequences for scholar- University, 1986), p. 212. Ch. 5—Impact of Technology on the Creative Environment c 143

for analytic skills and diminished the need for The technologies that make such things pos- some of the poetic skills that facilitated mem- sible are now more widely available, as the case orization. Similarly, the new information tech- of computer graphics illustrates. A few years nologies are bringing about changes in the ago, these technologies were only available to skills required to participate in the creative computer scientists and engineers involved process, helping to determine in this way who with computer-aided design, data analysis, and can take part in this process. The effect, how- mathematical modeling. Now a wide range of ever, differs depending on the product. Al- software applications are readily available for though these tools decentralize and democra- use in diverse fields. This software does not tize some kinds of activities, they might be pose problems for novices since they provide erecting barriers to entry for others. what has come to be called “a user-friendly operator-machine interface."52 In this way, ob- Until recently, computer technology was the jects, ideas, and projects of study can be ex- exclusive province of a technological elite. pressed and represented graphically for busi- Use of computers required a special set of skills ness, education, and personal use. For example, and knowledge held by highly trained comput- using stylized, highly professional fonts and er scientists and a select group of self-educated figures that can be “called up” on a personal computer hobbyists or hackers. Today, ad- computer, one father, as figure 5-3 illustrates, vances in hardware design and operation, as composed a rather artistic letter to his son, off well as improvements in software design and at camp. applications, have brought computer technology to the public as well as to artists and scho- Advances in hardware and software are also lars. Now everyone can use new technologies enhancing access to information itself, and to to expand and enhance their creative powers resources that can provide information. Elec- and vision. tronic networks such as the Source or Compu- Serve can put people in touch with vast infor- Before the advent of computer synthesizers mation resources such as on-line information or software tools such as MacPaint, innate abil- services, electronic databases, and new forms ity and years of training were needed to play of information sources, such as community a musical instrument, compose a tune, or cre- bulletin boards. ate an illustration for printing, While today tools substitute for neither artistic talent nor Searching the literature with on-line comput- training, they do open new avenues for crea- erized databases has, until recently, been done tive expression and communication of the un- principally by trained information specialists, initiated. Using a personal computer, one can such as librarians or technical specialists em- generate melodies, explore harmonies, and play ployed by large companies. Such searches not an instrument, bypassing the study and prac- only required the use of highly specialized and tice that separated the musician from the non- arcane computer commands but also highly musician.49 Digital synthesizers, sound sys- specialized knowledge of the databases them- tems, and recording systems can further ex- selves. More accessible software designed to tend the reach of both amateurs and profes- reach on-line databases makes it easier for sionals, and at increasingly lower costs.50 Now users of personal computers to retrieve infor- a musician can create highly sophisticated mation. Similarly, improvements in the design sound in his basement or in a studio, using interface of on-line systems themselves facili- tools that were once available only in a univer- tate search and location of information. These sity music research Laboratory.51 developments enable medical professionals, market managers, or off-campus students to ‘” hlusic in the (’omputer Age, Compute, January 1985, turn on their personal computers, connect with Scott M ace, ‘‘ F;lectronic orchestras in Your I.i\’ing

Room i ” Infoworld, Mar, 25, 1985, pp. 29-33, hlichael Kowalski, 01’.+4 Workshop on Technologies for In- “Andries \’an Dam, “Computer Software for Graphics, formation (’reation, I)ec 6. 1984. Scientific American, 101.251, September 1984, pp. 146-159, 144 . Intellectual Property Rights in an Age of Electronics and Information

Figure S·3.-An Example of At·Home Publishing

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SOURCE John Willis, Frederick, MD, 1985 Ch 5—Impact of Technology on the Creative Environment ● 145 on-line information providers, and obtain the the need for training and education in various materials they need.53 fields. Despite potentially broad and instantly available access to information, users still must Information can be acquired electronically learn to use these tools to their fullest capac- in other ways as well. Public bulletin boards ity. Given this need, education and training allow individuals of all ages, interests, and might best be used to help progress from de- levels of expertise to access information. Many veloping routine skills to adopting more inno- hundreds of such bulletin boards are now oper- vative processes, focusing less on the trans- ating nationwide. These facilities provide a va- fer of facts, and more on understanding how riety of information, from answers to a user to find and use information.56 questions by other users, to digital information tidbits, opinions, articles, or even entire As Ithiel de Sola Pool notes in Technologies magazines. Many also provide access to pub- of Freedom: lic domain soft ware. Use of the board requires The technologies used for self-expression, a phone line, a personal computer and disk human intercourse, and recording of knowl- drive, a modem, and software that makes the edge are in unprecedented flux. A panoply of connection to the board. Most boards can be electronic devices puts at everyone’s hand ca- reached without charge by dialing a local phone pacities far beyond anything that the print- number. 54 For many people, fellow bulletin ing press could offer. Machines that think, board users become more than a source of in- that bring great libraries into anybody’s formation; they comprise a community.’; study, that allow discourse among person’s a half-world apart, are expanders of human These new opportunities for both technical culture. They allow people to do anything that and nontechnical users have not diminished could be done with communication tools of the past, and many more things too.’” ‘See for example, ‘‘A New Shortcut to Electronic Librar- ies, ” Business $Ireek, May 28, 1984, p. 106 ‘See Steven I.evy, “Touring the Hulleting Boards, ’ Popu- far (’omputing, February 1984. “ For example, some companies provride corporate training A t the OTA W“orkshop on Students Perceptions of the In- in on-line searching to give the end user. such as the research tellectual Property Rights Issue, May 20, 1985, one high school chemist, the skills that would enable him to use highly techni- student explained that he had two sets of friends: 1 ) friends cal on-line databases, such as Chemical Abstracts. I n learning from school that he might call on the phone and talk about home- to use such search systems, researchers find they understand work or other things; and 2) friends from the computer whose more fully both the possibilities and limitations of the data- real names might not be known but who are a constant source base, and are able to use information professionals even more of conversation and recreation on-line. Notes this student: ‘‘ Mjr effecti~’ely for more complicated searches. See ‘‘on-I.ine I,iter- computer probably doesn ‘t stay off more than half an hour af- ature Searching Catches on Among Researchers, (’heroical &r ter I get home. and before 1 go to bed. So it’s on for essen- En@”neering News, May 7, 1984, pp. 29-31, tially 6 hours ‘‘ ‘-Pool, op. cit., p. 226.

IMPACT OF TECHNOLOGY ON RESOURCES AND MATERIALS In the process of creating, artists, scholars, informal or self-initiated activities. Modern in- and others build on the works of the past and formation technologies are greatly expanding draw on those of their contemporaries. In our capacity to store, input, search, and dis- preliterate societies, the poets, storytellers, and tribute any type of information that can be rep- artists drew their content from national lore. resented in digital form. The epic poem served, in effect, as a cultural database. In more recent times, the university Traditionally, the library has been a key re- and other institutions of learning have housed pository for information resources. Today, the a nation’s accumulated wisdom. Individuals Nation’s approximately 110,802 libraries sup- gained access to this knowledge either through ported by universities, education, research, and their own education and training or through business institutions, and by local communi- 146 . Intellectual Property Rights in an Age of Electronics and Information ties (see table 5-2), remain committed to orga- As the amount and use of information in- nizing knowledge, supporting continuing schol- creases in all sectors of society, other public arship and learning, and offering open-ended and private institutions have joined libraries access to the universe of knowledge.58 to provide information and services.63 These new institutions describe and synthesize in- This universe of information has grown ex- formation, provide logical access to it, evalu- ponentially, doubling steadily every 15 years ate and analyze information, and store and pre- or so.” Scientific journals now number 50,000 serve materials. (See figure 5-4. ) worldwide and 6,500 in the United States. Sim- ilarly, scientific books published in the United Dramatically affecting the ways information States now number 20,000 annually. ’() is stored, organized, accessed, reprocessed, and used, the new technologies may have a radical Works in other fields have grown as dramat- impact on libraries and analogous institutions, ically as those in science. For example, between They permit libraries and information provid- 1900 and 1970, the libraries of major universi- ers not only to enhance and expand the serv- ties in the United States doubled their book 61 ices they offer, but also to provide new serv- holdings every 17 years. The Library of Con- 64 ices that were previously unavailable. Using gress, the “Nation’s Library,” has more than electronic networks and databases, location or 80 million items in its collection, including over size are no longer the sole determinants of the 20 million books and pamphlets, Its collections 65 services that such institutions can provide. continue to grow at the rate of 7,000 items a day.62 Computer databases, themselves, now constitute a new kind of library. Members of the ““see, for example, Scholarship. Research and .4cces.s to In- legal profession, for example, now rely exten- formation, A Statement from the Council on I.ibrary Resources, Washington DC, January 1985, sively on on-line databases such as WESTLAW “.See King Research Inc., Impact of Information Technt~l- and LEXIS (see figure 5-5). Users can access ogy’ on information Sertrice Pro\’iders and 7’heir (’lien te]e, OTA many different kinds of information ranging contract report, July 1985, from bibliographic, full text, or abstracted ma- “’Derek de Solla Price, Little Science, Big Science (New York: Columbia University Press, 1963). terials to compendiums of processes on physi-

“ Isabel Cil]iers, 4’ Impact of the Information SOciet} on the cal and chemical properties. These data may Information Profession, ” Information Age, vol. 7, No. 2, April 1985, be compiled separately or jointly by govern- “% Peter T. Rohrback, FIND: Automation at the l.ibrar.}’ ment agencies, academic institutions, libraries, of Congress, The First Twent?,-five )’ears and lle-~’ond (\$’ash- information analysis centers, clearinghouses, ington, 1)(’: The I.ibrary of Congress, 1985). publishers of books, journals, newspapers, newsletters, and business and industry. Databases have also been created by indi- Table 5-2.— Libraries in the United States viduals, small groups, and communities of users with shared interests. Developed to meet Libraries N umber particular needs, they have often come to life Public (Central) 8,768’ spontaneously and informally. Some are acces- Total public outlets = 70,956 which “Includes 6,056 branch Iibraries Academic 4,924 b’$ee 1;.~, Brinberg, “Information in the U.S.–An Indus- School, public 70,400 try Service Industry, ” Information and the Transformation of School, private 14,300 .%ciet~’, G.P, Sweeny (cd. ) (New York: Else\rier North- Ilolland Special ...... 12,410 Publishing Co,, 1982), Includes. Federal “See for example, Patricia Battin, “The I;lectronic I.ibrary: Law A Vision for the Future, ” EDUCOM Bulletin, summer 1984. Medical Ilattin describes the application of computer and communica- Religious tion technologies to library processing activities over the past Corporate 15 years. In addition see, Peter T, Rohrbach, FIND: A utoma- tion at the Library of Congress, The First Twent~’-fi\’e Years Total ...... 110,802 and Beyond (Washington, DC: I.ibrary of Congress, 1985). SOURCE National Commission on Libraries and Information Science “see Battin, op. cit. Ch. 5—Impact of Technology on the Creative Environment ● 147

Figure 5-4.— Public and Private Institutions Providing Information Products and Services

Description & synthesis Logical access

Editing units c Su 5 Translating 3 units Information analysis centers Speech Writing Units Information brokers

Technical writing Financial units institutions

Engravers Libraries Photoprocessing — units book stores Publishers Word processing units Museums Printers Document Recording companies Film companies OCM units Database / Records producers management units Word processing units Computer centers Book stores Bibliographic OCR units / Clearinghouses utilities Physical transformation Storage & preservation

SOURCE Kinq Research Inc June 1985 sible only to authorized individuals; others are munity memory" owned and shared by all par- open to the public. Spurred by the desire to ticipants. 67 share ideas or obtain needed information, users Other kinds of technology-driven resources create these new information resources on elec- 66 are also emerging. Laser-read optical storage tronic bulletin boards or computer networks. systems are being used to store and retrieve Computer engineer and software designer Lee visual images, such as photographs, maps, Felsenstein envisions thousands of such user drawings and paintings. At the Smithsonian communities providing information within and National Air and Space Museum, for example, across communities and serving as the com- ———.—— videodisks derived from 1 million photographs “’Take the example of database teaching ideas brought to- currently stored at the museum will be used gether by members of the math/science forum on CompuServe. to capture the entire history of aviation.68 Ten The database came about when one participant in the forum asked others if they had examples of effective approaches to archival videodisks are planned, each contain- teaching physics. Almost immediately, several members of the ing color and black-and-white photographs of forum responded. In turn, other suggestions and revisions or U.S. and foreign aircraft, as well as the ar- expansions of the original set of ideas were shared. Thus the entries in this database increase just as they do on databases which compile information about published literature or laws and legal decisions. In this instance information is upgraded “Interview, Apr. 15, 1985. and revised, not by professional editors, librarians, or research- ‘“SW M. Woodbridge Williams, “ 100,000 Photos on a Plat- ers, but by users themselves. ter,” Photo District News, July/August 1984. 148 ● Intellectual Property Rights in an Age of Electronics and Information

Figure 5-5.— Institutional Users of Computer Readable Databases Legal

Industry Public libraries

Not for profit

Government Academia Information brokers SOURCE Martha Williams (ed), lnformation Market lndicators, September 1985 tifacts and people associated with the devel- provide greater access to more indices and opment of aviation and space flight.69 source material than single libraries contain. Like computer databases, videodisks make re- The use of videodisk for this and similar proj- sources such as photographs more accessible ects offers significant advantages over print to more people. Similarly, digital libraries of technology. Once they have been stored on software routines and tools, and optical disk videodisk and indexed by location on the disk, libraries of motion pictures, offer these mate- subject matter, and cross references, the pho- rials to larger audiences. Eventually, libraries tographs become database entries—inter- of audio data may be compiled for musical com- active, and easily accessible. Searching be- position. comes a dialog between the searcher and the database or electronic library. In this dialog In creating new ways to capture and handle the searcher is not limited by old structures information, the use of information technol- of knowledge that have been built into tradi- ogies may conflict with traditional methods tional library indexes; he can put together of scholarship, which require a clear record of whole new combinations of ideas.70 each contribution and a published work that is fixed. A computer-readable database, for ex- Electronic databases and libraries are power- ample, can archive information in permanent ful tools and important resources because they form. But at the same time, this information . - .- ..- . “It is interesting to note that most of the photographs are will be in constant flux if it is continuously up- in the public domain. Some, however, are still under copyright dated, revised, and deleted. These capabilities and will require permission for use by the photographer. As a raise concerns for many in the research com- research project, the developers hope that such permission will be given. But there are some members of the photography community. As the Council on Library Resources munity who view the “precedents” of this project with alarm. recently described the problem: (Interview with Philip Leonian, New York City, November 1984.) “’James Ducker, “Electronic Information–Impact of the Scholarship is personal, but its results are Database, ” Futures, April 1985, vol. 17, No. 2, pp. 164-169. not private. To judge the validity of scholar- Ch. 5— Impact of Technology on fhe Creative Environment ● 149

ly work, the records of past and present re- Although most creators want others to learn search must be open to scrutiny. This is the and benefit from their works, they also want only way the intellectual audit trail that is assurance that their personal contribution is at the heart of discovery can be maintained. recognized and kept intact. Limitecl or conditional access to bibliographic records (or information about information in A final concern for all creators, be they scien- 71 any form) is of particular concern . tists, scholars, artists, or individual learners, A second problem arises out of the increased is one relating to cost and access. As more data- capacity to manipulate information in comput- bases and electronic libraries develop, infor- er databases. Accuracy, reliability, and qual- mation that was once available in journals or ity are concerns for both author and publisher other paper forms may now appear only in com- when they enter their works or products in a puter-processable forms. Now providing com- database. Although in some instances, the puter database services, academic and public author may cooperate with the publisher in de- libraries face new and increasing costs. Some veloping abstracts of technical works or books, have been able to pass on costs of on-line in others, the author does not play a role. In- searching to users rather than subsidizing stead, teams of editors and research librarians, those costs within the library budget. But, or others who are developing or assembling the while grants and subsidies may fund the work database, may abstract the works. In all cases, of many scholars and scientists and, therefore, authors and publishers want to assure that the cover these additional costs, they will not fund abstracted or summarized work maintains its others, who will be disadvantaged. And those integrity. who can pay, cannot only tap into electronic resources, they can also take advantage of in- The issue of information presentation, integ- formation brokers and information on demand rity, and documentation of sources is also be- services now available at additional cost.72 coming a problem for artistic creators, such as photographers and artists whose images ‘See for example, Da\rid Streitfeld, “Ask and The3’ shall may become part of large electronic libraries. Retrie\’e, ” The W’ashignton Post, Aug. 16, 1985, p. 1~5. A t}rpi- —.—— cal information on demand research project may cost a client ‘Scholarship, Research, and Access to Information, A about $300. Clients include businesses, foundations, hobb~’ists, Statement from the Council on Library Resources, Washing- and ini’enters, even writers who are ‘‘reasonably success- t`on, D.C. January 1985. ful’’–and can afford to pay, for these services,

IMPACT OF TECHNOLOGY ON ROLES, RELATIONSHIPS AND REWARDS Roles and Relationships pendent on the publisher who had a monopoly on the distribution of works.73 The use of technology in society involves individuals working in relation to one another. New information technologies, too, can make The characteristics of the technology they use creators more or less dependent on others, al- help to define the roles people play in these rela- tering the relationship between author and tionships. Again, the case of printing illus- publisher, film maker and producer, database trates how this might take place. Before pub- compiler and distributor, and inventor and lishers became established, authors depended manufacturer. Whether this change in the rela- on patrons to support their work. With the advent of publishers, this dependency ended, to ‘Benjamin Kaplan, An Unhurried View of Copyright {New be replaced by another. The author became de- York and London: Columbia University Press, 1967). 150 ● Intellectual Property Rights in an Age of Electronics and Information

tionship occurs depends on how technological where the average film budget is $11 million.76 advances affect the costs of new tools, the loca- Just as audio technologies enable musicians tion of tools and resources, the restructuring to create finished products, so too have the of roles, and the control over the mechanisms tools to create and edit images allowed the film for distribution. The nature and scope of crea- maker to produce professional and appealing tive endeavors also help to shape the relation- products, on modest budgets, with funds ships among creators and others. Where crea- scavenged from foundations, government, in- tors must work in expensive, large-scale, dividual investors, and even relatives. More- centralized operations, they will be more in- over, with their greater sophistication and ap- terdependent. peal, and their more extensive distribution mechanisms, these films are being extended As tools based on new technology become beyond traditional audiences on college cam- cheaper, more powerful, more available, and puses and in art houses. Public and cable tele- easier to use, a greater number of creators can vision, as well as local multiplex theaters, are use them to explore and manipulate images, now showing independent films alongside first- sounds, and information, The increasingly so- run Hollywood features.77 phisticated tools also enable the artist to produce a more polished professional work. Mu- The world of publishing has similarly been sicians, for example, who once depended totally affected by the new technologies. Using a state- on recording studios, now may have equipment of-the-art printing system, a publisher such as in their basements for performing, recording, Westview Press can quickly produce books in mixing, and producing musical works.74 This limited editions of between 100 to 2,000 copies. technology can be used to produce tapes that, This kind of production run allows the pub- on the basis of quality, are indistinguishable lisher to rapidly accommodate the needs of the from commercial studio tapes. market and to produce highly specialized books for limited markets.78 The number of small, in- Such tools and technologies will also open dependent publishing houses has increased new avenues for distribution. As musician, while the older, larger, commercial publishing Richard Green, explains: industry is becoming more centralized through . . . musicians can for very small amounts of mergers and acquisitions. It is estimated that money do their recording project, print un- as many as 200 new publishers start operations limited cassettes and distribute them, totally every month. In the last decade, the number bypassing the larger aspects of the music bus- of publishing houses has quadrupled and now 79 iness as we call it, Totally bypassing, among stands at about 20,000. other things. . . . copyright laws [and] government regulations. There are a lot of bad things Whether creating and publishing computer- about this. The good point about this is that readable databases, monographs, or full man- it allows the individual to disseminate his uscripts, both authors and publishers can use 75 work. computer-driven tools and resources. At the In film making, too, highly sophisticated same time, technology itself is changing the cameras and audio equipment are no longer the exclusive domain of major studios. Dropping “Kathleen Hulser, “Ten Cheap Movies and How They Got in price, this equipment is more widely avail- That Way, ” American Film, May 1984, pp. 22-25, 53. able to a growing number of independent film 77See for example, Julie Salamon, “It’s Boomlet Time for makers. These creators find they are able to Moviedom’s Little Guys, ” Wall Street Journal, Mar. 28, 1985. Notes Salamon, the number of such film makers is growing: work cheaply and have the creative freedom the Association of Independent Video and Filmmakers has they say would not be possible in Hollywood, grown to more than 3,000 members from 700 in 1980. ‘“See for example, Lisa See, “Frederick Praeger: Portrait of a Publisher, ” Publishers Weekly, June 14, 1985. ‘Richard Green, OTA Workshop on the Impact of Technol- “see Marc Leepson, “The Book Business, Editorial Re- ogy on the Creative Environment, Apr. 24, 1985. search Reports,” The Congressional Quarterly, Washington, “’Ibid. DC, June 28, 1985. Ch. 5—Irnpact of Technology on the Creative Environment ● 151 relationship between the author, publisher, and While an increasing number of computer- user of copyrighted works. Some observers see driven tools are dropping in cost, some will al- this as a dramatic change, where products and ways be prohibitively expensive for the indi- services can be tailored with increasing speci- vidual artist, scientist, or inventor. Moreover, ficity to meet the needs and requirements of hand-held calculators or portable computer- users: aided design systems now exist that are more The user, in turn, becomes more than just powerful than the early mainframe computer a buyer of titles. Through his selective use of systems that occupied whole rooms, certain the databases, he signals to the publisher his classes of artistic work, or scientific problems specific interests, and through user-driven demand even more power and sophistication publishing he can become a publisher in his than even these systems provide. Thus, some own right. . . . In fact, one can say that there creators find that to do their work, they must is no true end product until the user tailors be part of a well-equipped facility, such as a the data into his unique set of ideas, for exam- computer graphics production studio. In other 80 ple, his own published product. instances, the writers, programmers, and ar- With an estimated 20 million printers now tists who choose to work in a highly innova- available, xerography has “made everybody tive and capital-intensive venture, such as a printer, according to Paul A. Strassman, videotex, may need to join a corporate entity former Xerox Vice President.81 Each improve- to work in that field. And the scientist whose ment in reprographic technology, such as im- research requires access to a multimillion dol- age clarity, color reproduction, speed, and com- lar supercomputing facility has to be affiliated pilation, makes it more feasible for creators with industry, government, or academic insti- 82 to publish and distribute their own work. In tutions. particular, where traditional modes of publish- Other factors may also limit use of new tools ing and distribution are either not accessible and mechanisms of distribution. Taking full or financially impractical, this mechanism can advantage of these technologies may require make it much easier to disseminate informa- technical expertise not normally held by authors, tion and images. Thus, for example, one can artists, or dancers. Thus, technology can re- easily publish a newsletter for a special-interest quire the creator to interact with people with group, a community association, or a group whom he has never dealt with before. of scholars. Moreover, the technology permits more people to share their work—be it a col- The System of Incentives and Rewards lection of poems, a book of recipes, or a series of drawings. The granting of rewards requires that crea- The development of electronic networks that tors and inventors be given a special status transmit text, numerical, or graphic images to in society. Historically, this did not happen un- printers at remote locations can further expand til the time of the Renaissance. Before then, authors’ publishing and distribution capabili- creativity was considered the prerogative of ties. The result is that roles once held by sev- God. Because the Renaissance notion of crea- eral people are now all held by one person. tivity deemed the work of any major poet, art- Starting with a single copy of a letter or arti- ist, or inventor as a product of a special crea- cle composed at a computer and transmitted tive genius, which most mortals lacked, it to readers at the other ends of the network, became something to be rewarded. ” one person can become author, printer, publisher, and distributor of a work. “The capital costs of buying and maintaining a supercom- puter facility requires sponsorship by large institutions. Once *’Ilerbert R. 13rinberg, “The Brave New J$’orld of F;lectronic established an individual user could simply buy time in small Publishing, ” Publishers it’eekl}’, No\. 23, 19/+4, pp. 3z-05 amounts still supporting only a fraction of the true costs of main- “’See Michael Kernan, “The Deans of Duplication, ” 7’he taining the facility. Jt’zx+ington Post, .Aug, 21, 1985. “’Pacey, op. cit, p. 87. 152 . Intellectual Property Rights in an Age of Electronics and Information

The technology of printing fostered this no- may not be an issue. To avoid problems of tion of the individual, as creator. With the in- dividing rewards, some creative teams have vention of the printing press it was possible formed their own companies or economic units, for a single author to produce a work, no longer jointly sharing their creative expertise, the de- dependent on communal efforts. Moreover, velopment costs, and eventually, the profits. conventions such as standardized texts and Many computer software efforts have been a title page were developed, making individ- built by such creative entrepreneurial teams. ual attribution practical. Today, the new in- In other cases, teams of creators and scien- formation technologies are affecting society’s tists are salaried and supported by an institu- attitudes about creativity, regarding both how tion such as a software development company, it treats the creative genius and how it assigns an advertising agency, a hardware manufac- rewards. turer, or a university or a government labora- The intellectual property system can be con- tory. In these circumstances, the creative conceived of as a societal device to foster creativ- tribution of the employed inventor or artist is ity. To be most effective, however, it requires often treated as a work-for-hire. The work of that an author’s particular contribution and the individuals in the team might be recognized work can be clearly identified. The new tech- in the process of applying for an institutional nologies are undermining this assumption. patent or copyright. In scientific fields, tech- They foster multiple authorship and intangi- nical papers are commonly authored jointly .84 ble works. Thus, instead of a situation in which Although there are many independent writ- a single author, artist or scientist creates one ers, artists, composers, and poets involved in single product, such as a book or mechanical creative activities, most information products device, now many authors work jointly and and services are developed by employee work- their individual contributions are often diffi- ing teams who rarely receive financial rewards cult to distinguish from one another. Moreover, in direct proportion to their particular contri- to the extent that they are working in and on 85 butions. Attribution is normally to the source electronic media, their materials may be con- of publication, not to the writer. Profits flow stantly changing. for the most part to the investors, not to those Examples of multiple authorship are found who found the data, organized the presenta- in the world of arts and entertainment, as well tion, or created an efficient expression. as in research and development. Whereas tradi- Nevertheless, there are many creative efforts tionally, a song was the work of a composer that go unrewarded or unrecognized, and it is and a lyricist, whose particular contribution these examples that free-lance creators often was easily discerned and rewarded by the incite when calling for changes in the present sys- tellectual property system, today the creation tem. Some free-lance graphic artists and pho- of a song, the production of a film, the devel- tographers believe, for example, that as crea- opment of computer software or an electronic tors, they should maintain control over their database, and the design of a new hardware images even when their materials have been system, may involve many different creative inputs, connected in a myriad of ways. Creat- “’Like creators employed by businesses, scientists are paid salaries, but the relationship between this compensation and ing a seaside landscape with computer-gener- the incentives to create intellectual property is weak. Gaston ated imagery, for example, may entail one art- studied the reward system in British and American science and ist creating the atmosphere, another texture, affirmed what has generally been believed: that scientists are rarely motivated by salary or other compensation. Rather, they and others rocks and beaches. In the final exe- operate more under nonpecuniary incentives such as distin- cution, a software program will “glue” it all guished titles at universities, distinguished levels of member- together. ship professional associations, honors, prizes, and fellowships, editorships of journals, and citation in journals. See Jerry When designers, artists, musicians, and pro- Gaston, The Reward System in British and American Science (New York: John Wiley & Sons, Inc., 1978). grammers are parts of teams that receive joint “’see Christopher Bums and Patricia A. Martin, The Eco- remuneration as teams, individual authorship nomics of Information, OTA contractor report, 1985. Ch. 5—impact of Technology on the Creative Environment . 153

commissioned as works-for-hire. This attitude White for OTA, participants pointed out that is becoming more pronounced as creative ma- rock stars, movie actors, and information in- terials become easier to manipulate and reuse.” dustries were making a lot of money. They were While creators want their works to be widely skeptical of the claim that such individuals or seen and distributed, they also want adequate companies would be seriously affected by per- compensation for derivative uses, which bring sonal copying. 87 And yet many book, film, and additional profits to publishers. They are con- computer companies are small, high-risk, low- cerned, moreover, that the images attributed profit operations. Similarly, many free-lance to them are, in fact, of their own creation. artists and performers barely make ends meet. The new information technologies can also It should be noted that the intellectual prop- affect how society views the work of the crea- erty system is only one means by which soci- tor and the values it attributes to his work. ety supports the creative environment. In ad- The growing economic value of information in dition, there still exists public and private the arts and entertainment industries fuel pub- programs providing grants and patronage. To lic perceptions of superstars, superbooks, com- the extent that alternative mechanisms will puter millionaires and the like. In focus group affect public policy choices about intellectual sessions conducted by Yankelovich, Skelly & property rights, they are discussed in other chapters of this report. “See the Graphics Artists Guild and the American Society of Magazine Photographers, Testimony Regarding M’ork-for- Hire Under the Cop~rright Act, before the Judiciary Commit- tee, U.S. Senate, Oct. 1, 1982. See also additional testimon~’ 87Yankelovich, Skelly & White, Inc., Focus Group Sessions presented by Robin E3rickman, Graphic Artists Guild Member. in Philadelphia, PA, and Greenwich, CT, October 1984.

IMPLICATIONS FOR THE INTELLECTUAL PROPERTY RIGHTS SYSTEM As we have seen in this chapter as well as and user. New participants have come on the in previous ones, the intellectual property sys- scene as new technologies have emerged. Thus tern governs the relationships among individ- in addition to the writer and artist, we now uals involved in the creative environment. It have the composer, photographer, and the film determines who are creators, what tools and maker. In addition to the publisher, we now resources are available to them, and how and have the record company, the television pro- under that circumstances their work will be ducer, and the cable operator. And added to distributed to the public. the reader, we have the radio and record lis- Technology is affecting the creative environ- tener, the television viewer, and the computer ment in a number of ways that are likely to user. have implications for the intellectual property With the new information technologies, the system. These can be summarized under two number and variety of players have increased major headings: 1) changing players in the many fold. Moreover, now more than ever be- creative environment, and 2) the emergence of fore, technology is affecting the roles that each new opportunities. player plays and his relationship to others in the system. Today the user, whether he is deal- Changing Players in the Creative ing with audio, visual, or computer-generated Environment materials is not just a passive receiver. He can at the same time be a creator or a distributor Traditionally, the intellectual property sys- of his own or others’ materials. In this sense, tem was a simple one, involving only a few for example, the personal computer user who players–the creator, publisher/distributor, make copies of software for several of his 154 ● Intellectual Property Rights in an Age of Electronics and Information —.— friends while making one for himself, is, in fact, As the economic value of information-based acting as a distributor. And the university that products and services increases, disagreements houses educators and researchers is increas- such as these may become more intense. ingly claiming rights as the creator of their The technology will also affect the expec- works. tations of the user, making him more or less Above all, these changing roles and relation- willing to comply with the rules of the system. ships may affect the consensus on which sup- As the Yankelovich study suggests, the more port for the system has traditionally rested. technology to which people have access, the Many of the new players, not a party to the more they expect of technology. Youth have agreements of the past, may hold different val- particularly high expectations. Often they take ues about who should have access to what ma- the new technologies for granted. As one young terials and who should be provided rewards. user recounted at a recent OTA workshop, he One such newcomer on the scene is the com- was willing to pay for work only if “it was really puter hobbyist who finds the thrill of creating awesome. ’90 something useful and successful more important than either owning the copyright or be- The Emergence of New Opportunities ing recognized as the author.88 As this chapter points out, the new technol- Given the trend identified in this chapter ogies greatly enhance the creative environ- towards joint authorship and the increasingly ment, providing new and powerful tools and fluid creative process, controversies may also new opportunities for artistic expression, so- emerge among players about the distribution cietal advancement, and financial gain. As in of rewards. Describing the culmination of the the past, the intellectual property system will development of the Data General Eclipse MV/ establish the rules by which these opportuni- 8000, Tracy Kidder depicts the dilemmas ties will be taken advantage of and who will around the distribution of rewards: get to benefit from them. Because of the en- Long before it disbanded formally, the hanced social and economic value of creative Eclipse Group, in order to assist the company and scientific works, intellectual property law in applying for patents on the new machine, becomes an important public policy tool in an had gathered and had tried to figure out information age. It will determine, for exam- which engineers had contributed to Eagle’s ple, whether new technologies are used to in- patentable features. Some who attended crease access to the Nation’s information re- found those meetings painful. There was bick- sources and if so, by whom, and at what cost. ering. Harsh words were occasionally exchanged. Alsing, who during the project had By virtue of their ability to increase access, set aside the shield of technical command, these technologies may pose problems for the came in for some abuse—Why should his intellectual property system and for the in- name go on any patents, what had he done? tegrity of the creator’s work. As noted in the Someone even asked that question regarding chapter, they allow users to access and manipu- West. Ironically, perhaps, those meetings il- late creative works with ease and speed previ- lustrated that the building of Eagle really did ously unheard of. While this may enhance their constitute a collective effort, for now that they had finished, they themselves were hav- ability to work jointly and create new prod- ing a hard time agreeing on what each indi- ucts and services, it will also make it more dif- vidual had contributed. But, clearly, the team ficult to identify or trace cases of copyright was losing its glue. ‘It has no function any- infringement or plagiarism that may occur. more. It’s like an afterbirth, ’ said one old hand This is significant for the creator’s motivation. after the last of the patent meetings.89 For, as we have seen, the creator is as often concerned about the integrity of his works as 88Stephen Levy, Hackers: Heroes of the Computer Revolu- he is about his own financial gain. tion (Garden City, NY: Anchor Press/Doubleday, 1984), pp. —— — 43-44. “’Tracy Kidder, The Soul of a New Machine (Boston, MA: “OTA Workshop on High School Students Perceptions of Little, Brown & Co.), p. 288. Intellectual Property Issues, May 20, 1985. Chapter 6 Technology, Intellectual Property, and the Operation of Information Markets Contents

Page Major Findings...... 157 Introduction ...... 158 Technology and the Emerging Economic Characteristics of Information...... 158 Information Distribution and Economies of Scale ...... 159 Information Production and Economies of Scope ...... 162 Private Investment and Information Resources ...... 165 Government Policy and the Diversity of Information-Based Goods ...... 170 Problems in Framing Policy To Promote Information Diversity ...... 171 Proprietor Concerns, Government Policy Tools, and the Diversity of Information . . 171 Problems in Selected Markets for Intellectual Works ...... 174 Print Technology and the Functioning of Copyright in Book Markets ...... 174 Motion Pictures, Videocassettes, and the First Sale Doctrine ...... 176 Information Services, Electronic Databases, and Derivative Works ...... 180 Computer Software, Market Size, and the Cost of Contract Administration ...... 182

Tables Table No. Page 6-1. Production Costs for PBS Television Programs ...... 159 6-2. Selected Information Markets: Costs, Profits, Revenues, and Economies of Scale ...... 160 6-3. Representative Charges for On-Line Database Access ...... 168 6-4. Primary Activities of Information Industry Association Members ...... 180

Figures Figure No. Page 6-1. Decision Tree for Communications Regulation Under Computer Inquiry III...... 166 6-2. Representative Release Sequence for a Major Theatrical Feature ...... 177 6-3. Feature Motion Picture Releases...... 179 6-4. A Shrink-Wrap License Contract ...... 184 Chapter 6 Technology, Intellectual Property, and the Operation of Information Markets

MAJOR FINDINGS New technologies are causing information to Intellectual property law is increasingly out- assume economic characteristics that make it sig- dated in providing appropriate incentives for the nificantly different from other commodities in production and distribution of many informa- the way markets develop and operate. These eco- tion-based goods. Because of this, markets may nomic characteristics-economies of scale and increasingly fail to provide economically and scope in production and distribution, and re- socially efficient varieties of information. In usability and expandability as a resource— trying to remedy information-market failures, are further complicated by information’s so- policymakers face trade-offs among interests cial and political significance. Therefore, gov- with high stakes in intellectual property de- ernment intervention, through intellectual bates. When they enact changes in intellectual property laws or other government policy property law they may be required to make mechanisms, is a particularly critical factor in some explicit decisions about the actual na- the operation of information markets. ture, content, and distribution of goods based on information. Policymakers currently have little objective, quantitative data with which to make policy It is clear that changes in intellectual prop- judgments about information markets. The data erty policy alone will not remedy all the market problem stems, in part, from the rapid changes failures to which information-based goods are in information markets attributable to tech- subject. Communication, antitrust, public nological change. As well, data collection in information, education, tax, and government this area of the economy is not yet institu- R&D policies, and perhaps others, can be ex- tionalized in government. Often, the available pected to interact more and more with intel- data are fragmentary and are supplied by lectual property policy in their impact on the stakeholders in the policy debates. As a result, operation of information markets. policymakers face a high level of uncertainty Although the information industry is relative- about the impact of decisions on the cost and ly unconcentrated today, this may change in the availability y of specific varieties of information. future: economies of scale and scope, the require- The effects of policies designed to govern ments for large capital investments, and mar- transactions between sellers and buyers of in- ket power and high profits that may come formation are becoming more complicated. It is through control of communications and content likely that a decision made to affect one vari- resources are potentially strong incentives to ety of information may be ineffective or inap- ownership concentration. Considering the so- propriate if applied more generally. Moreover, cial and political importance of information in more people are making a living by creating, a democracy, Congress may consider it impor- distributing, and using information, so these tant that the information industry remain less policies are becoming more important in reg- concentrated than other industries. Intellec- ulating the economy as a whole. The market- tual property rules affect the distribution of place rules that intellectual property policy wealth and opportunities in society; therefore, establishes will need to evolve, and perhaps they must be carefully crafted to maintain a become more subtle and complex, as informa- balance between private and public interests tion markets change. in information.

157 158 ● Intellectual Property Rights in an Age of Electronics and Information

INTRODUCTION Intellectual property law is based on the produced information when private enterprise premise that intellectual works differ from saw no advantage in doing so or when the in- other commodities traded in free markets. The formation was vital to government operations. U.S. Constitution authorizes Congress to enact The government has also used a variety of intellectual property law, recognizing that strategies, including intellectual property law, “writings and inventions” require special to encourage private investment and markets treatment. in intellectual works. Intellectual works are taking on greater sig- The mechanisms of intellectual property law nificance for society. Information’s value as were originally designed to counteract a basic a commodity and as a source of productivity economic characteristic of information: It is and wealth is rising; the range of available much more costly to originate valuable infor- information-based products and services is ex- mation than to reproduce it. Thus, the law gave panding; the technologies through which these producers limited control over reproduction products and services are created and distrib- and dissemination in the form of copyrights, uted are changing; and the number of people patents, and trademarks. The grant of such whose livelihood depends on information pro- marketplace control was intended to induce duction, trade, and use is increasing. Because producers to continue producing and dissemi- of these changes, the markets that determine nating works by allowing them to gain enough the supply, variety, price, and availability of income to cover their costs and earn a profit. different kinds of information are in flux. In this way, the public interest in learning was made to coincide with the economic interests The operation of markets for intellectual of creators and publishers. In the marketplace works is of particular interest because all for printed works, governed by copyright, the citizens require many kinds of information to incentive to produce was linked to the incen- make political choices and to become productive to disseminate printed copies as widely tive members of society. Because an informed as possible; for selling copies was how produc- and free citizenry is essential to democracy, ers generated income. the first amendment requires that the Feder- al Government value and defend freedom of As technologies for creating and marketing expression: the exchange of information un- information change, as new uses for informa- encumbered by government. The government tion are developed, and as information takes has intervened in information activities where a more central place in the economic and so- policy makers concluded that private enter- cial life of the Nation, information is beginning prise, acting on its own, would not provide to display a number of characteristics that citizens with the full range of information that alter the incentive structure for production and they deemed necessary for society. dissemination. This chapter examines some of these characteristics and explores how they af- The Federal Government has along history fect the interests and the marketplace activi- of involvement in the production and dissemi- ties of producers, distributors, and users of nation of information. The government has different kinds of intellectual works.

TECHNOLOGY AND THE EMERGING ECONOMIC CHARACTERISTICS OF INFORMATION An information-based good is a package that content is embodied and through which it is consists of an intangible content portion—the communicated. Information content is chang- information itself—and a medium in which the ing as people find new ways to use informa- Ch. 6—Technology, Intellectual Property, and the operation of Information Markets . 159 tion to entertain, educate, make decisions, and users, within the limits set by their equipment, produce other goods and services. The media at very low incremental cost. This is so because that make information available are also in the many information-based goods that are em- midst of rapid and profound change. In par- bodied in and distributed through electronic ticular, technology is increasing the economies media assume a basic characteristic of intan- of scale and scope under which information gible information content: They are not nec- packages are produced and disseminated; and essarily depleted with use.2 information-based goods are emerging as basic However, with time, much information does and essential resources for the economy, the become obsolete, or at least less interesting. polity, and culture. These changes in the me- Although information technology promises to dia, the content, and the uses of information improve the productivity of many aspects of are altering the operation of markets for in- information production, it is still expensive to formation-based goods, and thereby stressing originate movies, television programs, elec- the intellectual property system. tronic databases, computer programs, and other valuable information because these activ- Information Distribution and ities are labor intensive, requiring human Economies of Scale knowledge, creativity, and skill. Hence, the cost of originating information relative to the At the outset, intellectual property protec- cost of distributing it is high and is likely to tion was a response to an economic character- remain so. (See tables 6-1 and 6-2. ) istic of information-based goods in the print medium: origination costs are high in compar- The increase in distributional economies of ison to reproduction and distribution costs. scale achieved with modern information tech- Economists describe goods with this charac- nologies affects the incentives for producing teristic as having economies of scale. Modern and disseminating information-based goods, media allow even greater economies of scale and so influences the operation of information in information distribution, so that in some markets in three direct ways. cases an information-provider marginal costs 1 — .-—--— approach zero. For example, radio and televi- ‘How marvelous it is that, once recorded, an intellectual sion broadcast stations incur no additional work can potentially be reproduced and communicated an infinite number of times. The value of a given piece of informa- costs when additional people tune in; a com- tion, as for example a weather report, may change or diminish puter database company can serve additional over time. But the information itself can be used simultaneously or successively by many people without being consumed in the process. The value of information is a result of the con- ‘Economies of scale exist when the initial investment text in which it is received and used. (Gregory Bateson defines needed to begin production of a good (fixed cost) is high rela- information as “the difference that makes a difference. See tive to the cost of producing additional units of the good (mar- Mind and Nature (New York: Bantam Books, 1979).) Context ginal cost), and when marginal costs decline with increased pro- is essentially the knowledge possessed by the receiver of infor- duction. In the case of electronic information-based goods, in mation that shapes its meaning. Thus, information actually ex- contrast to other products, a distributor’s marginal cost may pands and takes on new meaning as it is received and used by involve only the cost of serving an additional customer, rather more people. See Harlan Cleveland, “Information as a Resource, than the cost of producing an additional, tangible unit. In this The Futurist, December 1982, p. 36. way, information-based goods resemble services. With electronic distribution, one “performance” may serve all customers, as Table 6-1 .—Production Costs for is the case in radio and television broadcasting. Thus, in con- PBS Television Programs trast to other services, the marginal cost of providing information can be essentially zero. Electronic information is often mediated by a system. Part of the cost of establishing the system Cost of producing is paid by the provider (e. g., broadcast transmitters or data- Program 1 hour episode base computers) and part by the customer (e.g., radio or TV The Brain ...... , $556,000 receivers or personal computers). Thus, a significant portion The Constitution: of the cost of distributing electronic information must be “sunk” That Delicate Balance . . . . 169,000 before any information is sent or received. See A. AlIan Schmid, Mystery ...... 76,000 A Conceptual Framework for organizing Observations About Frontline ...... 145,000 Parties Interested in Intellectual Property, contract report pre- Nova ...... 230,000 -— pared for OTA, February 1985, SOURCE Paul I Bortz 160 . Intellectual Property Rights in an Age of Electronics and Information

Table 6-2.—Selected Information Markets: Costs, Profits, Revenues, and Economies of Scale

Economies Creation Conversion Fixed costs Variable costs of scale Profit and taxes Revenues (percent) (percent) (percent) (percent) (percent) (percent) (billion$) Televisiona ...... 17 24 41 - 23 64 35 13.8 Recordingsb 22 34 56 34 62 10 6.1 Movies c ...... 26 18 44 31 62 25 4.1 Online service . . . 17 33 50 39 56 11 3.1 Radio a ...... 24 26 50 45 56 6 5.1 Print servicea . . . 30 10 40 46 47 15 11,0 Newspapers . . . . . 16 16 32 52 38 16 29.4 Magazines ...... 17 12 29 62 32 9 13.5 Documents a . . . . . 12 15 27 70 28 4 0.7 Books ...... 15 11 26 69 27 5 12.0 aError in total percent due to rounding bThese numbers are based on revenue from the sale of both audio records and tapes. cThese numbers are based on revenue from theatrical showings only NOTE Creation: Percentage of revenue that goes to Initial production of a work, including royalties, artwork, and editing. Conversion: Percentage of revenue that goes to embodying work in reproducible form, i.e., typesetting, entering data into computer, film negative cost, master recording cost, etc.. Fixed costs: Creation costs plus conversion costs as a percentage of revenue Variable costs: Percentage of revenue that goes to reproducing individual units and getting those units to end users, including reproduction, shipping, advertising and promotion and discount for retail houses Does not include users’ costs Incurred in purchase and operation of equipment necessary to use a good, such as television sets, radios, VCRs, and computer equipment Economies of scale: Fixed costs divided by the sum of fixed costs and variable costs Profit and taxes: Percentage of revenue that goes to profit and taxes Revenue: Estimated 1984 Industry revenue SOURCE Off Ice of Technology Assessment, data from C Burns and P A Martin, The Economics of Information, prepared for the Off Ice of Technology Assessment

by Christopher Burns, Inc., contract *433.9520 01 1985. tables Ii-l. II-2, 11.3, II-4, 11-5, 11-6, 11-7, 11-8, 11-10, and 11-11

First, assuming he can charge each customer in the profits being made through large-scale for access, and assuming that the cost of col- distribution.’ lecting payment from a customer, the trans- Second, rising economies of scale give infor- action cost, is not higher than the price he can 3 mation sellers a greater incentive to deny ac- charge, a seller has an incentive to increase cess unless they strictly control the conditions the number of customers for an information under which they offer it. In the world in which package. Of course, some kinds of information, the printing press was the only mass medium such as stock-market tips, secret formulas, and for reproducing and distributing information, entertain ment with current “snob appeal” may proprietors of intellectual works saw uncom- be more valuable if only a small number of peo- pensated use, such as in libraries or through ple have access. But for a wide range of infor- users trading books, as possibly troubling but mation, proprietors find that even a small mar- generally unthreatening. But since electronic ginal profit can yield large returns when many information can be reproduced and dissemi- customers are served. Conversely, originators nated so cheaply, the modern proprietor is may have less incentive to create or to pub- much more interested in maintaining physi- lish valuable information if they do not share cal control over works, and in selling access only if users agree not to reproduce and dis- ‘Transaction costs are those expenditures that a proprietor tribute identical or similar works. Because elec- must make to negotiate and execute a transaction agreement. tronic media make it costly and possibly They include the cost of price setting and billing. In selling information-based goods proprietors may also incur marginal costs ineffective to exclude nonpayers and compet- in monitoring and enforcing special transaction conditions, such as the exclusion of nonpayers and the prohibition of subsequent — copy and transfer of the information. Thus, transaction costs ‘This suggests that, in general, the increase in economies of serve as a check on providers’ ability to exploit distributional scale reinforces the rationale for intellectual property protec- economies of scale. Broadcast radio and television are two me- tion: The profits made from the wide distribution of informa- dia with high economies of scale where it has been difficult to tion should contribute to the cost of originating it. On the other charge the consumers of information because the transaction hand, because the cost of disseminating information declines costs would be so high. In these circumstances, advertisers have with increased economies of scale, the benefits given up by so- found it profitable to pay broadcasters for the opportunity to ciety through the grant of exclusive copyrights increases. See influence the purchasing behavior of the vast numbers of con- Competitive Enterprise Institute, “Intellectual Property and sumers of broadcast information. Copyright Laws, ” issue brief, 1985. . .

Ch. 6—Technology, Intellectual Property, and the Operation ot Intormation Markets ● 161 itors, proprietors may, more than ever, favor There will probably be uncertainty for some government intervention to help them enforce time over the most profitable ways to provide exclusion or collect payment. Alternatively, different types of information. Companies and they may invest in more efficient ‘‘ fences,” or research institutions are experimenting widely private means to exclude unwanted users. This with new media forms, exploring whether one alternative is explored in detail in chapter 4.5 medium may have a competitive advantage over others.10 People consider a complex set A third effect of increasing economies of of factors in choosing one medium over another scale on information markets is that owner- 11 for receiving a particular type of information. ship of distribution facilities tends to concen- 6 Cost is a major consideration; it may drop slow- trate in fewer hands. Since the per-user cost ly for a new medium as people adopt it and of distribution declines as the number of users economies of scale come into play. While un- rises, a large network can price information certainties rule, the ownership of media can lower than a small network and may eventu- 7 be expected to fluctuate. ally buy out or drive out the smaller business. This tendency is enhanced where the fixed Fiber optic systems are being rapidly added costs of developing a network infrastructure to the mix of information-distribution technol- are very high, as they are for launching com- ogies. ]2 The single-mode fibers now being in- munication satellites, laying cables, or secur- stalled in the country’s telephone plants have ing broadcast licenses or other government reg- communication capacities significantly great- ulatory approval.” er than copper wire or coaxial cable. One fiber can carry the entire Encyclopedia Britanica The potential of economies of scale to cause from Washington to Baltimore in a second or media concentration in electronic distribution 300 simultaneous television channels within is currently checked by the number and varie- a city, Laboratory results suggest that this ca- ty of distribution technologies.’ Newspapers pacity may rise 1,000-fold or more with im- compete with television in providing news and provements in signal transmission and detec- advertising; videocassettes compete wit h thea- tion equipment that can be used with existing ters and cable television to supply feature mo- fiber lines. vies; newsletters and magazines compete with on-line computer database services to provide The economies of scale offered by fiber op- specialized information on a wide range of tics are certain to affect communication com- subjects. panies’ strategies as they learn to employ this —.— technology profitably. Many other distribution Anothe;alternative, adopted by tele~’ision and radio broadcasters and also newspaper and magazine publishers, is to bun- technologies may prove much less economical. dle the entertainment or news information with advertising. For a time, large businesses with great data The advertiser ma~’ associate his message to bu~ with desira- communication needs will benefit the most ble aspects of the information-based good—e. g,, the integrity of the news, or the pleasures of the entertainment. from these economies. ” Small businesses will ‘ J?’, Curtiss Priest, The Character of Information: Charac- teristics and Properties of Information Related to issues Con- “’Although technological innovations may cause cost cerning intellectual Propert~’, contract report prepared for OTA, changes that move slowly at first, their longer term effects ‘can ~’ebruar~ 1985, p. 27. change cost ratios by orders of magnitude rather than by the See Geral(i Brock, The Telecommunications Industr~’: The few percentage points that constitute common static barriers Dynamics of .Ifarket Structure (Cambridge, MA: I{arxrard to entry, ” Brock, The Telecommunications industr~, p, 301. Universit~ Press, 1981). “J. Dimmick and E. Rothenbuhier. “The ‘i’heor?’ of the ‘NICI spent $10 miilion in regulator~ and iegal costs o~.er Niche: Quantifying Competition Among Media Industries, ” an %lear period to obtain approval for its first microwave long- Journal of Communication, vol. 34, No. 1, 1984, pp. 103-120. distance teiephone service. Brock, The Telecommunications In- “See the OTA report Information Technolomr R&D: Criti- dustr~r, p. 213. The facilities of Lele;’ision station KTI.A in I,os cal Trends and Issues, OTA-CIT-268 (Washington. DC: U.S. Angeles, and its F(’C broadcast iicense. sold for $510 million Government Printing Office, February 1985). for a case study in 1985. on fiber-optic technology. “See Benjamin hl. Compaine, Christopher H. Steriing, ‘ ‘Many large companies that rely heaviiy on data communi- Thomas Guback, and ,J. Kendrick Noble, tJr., Ii”ho Owns the cations, in particular, banks such as Citicorp, are installing their %fedia? (M’hite Plains, NY: Knowledge Industr3. Publications, own fiber lines in buildings that house their offices and com- 1982), puters and between their facilities and long-distance telephone (Continued on next page) 162 . Intellectual Property Rights in an Age of Electronics and Information also benefit as they begin to use data commu- Information Production and nications for such things as credit-card verifi- Economies of Scope cation and remote bookkeeping services.14 Economies of scope are present when a pro- An unresolved question is whether peoples’ ducer, because he makes one product, has a needs to communicate to and from the home cost advantage in making other products. 17 The can support the high cost of running fiber-optic production of information-based goods clearly cable the expensive ‘‘final mile’ to American involves economies of scope.18 In writing a residences. If this occurs, people at home will book, for example, the an author builds skills, be able to receive and transmit everything from experience, and a reputation that afford him television shows to computer software to elec- an advantage in producing and selling subse- tronic mail over switched telephone lines, and quent writings. be billed, and conceivably bill others, directly for use.15 Electronic media establish an entirely new dimension for economies of scope in informa- One of the major advantages society gains tion production. Information content may be from public communication media, such as the packaged in many forms to serve the particu- post office, is the ability to connect every citi- lar preferences or requirements of different zen and organization with every other. Mod- users. For example, a book may be produced ern communication media and their inherent with paper and ink, on audiocassette, or on economies of scale can be made available to optical disk; its content may be adapted into every citizen, as the post office and public roads a television ‘‘mini-series’ or an interactive have been, if efficient and equitable rules can game that can be distributed in a variety of be established for the development and use of forms. Users of information can gather con- these societal resources. To establish rules for tent from many sources, analyze it, and re- information commerce in a public electronic arrange it to produce new information. For ex- communication system of the capacity of dig- ample, daily stock market statistics may be ital fiber-optic technology, policy makers will processed very quickly to help investors ad- need to balance many interests: public and pri- just to changing conditions. Information may vate, individual and corporate, economic and be extracted from a larger bundle and used in social. In the electronic information environ- a new context. An artist, for example, can elec- ment supported by technologies such as fiber tronically pluck the image of an eye from a mo- optics, intellectual property rules will work tion picture film frame and use it to create a hand-in-glove with rules that govern, for ex- magazine advertisement or a T-shirt logo. ample, the operation of the local public telephone central-office switch.16 Intellectual property concepts are fundamental in determining who may take advantage of the economies of scope inherent in information production. Serving as marketplace rules that govern the conditions under which access points. (See Michael A. Laviola, ‘‘The Citibank Fiber- information-based goods are traded, intellec- Optic Network, ” Telecommunications, February 1984, pp. 86- 94.) tual property laws specify what rights attach “See, for example, “Bell Companies Race To Offer Local to a work, what rights are retained by the origi- Data Services,” Data Communications, April 1985, pp. 46-50. r nal proprietor, and what rights accrue to the ‘ ’Some believe that even rural users and others on thin routes that cannot support the cost of fiber-optic lines may still purchaser when he buys the work. The rules be served by broadband telecommunication links with cellular that govern how purchasers may use a work radio and low-cost satellite earth-station gear. See Ithiel de Sola in producing their own works are particularly Pool, “User Interfaces, ” The Information Societ.v, vol. 2, Nos. :1 4, p. 439. --—-.——-—--—— “’(liven a broadband, public-switched telecommunication ‘“For example, a steelmaker may have an advantage in pro- network available to all, Pool suggested that opportunities would ducing coke, pig iron, specialty steels, or perhaps knives, cook- abound for small, diverse information businesses to flourish in ware, or other finished products. an electronic environment. Ibid., pp. 433 and 441. “Priest, The Character of Information, p. 27. Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets ● 163 important. These rules strike a balance be- nomic, legal, and social questions involved in tween the benefits of exclusive control as an determining proper and efficient rules for con- incentive to innovate, and the cost of limiting trolling derivative use have become much more others’ ability to compete with a rights holder. complex. Until recently policy makers could allocate From the legal perspective, modern informa- the right to exploit economies of scope fairly tion technologies make it harder to define easily using relatively simple rules. Some rules which commercial uses are merely derivative have been passed down from antiquity in the (that is, copies) and thus unfairly competitive. customs of scholarship, which demand that These technologies make it more difficult and users cite and credit originators for their con- costly to detect infringements and enforce de- tributions. The legal concept of derivative use rivative use rights. Furthermore, detection of was first formalized as a rule by the courts in infringement and enforcement are potentially giving authors exclusive rights to make and more intrusive of personal privacy. These sub- sell foreign translations. In response to tech- jects are covered in chapters 3 and 4. nological change, this concept was later ex- From the economic perspective, it is unclear tended by the judiciary to give fiction writers whether, as a general rule, the right to control a say in the making of movies based on their derivative uses encourages or inhibits the books. In 1976, rules based on derivative use growth of knowledge. Because derivative rights were defined by Congress to govern a works may substitute for and undercut mar- broad range of situations. Copyright now con- kets for originals, they might diminish incen- fers to a proprietor exclusive rights over all tives to create or disseminate works. On the goods substantially based on an original work. other hand, the threat of competition from deri- In parallel to the evolution of rules for deriva- vations might spur the originator to make his tive use, the concept of fair use has grown and own derivations or to create new works. When evolved. Originally developed by the courts as proprietors seek to inhibit derivative uses, as an exception to exclusive copyright, it was de- they might, for example, by building techni- signed to promote the scholarly use of intel- cal or contractual ‘‘fences’ and suing infring- lectual works by suspending, under certain ers, they increase the transaction costs asso- conditions, the rule that users obtain permis- ciated with distributing information. Such sion to use portions of protected works in efforts reduce the benefits that society gains building new works. Fair use was codified by from the high economies of scale offered by Congress, also in the 1976 act, to apply to ed- electronic media, Moreover, if a user is not al- ucational use of photocopying technologies. lowed to make his own derivations, society may be deprived of the unique contribution he alone Today, however, technology is complicating could make. Thus, society could lose some of the allocation of rights in information. Mod- the benefit, in the form of economies of scope, ern information technologies force a fundamen- 19 that electronic information offers. Market- tal confrontation between the two concepts of place rules based on the right of derivative use derivative use and fair use. With new electronic clearly affect the competition that proprietors technologies, people have a host of new oppor- of information-based goods face and the profit- tunities to create new information packages making strategies that information providers based on existing works; to serve new custom- pursue. ers by manipulating and transforming works; to add value by placing existing information in new contexts; and, generally, to participate “’There are two ways in which a person ma} be pre~rented in intellectual work. These technologies have from making dw-i~ations: 1 ) enforceable rules prohibiting deri- given scholarship—the building of human vation: 2) secrecy or technical protection schemes that physically prevent deri~ations. Both of these prei’entions ma~’ re- knowledge—a new set of tools and a broader sult in the costly and inefficient duplication of effort, which the field of operations. And as a result, the eco- intellec~ual property system seeks to minimize. 164 ● Intellectual Property Rights in an Age of Electronics and Information —

Operating under conditions of economies of Computer database technology promises scope, information providers often construct information providers new opportunities to a variety of packages to tap markets for differ- amass comprehensive collections of informa- ent combinations of media and information tion, offer data processing services, constantly content. For instance, the movie industry updated information content on a broad range offers the same content in a variety of media of subjects, and precisely tailored packages in forms, including movie houses, free broadcast a wide variety of forms. They can do all these television, monthly subscription television, things through a self-service system for “one- “pay-per-view” and “premium-channel” cable stop” information shopping.2223 These comput- television, and videocassettes and disks. This erized delivery systems also offer proprietors repackaging of movies is designed to imple- greater potential to collect and analyze feed- ment price discrimination, the setting of prices back, in the form of transaction information, according to assumptions about how much on customers’ information-use habits so they users value the information package and their can implement price discrimination more ef- ability to pay, rather than on the basis of the fectively. 24 marginal cost of providing the information. Computerized information-retrieval systems Another set of information-providers oper- also make proprietors more vulnerable to un- ate in markets that cater to users’ needs for controlled derivative use of their resources. very specific information content. For exam- .— - -— ..— “Theoretically, any kind of information can be embodied in ple, financial analysts, engineering consul- a computerized database. Currently, most information that is tants, market research specialists, and a grow- offered through publicly available databases is factual in na- ing array of information brokers use their ture--economic and financial statistics, bibliographic citations, etc. (See Martha E. Williams, “Electronic Databases, ” Science, expertise to select relevant content from masses Apr. 26, 1985, pp. 445-455. ) More and more access tofunctional of available information and construct highly information is being offered, such as remote data processing customized packages .20 These providers price for bookkeeping or statistical analysis. A number of ventures offering computer software transmitted to the user from a cen- discriminate on the basis of users’ different tralized collection have been tried, with mixed success. (See content requirements, rather than on the ba- Download, January 1986, pp. 1-4.) Potentially, art can also be sis of users’ preferences for different media offered on a user-selectable basis, for example, full text of novels and other books, music in a form some have termed the “celes- forms, as is the case, for instance, with movie tial jukebox, and "imagebanks" that contain content and soft- distributors. ware for making and manipulating pictoral works. “Electronic technologies also make the cruder form of price The effectiveness of price discrimination discrimination that relies on bundling less effective. Photocopy hinges on proprietors’ ability to exclude com- machines, videocassette recorders, and especially computers allow users to quickly and conveniently “unbundle’ information, petitors from offering similar packages. Pro- taking only those pieces that are valuable to them. Christopher viders must also know what information users Burns and Patricia Martin, The Economics of Information, con- need and what they are willing to pay for it. tract report prepared for OTA, April 1985, p. I-7. This same unbundling capability threatens advertising revenues. The feedback that information providers re- 2’This transaction information has growing economic value ceive from their customers’ purchasing behav- as a marketing tool and a commodity in its own right. There ior allows them to tailor both the goods they is a potential conflict between the development of highly effi- 21 cient computerized information markets and the right of citizens offer and the prices they charge. to privacy in their personal affairs. The Cable Communications Policy Act of 1984 places specific limits on the collection and —.————— use of personally identifiable data on subscribers of cable sys- ‘(’One may consider many traditional “professions,” such as tems (section 631). The Videotex Industry Association has de- law, medicine, and engineering, as being in the business of pro- veloped voluntary privacy guidelines for the use of transaction viding highly customized information. data collected in their operations. A spokesman for the on-line “A crude form of price discrimination, which requires rela- computer database industry says that, at present, it is too ex- tively little control of derivative use or detailed knowledge about pensi}’e to collect and use detailed transaction data from their customers’ preferences and requirements, is employed by other operations. It may be possible to have computerized, electronic information providers. Publishers of newspapers and magazines, transaction systems that technically limit the collection and for example, “bundle” information and take advantage of the use of personally identifiable transaction information. See, for fact that some people value one feature or article enough to pay example, David Chaum, “Security Without Identification: a price that exceeds the cost of the article and thus contributes Transiiction Systems To Make Big Brother Obsolete, ” Com- to the provision of other items in the bundle. munications of the ACM, October 1985. Ch. 6— Technology, Intellectual Property, and the Operation of Information Markets ● 165 .

Their competitors can employ these technol- ment attempts to check the market power po- ogies to offer the same or similar information tential of vertically integrated communication packages and compete for customers. Conse- entities.27 (See figure 6-l.) quently, information providers may support strong intellectual property laws to protect Private Investment and their investments in originating, purchasing, Information Resources and customizing information, and to achieve and retain market share. Although they now For individuals and for society, information have legal rights over derivative uses, propri- is the raw material of knowledge and learning.28 etors still have an incentive to strictly control New information technologies are providing access because legal enforcement is so difficult tools and techniques for capturing, creating, and expensive. using, and sharing information in unprecedented forms and quantities. These technol- Economies of scope, like economies of scale ogies make possible a vast expansion of knowl- provide incentives for ownership concentra- 25 edge about the world, and they allow the tion. Users of information want to go to the establishment of information resources that most comprehensive source. Suppliers of con- people can draw on for many purposes As de- tent have an incentive either to deal through tailed in chapter 5, by automating many of the large distributors with popular recognition and tasks that artisans, scholars, and managers prestige (who may require contract provisions have traditionally had to master, they prom- that exclude dealing through competitors) or ise to raise productivity in creative and intel- to become employees of a large company and lectual work. We also expect these technologies ‘‘work for hire. And proprietors of informa- to enhance learning and amplify the social and tion resources have greater freedom to price economic benefits that come from knowledge- discriminate if ownership is concentrated and 29 able people and an educated society. Chief competition is checked. among these benefits, as seen in chapter 2, are Proprietors of electronic information also opportunities for citizens to more fully partici- have an incentive to integrate vertically-to pate in society-to develop and contribute their combine ownership of content resources and unique talents and insights to the economy and distribution facilities. In the current deregula- to the community. tory climate they are freer than in the past to Information-based products and the technol- do so. Policy makers are particularly concerned ogies that support them are also important as about vertical integration among communica- factors in the production of an expanding range tion and information providers in situations where competition in distribution facilities is weak.26 In these instances, a vertically inte- ——-—— —-— grated information provider has an incentive ‘“For overviews of the issues being addressed by the Com- to favor its content over that of competitors puter 11 I inquiry see Andrew D. I,ipman, “Taking the Compet- by cross-subsidy, “predatory” rate discrimi- itive Plunge: The FCC Dives Into Computer I I 1, Telephon?~, Oct. 7, 1985, pp. 48-49; and Edwin E. Mier, “Computer Inquiry nation, or outright refusal to deal. Common- III: The Emerging Monolith, ” Data Communications, March carriage regulation, and the more recent efforts 1986, pp. 51-58. at structural separation, leased or equal access, ‘“Information has been characterized as a nondepletable resource. For example, see Karen Levitan. ‘ ‘Needed Research in and “Computer III” regulations are govern- the Economics of Information Resources, proceedings of the .—— American Society for Information Science, vol. 17, p. 334; and “ Priest, The Character of Information, p. 27. “Information Resources as ‘(Goods” in the Life Cycle of Infor- ““A firm with monopoly power over part of the system has mation Products, ” Journal of the American Societ}’ for Infor- an incentive to restrict access to its part in order to extend con- mation Science, January 1982, pp. 44-54; see also, Cleveland, trol over other parts. . . W’ith public systems, such actions can “Information as a Resource. ” lead to a total monopoly. To have competition in a public sys- ‘<’In 1776, economist Adam Smith identified the skill, dex- tem with some parts monopolized, it is necessary that nondis- terity, and judgment of the labor force as primary determinants criminator~’ access be maintained. Brock, The Telecommuni- of economic and social well-being. See Adam Smith, The Vt’eal.th cations Industry, p. 301. of Nations (New York: The Modern Library, 1937). 166 ● Intellectual Property Rights in an Age of Electronics and information

Figure 6-1 .—Decision Tree for Communications Regulation Under Computer Inquiry Ill

No Is it a common carrier? v

Is it a dominant No carrier? v . I Yes

What is the nature of service?

Basic communications Noncommunications

Ancillary to communications

Is there a competitive environment? No Yes

Bottleneck facilities? Yes No

Minimal FCC regulation I Accounting (forbearance) controls . v 1 7 Regulated Regulated Accounting Accounting UnreguIated as before together and tariff - oversight - with “basic” controls only communications

Maximum Degree of FCC regulation Minimum SOURCE” From presentation by Pacific Bell to FCC Commtssloner Dennis Patrick, September 1985 of goods and services.30 Information technol- Although information is essential to mate- ogy increases productivity and contributes to rial production and social welfare, economists the material wealth and well-being of society;31 generally believe that private enterprise in- and information itself imparts competitive ad- vests less in its production and distribution vantages to those that possess it and can make than is socially desirable or efficient.33 The root good use of it.32 cause of this inadequate private investment ———— is uncertainty. Motivated by profit, individ- ‘OSee ch. 2 for a discussion of the importance of information to the economy. —— ———.— ‘iCharles Jonscher, “Information Resources and Economic %ee Yale Braunstein, “Information as a Factor of Produc- Productivity, “ Information Econorm”cs and Policy 1, 1983, pp. tion, ” The Information Society, vol. 3, No. 3, pp. 261-273. An 13-35. increased amount of valuable goods and services could be pro- “Michael E. Porter and Victor E. Millar, “How Information duced with a given amount of land, labor, and capital resources Gives You Competitive Advantage, ” Eh-vard Business Rew”ew, if more were invested in information that is applicable to produc- July/August 1985, pp. 149-160. tive activities. Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets Ž 167 — uals and corporations are uncertain whether The professional managers of information— they may benefit by investing in the develop- employees of companies and government who ment of information resources. obtain, organize, and provide access to information—also face large uncertainties. They The producers, distributors, managers, and must contend with increasingly complex me- users of information, and the people that india and information content, while continuing vest in these activities, all operate in an envi- 34 to meet organizations ever-changing informa- ronment characterized by uncertainy. Many tion needs. Moreover, within corporate and originators of information, whether they are State bureaucracies, the real cost of generat- artists, scientists, or computer programmers, ing and managing information resources is gen- are working at the frontier of knowledge, so erally accounted for very poorly or not at all, the outcome of their work is inherently uncer- so there is often little ability or incentive to tain. They may succeed or fail in accomplish- engage in rigorous “make or buy” decisions ing their goals, or the goals themselves may 35 when information is needed. be poorly defined, deliberately ambiguous, or self-justifying. They often do not know in ad- Users, perhaps, face the greatest uncertain- vance how much time will be required to meet ties of all. Economist Kenneth Arrow recog- their objectives, what the ultimate value of nized a paradox in trying to determine the de- their work will be, or how much money they mand for information. “[The] value [of will make from a work. information] for the purchaser is not known until he has the information, but then he has Distributors of information face uncertainty 36 in effect acquired it without cost. " Of course, because they have only imperfect control over through experience and exposure to advertis- the public dissemination and use of their prod- ing, users build expectations about the value ucts. Information is inherently “leaky,” so it of information packages that they consider for is both expensive and difficult for them to ex- purchase. They may browse through printed clude nonpayers and competitors from using information in book stores and, if facilities and it. Also, because users’ requirements and pref- resources are available, at public libraries. But erences are hard to define precisely and they the user of electronic information is generally change unpredictably, price discrimination is denied access unless he agrees in advance to a trial-and-error process. pay. Therefore, he may be unable to compare “The distinction between information distributors and man- one package with another. Moreover, because agers is informed by an analysis by Charles Jonscher. (“Infor- access to electronic databases is charged for mation Resources and Economic Productivity, pp. 18-1 9.) As by the hour or minute, the user is under the Jonscher states, it is difficult to precisely ascertain the relative 37 magnitude of effort accounted for by market allocation versus pressure of the clock. (See table 6-3.) Also, centralized management of information, but: The distinction is quite fundamental, in that the extent to ‘r’Marc Porat, which economic [and information resource] management is cen- “Information Workers Jt’ithin 13ureaucra- tralized or left to the interaction of independent trading parties cies, Bulletin of the American SOciet-}r for Information Science, lies at the heart of the distinction between market and non- February 1984, p. 17. See also, Burns, The 13conomics of Znfor- market allocation processes, and indeed between socialist and rnation, pp. V-l-9. capitalist economies. “Kenneth J. Arrow, “Economic Welfare and the Allocation Jonscher estimates that in 1978 information management and of Resources to Invention, ” Economics of Information and distribution activities, which together account for more than Knowledge, D.M. I.amberton (cd.) (Baltimore, MD: Penguin 80 percent of total information economic activities, were car- Books, 1971), p. 148. ried out approximately half by distributors (39 percent of total ‘“Both of these factors sharply limit peoples’ opportunity to activity) and half by managers working for firms or government browse randomly and make the occasional serendipitous dis- bodies (42 percent of total). Intellectual property rules are fun- covery. This is a complex subject that involl’es the design of damental to the operations of independent distributors, and thus computerized information-delivery systems and the methods crucial to market-driven allocation of information resources, In used to index, access, retrieve, and charge for computerized in- the absence of adequate incentives for independent distribu- formation, Automated systems may yet be designed and offered tion of information, it is reasonable to assume that private sec- that can promote the ability to make new connections among tor firms will be compelled to rely more on internal production disparate pieces of information. But this capability is limited and distribution and centralized management of information in present systems, and the pressure of a ‘‘running meter’ fur- resources, and the need for government to provide publicly avail- ther limits their use as general tools in knowledge building. The able information will rise. question of how information resources are to be structured to (continued on next page) 168 ● Intellectual Property Rights in an Age of Electronics and Information

Table 6-3.—Representative Charges for a small portion of the total value that individ- On-Line Database Access uals and society gain from the use of informa- Database Per minute tion resources can be expected to be returned (publisher) access chargea to producers and distributors through pay- Academic American Encyclopedia ments for use. This is because information is (Grolier Electronic Publishing) ...... $0.75 intangible and leaky, and its value expands un- AP News 1.40 predictably through new uses and the build- (Press Association) ...... 38 BLS Consumer Price Index ing of knowledge. As a result of this discrep- (U.S. Bureau of Labor Statistics)...... 0.75 ancy, the private economy allocates less land, Books in Print (RR. Bowker) ...... 1.08 labor, and capital to information resource pro- Career Placement Registry duction than is socially efficient or desirable. (Career Placement Registry, Inc.) ...... 1.58 ChemsearchTM Economists characterize those markets in (Dialog Information Services, Inc. and which resources are unlikely to be allocated effi- Chemical Abstracts Service) ...... 2.42 CIS ciently as exhibiting market failure. There are (Congressional Information Service, Inc.) . . 1.50 numerous types and degrees of market fail- 39 ClaimsTM/U.S. Patent Abstracts ure; study of market failures associated with (lFI/Plenum Data Company) ...... 1.58 40 Compendex information began in the mid-1920s. In their (Engineering Information, Inc.) ...... 1.65 analyses, economists generally have included Laborlaw information in a class of goods called public (Bureau of National Affairs) ...... 2.00 Medline goods. Others in this class are parks, light- (U.S. National Library of Medicine)...... 0.60 houses, and national defense.” Because the pri- Peterson’s College Database (Peterson’s Guides, Inc.) ...... 0,90 ‘FPriest, ‘The Character of Information, pp. 33-35. Pollution Abstracts “See, for example, Francis M. Bator, “The Anatomy of (Cambridge Scientific Abstracts) ...... 1.40 Market Failure, ” QmrterlyJoumal of Economics, August 1958, PTS U.S. Time Series pp. 351-379; and Robert H. Haveman and Julius Margolis (eds.), (Predicasts, Inc.) ...... 1.90 Public Expenditures and Policy Analysis (Chicago, IL: Mark- Zoological Record ham, 1970). (Biosciences Information Services) ...... 1.30 — 4“Pigou recognized that knowledge provides benefits to so- a Does not include telecommunications charges. which run $6 to $18 Per hour ciety as well as to the purchaser. Arthur C. Pigou, The Eco- SOURCE DIALOG Price List, October 1985 normcs of Welfare, 4th ed. (London: Macmillan, 1932). In 1962, Arrow wrote a seminal piece on the subject in which he recognized three forms of market failure associated with informa- unless public or shared facilities are available, tion: indivisibilities, inappropriability, and uncertainty. (Ken- he must buy equipment before he can receive neth Arrow, “Economic Welfare and the Allocation of Resources electronic information, equipment that may to Invention.”) More recent looks at information and market failure include: Yale M. Braunstein, “The Functioning of In- subsequently fall drastically in price or soon formation Markets, ” in Issues in Information Policy, directed become obsolete. by Jane H. Yurow, edited by Helen A. Shaw (U.S. Department of Commerce, National Telecommunications and Information Investment in information production, dis- Administration, February 1981), pp. 57-74; Michael D. Cooper, tribution, management, and use is risky. Only “The Structure and Future of the Information Economy, ” In- formation Processing and Management, vol. 19, No. 1, pp. 9- 26; W. Curtiss Priest, “Characteristics of Information in Com- merce and Transactions, ” working paper (Cambridge, MA: MIT Center for Policy Alternatives, Oct. 25, 1984); and W. Curtiss meet different information needs is a problem that libraries con- Priest, “Development of Economic Guidelines and Alternative stantly face. Public libraries are increasingly compelled to make Options for Public Investment Decisions in Scientific and Tech- either/or choices, in a time of shrinking budgets, among invest- nical [formation,” working paper (Cambridge, MA: MIT Cen- ments in different kinds of information resources for their pa- ter for Policy Alternatives, Mar. 15, 1984). trons. The issue of charges for information services in public “According to Samuelson, a public good has the attribute libraries is sparking great controversy, and the introduction “that each individual’s consumption of such a good leads to of computerized retrieval systems is at the center of that de- no subtraction from any other individual’s consumption of that bate. See, for example, Brett Butler, “Online Public Access: The good . .“ Paul Samuelson, “The Pure Theory of Public Expend- Sleeping Beast Awakens, ” Bulletin of the American Society iture, ” Review of Econorm”cs and Statistics, vol. 36, 1954, p. for Information Science, December 1983, pp. 6-10; and Jose- 387. Actually, Samuelson uses the term “collective consump- Marie Griffiths and Donald W. King, Impact of Information tion good, ” but public good is now the commonly accepted ter- Technology on Information Service Providers and Their Clien- minology. Stanley M. Besen, Economic Issues Relating to New tele, contract report prepared for OTA by King Research, Inc., Technologies and Intellectual Property, contract report prepared July 1985, pp. 54-84. for OTA, December 1984, p. 1. Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets ● 169 .— vate economy underinvests in them, public exclude nonpayers and competitors, col- goods are often provided or subsidized by the lect payment, or price discriminate; government.” Z. subsidize investment in the production or distribution of information that the pri- Given the importance of information re- vate sector finds unprofitable; and/or sources and the fact that the private sector un- 3. undertake the task of producing and/or derinvests in them, the public policy question disseminating information. is: How might the government best encourage their growth and use? Can the government re- The latter two approaches require that gov- duce the uncertainties faced by people engag- ernment identify unprofitable kinds of infor- ing in information activities, and if so, how? mation for which there is a compelling social May reducing the uncertainty of one group re- need and public interest. Some of these judg- sult in problems or expense for others? And, ments are straightforward. Public investment given that it costs more to originate informa- has long supported most basic scientific re- tion than to reproduce and distribute it, a corol- search, a large part of the applied research in lary question is: How might the government fields such as medicine, agriculture, and ener- best encourage the growth of the human re- gy, the bulk of economic and social statistics sources that form the pool of knowledge, crea- on which government policy is based, a large tivity, and skill from which valuable informa- share of the cost of formal education, and many tion originates? other information activities. Motivated only by financial profit, the pri- The first approach—helping private enter- vate sector will produce and distribute those prise exclude, collect payment, and price dis- types and forms of information from which criminate—has been the traditional role of they can inexpensively exclude nonpayers and intellectual property policy and law. It has af- competitors, and for which they can collect forded three distinct advantages over govern- enough revenue to cover their costs and real- ment subsidy or direct investment in produc- ize a profit that is competitive with other in- tion. First, it minimizes the government need vestments. 43 To compensate for insufficient pri- to make judgments about the specific value vate investment, government could: and uses of information. Second, it permits pri- 1. institute policies that help proprietors to vate markets to respond quickly to changes in consumer demand where profits signal investors to shift resources and where there are ..— no substantial barriers to competition. Third, ‘-Since exclusion is difficult and may be socially inefficient, intellectual property protection has tradition- the use of tax-payer money to supply the good can often be justi- ally promoted both learning and private invest- fied. F;conomists and public admimstrators point out that gov- ments in the production of ideas. ernment is not obligated to provide all public goods. There are situations in which the waste and distortion that government Changes in technology that alter the incen- ma~’ incur in trying to counteract market failures associated with public goods may produce more inefficiency than it cures. tives for producing and disseminating infor- See, for example I’ritz hlachlup, Know’fecige: Its Creation, Dis- mation may in some cases weaken the advan- tribution and F;ccmomic Significance, Volume 111: The Eco- nomics of Information and Human Capital 1 Princeton, NJ: tages of intellectual property protection. If Princeton University Press, 1 984), p. 157. unchecked, the incentive to control access and ‘ Fortunately, there are many moti~ations for producing to concentrate ownership of media and content and disseminating information aside from financial gain. See may undermine the promotion of learning and ch. 5, “The Creati\e Fln\rironment. ’ See also, Robert M. Hurt and Robert !YI. Schuchman, “The Economic Rationale of Copy- widespread participation in the development right, ” .+!merican Plccmomic }iet’iew’, Maj’ 1966, pp. 425-426. and use of knowledge and information resources. 170 ● Intellectual Property Rights in an Age of Electronics and information

GOVERNMENT POLICY AND THE DIVERSITY OF INFORMATION-BASED GOODS A basic goal of intellectual property law is Alongside changes in the character of infor- to promote a healthy diversity in the ideas, in- mation as a technical package, as an economic formation, and knowledge available to society. and social good, and as a cluster of legal con- In the age of print, diversity was fostered by cepts, the structure of incentives for originat- granting individual creators the right to con- ing, disseminating, and adding value to infor- trol the conditions under which their works mation is undergoing change. To maintain a were published, printed, and distributed in tan- balance in the rights over information, new gible copies. The questions of what rights at- definitions that correspond to the emerging tach to works embodied in tangible copies, technical, economic, and social characteristics which particular rights a proprietor retains, of electronic information must be developed. and which rights are transferred to a buyer of In particular, the definition of rights should a copy of a work have been relatively easy to clarify the ways purchasers may use works: determine. The incentives to originate works What are the rules for using protected works and disseminate copies were clearly fostered in producing and distributing information? by the limited controls afforded by copyright. How may one compete with his source of in- Users’ ability to employ existing works in formation or with sellers of similar works? learning and scholarship were supported by the For some types of information, especially legal limits of copyright control developed in 44 works of fact, proper inducements to add value the fair use and first sale doctrines. Thus, a may be as important in the information age rich diversity of information, and the growth as incentives to originate works were in the and use of knowledge, was promoted by a bal- 45 age of print. For other types of works, espe- anced set of rights over information. cially art, rules that help creators preserve the As information is increasingly distributed integrity of their contributions may be most in less tangible electronic forms, these ques- appropriate. New types of art that arise from tions of rights in information become more collaborative or interactive processes may re- complicated. If one assumes that, in the infor- quire new kinds of corporate arrangements. mation age, more people will make a living pro- Functional works may require new adminis- ducing, distributing, and using information, trative mechanisms to assure that proper, pol- these questions of rights become all the more icy-consistent controls are placed both on in- important. As detailed in chapter 3, new tech- fringements and on the market power inherent nologies are blurring the boundaries defined in patent-like protection.4G In these ways, by the traditional legal rights over informa- intellectual property law may continue to fos- tion. Concomitantly, as seen in chapter 4, the ter the creation and dissemination of emerg- enforcement of those traditional rights is in- ing information-based goods, a healthy diver- creasingly difficult and troublesome. Works sity of works, and the profitable trade of in electronic form take on a fluid character. information in open markets. Form and content are transformable and dy- Historically, many other government policy namic; separating idea from expression is a mechanisms-communications regulation, an- more arbitrary judgment; and information is titrust enforcement, R&D management and an integral part of automated processes, as well support, the development and promulgation as a conveyor of meaning to people.

“The first sale doctrine states that ownership of a copy of “Burns, The Econom”cs of Information, pp. 111-17-18. a work passes to the purchaser of the copy. The purchaser may “See Carroll Pursell, Historical Case Studies of the lrlflu- then sell or otherwise dispose of his copy (section 109). The first ence of Intellectual Property Laws on Technolo~”cal Change, sale doctrine allows the development of trade and rental mar- contract report prepared for OTA, August 1985, for a discus- kets out of the control of the copyright owner and thus limits sion clf the history of market power derived from patents in a his potential market power. selection of information technology industries. Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets • 171 of technical standards, special tax provisions, data is supplied by stakeholders in the policy the funding of education, and public informa- debates, and thus may be biased. At present, tion production and dissemination-have also the available data are inadequate to directly had significant effects on the development of and objectively test hypotheses about invest- information markets. As markets change in ment in and supply of different kinds of infor- response to new media and the expanding role mation. of information in economic life, policy makers may need to think about how all of these mech- Another problem is that the optimal diver- anisms interact in their affect on the diversity sity of information-based goods is difficult, if of available information. not impossible, to specify. Each person’s needs for information are unique; and individuals Problems in Framing Policy To place different value on information depend- Promote Information Diversity ing on the uses to which they plan to put it. In some cases, the information package may Designing policy to promote diversity in in- be most valuable if it is standardized, as, for formation is fraught with difficulty. Few ef- example, is information on the toxicity of forts have been made to collect adequate data chemicals. Other kinds of information are most to make policy judgments about information valuable when they are simultaneously avail- markets based on strict, quantitative criteria.47 able to a wide audience, as, for example, is news The data that exist reveal little about how dif- coverage of a historic event. Other informa- ferent kinds of information are produced and tion is uniquely prepared for, and only valu- used, about the factors that guide producers able to, a single individual, as is the financial and users in their investment and purchase de- analysis of one’s estate. Therefore, the intel- cisions, or about how to measure the influence lectual property goal of fostering a balanced of different kinds of information as factors in diversity of information is difficult to achieve, the production of subsequent information or given the vastly different kinds of content and other goods. 48 Moreover, much of the available the wide range of media that are needed to effi- 47Two comprehensive efforts at collecting data on the infor- ciently serve audiences ranging from one to mation economy have been undertaken and published. The first, millions of users. Fritz Machlup’s The Production and Ilistribution of Knowledge in the .!lnited States, published by the Princeton University Press in 1962 and since extended in three additional volumes, Knowledge and Knowledge Production, 1980, The Branches of Learning, 1982, and The Economics of Information and Hu- Proprietor Concerns, Government man Capital, 1984, presents data on aspects of the production of some varieties of information. The second, I,Iarc Porat The Policy Tools, and the Diversity Information Economy, published in 1977 by the Department of Information of Commerce, Office of Telecommunications, is a snapshot of information-related economic activities for the year 1967. A third The actual diversity of information-based study, which updates some of Machlup’s work, is scheduled for publication in 1986: Michael Rubin and Mary Taylor Huber, goods available to individuals and society de- The Knowledge Industry in the United States: 1960-1980 pends on a complex set of factors. Because of (Princeton, NJ: Princeton University Press, in press). The Copy- economies of scale and scope, proprietors’ right Office has begun to produce a series of studies on the size of the copyright industries, the first of which was presented choices of profit-making strategies will be to the Senate Judiciary Committee in December 1984. Many guided by whether, and to what degree, they economists and other writers use a wider array of industry-level can select the audience for a given information statistics in analyzing the operation of information markets. It is often the case that these data are incomplete or may even package. They select customers focusing on be inappropriate to the analytic questions under consideration. three major criteria: exclusion (of nonpayers ‘“”A strong argument can be made that this new kind of and competitors), collection, and price discrimi- capital [knowledge capital] is more critical to the growth of the American economy than is money capital. But knowledge capi- nation. Government policy interacts with pro- tal does not show up in the numbers economists look at (or quote) prietor concerns and their strategies for select- when evaluating capital formation. From “Gnomons, Words ing audiences on a technical level and a and Policies, a speech given by Walter B. Wriston to the I+~x- ecutives’ Club of Chicago on May 8, 1985, as quoted in Harper ‘s, transactional level to affect the diversity of September 1985, p. 22. available information. 172 . Intellectual Property Rights in an Age of Electronics and Information

Technical Concerns reliability of factual information distributed Information providers must select a distri- by computer databases. “These indicators bution medium with technical characteristics would provide the user with enough information to determine the utility and suitability for suitable for their particular variety of infor- 50 mation content. For example, a broadcast tele- specific purposes. ’ Such information, many vision signal requires a dedicated portion of believe, could yield substantial productivity radio spectrum; a publicly available computer- improvements in research, development, and ized database information service requires manufacturing in a wide range of fields, and computer hardware, software programs, and increased safety for workers and for the pub- a public switched telephone network. lic. NBS is also at work on technical standards for computer software to improve government Government support for and promulgation operations. These efforts may affect the na- of technical standards will fundamentally af- ture of computer programs used by the private fect the development and operation of commu- sector as well. nications media. The regulation and licensing of radio spectrum affects the operations of in- Because of technical differences among me- formation providers who use broadcast or pri- dia, the difficulty of excluding, collecting, and vate radio channels (including terrestrial micro- price discriminating will vary according to the wave and geosynchronous satellite links) to medium. For example, many goods published distribute goods. The development of Inte- in tangible copies, such as books, are available grated Services Digital Network (ISDN), which to everyone at more or less identical prices. will rely heavily on fiber-optic lines, is currently They are paid for in individual transactions, the subject of a worldwide, but loosely coordi- and require a visible capital investment to be nated, standards-making procedure. The re- competitively reproduced for sale. Information sulting system will have major and long-lasting broadcast over radio and television is, by and effects on markets for information-based large, available to all and paid for by adver- goods.” tisers, and competing broadcasts are easy to recognize and exclude from competition.51 Technical standards are also of fundamental importance in regulating the content of cer- Information-based goods may also be leased tain kinds of information, particularly factual or exhibited to consumers on a per-use basis. and functional information. The National Bu- Movies shown in theaters, pay-per-view tele- reau of Standards (NBS) has been interested vision, and electronic databases are paid for for some time in establishing “Data Quality in this manner. Many goods are provided by Indicators” for scientific and technical infor- subscription on a more or less continuing ba- mation that could help universities, businesses, sis. Information packages offered by lease or and government agencies by increasing the subscription vary widely in terms of how proprietors can exclude, collect, and price discriminate. Some of these packages and trans- ‘“See, for example, Michael D. Bander, “Pacific Bell Forsees action mechanisms are looked at in detail Three-Phase ISDN Revolution, ” Telephony, Mar. 24, 1986, pp. 44-53. In general, technical standards perform four basic functions in markets: 1. they provide information on termin ology and test and measurement methods; .— — 2. they promote minimum levels of acceptable quality, such ‘(’National Bureau of Standards, Workshop on Data Quality as safety standards do; Indicators: Summary Report and Recommendations. Gathers- 3. they promote compatildity of components in systems to burg, MD, Feb. 10-12, 1982, p. iii. allow users to purchase components from multiple vendors; “Printed and broadcast information are increasingly vulner- and able to advanced copying technologies, Proprietors’ ability to 4. they promote reduction in variety to allow economies of exclude private copying is a subject of heated debate, and is scale to be realized. discussed in other sections of this report. At this point, it is John H. Young, Effects of Standards on Information Technol- important to consider the potential for private copying as one ogy R&D: Local Area Net works and Integrated Service Di~”- of the factors that all information proprietors must consider tal Network, contract report prepared for OTA, November 1983. in their marketing strategies. Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets ● 173 below. 52 As technologies for storing, commu- Intellectual property law and other gov- nicating, and processing information converge ernment mechanisms may affect diversity by in computer-based systems, proprietors are in- encouraging one form of distribution over creasingly concerned about the extent to which another. For example, the enforcement of theft users may subsequently reuse or trade their of service laws might make terrestrial micro- works, and thus diminish proprietors’ oppor- wave (MDS) more attractive than free broad- tunities to collect for use and price dis- cast television as away of distributing movies criminate. by making transactions with individual consumers profitable. Government-sanctioned Some forms of distribution and payment will mechanisms that aggregate transactions, such encourage mass markets for goods and tend 53 as the Copyright Royalty Tribunal or private to restrict the diversity of the goods offered. collecting societies such as ASCAP, can reduce Other forms of distribution and payment will the cost of managing the transactions between encourage highly diverse varieties of informa- proprietors and users. This may give media tion that are tailored to individual needs and s that are covered by such arrangements cost preferences. ’ Economic theory suggests that advantages in obtaining content for distribu- producers will use the feedback they receive, tion. The aggregation of transaction arrange- from observing how consumers purchase and ments may also affect ownership concentra- use goods, to fine-tune products and services tion and market power in the information to serve consumer preferences. Information industry. For example, eliminating the com- providers may also use this transactional in- pulsory licensing provision for cable television formation to improve price discrimination and retransmissions may give cable program sup- thus increase their profits. pliers increased incentive to merge with or buy out competitors.55 Other regulations, such as Transactional Concerns those that govern common carriers and those A second factor a proprietor must consider called for in the Cable Communications Act in selecting distribution media and offering in- of 1984, can require companies to offer leased formation content is the cost of administering access to channels on a competitive basis. business transactions with his customers. Transaction costs will depend on the techni- Government policy may also encourage in- cal characteristics of the media, the number vestment in certain types of information con- of customers the proprietor must deal with tent by affecting the risks producers face in directly, and government-derived rules that transacting business. For example, tax credits specify the legal conditions to which trans- and subsidies may discriminate among differ- actions must adhere. The information he re- ent types of information-based goods. Compul- ceives from transactions will, in turn, provide c5Priest, The Character of Information, p. 37. The current the proprietor with feedback, allowing adjust- operation of the Copyright Royalty Tribunal (CRT) encourages ments in products, services, and prices. programs suppliers to work together to settle royalty disputes so as to avoid the Tribunal’s adjudication procedure. This requires suppliers to seek representation from powerful tradeass~ ‘“’’What we must do is to analyze the natural structure of ciations, such as the National Association of Broadcasters and the new systems of communication as they seem to be emerg- the Motion Picture Association of America, who can afford the ing to try to identify what systems of payment are enforceable cost of presenting a case for remuneration to the Tribunal. The and socially acceptable. ” Ithiel de Sola Pool, 7’ecfmolo@”es of Copyright Act grants antitrust immunity for private agreements Freedom (Cambridge, MA: Belknap Press, 1983), p. 5. on the distribution of royalties by the CRT. There is no public “If the profitable provision of highly differentiated prod- record of how the trade associations decide to disburse funds ucts can occur only where different prices can be charged to to the copyright holders they represent. See Cable Retransmis- different customers of the same product, while undifferentiated sion of Broadcast Television Programs Following Elimination products can be sold profitably at a single price, the differen- of the “Must Carrj’ Ru)es (Washington, DC: Office of Policy tiated products will not be offered even if efficiency would be Analysis and Development, National Telecommunications and increased by doing so.” Besen, Economic Issues Relating to Information Administration, U.S. Department of Commerce, New Technologies and Intellectual Property, p. 4. 1985), p. 7. Some private collecting societies operate under anti- ‘Ithiel de Sola Pool, ‘*The Culture of Electronic Print, ” trust consent decrees that serve to inhibit price fixing and anti- Daedalus, vol. 3, No. 4, fall 1982, pp. 17-31. competitive behavior. (See footnote 70, p. 281.) 174 . Intellectual Property Rights in an Age of Electronics and Information

sory licenses and royalty collection and dis- sector, profit-motivated information trans- tribution may affect the relative costs of actions .57 rebroadcasting versus originating information 56 At the most basic level, intellectual property content. Government R&D and public infor- law may specify which works are public information activities may make information-based mation or are of such a fundamental nature goods available that can compete with goods that they are neither copyrightable or patent- produced or offered by the private sector. Rules able. In this way, the law can prevent compa- limiting the transferability of intellectual prop- nies from discriminating in the selection of erty rights between creators and publishers users or from employing de facto proprietary may affect the transfer of risk. Common-car- standards to exclude competition and exercise riage, cross-ownership, equal-access, and anti- 58 market power. And, as discussed above, le- trust rules can set limits on industry concen- gal distinctions, such as those implied by the tration and check anticompetitive transaction categories of art, fact, and function, may be arrangements. useful in adjusting the incentive structure to Private sector transactions may not provide the realities of electronic information produc- all the information society requires because the tion and distribution. profit motive may not allow for the production or distribution of some kinds of informa- “OTA has studied the question of the impact of changing tion. Some information may be of such criti- technology on the provision of public information. See Federal cal importance to citizens and to the process Government Information Technology: Management, Security, of governing that policy makers may decide and Congressional Oversight, ch. 7, pp. 139-158, February 1986, for an overview of policy concerns relating to government in- that no one should be denied access for any formation. reason. Therefore, free or subsidized public in- “HThe fact that electronic information is often available only formation sources, such as libraries and pub- through a system, that is, “a set of complementary products which must be used together to provide value” (Brock, The lic schools, and tax-supported public informa- Telecommunications Industry, p. 16), the potential for attain- tion content, such as the census, weather ing market power is enhanced. For example, a computer manu- forecasts, and information on the operations facturer may be able to restrict competition in markets for peripheral components by developing proprietary processor-in- of government agencies, may be reasonable terconnection standards (Brock, p. 17). Similarly, a company and proper alternatives to reliance on private- may employ copyright on operating system software to restrict competition for its hardware or applications software; and a ‘hSee Cable Retransmission of Broadcast Television Pro- communication company may restrict competition by refusing grams Following Elimination of the “Must Carry” Rules. to provide competitors with connecting lines to customers.

PROBLEMS IN SELECTED MARKETS FOR INTELLECTUAL WORKS

59 Print Technology and the Functioning panies are small. But large advertising of Copyright in Book Markets expenditures, buyouts of publishing houses by conglomerates that may be more adverse to Traditionally, copyright law has been most taking risks,60 and the concentration of book 61 concerned with the relatively simple markets retailing have, some observers contend, for distributing information-based goods in “’’The Book Business, ” Ech”torid Research Reports, June printed form. Printing production technology 28, 1’385, p. 479. is efficient on a relatively small scale; for ex- ‘Twelve publishing firms, all of them divisions of conglomerate corporations, garnered 45 percent of book sales in 1983. ample, printers may produce a fairly small “The Book Business, ’ p. 486. See also, Lewis A. Coser, Charles number of copies of books at a per-copy cost Kadushin, and Walter W. Powell, Books: The Culture and Commerce of Publkdu”ng (New York: Basic Books, 1982), p. 29. that is not much higher than large-scale print- i ‘’ Although approximately 80 percent of the 9,500 full-line ing. Thus, there are more than 15,000 Amer- bookstores are independently owned, the volume of orders that ican book publishers, and most of these com- publishers obtain from the major chains, Waldenbooks, B. Dal- [continued on next page) Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets . 175 erected substantial and growing barriers for ership to the publisher in exchange for edit- authors trying to publish their first book.62 ing, typesetting, printing, distribution, adver- Others contend that, “the cost of printing, off- tising, and promotional services. The author setting, or photocopying a manuscript remains may receive compensation in advance of the low enough that virtually anyone can publish sale of copies. He also will receive a royalty, anything. "63 Thus, the problem for new authors usually about 10 percent of the sale price, for may not be getting their books published, but each copy sold. Often, the advance payment getting them reviewed and widely read. is deducted from the author’s forthcoming royalties. Not all publishing firms perceive of their business in the same ways. Some consider Currently, the players in the intellectual themselves to have an almost exclusive respon- property community are debating the transfer- sibility to maximize profits for owners and ability of intellectual property rights, and the stockholders. Others feel they are primarily re- potential alterations in the bargaining posi- sponsible to the educated public, to the gen- tions of creators and publishers that might eral public, or to the cultural traditions of the occur should the transferability of rights be Nation. 64 changed. The transfer of rights is closely related to the transfer of risk between author and Publishers are increasingly influenced by the publisher. Some economists contend that a media industries and corporate world in which change in intellectual property law that limits they must do business. The growth and result- the extent to which authors may transfer ing complexity of many publishing houses has, rights over their works will limit their ability in some cases, caused a loss of contact between 66 to transfer risk. Such a view assumes that publishers and the writers, thinkers, and liter- “work for hire’ is the extreme case in which ary critics who previously were central to the a creator is so averse to risk that he exchanges publishing business. The integration of book all rights in his work for a salary. publishing into conglomerate corporations also tends to divorce publishing decisions from Existing copyright law returns control of a purely literary criteria. Publishing contracts work to an independent author after 35 years are more often negotiated with literary agents unless he renews the transfer contract.67 Pol- or lawyers rather than with authors. 65 icymakers could shorten this term, taking into account the reasonable shelf life of different Independent authors use copyright in nego- kinds of works, and so give independent au- tiating the conditions under which publishers thors more long-term control over their work will offer their books to the public. In most without producing a large effect on their abil- cases, the author transfers his copyright own- ity to transfer risk. (continues from previous page) The work-for-hire situation is more compli- ton, Barnes & Noble, and Crown, give them a major influence over what gets published. cated. Employers often supply hired creators [T]he chains tend to reserve shelf space for guaranteed best- with sophisticated and expensive equipment, sellers b}’ name authors, books that are hot at the moment (such and therefore claim ownership in the works as celeb;ity exercise books or diet books) and low-cost sale books called remainders [unsold hardcover books returned to publishers produced in their shops. Another problem is and wholesaled to chains at very low prices]. Many books that that many works are produced by teams of cre- have been published in the recent past and sell in steady but low quantities, are difficult, if not impossible, to find at the dis- ators, and it can be very difficult to divide count chains. rights in a work. In such cases, corporate “The Book Business, ” p. 495. ““J%’ill Books Survive?”’ a discussion held at the American ownership may be a more efficient way of orga- Booksellers Association convention in San Francisco, Lewis H. Lapham, moderator, Harper’s, August 1985. ‘ ‘Paul Hirsch, “U.S. Cultural Productions: The Impact of “’Besen, Economic Issues Relating to New Technologies Ownership, ” Journal of Communication, vol. 35, No. 3, sum- and Intellectual Property, pp. 30-33. mer 1985, p. 114. ‘-Generally, publishing contracts allow publishers, but not “Coser, Kadushin, and Powell, Books, p. 15. authors, to terminate the contract. Coser, Kadushin, and Powell, “’Ibid., pp. 31-32, Books, p. 229. 176 ● Intellectual Property Rights in an Age of Electronics and information nizing production, distribution, and rewards products, where the questions involve the to creators. Thus, although modifying the rules rights retained by the inventor and those about transfer of rights may foster the diver- transferred to the exploiters of the in- sity of some kinds of information by encourag- vention. ing independent authorship, other kinds of information production may be too complex Motion Pictures, Videocassettes, and for anything but corporate sponsorship and the First Sale Doctrine control. Motion picture production and distribution Subsidiary rights to derivative works is is a part of the information industry in which another issue of interest in the negotiations the definition of rights and the conditions un- between a creator of an intellectual work and der which those rights may be transferred are a publisher. The law allows a copyright propri- of growing importance. In this part of the in- etor to exploit markets for a work other than formation industry, intellectual property rules those for the initial form in which the work is have a major influence on the diversity of prod- published. This raises the question of whether ucts produced and made available to the pub- the creator or the publisher is to control the lic. The markets for motion picture products exploitation of markets for these works. When have expanded since the 1950s as television, the subsidiary markets are known (e.g., a novel followed by videocassettes, became alternative always has a potential to be produced as a play methods of distribution, augmenting tradi- or movie), the contract between author and 68 tional theater exhibitions. publisher can specifically address the control of subsidiary rights. However, given the rapid The major motion picture distributors stag- changes in information uses and distribution ger the release of feature films in these mar- technologies, it is conceivable that new forms kets to maximize the per-viewer net revenue for distributing works will emerge that are not they can obtain in each, and thus maximize contemplated in current publication contracts. their profits for each film.69 (See figure 6-2.) The In this context, intellectual property law could staggered or ‘tiered’ release strategy is away specify which party owns rights in unantici- of implementing price discrimination. Those pated markets if contracts are not explicit consumers who value early access to a movie about subsidiary rights. are willing to pay a higher price than those who are content to wait for it to appear on pay tele- The questions raised by the issue of the vision or those who can wait 2 years or more transferability of rights between creator and until they may expect to see the movie on free publisher may be relevant to a wide range of television. situations. For example: ““The characterization of “scope” in movie products may be the development of computer software, a subject of disagreement. To be characterized, on a priori where the question involves the way in grounds, as distinct markets for different products, the differ- which the authors of software and firms ent forms of movie distribution would have to substitute very little for each other. In practice, there apparently is substan- that market and distribute their products tial substitution between at least some of the forms, in particu- divide the revenues from sale or lease; lar rented cassettes and pay television. Other forms, such as the production of motion pictures, where theater attendance and cassette sales, substitute less and may in fact be complementary products. See David Waterman, “Pre- the questions involve the rights retained recorded Home Video and the Distribution of Theatrical Fea- by producers and those transferred to a ture Films, ” ch. 7, pp. 221-243, in Video Media Competition: film’s distributors; Regulation, Econom”cs and ‘Technology, Eli M. Noam (cd.) (New York Columbia University Press, 1985). The Justice Depart- the production of television programs, ment has specific guidelines for defining market scope in merger where the questions involve the rights re- and antitrust actions that are based on the ability of producers tained by producers and those transferred to control prices. See U.S. Department of Justice, Antitrust Division, Merger Guidelines, 1984. to the networks; and “’Waterman, “Prerecorded Home Video and the Distribu- the invention of technical processes or new tion of Theatrical Feature Films, ” p. 231. Ch. 6—Technology, lntellectual Property, and the Operation of Information Markets “ 177

Figure 6-2. —Representative Release Sequence for possible, in part, because until recently movies a Major Theatrical Feature were not distributed to end-users in individual, tangible copies. And lease agreements for theaters and television have strictly controlled the conditions under which movies may be exhibited. The release of movies in videocassette form and the growth of the video rental market have loosened distributors’ control over the timing, frequency, and prices charged for access to their products. The first sale doctrine is a major impediment to distributors’ control over the cassette rental market.72 Because of this, the major distributors of feature movies sup-

SOURCE Waterman & Associates Video Media Competition. Regulation Eco- port amendment of the first sale doctrine to nomics and Technology. EIi M.Noam (ed) (New York Columbia Univer- allow distributors more income from videocas- sity Press 1985) sette rentals and to compel rental outlets to seek specific permission to rent cassettes.73 The profitability of the tiered release strat- Other cassette distributors who do not also dis- egy depends on the distributor’s ability to contribute movies to theaters for exhibition op- 74 trol the timing, number of exhibitions, and pose this change. price of the movie in each market. Such con- Amendment of the first sale doctrine could trol allows him to coordinate advertising and have mixed effects on the overall efficiency of promotion, and segment markets according to the videocassette market. On one hand, dis- the cost of the various distribution media and tributors would probably try to raise prices for the value of the product to different con- 70 cassette rental. This would tend to push their sumers. per-viewer revenues on cassette rentals closer Price discrimination in the sale of informa- to those from the highly price-efficient pay-per- tion-based products may promote efficient view cable and theater distribution modes and allocation of investment since the revenue thus increase the major distributors’ net rev- returned to a producer more closely approxi- enues. The major distributors argue that this mates the value of the good to consumers. The revenue would be used to finance the produc- profitability of markets for different forms can tion of more movies to meet the increased de- alert producers and distributors to trends in mand for films fostered by the new distribu- consumer preference. However, extensive price . are analysed in Michael Conant, Antitrust in the Motion Pic- control combined with barriers to market en- ture Industry (Philadelphia, PA: Ayer Co., 1978). try for potential competitors may reduce mar- “’’The fact that distributors choose to release movies on ket efficiency by allowing producers to restrict prerecorded software [video cassettes and disks] in spite of the [first-sale] doctrine is evidence that they increase their net rev- supply and obtain monopolistic profits. Tradi- enue by doing so. Waterman, p. 236. tionally, movie distributors have almost com- “The Motion Picture Industry Association and its member pletely controlled access to their products and companies, Paramount, Columbia, MGM/United Artists, 20th Century Fox, Universal, Warner Brothers, Embassy, Orion, and the prices charged for access.” This has been Buena Vista (Walt Disney), who together controlled more than 89 percent of theatrical distribution and 90 percent of videocas- I hid, sette distribution in 1983 (data from Waterman, tables 1 I and Marketplace controls by motion picture producers, distri- IV) have been the major proponents of first sale doctrine amend- butors, and exhibitors ha~re been the subject of antitrust litiga- ment for videocassettes. Two bills to amend the first sale doc- tion for many years. See, for example, Paramount Famous Lask.lr trine for audio-visual works were introduced in Congress and Corp. ~. United States, 282 U.S. 30,42 (1930), Schine Chain Thea- had hearings held on them in 1983 and 1984: H.R. 1029 and S.33. ters, Inc. t’. United States, 334 U.S. 110 I 1948), United States “’Statement of Austin O. Furst, Jr., before the House Judi- \r. l)aramount Pictures, Inc., 334 U.S. 131 ( 1948), and United ciary Subcommittee on Courts, Civil Liberties, and the Admin- S’tates }’. l,oew Inc., 371 U.S. 38 ( 1962). These and other cases istration of Justice, Apr. 12, 1984. 178 . Intellectual Property Rights in an Age of Electronics and /formation tion technologies. 75 They argue, moreover, that more control over a rental outlet shelf space, the prices for cassette purchases by users and could compete with other distributors on would decline because distributors could price bases other than the price and quality of his discriminate between sales to rental outlets goods. and to final consumers. The conflict over the first sale doctrine On the other hand, higher cassette rental among players in the videocassette market is returns to distributors may force many rental especially interesting in light of the motion pic- outlets out of business. The market for cas- ture industry’s overall current situation. Fig- sette rentals is in the process of consolidation ure 6-3 shows the number of feature movie and shake-out even with the first sale doctrine starts by major studios and independent pro- intact.76 Any increase in rental prices that ducers. The steep rise in feature film produc- caused a substantial reduction in rental vol- tion beginning in 1982 was predicated on the ume would be likely to cause further concen- industry’s perception of increased demand, tration and would work to the disadvantage fostered by the growth of the cable television of smaller outlets.77 A reduction in rental out- and videocassette markets and by an infusion lets would tend to reduce price competition of more than $1 billion in capital in 1984.80 among the remaining outlets; a reduction in Some stock analysts consider markets for fea- rental volume could force the outlets left to ture motion pictures to be facing an impend- devote more shelf space to mass-market fea- ing glut. They have cautioned investors not ture titles and less to titles appealing to to expect impressive earnings from the major smaller, more specialized consumer markets.78 distributors. 81 In fact, the major movie studios have recently cut production sharply .82 Some opponents of past attempts to amend the first sale doctrine for videocassettes are The important policy question is whether the also concerned that modifications could lead proposed amendment of the first sale doctrine to the imposition of “tie-in’ or “full-line” sales will, as the major distributors claim, lead to requirements by distributors. In such arrange- increases in the number of films produced and ments, a distributor would require a rental out- make the films more valuable and available to let to purchase additional titles as a condition consumers. Faced with impending market glut, for obtaining one or more very popular works. the producers of feature films often react by If this were legal,79 a distributor would have cutting production. Alternatively, they may —— ——- - — . —— attempt various mechanisms to exact more “’iThe Consumer Video Sales/Rental Amendment of 1983 revenue from the films they produce. Adver- Briefing Materials” (Washington, DC: Motion Picture Associ- ation of America, 1983), “’Alex Ben Block, “Hard Dollars in Video Software, ” Forbes, June 17, 1985, pp. 128-131. gation would be required to nullify cases of tying, whereas their “’Statement of Nina W. Cornell, President, Cornell, Pel- likelihood is much less under the current video cassette market covits & Brenner Economists Inc., before the Subcommittee structure. See Statement of Jonathan Rose, Professor of Law, on Courts, Civil I.iberties, and the Administration of Justice Arizona State University College of Law, before the Subcom- of the House Judiciary Comrnittee, Econom”c Impacts of Repeal- mittee on Courts, Civil Liberties, and the Administration of Jus- ing the First Sale Doctn”ne for Audiovisual Works, Oct. 27, 1983, tice of the House Judiciary Committee, Feb. 23, 1984. General- pp. 29-31. ly, unlike the legal precedent in patent infringement cases, ‘“Statement of Stuart Karl before the House Judiciary Sub- antitrust violations have not been treated as a valid defense committee on Courts, Civil Liberties and the Administration of copyright infringement. See Robert A. Feitel, “Copyright of Justice, Apr. 12, 1984, pp. 13-15. Misuse and Cable Television: Orth-O-Vision, Inc. v. Home Box

“9The Supreme Court has ruled that tying arrangements are office,’” Federal Commum”cations ~Jtfw Journal, vol. 35, fall 1983, illegal because they, “deny competitors free access to the mar- pp. ,347-373. ket for the tied product, not because the party imposing the “OHarold A. Vogel, “(llitterless Glut,’” ~ntert~”nment ~n. tying requirements has a better product or lower price but be- dustry, Merrill Lynch, Capital Markets Securities Research Di- cause of this power or leverage in another market. At the same vision, Jan. 28, 1985. time buyers are forced to forego their free choice between com- “J’ogel, “Glitterless Glut. ” peting products. ” Northern Pacific Railway v. United States, ““A cut in production apparently improves the quality of 356 U.S. 1,6 (1958). The amendment of the first sale doctrine films–and improves their chances to become hits by giving them proposed in H.R. 1029 may not specifically permit such tying more exposure. ” Ellen Farley, “The Movie Studios Hope Less arrangements, but it may lead to many situations in which liti- Will Be More, ” Business Week, Jan. 13, 1986, p. 9. Ch. 6— Technology, Intellectual Property, and the Operation of Information Markets “ 179

Figure 6-3.— Feature Motion Picture Releases

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1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 Year SOURCE Weekly Variety, Jan 2, 1985 tising and promotion for individual films may trol of all distribution rights to the major dis- increase. Concomitantly, distributors may try tributors, as they have generally been obliged to increase the efficiency of price discrimina- to do with feature motion pictures. The inde- tion. pendent distributors are also beginning to use their revenues to finance the production of The amendment of the first sale doctrine, as 84 films. The issue of first sale doctrine repeal we have seen, could be expected to aid the ma- may thus involve the question of whether the jor feature film producers, at least, in doing videocassette market is to be an ancillary mar- this. Some have suggested other ways to in- ket for feature films or a new means of offer- crease price efficiency. One proposal is to give ing consumers a diverse range of video prod- rebates to purchasers of cassettes to, in effect, ucts based on a new technology. discriminate between the sale-only and rental markets.83 Implicit in the above analysis of the videocassette market is a policy question that may The industry is responding to market con- be particularly difficult to answer definitively: ditions in the absence of changes to the first What level of investment on a given intellec- sale doctrine. Distributors are beginning to use tual work does and should intellectual prop- the broad retail market base that has sprung erty law encourage? For example, should pol- up from demand for cassette rentals to seg- icy encourage movies that cost $15 million to ment rental markets into more specialized and produce? This is not the kind of question that diverse video offerings. This trend is already intellectual property law has heretofore been evident in the growing popularity of educa- consciously concerned with. But decisions tional titles and such specialty items as “Jane about intellectual property rules may have a Fonda’s Workout. ” major influence on the level of investment in The videocassette market may represent an a given work that is profitable. Because film opportunity for independent film producers to makers compete for consumers’ time as well market their movies without signing over con- as money, a decision to uphold the first sale doctrine in the case of videocassettes may en- “ ftose, pp. ~12-fItI. The important factor- in the success of this courage investment in cheaper film projects strattigyr would he the elasticity of demand for cassette pur- at the expense of investment in costlier ch as(~s. S{)m(’ e~riden{e suggests that sales of some very popular title+ can t)e increased dramaticall~. l)~r lowering the pric’c to n(’zirer t ht. marginal cost. See M’aterman, p. 2;35, and (’ornell. pp 19-21 ‘“’ F’urst pp. I5-16

,. 180 . Intellectual Property Rights in an Age of Electronics and Information -. — — —— projects. 85 Thus, intellectual property policy- mation and package it in forms most useful making may require hard, explicit decisions to their clients. They may obtain the informa- about the nature and content of some infor- tion from government sources, nonprofit in- mation markets, which may compel policy stitutions, other private information compa- makers to make judgments about the social nies, or they may originate it themselves. They value of private investments in different kinds add value to this information by packaging the of works. most relevant, timely, and reliable information in its most useful form. Information Services, Electronic Within the information services industry, Databases, and Derivative Works the impact of intellectual property law is a subject of great interest and some controversy. The scope of the information services indus- In particular, these markets are directly af- try is illustrated by table 6-4 which lists the fected by the rules governing derivative uses variety of activities carried out by member of intellectual properties. companies of the Information Industry Asso- ciation. These companies find or create infor- Many information service providers obtain information from several sources and then ‘“At least one film-industry analyst disagrees strongly with profit from distributing the package of infor- this conclusion. He believes that the number of projects under- mation they create. Often, the information taken, and not the per-project spending or quality of films, will service company claims a property right on the be reduced by upholding the first sale doctrine. David Water- man, personal communication, January 1986. However, another package. In other cases, the service company analyst cites the movie industry reaction to the introduction administers the property rights of those who of television to argue that per-movie investment levels may de- provided them with information content. cline in the face of competition from new technologies. Hirsch, “U.S. Cultural Productions, ” p. 116; see also Paul Ilirsch, “Proc- A producer’s profits and leverage in attract- essing Fads and Fashions: An organization-Set Analysis of Cul- tural Industry Systems, American Journal of Sociology, Jan- ing information from originators depend on his uary 1972, pp. 639-659. ability to exclude nonpaying customers from

Table 6-4. —Primary Activities of Information Industry Association Members — 26 Document acquisitions and delivery (S) 15 Directories (P) 6 Forecasting services (S) 26 Periodicals-publishers (P) 13 Abstracting publishing (P) 6 Microform system design services (S) 25 Publishing (P) 13 Indexing services (S) 6 Micrographic services (S) 22 Consulting services (S) 13 International business information (S) 6 Records management services (S) 22 Databases—design and/or 12 Energy information (P) 6 Reprint publishers (P) management (S) 11 Abstracting services (S) 5 Accounting information (P) 22 Databases—information (P) 11 Financial information (P) 5 Agriculture (P) (publishers of information about 10 Marketing services (S) 5 Book information (P) databases) 10 Software (S) 5 Bookselling services (S) 20 Indexing publishing (P) 9 Scientific literature (P) 5 Chemical information (P) 19 Databases—searching (S) (firms 8 Audiovisual materials (P) 5 Computers-hardware (S) that carry out database searches) 8 Cataloging services (S) 5 Conferences-information (P) 19 Information systems—design and 8 Engineering information (P) 5 Drug information (P) evaluation (S) 8 Environmental information (P) 5 Education (P) 19 Market research services (S) 8 Legal information (P) 5 Europe (P) 18 Business information (P) 8 Television information (P) 5 Financial Information (International) (P) 18 Micropublishing 7 Clearinghouse (D) 5 Information industry (P) 17 Current awareness services (S) 7 Library Automation Services (S) 5 Looseleaf services (P) 17 Databases–vendors/lessors (S) 7 Medical literature (P) 5 Management information (P) (companies that produce or sell the 7 Newsletters-publishers (P) 5 Patent information (P) use of databases) 7 Typesetting services (S) 5 Product development (S) 17 Government information (P) 6 Asia (P) 5 Social science literature (P) 17 Literature searches (S) 6 Economics (P) 5 Statistics (P) 16 Corporate.- -—.—. information.— (P) — 6 Electronics — information.— (P) KEY (S) Service (P) Product SOURCE Carlos A Cuadra, ‘The Role of the Private Sector I n the Development and Improvement of LIbrary and Information Services ‘‘Library Quarterly, vol. 50, No 1, January 1980 p 98 Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets ● 181 using his goods. Success also depends on users with the proper computer and commu- whether he can prevent others from commer- nication equipment.87 These services operate cially exploiting his various packages, and by making a very large file of information, such whether he can prevent competitors from re- as scientific journal bibliographic citations or packaging his products. Such exclusion will industry statistics, available with software affect his competitors’ available sources of sup- that allows users to search the file and create ply and the ways they may use the informa- a customized information product themselves. tion available. Thus, the stronger derivative Competitors may copy the entire file or sig- use rights are, the greater the potential for con- nificant portions of it, construct their own trol a producer will have over the prices he search software, and exploit the original pro- charges and the exclusion of competition. But ducer’s market by undercutting prices. Thus, if derivative use controls are too weak, the pro- derivative uses of large electronic databases ducer may be unable to receive compensation can be more attractive to competitors; and deri- adequate to cover the cost of constructing a vations may damage the original producer of particular package. a large database more than they would a company serving a small market niche. Conversely, The information service providers’ dilemma producers of large electronic databases have over derivative use rights is mitigated some- economies of scale and scope not available to what by the nature of their business. Their those who employ people directly in produc- products are valued because they meet the spe- ing customized products. Thus, the on-line in- cific needs of their clients. Thus, given some formation service industry may have a greater latitude in the derivative use of others’ prod- tendency to concentrate than does its print ucts, small companies can succeed by target- counterpart, and large electronic database pro- ing a particular market niche and serving those ducers may have greater power to control the customers well. 88 supply and price of information. Since the products are highly customized, Another potential problem related to con- the market for a particular product may be centration in the electronic publishing indus- quite small because the demand for additional try concerns the question of private control copies is quickly exhausted. Thus, a service over information in a particular field. Although provider may be able to succeed by focusing it may be most efficient for consumers to be his efforts to exclude competitors on a small able to go to one source to obtain all the avail- group of people; and control over his products able information on a particular subject, the need only limit the ability of competitors to monolithic control thus afforded the proprie- steal his customers. With no marketplace rules, tor of such a source may allow him to elimi- competitors could do this by unfairly under- nate all effective competition—to corner the cutting prices and competing without invest- market for information on a subject—and thus ing in finding and purchasing or developing set conditions on access and prices so as to earn their own information. The regulation of un- 89 monopoly profits. fair trade practices may serve as well or bet- 86 ter than copyright in this situation. “’Martha E. Williams, “Policy Issues for Electronic Data- bases and Database Systems,’” The Information Societ~r, vol. Electronic delivery of information services 2, Nos. 3/4, 1984, p. 445. complicates the situation. Over the past 10 ““The top four (out of 14 total) vendors of electronic data- years, this segment of the information econ- bases in the U.S. information center library market accounted for 92.6 percent of the $54.08 million in 1984 re~enues in that omy has grown to the point where there are industry. Two firms accounted for approximatel~’ 84 percent now over 2,800 data files publicly available to of 1984 revenues. Martha E. Williams, Information ,Tfarlret IZI- dicators, summer 1985, pp. 1-2. ““Martha E. Williams, “Policy Issues for Electronic I)ata- “’The formalities of copyright, registration and deposit of bases and Database Systems, ” The Information Societ~r, vol. copies with the I,ibrary of Congress, ma}’ be especially burden- 2, Nos. 34, 1984, p. 4 11; and Pool, “User Interfaces, p. 441. some to the producers of highly di~’ersified and frequently up- Pool suggests that information resource monopolies are likel~r dated information products. to be narrow and perhaps short-lived. 182 ● Intellectual Property Rights in an Age of Electronics and Information

Computer Software, Market Size, and with some programs in the public domain, and the Cost of Contract Administration some that have been developed by hobbyists who are not especially interested in profiting The dynamics of markets for computer soft- from the use of their work.91 In such situations, ware programs depend, to a large extent, on users may see a wide disparity in the prices market size—that is, the number of users who being charged for programs that may appear may find a particular type of program useful to have similar capabilities. A proprietor in to them. Many programs are so specialized commercial business, in these circumstances, that markets for them are quite small. In these will have to compete with such substitutes by cases, it is possible for distribution to proceed advertising and offering superior service. Such on the basis of contracts worked out with in- competition can result in a healthy diversity dividual purchasers. Individualized contracts of software products. But users can also be con- have the advantage of spelling out in detail fused by this diversity, and they may be be- the rights that a user purchases and the rights wildered by the prices that commercial soft- that a proprietor retains. For example, software providers charge.92 Thus, the software ware for mainframe computers has largely been business can be particularly risky, and is often distributed under contract lease or license ar- dependent on elaborate and expensive market- rangements where the purchaser does not ac- ing techniques. tually buy a copy, but instead buys rights to Software developers have tried a number of use and perhaps modify a program. The vendor often agrees to provide certain services, innovative marketing techniques for software such as expert help in customizing a program programs. For example, one successful effort for specific user requirements, provision of up- goes under the title “Freeware.” The concept dated versions at favorable prices, or on-call of Freeware evolved of necessity, according to Andrew Flugelman, the program’s creator and response to problems that crop up in using the 93 software. Often, the software distributed un- developer. Flugelman was searching for a way to share a program he developed for commu- der contract is treated as a trade secret. Thus, nicating among computers by telephone, and when software is distributed under terms of individualized contracts, the government role make money from his efforts at the same time. may be confined to adjudication of contract To protect his investment, he considered a soft- disputes at the State level. Software proprie- ware protection scheme, but he discarded the tors may also seek Federal copyright for addi- idea because he figured that it would be un- tional protection against programs that may popular, ineffective, and would limit the use compete as substitutes.90 of his software. Having been a book publisher, Flugelman was well aware of both the high Computer software proprietors often face value and high cost of advertising a product particular problems in controlling or exclud- and of setting up mechanisms to distribute it. ing the marketing of programs that are poten- Putting these two concerns together, he came tial substitutes for their programs. There is up with the idea of offering his software free— often a range of programs available that may first on electronic bulletin boards and later by provide similar value to users. These programs mail. He anticipated that, once his method took may have been developed in the course of government-sponsored R&D, and many are in y Interview with Edward Conklin, FORTH, Inc., Apr. 19, the public domain. For example, the computer 1985. 9“Software companies, like most information providers, have language called “Forth” was developed at the significant discretion in setting prices because, once a package National Radio Astronomy Observatory. One is developed, reproduction and distribution costs are relatively company that deals in developing and market- low. They often set prices high under the assumption that a ing products based on Forth has to compete package with a high price is perceived as superior to one that serves a similar function but is much cheaper. Elizabeth Ran- ney, “The Puzzle of Software Pricing,” Info WorM, Nov. 4,1985, ‘See SAS Institute, Inc. v. S&H Computer Systems, Inc. pp. 35-39. (M.D. Term. 1985, nos. 82-3669 and 82-3670). ‘“ Interview with Andrew Flugelman, Apr. 15, 1985. Ch. 6—Technology, Intellectual Property, and the Operation of /formation Markets s 183 — hold, users would themselves advertise and dis- of managing individualized contracts and pro- tribute his product. However, while Flugelman viding customized user services has risen dra- offered his software for free, he encouraged matically. Proprietors have tried a number of those who used it to pay a nominal fee to show strategies to lower these transaction costs. For their satisfaction with the product. instance, many software companies offer” site licenses” that authorize a purchaser, such as Several other software developers have used a company or government agency, to make a similar approaches to launch their products. specific number of copies for multiple use Some, like Flugelman, have been successful in within the institution. But site licensing may generating healthy revenues and in maintain- 94 not be practical unless the proprietor deals with ing full-time businesses. These approaches, a relatively small number of institutions. This however, have had their problems. Since soft- is because the proprietor must have frequent ware products often require extensive docu- contact with the user institution, sending rep- mentation and user support to be fully utilized, resentatives to the site regularly enough to as- the costs of such support can grow uncontrol- sure that the terms of the agreement are not lably. Furthermore, as Flugelman has noted, being violated.” Moreover, when proprietors the Freeware concept appears to have worked are dealing with very large institutions, site most successfully with the individual user— licenses may make the problem of enforcing the computer hobbyist, the home user, and the compliance with the license extremely costly very small business man. With these users, the to monitor. creator can appeal on a one-to-one basis to “the morality and basic honesty of the public.”95 Another strategy adopted by the distribu- In the environment of large corporations, per- tors of personal computer software is the sonal appeals are apt to get lost. “shrink-wrap” license. With these, vendors of mass-market programs, such as word process- Software designers may indeed increasingly ing packages, display a licensing contract on have to resort to approaches that rely on users the cover of the container in which the soft- to advertise and distribute software, because ware and its documentation are sold that speci- both advertising and distribution are begin- fies the exclusive rights that they retain. (See ning to constitute larger and larger proportions figure 6-4.) By opening the package, the pur- of software companies’ total costs. Ashton- chaser tacitly agrees to the provisions of the Tate, for example, spent $4 million on adver- contract. The legality of such ‘take it or leave tising during the Democratic Convention and it contracts has been tested in only one State, the Los Angeles Olympics, Similarly, other Louisiana, which passed a specific statute companies are aggressively pursuing a vari- validating shrink-wrap licenses. ety of advertising and marketing schemes in an effort to stay at the top of what is now a Many computer program users are con- highly turbulent and competitive industry. To cerned about shrink-wrap licensing because it increase the sales and name recognition of their increases their uncertainty in making com- products, some companies are even offering puter software purchase and use decisions. A their buyers coupons, trial samples, and trade- user may decide after trying a program that ins on previous models. In such a climate, a it is not appropriate for his particular needs. whole variety of new advertising and distri- There is also a question of what rights a pur- bution schemes can be expected. chaser might have should the software vendor go out of business. A purchaser may en- As personal computers have come into wide- trust valuable information that is critical to spread use, the cost to software proprietors — his business to the operation of a particular “See Larry Thompson, *’Freewa-~ and Freeware. ” Iliscotrer, software system, and come to rely on vendor November 1984, pp. 87-89. support. Industry is addressing this problem 4 “Software: The .New Driving Force: J$rith Computers Be- coming More Alike, the Action Shifts to Programs, Business ‘+’lldward !{’arner, “Site I,icensin~ Stirs IJebat~ at Com- Ureek, Feb. 27, 1984, p. 74. dex, ” C’omputerworki, May 13, 1985, pp. 1,11. 184 . Intellectual Property Rights in an Age of Electronics and /formation to some extent by establishing “software es- licensees should the vendor go out of business crow” systems in which a third party holds or terminate service on a particular program.97 a program’s source code and development and “-Liliane Choney, “Software Escrow and the Security Prac- maintenance documentation for release to titimer, Computer Security Journal, summer 1984, pp. 67-76.

Figure 6-4.—A Shrink-Wrap License Contract

XYQUEST Program License Agreement YOU SHOULD CAREFULLY READ THE TERMS AND CONDITIONS OF THIS AGREEMENT BEFORE BREAKING THE SEAL OF THIS PACKAGE OPENING THE PACKAGE INDICATES YOUR ACCEPTANCE OF THESE TERMS AND (’CONDITIONS XYQUEST PROVIDES THIS PROGRAM AND LIENSES ITS USE IN THE UNITED STATES AND PUERTO RlCO. YOU ASSUME THE RESPONSIBILITY FOR THE SELEC- TION OF THE PROGRAM TO ACHIEVE YOUR INTENDED RESULTS, AND FOR THE INSTALLATION, USE AND RESULTS OBTAINED FROM THE PROGRAM LICENSE You may a) use the program on a single machine, b) copy the program into any machine readable or printed form for backup or modification purposes in support of your intended use of the program on a single machine. c) modify the program and/or merge it into another program on the single machine (Any Portion of this program merged into another program will continue to be subjecl to the terms and conditions of this agreement.); and, d) transfer the program and license to another party if the other party agrees to accept the terms and conditions of this Agreement If you transfer the program, you must at the same time either transfer all copies whether in printed or machine readable form to the same party or destroy any coples not transfered, this includes all modifications and portions of the program contained or merged into other programs You must reproduce and include the copyright notice on any copy, modification or portion merged into another program YOU MAY NOT USE, COPY, MODIFY OR TRANSFER THE PROGRAM, OR ANY COPY, MODIFICATION OR MERGED PORTION, IN WHOLE OR IN PART, EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS LICENSE IF YOU TRANSFER POSSESSION OF ANY COPY, MODIFICATION OR MERGED PORTION OF THE PROGRAM TO ANOTHER PARTY YOUR LICENSE IS AUTOMATICALLY TERMINATED TERM OF LICENSE The license is effective until terminated. You may terminate the license at any other time by destroying the program together with all copies, modifications and merged portions in any form It will also terminate upon conditions set forth elsewhere in this Agreement or if you fail to comply with any term or condition of this Agreement. You agree upon such termination to destroy the program together with all copies, modifications and merged portions in any form Limited Warranty THE PROGRAM IS PROVIDED ‘AS IS’ WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE THE ENTIRE RISK AS TO THE QUALITY AND PERFOR- MANCE OF THE PROGRAM IS WITH YOU. SHOULD THE PROGRAM PROVE DEFECTIVE, YOU AS- SUME THE ENTIRE COST OF ALL NECESSARY SERVICING, REPAIR OR CORRECTION. SOME STATES DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO YOU THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS AND YOU MAY ALSO HAVE OTHER RIGHTS THAT VARY FROM STATE TO STATE XYQUEST does not warrant that the functions contained in the program Will meet your requirements or that the operation of the program will be uninterrupted or error free. Limitations of Remedies XYQUEST’s entire liability and your exclusive remedy shall be: a) the replacement of any diskette not meeting XYQUEST’s Limited Warranty and which is returned to XYQUEST or an authorized XYQUEST distributor along with a copy of your receipt, or b) if XYQUEST is unable to deliver a replacement diskette which is free of defects in materials or workmanship, you may terminate this agreement by returning the program with all documentatlon and your money will be refunded. IN NO EVENT WILL XYQUEST BE LIABLE TO YOU FOR ANY DAMAGES, INCLUDING ANY LOST PROFITS, LOST SAVINGS OR OTHER INCIDENTAL OF CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OR INABILITY TO USE SUCH PROGRAM EVEN IF XYQUEST HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR FOR ANY CLAIM BY ANY PARTY. SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES SO THE ABOVE LIMITATION MAY NOT APPLY TO YOU. General You may not sublicense, assign or transfer the license or the program except as expressly provided m this Agreement. Any attempt otherwise to sublicense, assign or transfer any of the rights, duties or obligations hereunder is void. This Agreement will be governed by the laws of the state of Massachusetts. Should you have any questions about this Agreement, you may contact XYQUEST, Sofeware Sales and service, P.O. Box 372, Bedford, Massachusetts 01730. YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT, UNDERSTAND IT AND AGREE TO ITS TERMS AND COND1TIONS. YOU FURTHER AGREE THAT IT IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN YOU AND XYQUEST WHICH SUPERSEDES ANY PRO- POSAL OR PRIOR AGREEMENT, ORAL OR WRITTEN, AND ANY OTHER COMMUNICATIONS BE- TWEEN US RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.

SOURCE. XYWRITE II Program Materials, XyQuest, Inc. , 1983 Chapter 7 New Technologies and the Intellectual Property Bargain Contents

Page Findings ...... 187 The Intellectual Property Bargain ...... 188 Transformation of the Constitutional Bargain : : : : : : : : : : : : : : : : ...... 190 The Intellectual Property Bargain in a New Technological Context ...... 193 Private Use ...... 193 Private Use as Fair Use...... 195 Chapter 7 New Technologies and the Intellectual Property Bargain

FINDINGS

● Technology is spawning a wide range of new and cannot be the foundation for a legal right opportunities to use information-based prod- to profit from new uses of copyrighted works ucts and services. A central question for in- made available by technology. Whether Con- tellectual property law is who shall benefit gress wishes to consider new uses as harm- from these opportunities. In the Supreme ful will depend on the goals that it seeks to Court’s “Betamax” decision, for example, promote through copyright law, and where the question was whether proprietors or it believes the benefits of new technologies users would benefit, either directly or indi- should be allocated. rectly, from home videorecording capabil- ● The need for congressional action on this is- ities. As even newer technologies affect indi- sue is immediate. Public opinion, while tend- viduals’ abilities to copy, store, and modify ing to favor free private use, is not yet firmly information, such questions are likely to established. However, as technologies for multiply. duplicating, storing, and manipulating in- ● Because it evolved in a period when dupli- formation become more prevalent and so- cation and storage technologies were cen- phisticated, public opinion and public be- tralized and deployed in a commercial con- haviors may become more entrenched. text, copyright law offers little guidance to ● A separate, but related issue is that of ac- courts in resolving conflicts over who shall cess to information goods distributed elec- benefit from new uses afforded by technology. tronically. Traditionally, copyright law has Neither the existing framework of rights nor provided a quid pro quo between proprie- limitations on those rights, such as fair use, tors and the public in information goods sold clearly apply to the private use of informa- in copies. The sale of copies ensured public tion-based goods. access to copyrighted works. However, be- ● Some survey research has been conducted cause electronically disseminated works are on the financial benefits that would accrue not sold in copies, but accessed through com- to proprietors if they were remunerated for munications media, Congress may need to renew technological uses, and unremunerated think the intellectual property bargain to en- uses are often considered harmful to copy- sure adequate access to information goods. right proprietors. Estimates of harm, how- The policies pursued with respect to access ever, are in and of themselves insufficient to and communications law will affect the reso- assist Congress in resolving the issue of who lution of the private use issue. is to benefit from new uses. They presuppose

INTRODUCTION: A NEW INTELLECTUAL PROPERTY CONTEXT Innovations in information technology re- information-based products and services: 1) quire that policy makers address two funda- what rights in information products and serv- mental questions about property rights in ices should be granted to a proprietor and 2) what

187 188 ● Intellectual Property Rights in an Age of Electronics and Information — ———

rights should be retained by the public? Al- benefit conferred on an author by the grant though copyright law has traditionally an- of a right exacts a corresponding cost from the swered these questions, information and com- remainder of society. munication technologies have created a new The rights granted the author are not, how- context in which the application of copyright ever, meant to be gratuitous burdens on the law is uncertain. In some cases, the technol- freedoms of the public. Congress has in the past ogy is shifting the capabilities of printing, pub- stressed that rights are granted to authors for lishing, and distributing information from the the purpose of benefiting the public, and so, centralized commercial entrepreneur to private individuals. In others, the technology is cre- .,. [i]n enacting a copyright law Congress ating new and unprecedented uses for infor- must consider . . . two questions: First how mation products and services. The videocas- much will the legislation stimulate the pro- sette recorder, for instance, not only allows a ducer and so benefit the public, and, second, user to watch motion pictures where and when how much will the monopoly granted be det- he will, but also to store video transmissions rimental to the public? The granting of such exclusive rights, under the proper terms and taken off the airwaves. conditions, confers a benefit upon the public that outweighs the evils of the temporary The current debate before the courts and 1 Congress centers on whether copyright propri- monopoly. etors or the public shall benefit from these new The effect of technology on this ‘cost/bene- technological capabilities, and whether and fit” equation underlies the discussion in this how both can benefit. On the one hand, tech- chapter. To understand how the current debate nology gives the public an unprecedented abil- arose, the chapter looks first at the U.S. Con- ity to access, store, transmit, and manipulate stitution and the bargain that it established information, with little or no need for pub- between authors and the public. It then exam- lishers, printers, or distributors. On the other, ines how technology has changed the context the same technologies simultaneously permit in which that bargain is carried out, causing the copyright proprietor to exploit markets ambiguity and uncertainty over which rights that have never before existed. In many cases, should belong to the proprietor and which the interests of the proprietor and the public should be retained by the public. Finally, this are in conflict; as, for example, with home video chapter suggests that resolving this issue will recording. depend on which criteria are chosen for analy- In resolving the question of who should ben- sis, and which goals Congress seeks to imple- efit from new technology, one must begin by ment through intellectual property policy. understanding that rights granted to a propri- Four such criteria are considered: harm, effi- etor in a work act as prohibitions on the sub- ciency, access, and public opinion. sequent uses that others may make of it. To grant a right is to make certain activities illegal for all but the author of a work. Thus, the ‘H. R, Rep, No. 2222, 60th Cong., 2d sess. (1909).

THE INTELLECTUAL PROPERTY BARGAIN We saw in chapter 2 that American intellec- tion of writings, and the eventual return of both tual property law can be thought of as a bar- to the public domain.2 The purpose of copy- gain between individual creators and the pub- right, in particular, is to benefit the public by lie. In exchange for granting authors and encouraging learning through the dissemina- inventors exclusive rights in their writings and ——— ‘U.S. Const., Art., I, sec. 8, cl. 8. At the time the constitu- inventions, the American public is to benefit tion was written, the word “science” meant knowledge in the from the disclosure of inventions, the publica- broadest sense of the word. Ch. 7—New Technologies and the Intellectual Property Bargain ● 189 — —— tion of works. Although the Supreme Court James Madison, too, was aware of the mo- has consistently interpreted the intellectual nopolistic connotations of a governmentally property bargain to be “primarily” for the ben- granted exclusive right.7 However, he distin- efit of the public,3 James Madision—the prin- guished American intellectual property and cipal author of the intellectual property clause— thus copyright from the pernicious monopo- believed that “[t]he public good fully coin- lies that had preceded it: cides . . . with the claims of individuals’ in in- Monopolies are sacrifices of the many to the tellectual property.’ In Madison’s view there few. Where the power is in the few it is natu- was no question of subordinating the interests ral for them to sacrifice the many to their own of either the author or the public. The purpose partialities and corruptions. When the power of the intellectual property clause—the public as with us is in the many not in the few the benefit–and the mechanism for achieving that danger cannot be very great that the few will purpose—the creator’s exclusive right—were be thus favored.8 5 merged in one simple bargain. To avoid the evils of monopoly, Madison in- Although few disagree that the ends that intended that the exclusive rights afforded by tellectual property seeks to promote are in the copyright be very limited; he envisioned lim- public interest, many feel that the means cho- ited rights, owned by “many,” for limited sen are in fact inimical to it. Because the con- periods of time. stitution grants exclusive rights, copyrights Madison’s concerns over monopoly and his and patents are sometimes considered “monop- confidence in the “coincidence” of the public olies,” and—at best—necessary evils. Thomas and private interest were reflected in the par- Macaulay, a British legal historian, voiced this simonious bundle of rights granted by the first opinion in a speech on the subject of copyright copyright act.9 To accomplish its stated goal before Parliament: of encouraging learning, the act granted authors Copyright is a monopoly, and produces all rights that were far more limited than those the effects which the general voice of man- of the most recent copyright statute. Copy- kind attributes to monopoly. The effect of right law gave authors only the rights to monopoly generally is to make articles scarce, “print, reprint, publish and vend” their writ- to make them dear, and to make them bad. ings. The author retained the right to repro- It is good that authors should be remuner- duce the copyrighted work for sale, but he held ated; and the least exceptionable way of no property rights in books as such. A copy- remunerating them is by a monopoly. Yet right was infringed, not by the uses to which monopoly is an evil. For the sake of the good we must submit to the evil; but the evil ought a work was put, but by the unauthorized exer- not last a day longer than is necessary for the cise of the author’s commercial rights to sell purpose of securing the good.’ the work and to print copies of it. ’” Thus, af- calling for limits on its scope and duration. See: Stephen Breyer, ‘‘The Uneasy Case for Copyright, 84 Harvard La w Re~+ew 281, 1970: and Benjamin Kaplan, An Unhurried View of Cop~v-ight “’The Copyright law, like the patent statute, makes reward (New York: Columbia University Press, 1967). to the owner a secondary consideration.’” Fox Film v. Doyal, As ch. 2 discussed, many of the earliest intellectual prop- 286 U.S. 123, 127, as quoted in SorJy Corp. v. Universid Cit~T erty schemes, such as the Stationers Copyright, were true mo- Studios, 464 U.S. 417, 429 [1984). nopolies, concentrating a good deal of economic and social power ‘From The Federalist, No. XLIII, 281 (italics added). in the hands of a small number of people. Leon Seltzer, author of a noted book on copyright, wrote ‘Letter from James Madison to Thomas Jefferson, Oct. 17, that “to sav that the benefit to the author is a ‘secondary con- 1788, as quoted in Bruce Bugbee, (ienesis of American Patent sideration’-is like saying that when reliance is put on a flask and Cop-vright Law (11’ashington, DC: Public Affairs Press, to transport wine across a carpeted room, whether or not the 1967), p. 130. flask leaks is, with respect to getting the wine there, a ‘second- C’Act of May 31, 1790, ch, 15, 1 Stat. 124. ary consideration. ‘‘ Leon Seltzer, Exemptions and Fair Use “At the time that the constitution was written, printing in Cop}’right (Cambridge, MA: Harvard University Press, 1978), and publishing required large, costly equipment that made them p.14. essentially commercial enterprises. The constitutional bargain ‘Thomas Macaulay, “Speeches on Copyright” (1841), quoted therefore presupposed a commercial environment for the ex- from Barbara Ringer, The Demonology of Cop~ight (New York: ploitation of Writings; it could hardly have done otherwise, since R.R. Bowker, 1974), p. 13. More recently, Stephen Breyer and the technology of the day necessitated a publisher. Thus, be- Benjamin Kaplan have expressed similar views on copyright, cause of the economics and technology of publishing, the rights (continued on next page) 190 . Intellectual Property Rights in an Age of Electronics and Information ter a work had been commercially printed and Transformation of the sold, others could display it, read from it pub- Constitutional Bargain licly, or even write other books based on it, without infringing the author’s copyright.11 During the 19th and 20th centuries, this con- Even though the author might have profited stitutional bargain was gradually transformed, from these subsequent uses, the drafters of the perhaps the most significantly through the first copyright act did not believe it necessary gradual expansion of rights. Like the expan- to grant such extensive rights in order to en- sion of copyrightable subject matter (see ch. courage learning. 3), the expansion of rights granted under copyright largely tracked technological develop- Numerous other features of the first copy- ment. Those granted under the first copyright right law ensured that the bargain struck be- act of 1790 corresponded to the capabilities tween the author and the public would not con- 12 of the printing press; these were the rights to stitute a monopoly. For example, the term print, reprint, publish, and vend a writing.14 of copyright protection was limited to 14 13 New rights were gradually added to the copy- years, after which time the work would re- right scheme as social and technological change turn to the public domain and anyone would prompted Congress to include an expanding be free to print it. The copyright term ended variety of subject matter. The “right to per- within the lifetime of both the author and his form, ” for example, was first granted in 1856 reading public, so that, even if copyright were for dramatic compositions, 15 and in 1897 was a monopoly, it was one that could not last long. applied to musical compositions.16 In 1909, Moreover, copyright was initially vested in the Congress granted musical compositions a “me- author, although he could thereafter assign his chanical recording right, "17 at which time the copyright to others. By creating as many copy- duration of copyright was also lengthened from rights as there were authors, the law avoided its initial 14 to 28 years,18 and on renewal, to the concentration of market power, as Madi- 56 years.19 Finally, in 1976, the term of copy- son said, in “hands of the few. ” right was extended to the life of the author plus 50 years.20 (continued from previous page) During this period of statutory expansion, conferred by the intellectual property clause on authors had operational significance as a regulation of the business of pub- the judiciary also sought to mark the bound- lishing. Indeed, this notion of copyright as a form of trade reg- aries of the exclusive right. In the beginning, ulation is, as we shall see, substantiated in other developments. the courts confined infringement to literal The precursor to the concept of copyright—the Stationer’s Charter-granted publishing rights to printers, rather than word-for-word plagiarism, and seldom assessed authors; furthermore, the first Federal copyright statute was the ostensible similarities between one work held to extinguish any common law rights of the author upon and another. They did not extend copyright publication (an activity which at the time required the commercial publisher as intermediary). protection to protect what are now known as 21 “Each of these activities would be illegal today, “derivative works.” A playwright, for exam- 12It is doubtful that a copyright would qualify as a monop- ple, did not require permission from the author oly as defined by antitrust law. Monopoly, as the term is used in antitrust, is the power to set prices or exclude competition of a novel to base his play on the novel. Courts in a relevant geographic and product market. See, e.g., United strictly limited infringement to printing the States v. Grinnell Corp., 384 U.S. 563 (1966). A single copy- author’s book without his consent. right is at most a monopoly of a product, which seldom gives the copyright proprietor market power. Others are free to com- .— pete with the author, so long as they do not copy or produce ‘“A(t of May 31, 1790, ch. 15, 1 Stat. 124. works that are substantially similar. “Act of Aug. 18, 1856, ch. 169, 11 Stat. 138. 13This term was renewable by living authors for another 14 “Act of Jan. 6, 1897, ch. 4, 29 Stat. 481. years. The drafters of the act may have arrived at 14 years based ‘7 Act of Mar. 4, 1909, ch. 320, 35 Stat. 1075. on previous experience. Several of the States had, per a 1783 ‘n Ib~d. recommendation of the Continental Congress, passed copyright “Former Title 17 U.S.C. $24. legislation with a term of 14 years. The recommendation was ‘“Current 17 U.S.C. j302. modeled on the Statute of Anne, which also implemented a 14- “For example, a German translation of the entirety of Un- year term. L. Ray Patterson, Copyright in Historical Perspec- cle Tom Cabin was held not to infringe. Stowe v. Thomas, 23 tive (Nashville, TN: Vanderbilt University Press, 1968), p. 183. Fed. Cas. 201, No. 13514 (C. C. E. D. Pa. 1853). —.—

Ch. 7—New Technologies and the intellectual Property Bargain ● 191

Gradually, however, the courts began to law,25 it nevertheless extended the right to copy adopt a broader and more qualitative approach to a new subject matter.26 to the question of similarity.22 They began to This seemingly trivial change in the word- interpret “copying” to mean more than sim- ing of the law would have far-reaching conse- ple duplication and to include mimicking or ex- quences. The change meant that “copyright tensive borrowing within its definition. They proprietors, without seeking it and apparently decided whether a defendant had infringed a quite by accident, acquired at least the sem- plaintiff’s right to print, reprint, publish, or blance of a right of an activity that was to have vend on the basis of an often subjective esti- 7 increasing importance in the new century. “2 mation of what was essential and unique to 23 For the ambiguity of the word “copy” subse- a given author’s writing. As chapter 3 details, quently endowed proprietors with rights, not the courts began to use the concept of “idea” only against commercial piracy, but also versus “expression” as the accepted tool of against noncommercial personal or private analysis for determinations of similarity. They 28 use. To some, this expansion of copyright law ruled that infringement occurred not only when is at odds with the traditional intention of copy- an individual printed the writings of another, right. Commenting on the issue of photocopy- but also when one author adopted an expres- ing, Francis Nevins, a copyright scholar, notes sion that was similar to another’s. Courts that: found no infringement only when the similarities between works were confined to ideas— . . . [copyright is intended to govern relations the abstract concepts or themes employed in between the creator of a work and all those the work. business people who intervene between the creator and the work’s ultimate consumers. It was Congress however, that, unwittingly It is not intended to control non-commercial and perhaps accidentally, granted written works the most far reaching of rights in the ————— 25H.R. Rep. No. 2222, 60th Cong., 2d sess. 4 (1909). act of 1909. To the exclusive rights of print- ‘bThus, the redundancy of the terms “print, reprint, and ing, reprinting, publishing, and vending, it copy” was noted years later in a Report of the Registrar of added the right to copy.24 Before then, “copy- Copyrights on the General Revision of the U.S. Copyright Law, 87th Cong., 1st sess., 1961. Although the verbs “copy” and ing’ was a right applied only to photographs, ‘‘print are nowhere defined in the law, Webster offers a defini- paintings, engravings, and other graphic works: tion of print most clearly fitting the context of authorship and works that were not ordinarily reproduced publication: “to publish in print. ” This defintion would make sense of phrases such as “out of print. ” “Copy” is described through “printing” or “reprinting.” Although as a synonym for “imitate, mimic, ape, mock. ” section 1 of the 1909 act claimed to “retain “L. Ray Patterson, “Copyright, Congress and Technology: without change” the rights granted under prior The Public Record ’” —Book Review, 34 Vanderbilt Law Review, 833 (1981), n.30; see also Vernon Clapp, Cop.vright —A Librar- ian View (1968), 22 See, for example, the case of Daly v. Palmer, 6 Fed. Cas. “The dubious pedigree of the right to copy was later recog- 1132, No 3552 (C.C.S.D.N.Y. 1868), in which an escape from nized in the watershed case of Williams & Wilkins Company bondage to a train track constituted the sole common theme v. United States, 487 F.2d 1345, 1351 (Ct. Cl. 1973), aff’d, 420 between two plays, and the basis of infringement. U.S. 376 (1975), which stated that “ ‘copy’ is not to be taken “Kaplan, Unhurried View, p. 28. in its full literal sweep, thus raising ‘‘a solid doubt whether “The word “copy” was first used in conjunction with the in- and how far ‘copy’ applies to books and journals. In this case, fringement of etchings in an amendment of 1802, ch. 36, ~3, publishers of medical journals sued the United States for the 2, Stat. 171. Again, in an amendment of 1831, copying was a copying activities of the National Libraries of Medicine and Na- term applied to the infringement of other than literary works. tional Institutes of Health, which, in a split decision, the Court See the Revision of 1831, Ch. 16, jj6-7, 4 Stat. 436, In 1870, of Claims determined to be fair use. Professor Nimmer notes when paintings, drawings, chromos, statuettes, and other three- the ambiguity regarding “copy,” and says that the confusion dimensional works were added to the growing list of subject is no longer present ‘‘since under the 1976 act the term ‘copy’ matter, the rights afforded all copyrighted works were ag- clearly includes a photocopy (citing Section 101 of the Act which ~egated under one section ($86), but the activities constitut- defines “copies’’ ).” Nimmer on Cop~”ght j13.05[Ej (]984). HOW- ing infringing conduct were separated so that “copy” applied ever, the definition to which Professor Nimmer alludes is of the to works other than maps, books, and charts. Revision of 1870, noun form—i.e., “the tangible object’ ’–while the ambiguity ch. 230, \ \99-100, 16 Stat. 198. In the general revision of 1909, noted in Williams & Wilkins revolves around the meaning and infringing conduct was not defined, and “copy” was retained application of the verb form—i.e., whether the activity of copy- as a right applying to all works. ing is one in which the copyright owner holds a right. 192 ● Intellectual Property Rights in an Age of Electronics and Information

use of copyrighted works nor to permit law- The theory of copyright as property is the 29 suits against non-commercial users. source of much confusion and conflict over At a critical juncture in the emergence of new copyright law. It provides the basis for say- technologies such as the photocopier and the ing that copyright proprietors have a problem tape recorder, the vagaries of copyright law of enforcing unauthorized uses, such as home may have yielded a fundamental change in the videotaping (see ch. 4). If copyright is a public bargain between the proprietor and the pub- policy tool, directed toward regulating com- lic. A literal interpretation of the right to copy petitors in the marketplace, rights to these uses transformed copyright from the right to con- do not exist. Nor do problems of enforcing trol the use of copyright for commercial profit them. Also, as new uses for copyrighted works (vis-à-vis competing publishers) to the right are bred by technology (see later in this chap- to control the copyrighted work itself (vis-à- ter), conflicts arise over who benefits from vis the user of the copyrighted work) .30 Ironi- these new uses. Again, if copyright is con- cally, proprietors’ control over the copyrighted strued as a right to commercialize one’s crea- work emerged at same time as technology was tion, rather than a property right in each copy perfecting methods of denying them that con- of that creation, the benefits of new technol- trol—the photocopier and the tape recorder. ogies will go to the public. This distinction between control over a copy- The central question that Congress needs to right and control over a copyrighted work is address is whether copyright shall be consid- critical. If copyright is essentially the right to ered property or regulation. If Congress were commercially exploit an intellectual creation, to resolve the question, clear guidelines on the 32 then it is a form of regulation designed to en- legality of the “private use” of copyrighted sure that only an author will be allowed to sell works might be possible. So far, however, Con- his work to the public. It also means that end gress has not given a clear statement of the users of the work are free to copy, store, ma- nature and purpose of copyright. When it en- nipulate, and share copies that they have pur- acted the latest revision of the copyright law chased. If, on the other hand, copyright is a in 1976, Congress folded the exclusive rights right to control how a work is used, then it is to print, reprint, and copy into the right “to 33 a form of property; a bundle of rights that fol- reproduce the copyrighted work in copies. ’ lows each and every copy of a book, record, Ambiguities remain, however, about whether or computer program. Under this theory, pro- this and other exclusive rights are proprietary prietors have rights to profit from the uses to or regulatory in nature, and therefore, whether which the work is put.31 they apply to private use activities. The House Committee Report that accompanies the act sheds little light on the question, but suggests that at least the right to reproduce copies is directed at commercial printing and publish- “Francis M. Nevins, Jr., “University Photocopying and ing activities, and is therefore regulatory .34 Sig- Fair Use: An American Perspective, ” 8 European lntellectual Property Review 222 (1985) (italicx added). Support for this no- nificantly, no court has yet held private use tion of copyright as an essentially commercial right can also to be an infringement, which also suggests that be found in Supreme Court opinions: An author who possesses an unlimited copyright may preclude others from copying his creation for commercial purposes with- 32 out permission. . Congress may guarantee to authors and in- Private use is defined and discussed in greater detail in ventors a reward in the form of control over the sale or commer- the next section. cial use of copies of their works. “17 U.S.C. § 106(1). GoMs.tein v. California, 412 U.S. 546,555 (1973) (italics added). “11.R. Report No. 94-1476 says that: “’Note that this is different than the distinction made in A single act of infringement may violate all of these rights Section 202 of the Copyright Law between the work and the copy. (under $106) at once, as where a publisher reproduces, adapts, “Today, rights to these uses is confined to reproducing, de- and sells copies of a person’s copyrighted work as part of a pub- hshing venture. Infringement takes place when any of the rights riving, publically performing or displaying, and distributing the is violated: where, for example, a printer reproduces copies with- copyrighted work. 17 U.S.C. j 106. Other rights to uses of a work out selling them or a retailer sells copies of a person’s copyrighted have been proposed, such as rights to royalties on library lending. work as part of a publishing venture. Ch. 7—New Technologies and the Intellectual Property Bargain ● 193 — — copyright is regulatory and not meant to pro- ing and electronics industries disagree over hibit copying by end users of a work.35 The “Be- whether these comments apply to the 1976 re- tamax” decision, in which the Supreme Court vision. Proposed legislation, which would pro- ruled that videotaping for purposes of "time- vide for “royalties’ on blank tape,37 and ex- shifting’ is legal, left the question of private emptions for home-taping activities” are all use open. The status of rights in sound record- predicated on the resolution of this policy is- ings are also ambiguous. Although the House sue, which existed since the time the photo- Report accompanying the 1971 recording rights copier was introduced over 20 years ago. amendment says that “private copying’ is ex- 36 The issue of whether copyright is regulatory cluded from the act, advocates of the record- and governs only commercial entrepreneurs, or whether it is proprietary and controls the ultimate users of copyrighted works is still un- —.— settled. A definitive answer will require con- The U’illiams & WilJc~rIs case seems to be the closest that gressional action. Whether, in deciding the is- courts have come to deciding the issue of pri~’ate use. That sue, Congress wants to strike a new bargain case— which decided that the substantial and systematic copying and distribution of journal articles by two governmental will depend on a number of criteria, four of institutions was fair use— has little resemblance to the pritrate which are considered in the next part of this use concerns of the record, software, and motion picture indus- chapter. tries. The case was heard by a total of 16 judges, and was split /3 to 8 on the issue of infringement. In dicta, S0%’1’ Corp. }’. Universal Cit.v Studios. 464 U.S. 417 (1 984), the Supreme Court has said that: ., [e]ven copying for noncommercial purposes may impair the copvright hol(iers ah iljt} [ o oht ain the rewards that Congress intended him to havcj Specifically, it is not the intent ion of theC’ommittee to restrain But, the status of such pri~ate use was further obscured in the the home recording, from broadcasts or from tapes or records, next sentences: of recorded performances, where the home recording is for private use and with not purpose of reproducing or otherwise Hut a use that has no d(.mon~trahle effect upon the potential capitalizing on it This practice is common and unres[ralned market for, or the \alue of, the copyrighted work need not be today, and the record produc~rs and performers would be in no prohibited in order to protect the author’s incentive to create different position from that of the owners of copyright in of ~uch noncommercial uses would mere]; in- The prwhihition recorded musical composition o~’er the past 20 y ears. hihlt access to Ideas without an} countervailing benefit. ‘“S.31 and H.R. 1030 (Sen. N!athias and Rep. Don Edwards), The issue of private use, as a class of uses to which cop~righted 9t3th Cong., 1st sess. works majr be put, remains unresolved. %. 175 and H.R. 175 (Sen. DeConcini and Rep. Fole~r), 98Lh “ H.1{. Rep. No. 92-487, 92d Cong., 1st sess. 2 ( 1971) reads: Cong., 1st sess.

THE INTELLECTUAL PROPERTY BARGAIN IN A NEW TECHNOLOGICAL CONTEXT Technology is transferring activities such as what conditions. Whether copyright should ex- printing, publishing, reproducing, and modi- tend to private use depends, in turn, on a num- fying works from the commercial entrepreneur ber of criteria, including whether it causes to the end user. As a result, policy questions harm to copyright proprietors, whether it are emerging about whether and how the copy- would be economically efficient to extend right proprietor is to be remunerated for end rights, whether political support for an exten- user, or private use, activities. The private use sion of rights exists, and whether access to in- of copyrighted works raises questions of how formation can be ensured. far the rights currently granted to the copyright proprietor should extend when new tech- Private Use nologies change the context in which these rights operate. Because copyright law does not Private use of copyrighted works differs clearly extend to private use, Congress needs from commercial piracy in several ways. Pri- to consider whether it should, and if so, under vate use is private, meaning that it is difficult, 194 ● Intellectual Property Rights in an Age of Electronics and Information if not impossible, to detect, monitor, and con- new forms of private use will occur. At present, trol the use.39 Unlike commercial piracy, pri- these uses principally involve the copyright vate use is not a commercial activity. The per- proprietor’s right to reproduce the copyrighted son who makes a copy of a television program work.43 The photocopier and the audio and or a magazine article does not ordinarily at- videocassette player, for example, each enable tempt to sell that copy. He is typically an end users to reproduce information, and perhaps user of the information, and as such, does not infringe the proprietor’s reproduction right. As compete commercially with the proprietor. more information becomes distributed elec- However, as is discussed below, the aggregate tronically and downloaded over networks, the economic effect of individuals’ private use may issue of private use involving reproduction be equivalent to what might occur with com- may become more complex. In the age of print, mercial piracy. for example, a person could purchase a book, and read and re-read it as often as he pleased. For puposes of this discussion we shall de- When accessing information over a network, fine private use as the unauthorized, uncom- however, a person may need to reproduce a pensated, noncommercial, and noncompetitive work tore-use it. Thus, conflicts may arise be- use of a copyrighted work by an individual who 40 tween proprietors and users requiring a pol- is a purchaser or user of that work. The "time icy decision about the rights people have in shifting” videotaping involved in Sony Corp. 41 information they have purchased. v. Universal City Studios, the home recording of a piece of music, the copying of a maga- Private use involving reproduction rights zine, a newspaper article, or a computer pro- may be only the beginning of private use is- gram might all be considered instances of sues. As inexpensive home computers become private use. Private use may be occasional or more prevalent, and as more information is insubstantial-as when a cartoon is photocop- stored in computer processible media,44 the ied (possibly infringing reproduction rights) proprietor’s exclusive right to make derivative and posted on an office door (possibly infring- works may become an equally important is- ing display rights) -or it can be systematic and sue.45 The extreme manipulability of digitally substantial-as when music “libraries” are mediated information will allow individuals to built on blank tape (possibly infringing repro- reconstruct, enhance, and modify information duction rights) and shared amongst friends to suit their taste or needs. This is already pos- (possibly infringing distribution rights) .42 sible with computer programs, and may soon be feasible for music, video, and text. In the Technology has fostered private use, and it future, a user might enter the digital version will continue to expand individuals’ capabil- of a song—perhaps stored in a medium simi- ities to make private use of copyrighted mate- lar to today’s compact disk-into the memory rials. With each new application of technology, of his computer. Once in the computer, he could subject the song to any number of modifica- “The difficulties of enforcing private use activities is discussed in ch. 6 on enforcement. tions: he may take the vocals out and substi- ‘“See Anne Branscomb, The Accommodation of Intellectual tute them with his own; he may vary the pitch, Property Law to the Introduction of New Technologies, OTA contract re ort, December 1984, discussed under the term” r- rhythm, and melody; or he may add instru- P sonal use. ’ It should be noted that “unauthorized” herer oes ments. The issue will then be whether the copy- not mean “illegal’’ -it means without consent. “Noncompeti- tive” means that the fruits of private use are not sold commer- right proprietor has the exclusive right to pro- cially. Private use is also referred to as “ rsona.1 use, ” “pri- vide users with modified versions of his work. vate co in , “ “noncommercial use, ” anp “home use. ” 4’SO{~ (%orp. v. Universal City Studios, 464 U.S. 417 Just as today’s audiotaping potentially harms (1984). proprietors by displacing a sale (see below), so “The literal application of Section 106 of Title 17 would, subject to the application of fair use or exemptions, make any too might proprietors say that user derivation reproduction, derivation, dissemination, performance or display, of their works deprives them of potential sales. regardless of its context, an infringement. It may well be that the new wave of technological uses, urdike the technolo “es of 444“17 U.S.C. §106(1). reprography and reproduction, would implicate each o? these See ch. 4 on enforcement. rights. “17 U.S.C. §§ lOl, 106(2). —.

Ch. 7—New Technologies and the Intellectual Property Bargain ● 195

As computer networks proliferate, private with activities such as home taping, the propri- use may assume other forms, and create issues etors of DBS programming assert that the un- involving the proprietor’s exclusive rights to authorized and unremunerated reception of sig- distribute, perform, or display the copyrighted nals deprives them of revenue. Cable Television work. 46 If, for example, a user in a computer operators, who are the intended recipients of network sends copyrighted information to an- many of these satellite signals, also assert that other network user, has he infringed the propri- unauthorized reception undermines their sub- etor’s right to distribute the work? If policy- scription system. Like private use, the satel- makers or the courts liken this sharing over lite viewing rights issue also involves the networks to sending a book to a friend through balancing of compensation to proprietors with the mail, they will find no infringement of copy- public access to the signals.50 Like private use, right, and hence no issue of private use. If, in- unauthorized reception is difficult to monitor stead, they compare it to a person photocopy- and prove, and detection may raise privacy ing and sending a book to a friend, they may problems. 51 Because of these similarities, much find that the proprietor’s copyright has been of the following analysis of private use applies infringed. Whether private use is considered with equal force to unauthorized reception. an illegal activity will often depend on the analogies that policy makers use. Private Use as Fair Use New methods of distributing information, Fair use is a judicially developed doctrine, such as Cable Television, Satellite Master- which originated in 1841 in the case of Folsom Antenna Television (SMATV), Multichannel v. Marsh.52 Its purpose, like that of the copy- Multipoint Distribution Service (MMDS), and right itself, is to benefit the public by facilitat- Direct Broadcast Satellites (DBS), augment the ing the access to and dissemination of works. technologies for private use and exacerbate ex- 47 It is a “safety valve” for cases in which copy- isting tensions with respect to it. In many right law does not serve the public interest.53 cases, the communication issues created by the In other words, fair use concerns those uses new distribution technologies are very simi- of a work that would be technically infringing, lar to copyright issues involving private use. but for the fact that they themselves further The case of DBS and “satellite viewing the promotion of science and useful arts. rights’ is one example. A recently enacted law Fair use is not subject to precise definition. allows people to sell and own receiving equip- Which uses are fair will often depend on the ment, such as dish antennae, but requires them particular circumstances of a case. For this rea- to pay a “reasonable” fee to program owners son, fair use is often called an “equitable rule if a marketing system for collecting such fees of reason. ’54 Although Congress codified the has been set up.48 Although ostensibly a com- -.—.—-——- munications law, this prohibition of unautho- ‘(’S.1618 (Sen. Gore), “Satellite Viewing Rights Act of rized reception is bound up with intellectual 1985, ” for example, seeks to ensure access by limiting broad- property issues, including private use.49 As caster discretion over distribution, pricing, price discrimination, and decoder availability. “’’Short of Staking Out the Farmhouse, How Can Program “17 U.S.C. § 106(3),(4), (5). Owners Prove That a Farmer Ripped Them Off? Answer: They ‘-Although these communication technologies are presently Probably Can’t. ” Forbes, Nov. 5, 1984. See also ch. 4 on en- used primarily for television, their application need not be so forcement. limited. Telephone signals, videotext, teletext, and data trans- 529 Fed. Cas. 342,246, No. 4,901 (C.C.D. Mass. 1841). missions may eventually be routed through cable and satellite “In some cases, “courts in passing upon particular claims systems. Trudy Bell, “The New Television: Looking Behind the of infringement must occasionally subordinate the copyright Tube,” IEEE Spectrum, September 1984. holder’s interest in a maximum financial return to the greater ‘“Section 705 of the Communications Act (Section 5 of the public interest in the development of art, science and industry. ” Communications Policy Act). 13erlik v. E.C. Puln%mtions, Inc., 329 F.2d 541,544 (2d Cir. 1964). “’Unauthorized reception of signals by an individual in- “41 7 U.S.C. j 107; “Indeed, since the doctrine is an equitable fringes none of the rights of the copyright holder. SMATV, which rule of reason, no generally applicable defintion is possible, and ties many receivers to a master antenna, may infringe the right each case raising the question must be decided on its own facts. ” to perform. H.R. Rep. No. 94-1476 (1975). 196 ● Intellectual Property Rights in an Age of Electronics and Information .- ——

doctrine in the 1976 Copyright Act, it preferred a claim of infringement, it is clear that the de- not to define the term, and instead delegated fense of fair use is only relevant where infringe- its interpretation to the courts. Even the type ment is alleged.58 For instance, one need not of ‘use” that falls under the term ‘fair’ in the claim that sharing a book with a friend is fair statute was left unspecified by Congress, but use, because sharing books is not infringing a House Report says that such uses would “in- conduct under copyright law. Since neither the clude” reproduction.55 courts nor Congress has unequivocally determined that private use constitutes an infringe- Fair use is not, however, a tabula rasa. It ment, the application of the fair use doctrine is a defense to a claim of infringement that, to private use may be premature. if successful, negates a finding of infringement.56 Section 107 of the 1976 Copyright Act Secondly, fair use is a tool used by the judi- lists four factors that courts may consider in ciary to resolve competing claims over the use deciding whether a particular use is fair: of copyrighted works. However, the judiciary may be an inappropriate forum for address- 1. the purpose and character of the use, including the private use issue. Private use is essen- ing whether such use is of a commercial tially a policy issue. It involves a determina- nature or is for nonprofit educational purposes; tion of whether whole classes of activities, such 2. the nature of the copyrighted work; as audio or video taping, should be considered 3. the amount and substantiality of the por- infringements. It requires, moreover, an evaluation used in relation to the copyrighted tion of who shall benefit, and how, from new work as a whole; and technological uses, and whether copyright pro- 4. the effect of the use upon the potential mar- tection should extend beyond protecting com- ket for or the value of the copyrighted 57 mercial activities to protecting profits in mar- work. kets that did not exist before the introduction Although the fair use factors are neither ex- of new technologies. However, the function of haustive nor determinative of the “fairness” courts is not to make policy, but to interpret of a particular use, they are nevertheless used law. In recognition of this point, the Supreme by courts to balance the competing claims of Court stated in Sony v. Universal Studios, “it learning and economic incentive. Judicial his- is not our job to apply laws that have not been tory is replete with interpretations of the fair written. ’59 use factors, and the types of activities that can be labeled fair use are well charted. The fair ——— use doctrine has proven most difficult and con- ““Professor Nimmer seems to favor the latter interpretation troversial in cases of first impression, where (despite a substantial similarity of works, “the defendant is rendered immune from liability because the particular use which the court must proceed with little or no guid- he has made of the plaintiff’s material is a ‘fair use. ’ “ Nimmer ance from prior rulings. on Copyright, § 13.05 (1985));as does Professor Goldstein (“[t]he effect of the fair use defense is to excuse otherwise infringing Despite its usefulness as a safety valve for conduct in circumstances where the public interest compels free copyright protection, the fair use doctrine may access “ Goldstein, “Copyright and the First Amendment, 70 Columbia Law Review 1011 (1970)). Messers Kaplan (“policy be an inappropriate mechanism for resolving runs throughout our subject . . . it would, I think, be possible the private use issue for a variety of reasons. to dispense with it (fair use) in relation to (infringement). ” First, and perhaps most important, the appli- Kaplan, An Unhurried View of Copyright (New York and Lon- don: Columbia University Press, 1967), pp. 69-70 and Seltzer cation of the fair use doctrine presupposes in- (“[f]air use. . . has to do with whether a particular cost-free use fringing conduct. Although legal scholars dis- is one both foreseen by the author and contemplated by the agree about whether fair use excuses or negates Constitution.” Seltzer, Exemptions and Fair Use in Copyright, (Cambridge and London: Harvard University Press, 1978), p. 29 seem to favor the former. For purposes of this discussion, 55Id. Arguably, fair use comes into play anytime there is an the matter may be academic, since the fair use defense arises allegation of infringement of any of the exclusive rights in § 106 only in cases where a claim of infringement is made. of Title 17. “Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984). ‘hSee n. 58. For a discussion of the institutional reasons why the courts may ‘“17 U.s.c. §107. not be best suited to deal with these issue, see ch. 9. —

Ch. 7—New Technologies and the Intellectual Property Bargain ● 197 . —— . . .

Moreover, because fair use evolved in a com- called on to resolve extra-copyright claims be- mercial context, the fair use doctrine may sim- tween proprietors and end users. ply be inapplicable to private use activities. To decide the issue of reprography, the courts Traditionally, fair use has been limited to cases in which a copyrighted work was used in the drew an analogy between photocopying and 60 making a handwritten copy of the work for pri- production of yet another work. The use of a work for its own sake-for intrinsic pur- vate consumption. Photocopying was regarded poses–has traditionally fallen outside of the as merely a more efficient way of doing the same thing as hand copying, and as such, was fair use doctrine. The reason for this interpre- 64 not considered to be an infringement. Al- tation had to do with the very purpose of copy- 61 though similar in principle, the analogy be- right: the promotion of learning. Without tween hand and photocopying soon breaks some “give” in the exclusive rights of an down, however. For, precisely because pho- author to his or her work, other authors might tocopying is more efficient than hand copying, be thwarted in their ability to make contribu- its potential to cause economic harm is much tions to the public good by way of “criticism, 65 greater. This is the problem of harm in the comment, news reporting, teaching, scholar- 62 aggregate, a problem that becomes more ship or research." Fair use, then, does not troublesome as technology continues to im- shield every ostensibly infringing use of a prove the efficiency of private copying. work, only those justified by the very purpose of copyright itself. In addressing the private use issue to which Fair use evolved in the context of print era the new technologies give rise, the fair use doctrine, as we have seen, is of limited value. In- technologies, and was designed to resolve the stead, policy makers will need to decide the is- tensions between an author and others mak- sues on the basis of value judgments about who ing use of his work. Typically, the doctrine was invoked by an author who wanted to use por- should benefit from the new uses that technology creates—proprietors or private users. The tions of another’s work. Thus, it was aimed primarily at the resolution of tensions between four criteria discussed below may serve as the basis for such a discussion. copyright interests, broadly construed to include those activities for the promotion of 1. The Criterion of Economic Harm learning. The emergence of reprographic technology, however, created a new and uncertain Within the copyright community, many peo- context for fair use. For the first time, it was ple argue that private use damages the copy- end users and not competing authors who in- right proprietor economically by displacing po- voked the doctrine, seeking to use material for tential sales and thus profits. This argument, its intrinsic purposes.63 Thus, fair use was founded on an interpretation of existing law — —— - ——— —— and on economic analyses of harm, presup- “ Fair use “has always had to do with the use by a second author of a first author’s work. Leon Seltzer, Exemptions and .— Fair Use in Copvright, p. 24. This principle, termed “produc- “The legal status of hand-copying for personal use is not ti~’e use” by the Circuit Court in Universal Cittiv Studios, Inc. known. Nimmer reports that “[t]here is no reported case on the ~’. Son.}’ Corp., 659 F.2d 963 (9th Cir. 1981 ), rev ‘d, 464 U.S. 417 question of whether a single handwritten copy of all or substan- ( 1984)104 S. Ct. 774 ( 1984), was rejected as a sole criterion by tially all of a book or other protected work made fort he copier’s the Supreme Court majority in the Son-v case, but the rejection own private use is an infringement or fair use, ” ,Vimmer on Cop> T- has no support in prior case law. Indeed, in a study prepared right j 13.05[E], but the ~~illiams and llllkins case states that ,, by Alan I,atman for the Senate Committee on the Judiciary, . . . it is almost unanimously accepted that a scholar can make Copyright I.aw Revision, Subcommittee on Patents, Trade- a handwritten copy of an entire copyrighted article for his own marks, and Copyrights. 86th Cong., 2d sess., 1 (1960), not a use. . . “ 487 F.2d at p. 1350. “[A]nyway,” says Professor case was found upholding the fair use defense in the instance Kaplan, ” it was a question no one would be interested to liti- of intrinsic, private use. gate,’” op. cit. p. 68. ‘‘ See: Patterson, Cop.vright and .Vew Technolog~’: The Im- “’’Few people hand copy, but millions find machine copying pact on the Law of PrivacLv, .4ntitrust, and Free Speech, OTA economical and convenient. . . .(the argument) fails to take into contract report, 1985. account the true economic effect when thousands of individual ‘-17 U.s. c. $107. decisions are aggregated. ‘“ “New Technology and the Law of ‘‘\{’illiams & W’ilkins Co, F’. United States, 487 F.2d 1345 Copyright, ” 15 U. C.1..A. Law Review 931, 951 (1968). Whether (Ct. Cl. 1973), aff’d, 420 IJ.S. 376 (1975). such deleterious economic effects exist is uncertain (see ch. 4). 198 • Intellectual Property Rights in an Age of Electronics and Information

poses the existence of a right to profit on pri- burden of proof for extending rights to new vate use.66 Such a right, however, does not areas and showing harm should lie on those clearly exist. Instead, policymaker have yet seeking proprietary rights. David Lange would decide to what uses the proprietors’ exclusive have the proponent of a new right prove not rights should extend. In doing so, they may only that it would make him more secure eco- want to take the economic consequences of pri- nomically, but that the public domain would vate use into account. They should also note ultimately be enhanced by the extension of ex- that assertions that private use causes eco- isting or new rights to the new uses.68 The Su- nomic damages presupposes the transgression preme Court, in Sony Corp. v. Universal City of a legal right, and cannot, therefore, be the Studios, proposes yet a different standard: foundation of that right. . . . [a] challenge to a non-commercial use of a One of the difficulties of using economic copyrighted work requires proof either that harm as a criterion for determining the issue the particular use is harmful, or that if it of private use is that the economic conse- should become widespread, it would adversely affect the potential market for the copyrighted quences of new technological uses vary signif- 69 icantly according to the type of use, the type work. of work, and the marketing adaptations that The use of harm as a criterion is made even copyright proprietors make to accommodate more difficult by the fact that the concept has that use. Moreover, technologies that permit no clear qualitative definition. Rights define copying can either harm or benefit both propri- harm. Where there is no right, there may be etors and users, depending on several empiri- economic consequences, but not harm. If, for cally determined factors: the costs of produc- example, a person wished to charge money tion and distribution, the behavior of producers every time his name was uttered in public, he and consumers in the absence of unauthorized would need a right to do so. If his claim to copying, and the effects of copying on subse- remuneration went uncompensated, he might quent purchasing behavior. Using harm as a be said to suffer economic consequences (he criterion for determining rights in new tech- would not receive money), but in lieu of a right nological uses would require, therefore, the to receive money, one would hesitate to say compilation and analysis of a significant amount he had been harmed. Harm to intellectual prop- of information. erty owners therefore hinges on how policymakers define the proprietors’ rights, but new It is not surprising, therefore, that not all technologies have made the application of of those involved in the intellectual property rights to new contexts ambiguous. debate agree that harm should be used as a basis to determine rights. David Ladd, a form- Notwithstanding these difficulties, OTA er Register of Copyrights, for example, argues found that a calculation of harm is unavoida- that to require a showing of harm in order to ble in instances where new technology re- secure protection would inevitably prejudice arranges the relationships between proprietors the interests of proprietors, since such a show- and the public. Because intellectual property ing is difficult in any event, and it assumes that a neutral observer could determine what —— “fair” compensation is for new technological discretion, award statutory damages in lieu of actual damages 67 for willful infringement, the issue of harm is irrelevant to in- uses. Others, however, suggest that a heavy fringement. This argument, however, is not entirely germane to the policy issue of whether a right should be granted or ex- ‘Notwithstanding those uses which are fair uses, or which tended in the first place, and assumes that a fair use defense are exempt or not covered by the act. is unsuccessful. “Mr. David Ladd, from a speech, “Seven Years of the New ‘Statement of Professor David Lange, Duke University Copyright Act, ” sponsored by the American Bar Association School of Law, Hearings Before the Subcommittee on Courts, Forum Committee on the Entertainent and Sports Industries, Civil Liberties, and the Administration of Justice of the Com- Section on Patent, Trademark and Copyright Law, Washing- mittee on the Judiciary, House of Representatives, 98th Cong., ton, DC, Oct. 26-27, 1984. Some have also argued that since 1st sess., July 20 and 21, 1983. Section 504(c) of the Copyright Act permits a court to, in its “Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984). Ch. 7—New Technologies and the Intellectual Property Bargain ● 199 law itself serves to compensate for market failing the album by taping it off-air, the ure in the production or dissemination of a pub- proprietor has suffered actual harm;76 lic good,70 and because the allocation and • if a purchaser of a computer program runs strength of rights determines who and what that program simultaneously on several will be compensated, the question of harm can- machines, no actual harm has occurred;77 not be dispensed with.71 Moreover, in the ab- ● if the purchaser of a computer program sence of clearly defined rights to new uses,72 modifies the program to run more effi- it is still possible to distinguish between at ciently, the copyright proprietor of the un- least two different types of claims to harm in modified program has suffered no actual intellectual property: actual harm and poten- harm;78 and tial harm. ● if a SMATV system is set up in a hotel to receive commercial broadcasts and dis- Actual harm occurs when there is a reduc- tribute them to the hotel rooms, no actual tion in the profits of the producer below their harm has occurred.79 level prior to a new unauthorized use.73 Actual harm does not occur, however, if the unautho- Actual harm cannot be presumed on the ba- rized use leaves profits from all previous uses sis of infringement—it is a thoroughly empiri- unaffected. 74 The criterion of actual harm looks cal measurement. The same standard of meas- to whether new uses made available by tech- uring actual harm can be used regardless of nology compete with proprietors’ preexisting the technology involved: if a new technologi- economic interests. For example: cally based use causes a reduction in profits by substituting for previous uses, then actual Ž if a commercial broadcaster’s programs harm is present. Causation, however, is not al- are taped off-air by a viewer, and the ways easy to establish, even with empirical broadcaster’s advertising revenues from data available, since mere correlation (e.g., that program do not decline, the broad- 75 declining sales in the presence of a new use) caster has suffered no actual harm; is not tantamount to causation (e.g., the sub- • if a radio broadcaster or cable company stitution of a new use for a previous one). transmits a long-playing album to an audience, and the audience avoids purchas- The second type of harm is potential harm, where harm occurs if the new use reduces profits below the level they would have reached had the producer been able to exploit the mar- “’For a discussion of market failure, see ch. 6. ket served without authorization.80 In other “Moreover, copyright law–through the vehicle of the Copy- words, potential harm arises where a proprie- right Royalty Tribunal—is already determining what constitutes a “fair return’ to creators and ‘‘fair income’ to users un- tor could have and would have been able to der two of the compulsory licensing provisions of the act. 17 supply the product and receive compensation. U.S.C. \801(b)(l)(A), governing the objectives of rates under Unlike actual harm, potential harm occurs even Sections 115 and 116. In addition, bills submitted in the 98th Congress (S.31 and H. R.103O), which deal indirectly with the if existing markets are unaffected. issue of private use by imposing a‘ ‘compulsory license’ on purchasers of video and audio equipment and tape, would have an —.———. arbitration board determine “the projected impact of home video “’Note that the copyright owner of the sound recording has recording on copyright owners. The ‘compulsory license’ cre- no performance right, and a broadcast of sound recordings is ated by these bills differs from any previous compulsory license. not an infringement, even though the broadcast may be taped. Formerly, compulsory licenses were imposed on the copyright The end-user’s taping may be an infringement, but this is un- owner for the benefit of competitors; the bills would impose a certain. compulsory license on the user for the benefit of the copyright “Technically, loading programs into several machines may owner. Patterson, Copyright and New Technologies. be an infringement of the reproduction right, but this is uncer- ‘iThe analysis of harm that follows is, in other words, based tain under Section 117 of the Copyright Act. on the assumption that the proprietor’s exclusive rights under 78The modification of the program is probably an infringe- $106 of Title 17 do not clearly apply to private use. ment of the proprietor’s right to prepare derivative works, un- ‘iBesen, op. cit., p. 46. less allowed by Section 117. ‘“Ibid. “’This conduct may be in violation of Section 705 of the “$Even though the copyright holder’s right to reproduce the Communications Act. work may have been infringed. “’Besen, op. cit., p. 46. 200 . Intellectual Property Rights in an Age of Electronics and Information

Claims of potential harm are based on a right an article. The user thereafter consults the to the new opportunities provided by technol- article at his leisure. Database articles are ogy. In a potential harm situation, proprietors normally paid for on a “pay per use” ba- and users have competing claims to the value sis. The proprietor has suffered potential of the new use. To the copyright proprietor, harm if the user could have and would these new opportunities represent new and have paid for each use. profitable markets. To the copyright user, the A television station broadcasts its news opportunities provide enhanced flexibility, wide- stories and shortly thereafter erases the spread availability and inexpensive access. videotapes on which they are fixed. A business videotapes the news programs off- Arguments based on an analysis of harm pre- air, and later sells copies of the tapes to sume—and so cannot be the basis of—a pro- interested parties. The news program has prietary right in the new opportunities for use.81 Potential harm, therefore, cannot in and suffered no potential harm, since interested parties could not have purchased the of itself justify the extension of a right. In- 83 tapes from the television station. stead, some other criterion, such as an increase in efficiency or access (see below), is needed The criterion of potential harm makes intel- in order to determine whether to extend a right lectual property rights considerably more pow- to new uses. erful than that of actual harm. This added strength of rights under a theory of potential Like actual harm situations, potential harm harm stems from the fact that the potential can take many different forms and appeal to uses to which a work can be put are unlimited many different rights: in number and variety. Once the criterion of ● An unauthorized off-air videotape of a sub- potential harm is accepted, its amount is scription television motion picture is made limited in principle only by the activities cov- by a consumer. The proprietor of the mo- ered by intellectual property rights. So long tion picture has suffered potential harm as a case can be made that a user could have if the consumer could have and would have and would have84 remunerated the proprietor purchased the motion picture from the for the use, all conceivable uses that infringe proprietor-or if the consumer could have a right could be said to cause potential harm. and would have paid for the right to make Potential harm, however, is not an easy case an authorized videotape of the motion pic- 82 to make. Empirical studies of the potential ture. harm done to proprietors all suffer from a basic ● A computer program designed to run in methodological shortcoming: they do not clearly BASIC computer language is translated, describe the behavior of either consumers or without authorization, by a user to run in 85 producers in the absence of private use. The FORTRAN. The author of the program assertion that consumers “would have” pur- has suffered potential harm if the user chased an original in the absence of private use could have and would have purchased a translated version of the program from the .— author. “’See: Duncan v. Pacific and Southern, 744 F.2d 1490 (llth ● Cir. 1984), cert. denied, 105 S. Ct. 1867. A user of an on-line database downloads, “Note that even “would have and could have” suffers from without authorization, the entire text of definitional ambiguity. “Would have” can refer to a subjective disposition of the user to buy in the absence of an ability to copy (a most difficult item of proof), or to the collective economic behavior of the market in the absence of copying (it is the latter of these that Besen uses in his resolution of the problem of indeterminacy (see below)). “Could have” can refer to “’To predicate a proprietary right on a potential harm anal- either the financial ability of the user to buy in the absence of ysis is circular: X is harmed because X has a right to the new copying (calculated either individually or in the aggregate) or use and X has a right to the new use because X is harmed. to the availability of an original (problematic in the case of tele- “’Note that in this scenario, potential harm exists even vision broadcasts). though the conduct may be entirely legal. “S~e Besen, op. cit.,pp 52-54. Ch. 7—New Technologies and the Intellectual Property Bargain . 201

depends on what the price of the original would kets for intellectual property is often absent have been in the absence of private use. But from such estimates. Although the videocas- by the same token, the price of the original can- sette recorder may give rise to copying, it also not be determined until the behavior of con- permits the exploitation of markets that would sumers in the absence of copying is known, The otherwise not exist. Both factors must be taken harm done to producers by private use is there- into account in considering harm. The policy- fore indeterminate.” maker is therefore still left with a decision over who will benefit from new technological uses, The situation is even more complicated when and for what reasons. no copy (i. e., no original tangible object) is available-as is the case with television and To make such decisions, Congress may it- radio broadcasts, teletext and videotext, and self need to gather timely and accurate data on-line databases. In these instances, the al- on harm. Existing surveys vary considerably, legedly infringing copy is often not a substi- and rapid changes in technologies and use tute for the sale of an original, since the origi- make previous surveys of harm increasingly nal is seldom sold in copies (i. e., published or less relevant. Conducted by parties involved distributed). The copyright holder must then in the intellectual property debate, most of the use other empirical criteria to demonstrate surveys that are available are, moreover, sub- harm-i. e., the user would have and could have ject to bias. made further use of, or further access to, the The discrepancies in previous analyses are ephemeral copyrighted work. It should be clearly illustrated in a sampling of principle noted, moreover, that works disseminated over findings of surveys conducted over the last electronic media, instead of in copies, also raise 10 years, listed below. Because these surveys questions of access. This issue is discussed often focused on a unique product or geographi- below. cal market, and because each employed differ- Most estimates of harm to producers of in- ent methods of research and presentation, no tellectual property are based on surveys of user attempt has been made to list them in a com- practices, in combination with data on sales parable form. and the costs of production. However, a consideration of the beneficial effects of new tech- Survey Sponsor: Recording Industry Association nological uses to either new or existing mar- of America (RIAA) Year: 1983 {for sales year 1982) .—— Domain: audiocassette taping “’To know what consumer behavior “would have been, ” one Conducted by: Greenspan must determine price in the absence of private use; but price Principal Findings; is itself partially depend ant on consumer behavior. A model for estimating harm that may account for this indeterminacy has ● Overall, more than two-fifths of home taping been suggested, but has not yet been used in any empirical study was in lieu of the purchase of prerecorded of harm. records and tapes, representing lost sales of In order to estimate the effect of copying. it is necessary to de- approximately 32 percent, or about $1 billion termine what would have been the situzition if copying had not occurred. the determination of a counterfactual. The tech- out of a total of $3.2 billion in actual sales. This nique is to ‘calibrate’ the model. using data on the number of sales displacement is said to have depressed copies made per original, the cost of copying, the cost of producing originals, the number of originaIs sold, and the price being all record sales by 5 percent, bringing total charged for originals m the absence of copying, The intercept losses from home taping to $1.4 billion. In par- of the demand curve can be determined using data on the price ticular, the study found that: of originals, the costs of producing originals and copies, and the number of copies per original. The intercept, together with the –Approximately 50 percent of taped, bor- cost of originals, can then be employed to dererrnine (sic; in origi- rowed records or tapes ‘‘would have gener- nal) the price of originals that would have prmailed if there were ated” purchases of originals, if no taping had no cop:ing. With data on the number of originals sold, the estimated intercept of the demand curve, and the number of copies occurred. per original, the slope of the demand curve for originals can be —Forty-two percent of taping from owned calculated. Together wit h information on the cost of producing originals, the market equilibrium that would have existed in the records “would have resulted’ in purchases absence of cop}ing can he estimated. of additional records and tapes, if no taping 13esen, op. cit., pp. 54-55. had occurred. 202 ● Intellectual Property Rights in an Age of Electronics and Information

—Forty percent of all off-air taping “would have Principle Findings: generated” record and tape purchases. ● Loss estimates based on the length of time of music taped in-home correlated with the LP Survey Sponsor: Motion Picture Association of equivalent-hours were used. . . America (MPAA) ● . . . in combination with a survey of whether Year: 1983 (for sales year 1982) consumers would have purchased if not for Domain: videocassette taping taping. This yielded a loss sales estimate of Conducted by: Battelle Pacific Northwest between £ 63 and £ 98 million. Principal Findings: ● . . . in combination with estimates of the ● Tape-to-tape copying: If no blank videocas- proportion of blank tape used for home tap- settes were sold, the market for prerecorded ing and with the above survey. This produced videocassettes would approximately double a loss sales estimate of between £ 90 and (by inference, lost sales due to tape-to-tape £ 139.5 million. copying). Using this figure, lost sales for 1982 ● . . . a third estimate based on a comparison be- would be about 1.1 million units, or about $11 tween actual sales and projected sales (using million in royalties (based on a $10 per unit data from 1972 to 1974) produced an estimate royalty rate). Projections for 1990, using the of lost sales of £ 85 million. same assumptions, amount to approximately 11.2 million units lost sales, or $112.4 million Survey Sponsor: National Music Publishers Asso- in lost royalties ciation (NMPA) and Recording Industry Asso- ● Off-m-r taping: The survey predicts that ciation of America (RIAA) prerecorded videocassette sales would again Year: 1982 approximately double, were there no off-air Domain: audiocassette taping taping from television. Using this result, they Conducted by: Roper Organization estimate royalties lost in 1982 of approxi- Principle Findings: mately $26.9 million for commercial television, ● Based on a survey of people who taped at and approximately $19,3 million for pay tele- home from any source, in which the respond- vision. Comparable estimates for 1990 are ents were asked how many records and tapes $273.7 million and $196.7 million, respectively, they saved buying as a result of taping. The for commercial and pay television. survey revealed that 90 percent of everything taped from other than respondents’ own col- Survey Sponsor: International Federation of Phono- lections would have been purchased if not gram and Videogram Producers (IFPI) taped at home. This translates into 268 mil- Year: 1979 lion albums and 213 singles. Roper ultimately Domain: video and audio cassette taping (United accepted a potential sales loss of 14 percent. Kingdom) Conducted by: G. Davies Survey Sponsor: Audio Recording Rights Coalition Principal Findings: Year: 1982 ● Audiotaping In 1979, approximately 280 mil- Domain: audiocassette taping lion LPs had been copied. Approximately 25 Conducted by: Yankelovich, Skelly & White, Inc. percent of these copies replace retail sales, re- Principal Findings: sulting in lost sales of approximately $622 ● This survey—unlike others—concerned pri- million-or the equivalent of 70 percent of the marily audiocassette taping practices and the value of retail sales in 1979. reasons cited for those practices, rather than • Videotaping A‘ ‘tentative estimate’ of losses estimates of harm done by audio taping. to the video industry of $24 million at the re- Among the major findings were: tail level, and $9 million to the copyright –Seventy percent of the respondents recorded holders. (No details of methodology provided.) primarily to construct their own program selections, rather than to avoid paying for Survey Sponsor: British Phonograph Industry prerecorded selections. From 1 to 3 percent Year: 1973, 1975, 1977 cite cost as the only reason for home taping. Domain: audiocassette taping (United Kingdom) –Seventy-five percent tape for reasons of Conducted by: Anna, Impey, Morrish & Partners portability; 51 percent cite quality; and 57 (AIM) percent cite convenience. Ch. 7—New Technologies and the Intellectual Property Bargain • 203

–Fifty-two percent of all audiotaping was of ● Forty percent of consumers tape from their something other than prerecorded music. own records or tapes, and 30 percent tape from Fifty-one percent of tapes were made from borrowed records or tapes. An additional 20 respondents’s own selections. percent tape from radio broadcasts. –“Heavy tapers” owned approximately three times as many prerecorded selections (which, Survey Sponsor: The Association of Data Process- according to the survey, indicates that taping Service Organizations (ADAPSO) ing stimulates purchases). Year: 1985 (Survey Year 1984) Domain: Computer Software Survey Sponsor: Recording Industry Association Conducted by: Future Computing, Inc. of America (RIAA) Principal Findings: Year: 1983 ● Fifty percent of all programs (database pro- Domain: audiocassette taping grams, spreadsheet/accounting programs, and Conducted by: Audits and Surveys word processing programs) are unauthorized Principal Findings: copies. (No distinction made between legal ● Americans tape the equivalent of 564 million “backup” copies authorized by 17 U.S.C. albums of music annually, resulting in lost § 117 and other copies). sales of 325 million albums. Non-copyrighted ● Estimated loss revenues in 1985 were $800 materials accounted for 302 million album million. equivalents. • Only 7 percent of retail purchases of prere- 2. The Criterion of Efficiency corded tapes are stimulated by taping. Another criterion for determining rights in ● Eighty-four percent of blank tapes are used to record prerecorded music, private use is that of efficiency: does private use either hinder or promote an economically Survey Sponsor: Warner Communications, Inc. efficient market for particular types of infor- Year: 1981 (1980 Survey Year) mation-based products or services.87 The term Domain: audiocassette taping “efficiency” assumes that the welfare of pro- Conducted by: M. Kapp, S. Middlestadt, and M. ducers and users will both be simultaneously Fishbein maximized. It is a relevant criterion, therefore, Principal Findings: because the intellectual property bargain also ● A ‘‘conservative estimate’ the total value of assumes that the interests of the public and home-taped music is $2858.5 million. the author coincide. Like harm, however, effi- ● Seventy-five percent of all blank tapes purchased were ultimately used to record music. ciency is hard to determine. Depending on the Consumers spent $609 million for blank au- particular market for the type of information dio tape for the purpose of recording music or that is being produced and on the costs of other professional entertainment transactions in these markets, uncompensated ● Twenty-five percent of all home tapers taped use may either increase, decrease, or have no in order to avoid buying prerecorded music. effect on efficiency. The problem of determining efficiency is made more difficult by the fact Survey Sponsor: CBS Records that, as the previous chapter points out, in- Year: 1980 (1979-80 Survey Year) formation markets are subject to market fail- Domain: audiocassette taping ures, and our understanding of, and knowledge Conducted by: CBS Records Market Research about, these markets is still quite limited. Principal Findings: Audiocassette taping costs the prerecorded music industry 100 million units annually— ——. . or lost sales of $700 to $800 million. ‘“A market is economically efficient when the cost of pro- Seventy-five percent of home tapers tape in ducing an additional unit of a good equals the value of that unit order to “customize” tape selections, to consumers. An economically efficient market maximizes the Fifty-five percent of home tapers tape in or- welfare of both the producers and consumers of information, and allocates resources to their most valued use. These concepts, der to save money. Twenty-five percent cite as the~’ appl~’ to information markets, are discussed in greater “better quality” as the reason for taping. detail in ch. 6. 204 . Intellectual Property Rights in an Age of Electronics and /formation

Using efficiency as a criterion for allocating Determining efficiency in the granting of in- rights, policymakers might extend proprietors tellectual property rights will become even rights to private use so as to allow them to more troublesome as new technologies allow recover income equal to the value of private individuals not just to copy, but to reprocess use to consumers. Under ideal market condi- information in their homes. In effect, private tions, the producer would then be able to in- use will take the form of derivative use. And, vest this additional income in more informa- as in all cases of derivative use, policy makers tion products, and the market would receive will find it difficult to use efficiency as a cri- the signal it needs to identify and supply con- terion for determining rights. For they will not sumer demand. Consumers would also bene- be able to anticipate all future uses to which fit from the resulting increase in productivity a work might be put, or the values that might and from a market that was attuned to their be attached to them. preferences. Unable to establish an efficient level of In the case of information markets that are rights, policy makers may want to leave some not ideal, however, the criterion of efficiency leeway for unremunerated private use. In the is more difficult to apply. Because information absence of clear evidence to the contrary, flex- is a public good, it does not operate efficiently ibility may be the best way to encourage the in the marketplace. Hence, it is impossible to greatest variety of works and those that are determine precisely at what point rights to pri- best suited to individual needs. In this way, vate use would maximize the joint welfare of if they err, it will be on the side of creativity. users and producers.88 3. Access as a Criterion The costs of transactions in information impedes efficiency, and thus greatly complicates One criterion that will have to be used in re- this problem. The user’s need to obtain clear- solving issues surrounding private use is ac- ance and pay for use, and the producer’s need cess. This criterion differs from efficiency or to monitor use and obtain payment may off- harm in one important respect: the right to ac- set the actual value of the use to the user, or cess is part of the constitutional bargain. More- the income to the provider. Transactions costs over, unlike the other criteria, access is not may be reduced through the formation of hard to define or measure. Rather, the prob- collecting societies (for example, Copyright lem for policymakers in an electronic era is in Clearance Center), or by compulsory licenses establishing rules that will continue to provide administered through a governmental or non- access to information. governmental agency (such as The Copyright Problems of access can arise, for example, Royalty Tribunal). In these arenas, outcomes when copyright protection is extended to often have less to do with efficiency than with information that is communicated through a the extent of the resources that stakeholders means other than publication- e.g., television, can bring to bear. teletext and videotext, and computer networks. The access problem occurs because electronic 88For example, if all consumers pay the same rate to down- dissemination—unlike printing—does not in- load from a database, those who value the use at less than that volve the publication of copies. As a conse- price will be unwilling to purchase it. This is inefficient since there are no additional costs to serving these consumers, At quence, copyright ownership is transformed the same time, consumers who value the use at more than the from the right to reproduce a copyrighted work market price contribute less to its production and distribution in copies for sale to the right to control access than its value to them. This, too, is inefficient, because the value 89 placed on the use by the consumer is not reflected in the price to the copyrighted work for any reason. Thus, that he is charged. In the absence of an ability to price dis- when copyright is applied to works that are criminate between users based on value, a market based on legal rights to private use is unlikely to be efficient. In other words, it is impossible to determine whether rights to private use would “’This potential was articulated by L. Ray Patterson, Copy- simultaneously maximize the welfare of both producers and users right and New Technology: The Impact of the Law of Privacvv, of information. Antitrust and Free Speech, OTA contract report, 1984. Ch. 7—New Technologies and the Intellectual Property Bargain . 205

electronically disseminated, the balance be- the work is created and fixed in a tangible tween the rights held by the proprietor and medium.94 those retained by the public is changed. This Where a work is sold in copies, a proprietor’s problem of access can best be seen by contrast- control over these copies (but not the copying what happens when works are dissemi- 95 right) ceases after they are sold. This is known nated by print and electronic technology. as the first sale doctrine and it permits a pur- Dissemination by Print. Copyright law, from chaser of a copy of work to lend, sell, or freely the Statute of Anne in 1710 to the Copyright reuse that copy without authorization from the Act of 1976, has adopted the technological par- proprietor. Once a copy enters the public arena, adigm of printing—the distribution of a work its presence there is permanent and uncon- in copies for sale-as its underlying concep- trolled; determining who sees the copy, for how tual paradigm. 90 Indeed, until the invention of long, and under what conditions are not the radio around 1900 and television in about 1928, prerogatives of the proprietor. Copyright con- no other form of dissemination was possible; trol extends to the first sale of the copy,96 af- copyrighted works were always found in printed ter which efforts to control distribution or price copies. 91 are prohibited by law. In print publishing, the proprietor does not control the conduits through Until the Copyright Act of 1976, copyright which the public has access to a work—or, if protection was conditional on publication. That he does, the control was not based on copy- is, unless the work was available to the public right. Thus, a publisher’s effort to maintain in copies, it did not receive statutory copyright 92 the retail prices of its books was rejected as protection. 97 Common law protection was avail- counter to the first sale doctrine. Even when able for unpublished works, but Federal law the copyright owner does not exercise his right required that, if statutory protection was to vend the work, and instead licenses its use, sought, the author’s discretion over whether 93 attempts to maintain prices or control perform- to publish was relinquished. The 1976 act ance of work sometimes may run afoul of anti- abolished this requirement, replacing it with 98 trust laws. the principle of “automatic copyright ‘–that is, copyright now subsists from the moment Under a print system, the legal rights are also limited to control over the first sale of a —— “’The Statute of Anne was concerned exclusively with copy. Property rights in the intangible “work,” books, since the printing press was the only “information tech- such as a literary work, do not extend to the nology” then in existence. The Statute is prefaced by this phrase: tangible “thing,” such as a book, in which the “An Act for the ~ncouragement of I.earnin~, by Vesting the Copies of Printed Books in the Authors or Purchasers of such information is embodied. The public access to Copies, during the Times therein mentioned. ” 8 Ame C. 19 (1710) a copyrighted work—the number and variety (underline added). The Statute contemplated that the only of conduits through which copies of a work can method for distributing information was in books. The 1909 Act predicated copyright protection on publication be obtained and the ability to use and dispose of a work in copies. Former Title 17 U.S. C. 510). of the copy freely—is thus guaranteed under Similarly, the Copyright Act of 1976 contemplates the dis- a print system requiring publication as a contribution and publication of a work in copies, 17 U.S.C. \ f 106, 101, and the formal requirements of ❑ otice ($ \ 401-406) and deposit (~407) are also based on publication. ‘“Sections 102 and 302 of Title 17. The act also preempted “A copy is the material object in which a work is fixed; it commonlaw copyright. is, for example, the printed and bound version of the literary “This principle is known as the doctrine of first sale. See: work Grat’ity ‘S Rainbow, or the exposed strip of celluloid in 17 U.S.C. $109 (formerly $27). Under the first sale doctrine, copy- which the work known as Citizen Kane is fixed. For sound record- right permits no restraints on the alienation of a copy. ings, the material object is referred to as a “phonorecord, ” 17 ‘Former Title 17 U.S.C. $27, the first codification of the U.s.c. $101, “first sale doctrine. ” “’section 10 of the 1909 act required publication of the work “-Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908); See also: with notice as a condition of copyright. An exception to this Scribner v. Straws, 210 U.S. 352 (1908) and !3rzms v. American rule was found in Section 12, concerning works, such as motion Publisher’s Association, 231 U.S. 192 (1913), pictures or statuary, which are not normally reproduced for sale “’E.g., Interstate Circuit, Inc. v. United States, 306 U.S. (published), but performed or exhibited in public. 208 (1939) and United States ~’. Paramount Pictures, Inc., 334 ’117 U. SC. ~\2, 10 (repealed). Us. 131 (1947). 206 ● Intellectual Property Rights in an Age of Electronics and Information

dition of protection. The bargain between tangible “thing” to be bought and sold have author and public is built into the law, and as- been removed, and it has taken on the attrib- sumes the dissemination of a work in copies. utes of a service.103 Electronic Dissemination: A New Copyright Not all technologies for electronic dissemi- Milieu. While the system of print publication nation have the same potential to raise issues may to an extent still reflect reality, it has in of access. The technologies differ widely in recent years been largely superseded by a new their format, limitations, and suitability for 104 system of dissemination.99 For purposes of this use with particular types of information. discussion, we will refer to the new system as Moreover, technological limitations, consumer electronic dissemination, 100 and define it as the demand, and the economics of production will transmission of information in the form of elec- variously affect the likelihood that these tech- tronic signals. Under this system, a work is nologies will replace or augment a traditional communicated, rather than distributed. In mode of distributing copyrighted works. Other other words, the work is disseminated in an factors, such as whether the dissemination sys- ]05 intangible, rather than tangible, medium.101 tem is “open’ or “closed, " and prohibitions Hence, novels and newspapers, which have on copying or downloading, may also affect the traditionally been distributed in print on pa- salience of the access issue. Also, many of the per, may now be stored and delivered electron- technologies now being developed are of un- 106 ically. 102 The last vestiges of information as a known technological or commercial viability, or lack definite application. These uncertainties further obscure the possibility of conclu- — .— sive statements regarding affect of access con- ‘As Ithiel de Sola Pool observes: cerns on private use. The nonprint media are not just passing the print media (in terms of the amount of information as measured by the number of words), but are for the first time showing signs of displacing In general, the technologies of electronic them in part. dissemination can be, or are now used for Ithiel De Sola Pool, 7’echnolo@”es of Freedom, (Cambridge, MA: communicating copyrighted or copyrightable Belknap Press, 1983), p.20. ‘(”)The word “dissemination” is used in place of either “dis- works to the public. Each technology makes tribution” or “publication.” The latter are terms of art having it unnecessary to distribute copies. Each also a unique legal denotation. Under the Copyright Act, ‘ ‘publica- represents a way of moving information from tion” is the distribution of copies or phonorecords of a work, 17 U.S.C. jlOl, and “distribution” occurs by offering copies place to place that has no clear analog in the or phonorecords of the work for sale or other transfer of owner- system of print. Electronic dissemination re- ship, 17 U.S. C. \ 106(3). Both terms are predicated on the no- quires a consideration of how copyright prin- tion of a copy–the material object in which the work is fixed. 107 17 U.s.c. $101. ciples that apply to it—automatic copyright, ‘(’’Electronic dissemination can be said to be an intangible medium for a number of reasons: 1. electrons, electromagnetic waves or photons are transient tain uses, such as temporary storage media—printed informa- (for our purposes these can be considered the same tion will always be with us. OTA Workshop on Storage Tech- phenomena); they disappear when their energy stimulus nologies, 1985. is turned off. On a high speed telecommunications circuit “’’Electronic dissemination is not new, only the copyright they appear and disappear as rapidly as 10 billion times protection of electronically disseminated works. Television and each second; radio broadcasts have been around since early in the century, 2. without a receiving devise of some kind, the transmission but were not copyrightable until the 1976 act. is for all practical purposes, non-existent; and ‘(’’For present purposes, electronic dissemination technol- 3. unlike physical media (disks, tapes, film), wire or other trans- ogies comprise television (including broadcast, cable, SMATV, mission does not lend itself to physical controls (such as DES, STV, and others); radio; video and teletext (included, per- a locked box). haps, under the designation of television); and online services. From Solomon, “Intellectual Property and the New Computer- ‘(’’Broadcast television is an example of an open system; pay Based Media, ” OTA contractor paper, p.8. television or on-line database services are examples of a closed ‘(]’The demise of the book has been prophesied for some system. time now (See; e.g., C. Overhage, and R. Harmon, Project ln- “’hPay-per-View television is a case in point. See: “Here We trex (Cambridge, MA: MIT Press, 1965), speculating on the Go Again, ” Forbes, Aug. 26, 1985, pp. 108-114. promising future of microfilm), but despite a growing infrastru- ‘(’’Automatic copyright, endows the proprietor with copy- cture (i.e., the growing popularity of the home computer, the grow- right protection from the moment a work is created, with no ing availability of online information, and the prospect of the obligation to make the work available to the public—in copies Integrated Services Digital Network), it is likely that–for cer- or otherwise. 17 U.S.C. §102(a). Ch. 7—New Technologies and the lntellectual Property Bargain . 207 uniform protection,108 and the first sale doc- Copyright protection is, however, still use- trine 109—affect private use issues. ful to proprietors whose works are electroni- Because no copies are distributed, electronic cally disseminated. Indeed, the value of copy- dissemination means that the proprietor must right to the proprietor may be enhanced, since either monitor or control access in order to be he may avoid the consequences of the first sale remunerated. 110 111 In broadcasting, where ac- doctrine. Consequently, the proprietor can cap- cess to works can be measured but not con- ture payment for more of the value of addi- trolled, advertising has proven a successful tional uses of the copyrighted work, and can method of paying for the copyrighted work. 112 price discriminate among buyers, thereby re- covering the marginal utility of a work to a In other cases, advertising may not be viable 115 or desirable. In these instances, the communi- variety of users. The proprietor may also avoid the need for channels of distribution, in- cations medium must lend itself to the measurement and control of access, whether by sub- cluding shippers, wholesalers, and retailers. The result may be an overall increase in the scription, pay-per-use, or user-identification. economic efficiency of production and distri- The proprietor is remunerated through control bution, but may pose problems insofar as the over access to either the medium (e.g., cable 113 dissemination of copyrighted works is encum- television) or the work (e.g., on-line data- 114 bered with the public interest. bases, and videotext and teletext). Electronic dissemination creates some very “All original works of authorship are copyrightable, re- complex issues with respect to the public in- gardless of how they are disseminated, as long as they are per- ceptible either directly or with the aid of a machine or device. terest, and involves the intellectual property 17 U.S. C. j102(a). Thus, books disseminated in tangible copies system in other issues, such as communica- and books that are distributed in the form of intangible elections, antitrust, and freedom of speech. The tromagnetic signals receive the same protection. While the copyright holder of the printed book loses control over price, use, very means by which the proprietor secures and distribution of the copy once the work is published, the copy- remuneration is by controlling dissemination right holder of the “electronic” book does not. Performances to the public. The public does not gain access and pictures of events transmittedlive are also protected as long as a tangible copy —e. g., a videotape—is fixed simultaneously to copyrighted works by buying or borrowing when the signal is transmitted. However, a performance, e.g., published copies, but through the reception of a news broadcast, does not constitute publication. (It should ephemeral performances or displays, such as be noted that different rights for different kinds of subject matter are provided in Section 106, and that Section 108 through 118 television programs. Because works are never set subject matter specific limitations on rights). published, the proprietor need not give up le- ““’The doctrine of first sale, Title 17 U.S.C. f109, which has gal control over access. As a consequence, the always abbreviated the rights of the copyright holder in the copy, is largely irrelevant to works disseminated electronically, public is dependent on the information pro- since no tangible version of such works is ever sold. Instead, vider for each and every access made to a work, what is sold is access to the copy in limited slices of time or and the provider may be the sole source for quantity. “’’The copyright proprietor of many television shows, for in- the work. Competitive pricing between re- stance, is also the broadcaster, but need not be—the copyright tailers, and the competition for the copyrighted proprietor may be the producer, or even the filmmaker. Ulti- work from alternative sources, such as libraries mately, a copyright proprietor must be compensated for proceeds of a broadcast (whether by assignment of performance and “second hand” booksellers is removed. or display rights, or license, or royalty). “The measurement or control of access may take many Situations in which access is controlled by forms. In television, for example, it maybe based upon by viewer a proprietor heighten the potential for anti- penetration rate, as measured by “Nielson Ratings,”’ which is in turn translated into advertising revenues (as with network- broadcasts); or it may be based on a set royalty (as is the case proprietor, assignee, or licenser and the disseminator are one with cable television rebroadcasts); or on a pay-per-use basis and the same entity. In such cases, copyright control is direct: (as with many database services). access to the work itself is controlled. “- For a discussion of private alternatives, see ch. 6. ‘]’’See: Besen, op. cit., p. 4; and David Waterman, Videocas- “ ‘Where access to the medium is controlled, the copyright settes, Videodiscs, and the Role of Theatrical Distribution, proprietor is often remunerated indirectly. In cable television, Waterman and Associates, and Annenberg School of Commu- for example, the copyright proprietor is remunerated (often via nications, University of Southern California, Mar. 13, 1984, from a compulsory license) indirectly on the basis of the cable com- a conference on “R-ivalry Among Video Transmission Media: panies’ ability to control access to the coaxial cable. Assessment and Implications. ” (Harriman, NY: Arden House, 114The situation occurs most often in cases in which the Apr. 13-15, 1984). 208 ● Intellectual Property Rights in an Age of Electronics and Information competitive behavior, especially where cross- no copy of a copyrighted work is available to ownership exists between the medium of com- the public, the “right to receive information munication and the material that is communi- and ideas"119 may conflict with the right to re- cated. This potential becomes even more acute strict access based on proprietary discretion. 120 when the copyrighted content is accessed, but Robust debate requires that information be not purchased by the consumer. Since the copy- available for public inspection and analysis. 121 right owner need not lose control over distri- Fair use may be a way of reconciling conflicts bution, it can at once be the owner and the sole between private rights and political rights, but source of access to the copyrighted work.116 there are important theoretical as well as prac- This combination of content and distribution tical differences between fair use and the first is a form of vertical integration, and forms the amendment. 122 junction between copyright policy-which has traditionally dealt with ownership of content 5. The Criterion of Public Opinion —and communication policy-which has tradi- Finally, the importance of public opinion in tionally dealt with the ownership of carriage. decisions about intellectual property rights When communications becomes the neces- cannot be overlooked. For the public’s percep- sary condition for access to a work, it is neces- tion of what is fair and equitable is bound up sary to consider what interrelations exist be- with questions of legitimacy and enforce- tween carriage and content. In particular, when ability y: control over content and control over carriage On few points in the longstanding debate are located in one and the same entity, the over the “rule of law” is there greater con- power of copyright becomes closely related to sensus than on the close and necessary rela- the number of channels of access to a given tion between societal support for a system of work. Some cross-ownership restrictions117 address themselves primarily to cross-ownership “’Board~f Education v. Pico, 457 U.S. 853, 867 (1982); Cf. between the media (telephone and broadcast Stanley v. Geor~”a, 394 U.S. 557, 564 (1969). television), but do not deal with the medium- “’)In Duncan v. Pacific& Southern Co., Inc., 744 F.2d 1490 content issue. The FCC’s Computer I and II, (1 lth Cir. 1984), cert. denied, 105 S. Ct. 1867 (1985), for example, a defendant to a copyright infringement suit was enjoined and most recently, Computer III regulations from taping local television newscasts and selling them to in- are efforts to address the issue of vertical interested parties. Despite the fact that the television station tegration through restrictions on the commu- erased tapes of its news programs after they were retained a 118 week, and the fact that the news clips were sold only to the nications industry. subjects of the station’s broadcasts, the court found for the plaintiff. Unlike the recent case of Harper & Row, Inc. v. Nation There may also be first amendment consider- Enterprises, S. Ct. No. 83-1632 (citing the Duncan case), the ations involved in the issue of access. When plaintiff in the Duncan case, per its own admission, was neither in competition with nor harmed by the defendant news serv- —-— ice. I n the Duncan case, ironically, the infringed videotape was “’There are some indications that the vertical integration of obtained through a customer of the defendant’s. production and dissemination through cross-ownership is be- “’Such was the basis of the defense in the CBS v. Vander- ginning to occur, especially in the cable industry. The motion bilt University litigation (Civ. No. 7336 (M.D. Tenn., filed Dec. picture industry is presently an oligopoly of seven companies 21, 1973), a case in which Vanderbilt University was engaged which comprising S5 percent of the market (based on box office in copying CBS’s news coverage for archival and educational gross]. ~~sjmss ~ee~, Feb. 21, 1983, p. 78. Each major pro- purposes. The suit was later dropped when Section 108(b) of duction studio, or its parent, either owns or is involved in joint the new copyright law essentially mooted the issue. ventures in pay-television st~tions. See Ithiel de Sola Pool, 7’ec~- “’’’The scope and extent of fair use falls within the discre- ~oh~”es of Freedom (Cambridge MA: Belknap Press, 1983); and tion of the Congress itself. Fair use, when properly applied, is Who Owns Whom (London: Dun & Bradstreet, 1984). In gen- limited to copying by others which does not materially impair eral, acquisitions and mergers in the information industry hit the marketability of the work which is copied. The First Amend- a new record in 1984. Information Hotline, vol. 17, No. 5, May ment principle, when appropriate, may be invoked despite the 1985, pp. 1, 12. fact that the marketability of the copied work is thereby im- ‘“For example, Section 613 of the recently enacted Cable paired. Nimmer, Cases and Maten”a)s on Cop~ight ( 1978), Sec- Communications Policy Act of 1984 (Title VI of the Communi- tion 1.10 A, pp. 1-64 as quoted in Rosenfeld, “The American cations Act of 1934). constitution, Free Inquiry, and The Law, ” in Fti”r Use and Free “KSee ch. 6 on information markets for a more thorough dis- Znqujry, Lawrence and Timberg (eds.) (Ablex Publishing Corp.: cussion of the vertical integration. New Jersey) 1980, p. 287, 302. Ch. 7—New Technologies and the Intellectual Property Bargain ● 209

law and the effectiveness of such a legal sys- to civil liability under copyright law,125 there tem in regulating conduct. The viability of the appears to be little public support for such con- legal order of a free society cannot rest solely sequences. on applications or threats of force by authorities. It must rest on a people’s sense of the However, when asked about conduct which legitimacy of the rule-making institutions and generally involved commercial, for-profit activ- of the rules these institutions make. 123 ity or willful, active attempts to avoid paying A survey of the public commissioned by for something the public responded as follows: OTA on the issue of intellectual property rights More than 8 in 10 among the public find reveals a number of findings of relevance to behaviors that obviously circumvent a fee the public’s perceptions of what rights should or service (such as purchasing a descram- and should not exist in information products.124 bler to watch pay TV, or secretly record- With respect to the issue of private use, in paring a concert) to be unacceptable. ticular, the public’s attitudes seem to reflect There is almost complete unanimity among a rough congruence to the distinction between the public that behaviors which jeopard- commercial and noncommercial uses. ize privacy, such as entering a database The survey reveals that two-thirds of the without permission are unacceptable. public is neither familiar with nor feels affected If copying of copyrighted materials is by intellectual property rights issues. How- done for reasons other than private use, ever, neither familiarity nor self-interest appear for public display, for sale or personal gain, to be related to their responses; the knowledge- or on behalf of a large corporation, the able and the uninformed responded in very majority oft he public found the behavior much the same way. Among the more signifi- less acceptable. cant of those responses were: While the public was not informed of the ille- The vast majority of the public (over 7 in gality or criminal nature of any of the behaviors 10) believes that copying personal posses- on which they were questioned, it is interest- sions, like a record or a program from one’s ing to note that many of their responses re- own TV, is acceptable behavior. flect the criteria for criminal infringement set A majority of the public believes that trad- forth in in the copyright law: the infringement of copyright “willfully and for purposes of coming and copying information and enter- 126 tainment such as computer programs and mercial advantage or private financial gain." records is acceptable behavior. In general, the public seems to be in support When there is an issue of access–either of laws regarding criminal infringement or ac- the information is readily available such cess, and competitive or institutionalized copy- as a library book or there is a question ing activities, but it withholds support for pro- whether the information (broadcast sig- hibitions on civil infringement or private use nals or airwaves) should be free—the pub- copying behavior. lic is divided. ——. “ Under 1 T U.S. C \ \ 106, 501, if these protrusions arc inter- While each of these behaviors involved per- preted to co~’er pri~ate use, sonal or private behavior which might give rise ‘“’ 17 U .S. C, \50G. This is not to suggest that criminal infringement is not a problem for the motion picture :Ind record- Sha[ tu{k. l’ublr’c \ ttitude.q .nnd th(> b.’nf[]rceahilitjr of Law, ing industries. “W’hile reports of raids and confiscation of pi- OTA contract report. 1985. p 2. “Sometimes . the official sec- rated materials are quite common, it should be emphasized that tor maj be dt’tached from the prik’ate sector, in the sense that the statistics suggest that there [ire man~’ nlore pirates opw-at - there l’+ no longer genw-al obedience tot he rules which are valid ing than are ever apprehended, . “ Statement of Nlr, Df)nald according LO the (t it ~ria of ~’aliditj’ in use in the courts. Th~’ C. (krran, Acting [tegistrar, I.ibrary of ~ongrt>ss, ]]cari) ig on ~’aricty of w:t}~ in whi~h t his may happen !Jelongs to the pathol- Ci\il and Crirnin:il k;nforcement of th~ Copyright I.aws Refore ogy of 1(’#

Page Findings ...... 213 Introduction ...... ,..214 Early History ...... 214 Present International Intellectual Property System ..,,, ...... 215 Harmonization of Disparate National Intellectual Property” Systems ...... 215 Principle of National Treatment ...... 219 Minimum Rights ...... 219 Stresses on the International Intellectual Property System...... 220 Increasing Flows of Information and Information-Based Products and Services Between Nations ...... 221 Policy Implications ...... ,223 Growing Importance of Information and Information-Based Products and Services to National Economies and International Trade and Competitiveness ....224 Policy Implications ...... ,...... 225 Increasing Cultural and Political Significance of Information and Information-Based Products and services ...... 228 Policy Implications ...... 230 Emergence of New Information-Based Products and Services That Do Not Correspond to Traditional Intellectual Property Protections ...... 232 Policy Implications ...... 235 Increasing Difficulty of Enforcing Intellectual Property Rights Caused by Emerging Information and Communication Technologies ...... 237 Policy Implications ...... 246 Growing Convergence of International Intellectual Property Issues With Other International Issues...... 247 Policy Implications ...... ,...... 249 Implications for Future U.S. International Intellectual Property Policy ...... 250

Tables Table No. Page 8-l. International Intellectual Property Agreements ...... 216 8-2. Membership in the Berne Convention, the Universal Copyright Convention, and the Paris Convention for the protection of Industrial Property ..., ...... 218 8-3. Estimated Losses From Piracy in Ten Selected Countries ...... 241 8-4. Countries and Regions That Infringe Copyrights of U.S. Motion Picture and Television, Prerecorded Entertainment, Publishing, and Advertising Industries . . .242 8-5. Policy Options for Addressing International Intellectual Property Issues ...... 251

Figures Figures No. Page 8-1. Shrinking of Our Planet by Humans’ Increased Travel and Communications .. ...222 8-2. Computer Utilization: Selected Countries, 13 Sectors ...... 226 8-3. The Speed of Change: Intervals Between Discovery and Application in Physical Science...... 233 8-4. The Level and Location of International Counterfeit Activity of U.S. Products ...239 Chapter 8 Impact of New Technologies on the International Intellectual Property System

FINDINGS

OTA found that recent developments in in- change of intellectual property, domestic formation and communication technologies are intellectual property issues will need to creating new stresses on the international in- be resolved within an international con- tellectual property system. Such developments text and according to internationally agreed include: upon norms. As technological change prompts greater ● the increasing flow of information and need for rapid international consensus on information-based products and services how and what to protect, the United among nations; States will need to take greater interna- ● the growing economic importance of in- tional action to keep abreast of as well as formation and related products and serv- influence the development of international ices, both within and between nations; policies for the protection of new tech- ● the increasing cultural and political sig- nologies. nificance of information and related prod- As information and information-based ucts and services; products and services become major trade ● the emergence of new information-based items and the basis for economic growth, products and services that do not corre- international trade and economic consider- spond to traditional categories of pro- ations will increasingly be brought to bear tection; on the resolution of international intellec- ● the increasing difficulty of enforcing in- tual property issues. tellectual property rights at the interna- Given the growing cultural and political tional level; and significance of information-based prod- ● the growing convergence of international ucts and services, international political intellectual property issues with other in- relations will need to be taken into account ternational issues. in resolving international intellectual prop- Given their magnitude, these technological erty issues. developments pose novel difficulties that chal- As information and communication tech- lenge the relative stability of the international nologies undermine the traditional mech- system. They affect not only the international anisms for enforcing intellectual property legal system, but also international economic rights, the international community will and political relations. Consequently, they need to cooperate and coordinate their ef- have major implications for the United States forts to provide adequate and uniform en- both as a participant in the international in- forcement mechanisms and remedies. tellectual property system and also with re- Given the convergence of international in- spect to its choices for domestic intellectual tellectual property issues with other in- property policy. These policy implications are: ternational issues, the United States might need to establish domestic institu- ● As information and communication tech- tional arrangements to develop and coor- nologies facilitate the international ex- dinate consistent international policies.

213 214 • Intellectual Property Rights in an Age of Electronics and Information

The United States can choose among a vari- intellectual property issues (for example, in ety of policy strategies to deal with technologi- terms of trade, legal, or political relations) and cal change and its effects on the international design its international intellectual property intellectual property system. There is no clear- policies accordingly. As information and com- cut, single strategy, however, that will communication technologies become major factors prehensively address all international intellec- in international trade and nations’ economic tual property issues. Moreover, many policy and social development, such policy decisions strategies may conflict with one another and will become more significant to many aspects exacerbate other stresses on the international of U.S. foreign policy—from international is- intellectual property system. Thus, the United sues of trade, defense, and foreign aid to is- States will need to make fundamental decisions sues of international information and commu- about how it would like to frame international nication policy.

INTRODUCTION Historically, U.S. intellectual property pol- a more active role in the international intellec- icy developed in isolation from the rest of the tual property system. world. Such isolation was possible because To examine the effects of new communica- print materials were confined, for the most tion and information technologies on the in- part, within national borders. Over time and ternational intellectual property system and as the necessity arose, the United States slowly the adequacy of U.S. participation in it, this began to extend its participation in the inter- chapter will: national intellectual property system. 1. review the early history of U.S. partici- Recently, however, new technological devel- pation in the international intellectual opments have led to a great expansion in the property system; number of ways to create, store, reproduce, dis- 2. describe the present international intellec- tribute, and transmit literary, scientific, and tual property system; creative works. The progressive development 3. describe how technological developments of, for example, radio, television, and comput- may affect the international intellectual ers coupled with advanced telecommunication property system; and and satellite systems have greatly increased 4. suggest the implications that these devel- international distribution and access to works. opments have for both the level and type These technological developments are creat- of U.S. participation in the international ing new stresses on the international intellec- intellectual property system and for U.S. tual property system, which raise questions domestic intellectual property policy. about whether the United States should play

EARLY HISTORY Before the 19th century, intellectual prop- By the early 1800s, a variety of social and erty protection was largely a domestic concern. technological developments began to generate Because of the limited intercourse and com- interest in international intellectual property munication among nations, works were distrib- protection. Increased trade, communications, uted almost exclusively within their authors’ and travel were important factors, as was the country. Thus, the lack of international pro- growing practice of learning foreign languages. tection caused little concern. In response, the European nations began to —

Ch. 8—Irnpact of New Technologies on the International Intellectual Property System ● 215 consider mechanisms to ensure protection . . . [N]othing in this act shall be construed to abroad for their domestic works, as well as to extend to prohibit the importation or vend- protect foreign works. These nations first set ing, reprinting or publishing within the up a number of bilateral protection agree- United States, of any map, chart, book or ments; then, in 1866, many of the European books, written or printed, or published by any person not a citizen of the United States, in nations joined together and signed the first 1 foreign parts or places without the jurisdic- multilateral agreement, the Berne Convention. tion of the United States.3 While many European states relied on mul- It was not until 1891, when Congress passed tilateral agreements to regulate their copyright the Chace International Copyright Act, that relations, the United States did not participate the United States begin to recognize interna- in any international copyright arrangements tional copyright relations. The act, however, for the first 100 years of its existence, nor did provided neither for multilateral agreements it recognize any copyright protection for for- z nor for the protection for foreign works man- eign works or authors. In fact, in the first U.S. ufactured outside the United States.4 But it copyright law of 1790, Congress explicitly re- did extend copyright relations to nations found stricted the protection of foreign works: and proclaimed by the President to afford adequate protection to American works. This act ‘Edward W. Ploman and L. Clark Hamilton, Copyright: IrI- teffec.tual Property in the Information Age (London: Routledge provided the basis for all of the U.S. bilateral & Kegan Paul, 1980), p. 18. copyright relations for more than the next 60 The position of the United States was almost unique at the years. time. The major Western nations early on made provisions for the international protection of authors’ rights. Acting in 1828, ‘Committee on the Judiciary, Subcommittee on Patents, Denmark was the first, Prussia followed in 1836 and England Copyrights, and Trademarks, hearing on “Oversight on Inter- in 1837. France in 1852 and Belgium in 1854 also granted pro- national Copyrights, ’ Sept. 24, 1984, p. 28. tection for alI for foreign works. By the mid-19th century, only ‘The manufacturing requirement, still in existence today al- the Soviet Union, the Ottoman Empire, and the United States beit in a much diluted form, stipulates that nondramatic liter- did not grant protection for foreign works. Aubert J. Clark, The ary material must be manufactured in the United States (or Movement for International Copyright in Nineteenth Century Canada) to enjoy full copyright protection in the United States. America, (Washington DC: The Catholic University Press, 1960), This requirement is scheduled to be repealed as of July 1986. p. 26. Title 17 U.S.C. Sec. 601(a).

PRESENT INTERNATIONAL INTELLECTUAL PROPERTY SYSTEM Over the last century, the international sys- agreements to which different groups of coun- tem for protecting intellectual property has tries adhere. These conventions share several been quite stable, displaying a higher level of outstanding characteristics that govern the in- cooperation than other international agree- ternational intellectual property system. They ments. Unlike other international agreements are: that are periodically readapted or completely 1. the harmonization of disparate national revised, the interlocking conventions that con- intellectual property systems; stitute the international intellectual property 2. the principle of national treatment; and system have provided a permanent legal frame 3. the establishment of minimum rights. work, although it is subject to amendments and revisions if required. Table 8-1 summarizes the major international intellectual property Harmonization of Disparate National conventions. Table 8-2 shows the national intellectual Property Systems membership of each of the three major intel- Although rooted in various philosophical tra- lectual property agreements. ditions, the intellectual property systems of The system is complex and structured around different nations have been harmonized over many different international conventions and the years under international intellectual prop- Table 8-1 .—International Intellectual Property Agreements — — .— — —. Agreement - Revisions Protected subject matter U S membership Comments ——.—— —.—— ——. — —. — Copyright agreements: The Berne Convention for the Protection of Literary and Artistic Works (1886) 1896: Paris Additional Act and “This Convention obliges Contracting States to protect the No Basic principles established under Interpretative Declaration expression of literary and artistic works [which include] every the Berne Convent Ion 1908 Berlin Act production in the literary, scientific, and artistic domain, whatever may 1 Principle of national treatment 1914 Berne Additional Protocol be the mode or form of its expression, such as books, pamphlets, 2. Principle of automatic protection 1928: Rome Act and other writings: lectures, addresses, sermons and other works (with no formalities) 1948: Brussels Act of the same nature, dramatic or dramatlco-musical works: 3 Principle of Independence of 1967 Stockholm Act choreographic works and entertainments in dumb show; musical protection 1971 Paris Act compositions with or without words, cinematographic works to which 4 Minimum rights are assimilated works expressed by a process analogous to cinematography: works of drawing, painting, architecture, sculpture, engrawng, and Iithography, photographic works to which are assimilated works expressed by a process analogous to photography; works of applied art, Illustrations, maps. plans, sketches, and three- dimensional works relative to geography, topography, architecture, or science. ” Article II The Rome Convention for the Protection of Performers, Producers of Phonograms, and Broadcasting Organizations (1961) None This Convention obliges Contracting States to extend protection: No “a) to performers who are its nationals, as regards performances taking place, broadcast. or first fixed. on its territory, b) to producers of phonograms who are its nationals, as regards phonograms first fixed or first published on its territory, c) to broadcasting organizations which have their headquarters on its territory, as regaras Broadcasts transmitted from transmitters situated on its territory “ Article II The Universal Copyright Convention (1957) 1971: Paris “Each Contracting State undertakes to provide for the adequate and Yes The primary purpose of the UCC was effective protection of the rights of authors and other copyright to join the United States and the proprietors in literary, scientific, and artistic works, including writing, Latin American countties with the musical, dramatic, and cinematographic works, and paintings, engrav- countries of Europe, Asia, and Africa ings, and sculpture. ” Article 1. in a Single multinational agreement. Like the Berne Convent Ion, the UCC IS based on national treatment and minimum rights. Unllie the Berne Convention, the UCC has several formalities, such as a notice requlirement The Convention for the Protection of Producers of Phonograms Against the Unauthorized Duplicatlon of Their Phonograms (1971) None “Each Contracting State shall protect producers of phonograrns who Yes are nationals of other Contracting States against the making of duplicates without the consent of the producer and against the Importation of such duplicates, provided that any such making or Importation IS for the purpose of distribution to the public, and against the distribution of such duplicates to the public. ” Article Il. Table 8-1 .—International Intellectual Property Agreements—Continued

Agreement Revisions Protected subject matter U.S. membership Comments

Inter American Copyright Convent Ions The Montevideo Convention (1889) This Convent Ion obliges Contracting States to protect the expres- No The Buenos Aires Convent Ion of I None S ion of Iiterary and artistic works which include books, writings, 1910 remains the basic Pan The Mexico City Convent Ion (1 902) pamphlets of al I Kinds, whatever may be the subject of which they No American copyright Instrument None treat and whatever the number of their pages, dramatic or dramatico- During the past 20 years there has The RIO de Janeiro Convent Ion (1 906) musical works choreographic and musical compositions with or No been a clear trend away from these None W ithout words, drawings paintings scuIpture engravings regional copyright conventions I n The Buenos Aires Convention (1910) photographic works astronomical and geographical globes. plans Yes favor of worldwide agreements sketches or plastic works relating to geography geology or None Consequently in many Instances The Havana Convention (1928) No topography archiItecture or any other science and finalIy alI the UCC has replaced the Pan- None productions that can be published by any means of Impress Ion or American conventions as the The Washington Convention (1946) reproduction Article II No operative agreement None

The Convent Ion Relating to Distribution of Program-Carrying Signals Transmitted by Satellite (1974) None The Convent Ion obliges Contracting States to take adequate and Yes effective measures to prevent the distribution on or from its territory of any program-carrying signal by any distributor for whom the signal emitted to or passing through the satellite IS not Intended." Patent and Trademark Agreements: The Paris Convent Ion for the Protect Ion of Industrial Property (1 883) 1900: Brussels The protection of industrial property has as Its object patents, utility Yes 1911 Washington models industrial designs, trademarks, service marks, trade names 1925 The Hague indications of source or appelIations of origin. and the repression of 1934 London unfair competition. 1938 Lisbon Industrial property shall be understood in the broadest sense and 1967 Stockholm shall apply not only to industrial and commerce proper but Iikewise to agricultural and extractive Industries and to all manufactured or natural products for example. wines, grain, tobacco leaf fruit cattle. minerals, mineral waters, beer, fIowers, and flour Patents shall Include the various kinds of Industrial patents recognized by the laws of the countries of the Union such as patents of importation patents of [improvement, patents and certificates of addition etc." Article I The Patent Cooperation Treaty (1 978) None The Treaty facilitates the filing of the applications for patents on the Yes same Invent Ion in member countries by providing among other things for centralized fiIing procedures and a standardized application format SOURCE Off Ice of Technology Assessment

● 218 ● Intellectual Property Rights in an Age of Electronics and Information —

Table 8-2.— Membership in the Berne Convention, the Universal Copyright Convention, and the Paris Convention for the Protection of Industrial Property

Country Berne UCC Paris Country Berne UCC Paris Algeria ...... x x Korea, Republic of ...... x Andorra...... x Laos ...... x Argentina ...... x x x Lebanon ...... x x Australia...... x x x Liberia...... x x Austria ...... x x x Libya ...... x Bahamas ...... x x x Liechtenstein...... x x x Bangladesh ...... x Luxembourg...... x x x Barbados ...... x x Madagascar ...... x x Belgium ...... x x x Malawi ...... x x Belize ...... x Mali ...... x x Benin ...... x x Malta...... x x x Brazil ...... x x x Mauritania ...... x x Bulgaria ...... x x x Mauritius ...... x x Burkina Faso ...... x Mexico ...... , ..., x x x Burundi ...... x Monaco ...... x x x Cameroon...... x x x Morocco ...... x x x Canada ...... x x x Netherlands ...... x x x Central African Republic . . . . . x x New Zealand ...... x x x Chad ...... x x Nicaragua...... x Chile ...... x x Niger...... x x Colombia ...... x Nigeria ...... x x Congo ...... x x Norway ...... x x x Costa Rica...... x x Panama...... x Cuba ...... x x Pakistan ...... x x Cyprus ...... x x Paraguay ...... x Czechoslovakia ...... x x x Peru ...... x Democratic Kampuchea . . . . . x Philippines ...... x x x Denmark ...... x x x Poland ...... x x x Dominican Republic ...... x x Portugal ...... x x x Ecuador ...... x Romania...... x x Egypt ...... x x Rwanda...... x x El Salvador...... x San Marine...... x Fiji ...... x x Senegal ...... x x x Finland ...... x x x Singapore ...... France ...... x x x South Africa ...... x x Gabon ...... x x Soviet Union ..., ...... x x Germany, Democratic Spain...... x x x Republic of...... x x x Sri Lanka ...... x x x Germany, Federal Suriname ...... x x Republic of ...... x x x Sweden ...... x x x Ghana ...... x x Switzerland ...... x x x Greece ...... x x x Syria ..., ...... x Guatemala ...... x Tanzania...... x Guinea ...... x x x Thailand ...... x Haiti ...... x x Togo ...... x x Holy See...... x x x Trinidad and Tobago ...... x Hungary ...... x x x Tunisia ...... x x x Iceland ...... x x Turkey ...... x x India ...... x x Uganda ...... x Indonesia ...... x United Kingdom ...... x x x Iran ...... x United States ...... x x Iraq ...... x Upper Volta ...... x Ireland...... x x x Uruguay ..., ...... x x Israel ...... x x x Venezuela, ...... x x Italy ...... x x x Viet Nam ...... x Ivory Coast ...... x x Yugoslavia ...... x x x Japan ...... x x x Zaire ...... x x Jordan...... x Zambia ...... x x Kenya ...... x x Zimbabwe ...... x x

SOURCE -Office of Technology Assessment Ch. 8—Impact of New Technologies on the International Intellectual Property System . 219 — — erty agreements. This harmonization was pos- unify laws among countries that offer differ- sible because each of the national systems ing levels of protection.7 shared a common set of goals. In general, na- National treatment facilitates international tions have advanced four major rationales to judicial interpretation because it requires that justify intellectual property protection. These judicial decisions be made within the country have generally been accepted in most coun- 5 where the rights holder seeks protection, re- tries, but nations weigh them differently. gardless of his nationality. As a result, judg- Based on these justifications, three tradi- ments are more consistent and more certain; tions of intellectual property law have evolved. the courts can more effectively interpret their These include: the droit d’auteur system, which own laws as opposed to those of other nations. places the emphasis on the principles of natural justice; the Anglo-Saxon or copyright sys- Second, many nations adhere to national treatment because they believe it leads to bet- tem, which is based on economic arguments; ter political relations and unifies levels of pro- and the socialist system, which places the em- tection among countries. Nations believe that phasis on socialist doctrine and the importance this will occur because rights owners in coun- of the author in terms of his social role. There tries of low-level protection, who receive higher are, however, considerable variations among levels of protection in other countries, will different countries that follow the same sys- 6 press their governments to raise their domes- tem. Although both the justifications for and tic levels of protection. Thus, it is believed that the actual systems of protection may differ national treatment will give rise to a more uni- from nation to nation, overall international fied and higher common level of protection agreement is possible because the end result among nations. or goal is the same–to protect intellectual property. Minimum Rights Principle of National Treatment All international intellectual property agreements also establish a common set of minimum The second shared characteristic of these in- rights that may be claimed in all adhering coun- ternational agreements is the principle of na- tries, regardless of national legislation. Al- tional treatment. In practice, this principle was though convention countries are not required adopted to achieve two goals: 1) to facilitate international judicial interpretation; and 2) to to grant minimum rights to their own nationals, all foreign member country nationals are “First, the principle of natural justice says that the author entitled to these minimum rights. These mini- is the creator of the work, which is the expression of his person- mum rights attempt to ensure that national ality, and therefore he should decide whether and how his work treatment does not lead to any imbalances in is commercialized and prevent any injury and mutilation of his levels of protection among nations. Without intellectual offspring. The royalties he receives are the wages for his intellectual work, Second, the economic justification for them, national treatment, which exclusively protection is based on the argument that the investment in creat- calls for equal treatment of foreigners and na- ing works, as well as in disseminating them to the public, would tionals within a convention country, could not not be undertaken unless creators have a reasonable expecta- tion of recouping investments and earning a reasonable profit. prevent large discrepancies in levels of protec- The third justification for protection is based on the argument tion among countries.8 Consequently, mini- that creative works are a considerable national asset, and therefore it is in the public interest to encourage and reward creativity ‘Ibid., p. 39. as a contribution to the national culture. The fourth is based on a social argument that the dissemination of works to many “The principle of national treatment without minimum diverse sectors of the public improves social cohesion and ad- rights might produce a serious imbalance which States would vances the society. Stephen Stewart, The Law of International find unacceptable. For exampIe: Copyright and Neighboring Rights (London: Butterworth & Co. If countries A and B were members of a [international] conven- (Publishers) Ltd., 1983), pp. 3-6. tion which provides only for national treatment and has no minimum rights and country A grants performance and broadcasting ‘Stephen Stewart, The Law of International Copyright and rights as well as a reproduction right, the effect would be that Neighboring Rights (London: Butterworth & Co. (Publishers) the nationals of country B would enjoy performance and broad- Ltd., 1983), pp. 6-11. casting rights in country A, but nationals of country A would [continued on next page) 220 ● Intellectual Property Rights in an Age of Electronics and information mum rights work in conjunction with national cinematographic right. The Universal Copy- treatment to achieve the greatest possible uni- right Convention (1952 text) originally pro- formity of intellectual property protection vided only for the translation right; its revised among countries.9 version (1971 text) added the reproduction right, the broadcasting right, and the public Minimum rights also provide a flexible mech- performance right. ’” anism for unifying and increasing levels of international protection as needed. Starting with The harmonization of different national in- a small number of minimum rights, a conven- tellectual property systems, the principle of tion can add others as new rights are required national treatment, and minimum rights have and as the level of international agreement enabled the periodic revision of international rises. For example, beginning with the trans- conventions, which has given the international lation right, the Berne Convention later added system the flexibility needed to adapt over the rights of public performance and broad- time to technological change and changing atti- casting, the droit moral (moral rights), and the tudes about intellectual property protection. However, with the development of many new — —.—.— —- ways of creating, reproducing, and exploiting (continued from pre~’ious page) intellectual works, the international intellec- not enjoy these rights in country B because the nationals of coun- tual property system is currently experienc- try B do not enjoy them either. This could produce a serious dis- equilibrium which would be unacceptable to country A. ing a number of new and perhaps more seri- Ibid., pp. 40-41. ous stresses. Questions arise, therefore, as to “A history of copyright and neighboring rights bears this out . . . whether U.S. domestic policy and participa- When the Universal Copyright was negotiated 60 years after [the 13erne Convention], the difference in the level of protection with tion in the existing international system can rights covered by the convention became less marked, and thus deal with such changes. less stringent measures to insure against unacceptable differences in the level of protection were required. ——. Ibid., p. 40. “’[bid., p. 40.

STRESSES ON THE INTERNATIONAL INTELLECTUAL PROPERTY SYSTEM Recent technological developments are cre- 5. the increasing difficulty of enforcing in- ating pressures on the international intellec- tellectual property rights at the interna- tual property system. Such developments and tional level; and their effects include: 6. the growing convergence of international intellectual property issues with other in- 1. the increasing flow of information and ternational issues. information-based products and services among nations; Greater in magnitude than those of the past, 2, the growing economic importance of in- today’s technological developments pose novel formation and related products and serv- difficulties that challenge the relative stabil- ices, both within and between nations; ity of the international system. Such develop- 3. the increasing cultural and political sig- ments affect not only the international legal nificance of information and related prod- system, but also international economic and ucts and services; political relations. Consequently, these devel- 4. the emergence of new information-based opments may affect the U.S. role in the inter- products and services that do not cor- national intellectual property system as well respond to traditional categories of pro- as domestic intellectual property policy. A tection; brief description of these developments and Ch. 8—Irnpact of New Technologies on the Intemational Intellectual Property System “ 221 their potential implications for U.S. interna- from 3.3 million in 1973 to 12.5 million in 197613 tional and domestic policies are provided and the number of users of database services below. increased from 10,000 in 1965 to 2 million in 1978. 14 Exports by U.S. information services Increasing Flows of Information companies increased by 9 percent between and Information-Based Products 1982 and 1983, and are expected to continue to increase by 9 percent annually through and Services Between Nations 15 1987. The U.S. software industry also reported Technological advances in and the growing an increase in exports that represented 30 per- 16 convergence of information and communica- cent of total sales by 1982. In addition, the tion technologies have greatly increased the use of satellite technology is greatly increas- flow of information and information-based ing the electronic exchange of entertainment products and services across national borders. programs internationally. Sky Channel, for ex- Increases in international trade, as well as the ample, provides by satellite many European development of satellite, broadcast, fiber op- cable systems with programs intended for the 17 tics, and other telecommunication technol- entire European market. Estimates place the ogies, have combined with more powerful in- 1985 transatlantic flow of television programs formation storage, processing, and distribution at approximately 20,000 to 30,000 hours annu- 18 technologies to bring about international ex- ally. changes of intellectual property. As illustrated Other indications of international informa- in figure 8-1, these developments have led to tion exchanges are reflected in increases in greater international exchanges of information international trade of computers and telecom- and technology and international inter- munication equipment, as well as by the grow- dependence. ing international exchange of patents, scien- Although exact measurements of computer- tific information, technology, and cultural ized data flows are difficult to attain, many products. ” For example, between 1978 and inquiries reveal that their rate of growth 1982, U.S. exports and imports of computers exceeds the growth rate of nonvoice communi- and equipment increased by 21.2 and 29.8 per- cations. 11 The growing number of installed ter- cent, respectively .20 U.S. exports and imports minals, telecommunication facilities, database ———-———— searches, and computer services all reflect the ‘ ‘Paul B. Silverman, “international Telecommunications as a Tool for Technology Transfer, paper for the Technolog~ E x- increasing flow of information. change ’78, Atlanta, February 1978. “P.]. van Velse, “Aspects of a European Information In- For example, the number of network termi- dustry, paper for the Commission of the European Communi- nating points (points of connection between ties, Luxembourg, September 1979. user equipment and telecommunication trans- “US. Department of Commerce, International Trade Ad- ministration, “A Competitive Assessment of the U.S. informa- mission facilities) in Western Europe increased tion Services Industry’ (J$’ashington, DC: (J. S. Government from 393,000 in 1979 to 832,000 in 1983 and Printing Office, 1984), p. 35. is projected to reach 1,620,000 in 1987. The “’U.S. Department of Commerce, International Trade Ad- ministration, “A Competitive Assessment of the U.S. Software total number of bits sent per average working Industry’ (Washington DC: U.S. Government Printing office, day grew from 1,310 billion in 1979 to 3,970 1984), p. 35. billion 1983 and is expected to reach 9,820 bil- “Michael Schrage, “Murdoch Reaches for Sky in European TV Battle, ” The tlrashington Post, Nlar. 3, 1985, p. F, 1, 6, 7. lion in 1987. In North America and Western IKKalba Bowen Associates, The Economist: Connections: Europe, the number of data searches increased U’orid Communications Report, No. 32, May 24, 1985, p. 8. “For a detailed analysis of these trends, see U.S. Congress, Office of Technology Assessment, Information Technology Cees *J. 1iamelink, Translational Data F’lows in the Infor- R&D: C1-iticd Trends and Issues, OTA-CIT-268 (Washington mation ,4ge (Sweden: Studentlitteratur AH, Chartwell-Bratt DC: U.S. Government Printing Office, February 1985). i,td., 1984), p. 44. “’U.S. Department of Commerce, International Trade Ad- “M. Renedetti, “Ejurodata ’79: The Growth of Data Com- ministration, “High Technology Industries: Profiles and Out- munications in W’estern Europe, paper for the I B I Conference looks: The Computer Industry” (Washington DC: U.S. Gov- on ‘1’ranshorder Flow Policies, Rome, June 1980. ernment Printing office, 1983), p. 24. 222 ● Intellectual Property Rights in an Age of Electronics and Information

Figure 8-1 .—Shrinking of Our Planet by Humans’ Increased Travel and Communications

Miles per hour - 150,000

- 17,000

- 2,000

- 1,500

- 1,000

- 500

- 100

- 50

“ 25

- 5

Year - Represents population growth Stages in human communication r 1 Word of mouth, drums, smoke, relay runner, I drawings and hand printed material prior to 1441 I Mechanized printing

, Use of electro-magnetic communications- I telephones, radio, and television “intelligent” telecommunications networks through computerization-virtually worldwide

SOURCE: John McHale, World Facts and Trends (New York: Collier Books, 1972), p 3, as cited in Magda Cordell McHale, Facts and Trends: The Changing Information Environment: An Information Chartbook (Rome Intergovernmental Bureau for Informatics, 1985), p 2.

of telecommunication equipment increased ature increased 6 percent between 1973 and from 1977 to 1983 by 22.1 and 35.3 percent, 1980;23 the U.S. technology transfer exports respectively .21 Between 1966 and 1981, the (patents and management or consulting fees) number of U.S. patents granted to foreign na- equaled approximately $3,034 million in 1973.24 tionals increased from 13,722 to 26,546.22 The U.S. exports of cultural products (motion pic- U.S. use of foreign scientific and technical liter- tures, television programming, prerecorded en- —.——-—— tertainment, published materials) have also 21U.S. Department of Commerce, International Trade Ad- grown dramatically over the last few years: for ministration, “High Technology Industries: Profiles and Out- example, the foreign revenues for U.S. motion looks: The Telecommunications industry” (Washington DC: U.S. Government Printing Office, 1983), p. 21. ———. — ‘zNational Science Board, National Science Foundation, SU”- ‘Sh-ational Science Board, National Science Foundation, ence Indicators-1982 (Washington DC: U.S. Government Print- Science Indicators-1982 (Washington DC: U.S. Government ing Office, 1983), p. 206; and Office of Technology Assessment Printing Office, 1983), p. 12. and Forecast, U.S. Patent and Trademark Office, “Indicators “Marc Uri Porat, “Global Implications of the Information of the Patent Output of U.S. Industry IV (1963 -81),” 1982. Society, ” Journal of Communications, winter 1978, p. 78, Ch. 8—impact of New Technologies on the International Intellectual Property System ● 223 picture studios rose from $820 million to $1,420 tion in funding for studies on emerging copy- million from 1978 to 1983.25 right issues which are traditionally sponsored by the UCC might also occur. Moreover, the Policy Implications United States might lose some of its ability to influence decisions about which substantive The increasing flow of information and in- issues such studies will address. For example, formation-based products and services are recent U.S. efforts to convince the UCC Inter- breaking down national boundaries, thus chal- governmental Committee to undertake studies lenging the traditional theories of international on the copyrightability of computer software relations, which are based on the nation-state.26 have not yet been successful. With the erosion of national sovereignty, events taking place in one country will increasingly Magnifying the problems arising out of the be felt in others. Consequently, intellectual U.S. withdrawal from UNESCO is the fact that property decisions, that were once considered the United States is not a member of the only exclusively domestic concerns, will now have other major international copyright conven- to be made with international considerations tion, the Berne Convention. Although, over in mind. time, the United States has amended its domestic copyright laws to be more compatible Currently, U.S. participation in international with those of the Berne Convention, several intellectual property fora is relatively limited. major attributes of U.S. copyright law impede No longer a party to the United Nations Educa- U.S. ratification of the Berne Convention. tional and Cultural Organization (UNESCO), These attributes include, for example, the for- the United States might not have as much malities required to obtain protection under political leverage in the Universal Copyright U.S. copyright law, such as registration and Convention (UCC), which is administered by those enumerated in the manufacturing clause.28 UNESC0.27 Although the U.S. withdrawal As a nonmember of the Berne Convention, the does not preclude the United States from ob- United States can only observe Berne policy serving UCC activities, it does prevent the decisions; it cannot directly influence the de- United States from participating in the velopment of policy concerning international UNESCO General Conference, which reviews protection of new technologies. and approves the various budgets and administrative bodies of UNESCO, including the Given the increasing internationalization of Copyright Division. As a result, the U.S. abil- intellectual property issues, the United States it y to influence other nations in its favor might may want to take greater steps to influence be weakened. Because the United States is no their resolution. There are several options the longer funding UNESCO activities, a reduc- United States might pursue to strengthen its presence in international intellectual property -.—— “CBS, inc., “Trade Barriers to U.S. Motion Picture and organizations. First, the United States might Television, Prerecorded Entertainment, Publishing and Adver- consider rejoining UNESCO. Because UNESCO tising Industries, ” September 1984, p. 10. houses not only the governing body of the “The theory of the nation-state or the state-as-the-only -actor approach was first advanced by Arnold Wolfers. According Universal Copyright Convention, but also to his theory, the most important characteristic of States is other agencies that oversee related matters of their sovereignty, which is considered indivisible and absolute. international information and communications The model further implies that because States do not recognize any higher authority, they are consistently in an international policy, joining UNESCO might place the United state of conflict and competition. Consequently, there is almost States in a more advantageous position from a complete separation between politics within nations and politics between nations. Arnold Wolfers, ll~scm~ m(i Collfi~or8- .tion: Essays in International Politics (Baltimore: Johns Hop- “Statement of Ralph Oman, Register of Copyrights, Assis- kins University Press, 1962). tant Librarian for Copyright Services, Library of Congress, Hear- ‘-The increasing politicization that polarized UNESCO was ing on S. 1822 and S. 1938 Bills to Make Permanent the Manu- a major impetus of the U.S. decision to withdraw from UNESCO facturing Clause of the Copyright Act, before the Subcommittee in late 1984. Seymour Finger, “Reform or Withdrawal, ” For- on Patents, Copyrights and Trademarks, Senate Committee on eign Service Journal, vol. 61, June 1984, pp. 18-23. the Judiciary, Jan. 21, 1986, p. 35. 224 ● Intellectual Property Rights in an Age of Electronics and Information which to influence the decisionmaking proc- number of benefits would accrue to the United ess of such agencies, Rejoining UNESCO, States if were to adhere to the Berne Conven- moreover, might relieve much of the resent- tion.30 ment harbored by many developing countries At the same time, there are several trade- for the United States and its historical lack offs associated with U.S. ratification of the of international participation in the interna- Berne Convention. The major disadvantage of tional intellectual property system. signing would be the legislative adjustments Rejoining UNESCO, however, is not with- needed to bring the present U.S. copyright law out political and economic tradeoffs. Addition- into compliance with the Berne Convention. al funding, for example, would be required if Although Congress has over the years sought the United States were to become a member to make U.S. law more compatible, several le- of UNESCO. In addition, the United States gal adjustments are still required. These in- would most likely need to make further politi- clude the need to remove copyright formali- cal and perhaps economic concessions to ad- ties embodied in the U.S. law—such as notice dress the concerns of the developing nations. and deposit, compulsory licenses, and the manufacturing clause— and the need to add moral A second option to strengthen U.S. partici- 31 rights. The Department of State’s Ad Hoc pation in the international intellectual prop- Working Group on U.S. Adherence to the erty system would be to ratify the Berne Con- Berne Convention, which is made up of repre- vention. This would benefit U.S. international sentatives of the copyright community, is cur- copyright relations in several ways. First, the rently exploring how these adjustments can administrator of the Berne Convention, the be made while preserving traditional U.S. laws World Intellectual Property Organization and practices as much as possible. (WIPO), would provide a more favorable forum for dealing with international intellectual property issues because it specializes only in Growing Importance of Information intellectual property rights and it is consid- and Information-Based Products and ered to be less politicized than UNESCO. Sec- Services to National Economies and ond, the Berne Convention provides the high- International Trade and est levels of international copyright protection. Competitiveness Third, ratification of the Berne Convention would also provide the United States with the Historically, all nations have viewed the cre- opportunity to influence major policy devel- ation of intellectual works as having great cul- —. -. .——. opment with regard to new technologies. Fi- “’For example, at the Sept. 12, 1984, meeting of the Depart- nally, joining the Berne Convention would ment of State’s International Copyright Advisory Panel, the show other nations, particularly developing na- private sector representatives from all different parts of the intellectual property community were unanimous in their sup- tions, that the United States is indeed very port for U.S. adherence to the Berne Convention. Moreover, all committed to the protection of international of the witnesses who testified before the Subcommittee on Pat- intellectual property rights and that it is cog- ents, Copyrights, and Trademarks, Senate Committee on the Judiciary, expressed their support for U.S. adherence to the nizant of the growing need for its system of Berne Convention. Hearing on “U.S. Adherence to The Berne intellectual property rights to operate within Convention, ” before the Subcommittee on Patents, Copyrights, an international context.29 For these reasons and Trademarks, Senate Committee on the Judiciary, May 16, 1985. and others, there is wide agreement among “’’The importance of maintaining the attributes of U.S. those dealing with intellectual property issues, copyright law, such as deposit, registration, and recordation particularly at the international level, that a provisions can scarcely be questioned. For these provisions have served a most important public function; they have enabled the Library of Congress to become the most important repository ‘sDonald Quigg, Acting Assistant Secretary and Commis- for U.S. cultural expression as well as for the rest of the world. ” sioner of Patents and Trademarks, testimony on “U.S. Adher- Donald Curran, Associate Librarian of Congress and Acting ence to The Berne Convention, ” before the Subcommittee on Register of Copyrights, Copyright Office, testimony before the Patents, Copyrights, and Trademarks, Senate Committee on Subcommittee on Patents, Copyrights, and Trademark, Sen- the Judiciary, May 16, 1985. ate Committee on the Judiciary, May 16, 1985. — — .- .-

Ch. 8—Impact of New Technologies on the International Intellectual Property System ● 225 tural and social significance. Recently, how- tific research.36 Because they have become not ever, intellectual products are becoming an only an important component in the U.S. econ- increasingly important component of national omy, but also a significant productivity fac- and international economies .32 A recent study tor in many industrial sectors, information and on the size of the copyright industries reflects information-based products and services have the same trend. These industries, which rely become an extremely crucial element in the on the exploitation of the legal protections em- U.S. economy and its overall international com- bodied in the copyright law, showed growth petitiveness. 37 in sales from $6.2 million, or 2 percent of the gross national product (GNP), in 1954 to $140.9 Just as information and information-based products and services are of increased value billion, or approximately 5 percent of the GNP, in 1982.33 An additional $11.3 billion would be to national economies, they are also becoming more important to the world economy. Recent added if semiconductor chips were included. Estimates of the U.S. labor force involved in evaluations have found that this complex of information industries is already the third the copyright industries suggest that more largest in the world economy. In 1980, each that 2.2 million workers are affected by trade 34 of the industrialized nations spent approxi- in intellectual property . The U.S. Department mately 4 or 5 percent of its GNP on informa- of Commerce also estimates that in 1983, the 38 tion-based products and services. Figure 8-2 United States enjoyed a $4.7 billion favorable illustrates the large number of sectors in which balance of payments in the licensing and as- many nations are using information technol- signment of patent rights, trademarks, and 35 ogies. Another estimate notes that the world copyrights. information market equaled approximately Information and information-based products $350 billion or 18 percent of world trade in and services are not only valuable economic 1980.39 commodities in and of themselves; their use also increasingly affects the performance of Policy Implications other economic sectors. The application of information technology is responsible for vast Given the growing importance of informa- increases in productivity y in manufacturing in- tion and information-based products and serv- dustries, offices, financial services, and scien- ices to the U.S. economy, its export markets, and thus to its international competitiveness, Several major studies completed over the last several intellectual property rights are acquiring great- years document this trend. Daniel Bell was one of the first to describe the changing role of information in society: “And if er significance. Policy makers are now recog- capital and labor are the major structural features of industrial society, information and knowledge are those of the post- .— industrial society. Daniel Bell, The Corning of Post Industrid “One economist documented these trends by showing that Societ~r (New York: Basic Books, 1976), p. xiii. A quantitati~re the introduction of information technology has made work more stud~’ b~’ Marc Porat found that by 1967, the primar~r and sec- specialized and efficient, which in turn has led to greater produc- ondary production, processing, and distribution of information- tivity. Thus, the analysis showed that the quantity of real out- based products and services constituted approximately 46 per- put produced by each production-sector worker in the U.S. econ- cent of the G N P and that nearly half of the labor force is en- omy was 6.4 times greater in the year 1970 than in 1900. Charles gaged with informational activities. Marc Uri Porat, Office of Jonscher, “Information Resources and Economic Productivit~”, ” Telecommunications, U.S. Department of Commerce, “The In- Information Economics and Public Policjr, vol. 1, No. 1, 1983, formation I+:conomy: Definition and Measurement” (Washing- p. 21. ton DC: U.S. Go}’ernrnent Printing Office, 1 977). ‘qThe President’s Commission on Industrial Competiti\”e- “Michael H. Rubin, *’The Copyright Industries in the ness, Committee on Research, Development, and Manufactur- United States: An Economic Report Prepared for the Amer- ing, Appendix D, 4’Preserving America’s Industrial Competi- ican Copyright Council, ” 1985, p. 1. tiveness-A Special Report on the Protection of Intellectual “U.S. Copyright Office “The Size of the Copyright Indus- Property Rights, ” October 1984. tries in the IJnited States, ” Subcommittee on Patents, Copy- 1“Edward W’. Ploman and 1.. Clark Hamilton, Copyright: 1n- rights, and Trademarks, Senate Committee on the .Judiciary, te]lectual Propert.v in the Information Age (London: Routledge December 1984. & Kegan Paul, 1980], p. 217. ‘ Flileen Ilill, *’Commerce Department Seeks Greater Pro- ‘L’Cees J, Iiamelink, I%msnational Data Flows in an Infor- tection for U.S. Intellectual Property Rights, ” Business Amer- mation ,4ge i Sweden: Studentlitt.eratur Ab Chartwell-Bratt I.td., ica, Mar. 18, 1985, p. 3. 1984), p. 23. 226 • Intellectual Property Rights in an Age of Electronics and Information

Figure 8-2.—Computer Utilization: Selected Countries, 13 Sectors

France (1978)

Mexico I : :..., ,

nizing the importance of factoring intellectual The United States has already taken some property protection into bilateral and multi- steps toward recognizing the protection of in- lateral trade relations. Similarly, international tellectual property rights as a major trade trade concerns are looming larger in interna- issue. The recent passage of the Trade and tional intellectual property relations. Such Tariff Act of 1984 (Public Law 98-573), for ex- growing linkages may call for greater atten- ample, allows the President to take into action to these relationships and new ways of count nations’ laws and practices to adequately coordinating and addressing the issues to protect intellectual property rights as a con- which they give rise. Thus, the United States dition for receiving the trade preferences might need to reassess its intellectual prop- granted under the Generalized System of Pref- erty policy at the national and international erences Program (GSP).40 In addition, the Car- levels to accommodate these new linkages. ‘“The Trade and Tariff Act of 1984 contains five provisions (continued on next page) —

Ch. 8—Impact of New Technologies on the International Intellectual Property System “ 227

Figure 8-2.— Computer Utilization: Selected Countries, 13 Sectors—Continued

The Netherlands (1980)

Philippines (1980)

Spain (1978)

Switzerland (1978)

Taiwan (1978) ● I I 1. ●

Venezuela + (1979)

= Mini computers 1 —– Small computers Key —- -1— ● 1 = Medium computers = Large computers ~ 1’ JI 1 SOURCE U S Department of Commerce, International Trade Administration, Computers and Peripheral Equipment — Various Countries (Washington, DC U S Govern. ment Printing Office, 1980), as cited in Magda Cordell McHale, Facts and Trends: The Changing Informatfin Environment: An informatron Char/book (Rome Intergovernmental Bureau for Informatics, 1985), p 32 ibbean Basin Economic Recovery Act (Public A number of other strategies are also avail- Law 98-67) makes the protection of U.S. copyable to strengthen trade opportunities for U.S. righted broadcast works a condition for Carib- intellectual property products. One such op- bean nations to receive U.S. aid. tion is to prevent imports of illicit copies of U.S. products or products illicitly manufac- related to intellectual property protection. Many of the coun- tured with U.S. patented processes. The pro- tries that are eligible for GSP benefits are also those countries posed Process Patent Amendment of 1985 (S. which do not adequately protect intellectual property rights. 1543 and H.R. 1069), for example, would make These countries include, for example, Argentina, Bangladesh, Brazil, Chile, Colombia, Costa Rica, Egypt, Ecuador, Guate- it a violation of patent law to use, sell, or im- mala, India, Indonesia, Korea, Mexico, Pakistan, Peru, the port any product made overseas that is pro- i Philippines, Portugal, Sr Lanka, Taiwan, Thailand, Turkey, Uru- duced by an unlicensed patent process. guay, Venezuela, and Yugoslavia. 228 ● Intellectual Property Rights in an Age of Electronics and Information — ——

Another recently proposed option is to in- Developing nations make the same argu- clude information products and services within ment today. Many believe they should be ex- the General Agreement on Tariffs and Trade empt from measures protecting intellectual (GATT). This option has broad support for sev- property created outside their borders. They eral reasons. First, including intellectual prop- argue that access to information is vital to their erty products in the GATT could provide in- development. Championing this viewpoint, de- ternational enforcement mechanisms in the veloping nations were able to get revisions in form of dispute settlement mechanisms and the Berne Convention at Stockholm in 1967 trade sanctions as final retaliatory mechanisms and in the Universal Copyright Convention in for dealing with infringements—mechanisms 1971. Moreover, the influence of these coun- that are not currently provided in international tries has been felt at meetings of the United intellectual property agreements. Second, un- Nations Conference on Trade and Develop- like many international intellectual property ment (UNCTAD) and at the recent meeting to agreements, the GATT has a broad represen- revise the Paris Industrial Property Conven- tation of the industrialized and developing nation.41 tions as well as a history of consensus-building As information and information-based prod- among its member states. Third, the GATT ucts and services become more important to takes into account the economic development needs of the developing countries, allowing social and economic development, questions them differential treatment as a means of as- of information access, which were formerly quite distinct from political considerations, are sisting their development. 42 acquiring greater political significance. Be- There are, however, some negative aspects cause both developed and developing nations to such approaches. Linking the granting of view intellectual property protections as a ma- trade preferences or foreign aid to the protec- jor mechanism for regulating and controlling tion of intellectual property rights might pro- the flow of and access to information and in- voke political discord between the United formation-based products and services, there States and developing nations. Including in- is growing political pressure on the interna- tellectual property products within the GATT tional intellectual property system.43 also conflicts with many developing countries’ notions of information and information-based A case in point is the information gathered products and services and might lead to polit- by remote sensing satellites. In 1972 the United ical unrest and various forms of retaliation. States launched the Land Remote Sensing Sat- ellite (Landsat) as part of a broader resource Increasing Cultural and Political Significance of Information and “For example, the provisions for developing nations that were added to the Universal Copyright Convention in 1971 in- Information-Based Products clude exemptions that fall into three categories: 1 ) translation and Services rights subject to compulsory licensing; 2) reprint rights subject to compulsory licensing; and 3) compulsory licensing in gen- Historically, there have been political ten- eral. Subcommittee on Patents, Copyrights, and Trademarks, Senate Committee on the Judiciary, hearing on “Oversight on sions between nations whose role as produc- International Copyrights, ” Sept. 24, 1984, pp. 61-62. ers of intellectual property allowed them 4’Rita Cruise O’Brien and G. K. Helleiner, “The Political greater access to such products and nations Economy of Information in a Changing International Economic Order, ” International Organization, vol. 34, No. 4, Autumn 1980, that imported intellectual property products, p. 446. and had only limited access to them. When the “These access tensions, for example, have given rise to dis- United States was still a relatively young and cussions of a New World Information Order in which developing nations call for freer access to technical and educational ma- developing country, for example, it refused to terials as well as a redress of the imbalances in the international respect international intellectual property flow of news and cultural products and a New World Interna- rights on the grounds that it was freely enti- tional Economic Order which calls for greater controls over and access to technology transfer to Third World nations. Both of tled to foreign works to further its social and these orders are intended to strengthen the self-sufficiency of economic development. developing nations. ———

Ch. 8—impact of New Technologies on the International lntellectual Property System ● 229 monitoring and assessment system .44 Uncopy- These nations want to use information and rightable raw data on all countries generated communication technologies for such things by this series on the Earth Resources Satel- as: national integration; administrative effec- lite Program are disseminated to governments, tiveness; the delivery of formal and informal firms, or individuals at very low prices. As education; teacher training; agricultural infor- Landsat is currently being transferred from mation; medical and health care services; re- government ownership to the private sector, gion-specific cultural programming; and cop- data that have been processed and analyzed ing with natural disasters.47 Many developing (by private sources), and thus are copyright- countries believe, therefore, that international able, such as field-by-field analyses of crop- intellectual property protection, which can act lands, blight, drought, and mineral resources, as a regulator of information flows, might in- are available at a much higher price. Because hibit such use and act as a barrier to devel- less developed nations have difficulty paying opment. these prices, or lack the computer technologies For these same reasons, many developing needed to process and interpret the data them- countries are wary of certain product patents. selves, they often cannot gain access to such They contend that royalty payments required data. As a result, they believe that they are by patents should be relaxed for products that potentially at a disadvantage in world agricul- are necessary for development, and in some tural commodity markets, where private firms 48 cases, human survival. Many industrialized and wealthier governments can afford and use the data to make more well-informed, strate- nations oppose this point of view. Having incurred large costs in the research and devel- gic decisions: opment of products, they believe they are en- The importance of information lies in its titled to recoup their investments by selling role as a central factor in decision-making, in- in foreign markets. cluding all matters related to development. Information is a precondition for identifying One product that caused such a problem is alternatives, reducing uncertainties about the patented pharmaceutical product Tagamet their implications, and facilitating their im- (generic name, cimetadine, an anti-ulcer drug), plementation. As such, information is a criti- developed by the U.S. company SmithKline- cal resource, not least for enhancing the ne- Beckman. By the time the company was ready gotiating capabilities of developing countries to market its product in Argentina, 48 percent in the pursuit of clearly defined objectives, of its market had already been undercut by a in particular in dealing with translational cor- 45 local firm selling the product at a much lower porations. price. Due to Argentina’s lack of patent pro- Many governments of developing countries tection for pharmaceuticals, the local compa- also view information-processing and commu- nies could take the product and sell it at a lower nication technologies as means to achieve ma- price because they did not have to recoup de- jor societal goals. Likening these technologies velopment costs or pay royalty fees. Smith- to a change in the “entire nervous system of “Jorg Becker, Information Technolom’ and a iVew Interna- social organization, many governments con- tional Order (Sweden: Studentlitteratur A13, Chartwell-Bratt sider the establishment of information infra- Ltd., 1984), pp. 109-111. structures to be crucial for development.46 ‘“Because many developing nations believe they need to acquire technology from the advanced nations, they tend to re- “For a detailed analysis of international remote sensing sat- tain patent, trademark, and copyright laws because they pro- ellite issues, see U.S. Congress, Office of Technology Assess- vide some security that helps to continue to attract foreign ment, Remote Sensing and the Private Sector: Issues for Dis- enterprise. However, the intellectual property protection is fre- cussion– A Technical Memorandum, OTA-TM-I SC-20 quently modified. They may offer, for example, compulsory (Washington, DC: U.S. Government Printing Office, March license requirements, curbs on the manner in which the royal- 1984). ties are paid, exclusion of certain products or subject matter “United Nations Center for Transnational Corporations, from protection, or official examination of the terms on which Transborder Data Flows: Access to the International On-1ine foreign rights owners establish their own local operations or Database Market (New York: United Nations, 1983). grant licenses to local enterprises. W.R. Cornish, Intellectual “Simon Nora and Alain Mine, The Computerization of So- Propert-v: Patents, Cop-vright, Trademark, and Allied Rights cietj’ (Cambridge, MA: MIT Press, 1980). (London: Sweet & Maxwell, 1981), p. 17. 230 ● Intellectual Property Rights in an Age of Electronics and Information

Kline-Beckman claimed it lost approximately However, one of the major impediments to $50 million in revenues because of the lack of gaining the support of other nations is the is- patent protection in many developing na- sue of ownership of technology. For example, tions.49 the United Kingdom made it clear to the United States that it would not participate in Growing political tensions between nations the SDI program unless the terms for the are also occurring with regard to intellectual rights to the technology were stipulated at the property rights for plants. The United States outset of the research. The United States, how- and the other industrialized nations have no ever, believes that this would be incompatible native primary crops. As a result, Western na- with the Defense Department’s regulations, tions have traditionally used plant varieties which do not allow blanket patent and tech- from the Third World to genetically engineer nology transfer guarantees and require con- new and better seeds for farm crops. Because sideration on a case-by-case basis. Thus, intel- many of the developing nations do not have lectual property rights are the source of some the technology for seed development, they are political pressures among nations and may ac- generally forced to buy many of these geneti- tually preclude international political cooper- cally engineered seeds from the industrialized ation and participation in the SDI program.51 nations. Political tensions between nations arise because developing nations believe that the industrialized nations are exploiting the Policy Implications Third World’s natural resources. They attrib- There are no simple solutions to the politi- ute the problem to the granting of intellectual cal issues raised by intellectual property rights. property rights: Although U.S. economic interests would most How is it that we farmers [from the Middle likely be served better by strict enforcement East] spent 10,000 years cultivating and of intellectual property protections in other na- breeding our plants, then someone else from tions, political relations may also be a consid- the West works on it for 10 years, and only eration. Many U.S. intellectual property prod- then is it called “intellectual property” and ucts, for example, help promote U.S. culture 50 becomes patentable? abroad: Although most tensions arising out of intel- Books have unique qualities enabling them lectual property rights have been primarily be- to provide foreigners substantive perceptions tween industrialized and less developed na- and insight into American society and gov- tions, political issues related to such rights ernment policies which they can get no other have recently begun to emerge between devel- way. . . [T]hey smooth the path for the pur- oped nations as well. A case in point involves suit of our foreign policies. It has been said the Strategic Defense Initiative (SDI) research that next to people, books are our best am- bassadors of international enlightenment and program. Among other goals, political comity 52 and support among nations for defense are ma- goodwill. jor goals of the SDI research program. For this reason, the United States is seeking other nations’ cooperation and participation in the SDI —. research program. 5’Karen DeYoung, “British, American Officials Hit Snags on SDI Cooperation: Allies at Odds Over Contract Terms, Own- ership of Technology, ” The Washington Post, Oct. 26, 1985, A5. “Curtis Benjamin, U.S. Books Abroad: Neglected Ambas- “Gerald Mossinghoff, President of the Pharmaceutical Manu- sadors (Washington, DC: U.S. Library of Congress, 1983), p. facturers Association, testimony ‘on the BenefiCiw Countv 72. Recognizing the importance of books to increased under- I+actices, before the General System of Preferences Subcom- standing of the United States, the U.S. Government through mittee of the Trade Policy Committee, June 24, 1985. the U.S. Information Agency distributes books worldwide in ‘OPhillip Hilts, “Battles Sprout Over World Seed Supply: 57 languages; by 1971 it had published and disseminated 19,220 Bureaucrats and Nations Grapple With Charges of Neglect and editions totaling 157,200.000 copies. Nicholas Henry, ~p~’ght, Genetic 1mperkilism,” The Washington Post, Nov. 4, 1985, p. Information Technology, Public Policy, Part 1: Copyright-Public A3. Policies (New York: Marcel Dekker, Inc., 1967), p. 5. Ch. 8—Impact of New Technologies on the International Intellectual Property System ● 231

Similarly, copyrighted musical works, audio- Another U.S. diplomat pointed out that other visual works, sound recordings, and patented industrialized nations, such as France, the technical works also further international un- United Kingdom, and West Germany, devote derstanding and an appreciation of U.S. cul- a greater proportion of their national budgets ture, and so might aid U.S. relations with both to public distribution of information products developing and industrialized nations. for diplomatic purposes than does the United States.” Although many consider it unfair to expect producers of intellectual property to absorb The United States has several options for large losses in international markets in order addressing the political issues raised by new to foster international relations, the cultural technologies. If the United States wishes to and political significance of these products address the informational needs of developing might require striking a new balance between countries, for example, it might increase USIA producers and importers of intellectual prop- information distribution programs, and include erty products. Political and cultural consider- provisions for the distribution of information ations as well as economic concerns might need in other international development programs to be taken into account when adjusting the for education, agriculture, medicine, transpor- international intellectual property system. tation, etc. Moreover, USIA might implement These considerations might also need to be fac- new programs to help nations to develop in- tored into U.S. domestic intellectual property formation and communication infrastructures, policy and international trade and political so they can utilize information in electronic relations. forms such as databases, videotapes, and software programs: Recognizing how important U.S. cultural and educational products are to its relations Information access is easier to transfer to with other nations, the United States has es- the developing world than was agriculture or tablished several programs within the U.S. In- industrial know-how. While it is not possible formation Agency (USIA). These programs are to put the Third World on an equal footing designed to promote international understand- with the First World in the next ten years, ing by providing developing and industrialized it is possible to communicate the needed ex- countries with American films, radio pro- pertise now. The best mathematicians in the world could create expert systems and make grams, television programs, music, books, and them available to the poorest countries cultural programs at low or no cost. These pro- through existing satellite networks and earth grams, however, have been greatly reduced stations, relayed by telephones to low-cost over the last few years. The USIA-sponsored terminals. Medical diagnosis and training or book publishing program, for example, which engineering design could also be redistributed includes translation programs and low-priced throughout the world at a unit cost within book programs, was reduced from 6,621,000 national budgets.56 53 copies in 1956 to 525,000 copies in 1980. As Another option that the United States might a result, many people have criticized the U.S. pursue would be to earmark funds that were Government for failing to meet the Third traditionally allocated for foreign aid for the World’s cultural and educational needs. One purchase of intellectual property products. former U.S. ambassador, for example, asserted This would give developing countries access that the U.S. Government’s recent neglect of to information and information-based products its overseas book, educational, and cultural and services and at the same time instill re- programs denies our foreign policy “one of our greatest sources of strength as a nation.”54 5’Allen Hansen, Jr., USIA Public Diplomacy in the Comput- “’Curtis Benjamin, U.S. Books Abroad: Neglected Ambas- er Age (New York: Praeger Press, 1984). sadors (Washington, DC: Library of Congress, 1984), p. 91. “Jerome Glenn, “Helping Countries Help Themselves: “’’’Selling America in the Marketplace of Ideas, ” New York Keys to Third World Development, ” The Futurist, December Times Magazine, Mar. 20, 1983. 1985, pp. 33-35. 232 ● Intellectual Property Rights in an Age of Electronics and Information .- spect for the protection of intellectual prop- have made agreement at the international level erty rights. more difficult. Although these options address the grow- Intellectual property protection for computing political issues relating to intellectual proper software is one often-cited example of the erty rights, they might also conflict with U.S. differing levels of protection nations have trade and economic views of intellectual prop- granted a new technology: erty. For if the United States contributes many The debate on both the possibilities and ap- of its information-based products and services propriate form for protection of software has to developing countries, it cannot receive the now been continuing for nigh on 15 years. international market value of such highly . . . Despite the harmonization of national leg- sought after products and services. This, in islation . . . we are still faced with a whole turn, could have a negative effect on the U.S. gamut of divergent solutions ranging from balance of payments. the full recognition of the patentability of software and its protection under copyright, Emergence of New Information-Based through various intermediary solutions, to a radical refusal of any protection for computer Products and Services That software. 58 Do Not Correspond to Traditional Intellectual Property Protections Because the United States was one of the first countries where computer software be- Although rooted in different philosophical came a large and important market, it was here traditions, the intellectual property systems that the debate over its protection first took 59 of different nations have been harmonized over place. Like many other industrialized nations, the years through the international intellec- the United States explored the possibilities of tual property system. This cooperation, made protecting software by drawing analogies be- possible by a shared set of goals as well as by tween the characteristics of software and other national treatment, led in the past to general intellectual properties that are protected by agreement among nations on what constituted existing legal frameworks, such as copyright, protectable subject matter, infringement activ- patent, and trade secrets. After many heated ity, and the like. This process of reaching in- debates and commissioned studies, the United ternational agreement is generally slow, de- States, in a 1980 amendment to the 1976 Copy- pending on years of interplay between national right Act, explicitly granted copyright protec- 60 and international laws and policies.57 tion for software. — .—— The unprecedented rapid and large-scale de- 5MKolle, “Computer Software Protection–Present Situation velopment of new information and information- and Future Prospects, Copyright 13, 1977, p. 70. “In 1982, the worldwide revenues from software amounted based technologies, which is illustrated in fig- to $13 billion and is projected to quadruple by 1987. U.S. com- ure 8-3, has disrupted this formerly stable sys- panies garner approximately 70 percent of the market. United tem. Such rapid and large-scale technological States Trade Representative, “USTR Seminar on International Copyright Issues in Computer Software, ” Sept. 24, 1984. change has forced nations to respond faster ‘The United States implicitly extended copyright protec- and perhaps more dramatically in interpret- tion to computer software in the Copyright Act of 1976, 17U.S.C. ing and legislating intellectual property pro- jj 101-810. The National Commission on New Technological Uses of Copyrighted Works (CONTU), created by Congress to tection. Some nations have enacted intellec- revise comprehensively the copyright laws of the United States, tual property legislation to protect emerging stated in its final report that “it is clear that. . . those who have technologies, while other nations have not. admini:~tered the portions of the 1909 act concur in the position that programs are copyrightable. The Copyright Act was These divergent reactions have led to great in- amended in 1980 to expressly state that computer programs consistencies among nations, which, in turn, were to be included as copyrightable works: Section 101 of the Act was amended by addition of the word “computer program, ” “This slow and elastic process of unifying national intellec- and a definition of that term; Section 117 was amended by the tual property law and policies is cited as one of the most impor- addition of certain limitations on exclusive rights pertaining tant aspects of the international intellectual property con- specifically to computer programs. The U.S. courts have also ventions. recognized copyright protection for software. Ch. 8—Impact of New Technologies on the Irrternational Intellectual Property System ● 233

Figure 8-3.— The Speed of Change: Intervals Between Discovery and Application in Physical Science

SOURCE John McHale, World Facts and Trends (New York Collier Books, 1972) p 3, as cited in Magda Cordell McHale Facts and Trends The Changing Information Environment: An Information Chartbook (Rome Intergovernmental Bureau for lnformatics 1985) p 4

Although most nations have not explicitly Among those nations that are considering amended their copyright laws to include soft- protection for software, there is a wide vari- ware, some either consider it to be protecta- ety of schemes envisioned. Some nations would ble under copyright law through judicial inter- offer such protection, but with limitations. A pretation and/or are actively pursuing copy- white paper prepared for the Canadian Gov- right protection.61 These countries include Aus- ernment, for example, proposes to limit copy- tria, Canada, Colombia, France, Finland, the right protection for object code (machine- Federal Republic of Germany, Italy, India, Ja- readable language) to 5 years.63 Other nations pan, Korea, Mexico, the Netherlands, South have declared that they will not protect soft- Africa, Spain, Sweden, and the United King- ware under the copyright law, although they dom.” may grant it some type of sui generis protec- ———— tion. Other nations may not protect software ‘ ‘Currently-, Australia, Hungary, the Philippines, and Tai- at all. Brazil, for example, is considering leg- wan have amended their copyright laws to include computer islation that would establish a sui generis form software as protectable subject matter. ‘“United Nations Educational, Scientific, and Cultural Orga- of protection that would require compulsory nization (UN F; SC()), World Intellectual Property Organization licensing of software to Brazilian companies (WI PO), Group of Experts on the Copyright Aspects of the Pro- and compulsory registration of both source and tection of Computer Programs, Michael S. Keplinger, “A Sur- vey and Analysis of N’ational I.egislation and Case Law, hlarch 1985; and Michael S. Keplinger, “Authorship in the Informa- ‘ Consumer and Corporate Affairs and Department of Com- tion Age: Protection for Computer Programs Under the Berne munications, Government of Canada, ‘‘From Gutenburg to Tel- and the Universal Copyright Conventions, Copyright, March idon: A Guide to Canada’s Copyright Revision Proposals" (Ot- 1985, pp, 119-128. tawa: Ministry of Supply and Services, 1984). 234 ● Intellectual Property Rights in an Age of Electronics and Information

object codes. The proposed protection, more- ment. The West German compulsory license, over, would be for a very short duration. Such although under the rubric of copyright law, varied approaches to protecting—or not pro- would be incompatible with the solution tecting—software and other rapidly changing enacted by the French. The more serious diffi- technologies might impede attempts to reach culty, however, arises with solutions like that an international agreement on software pro- adopted by France. Because the right to com- tection. 64 pensation is introduced under legislation outside of the copyright law, the principle of The introduction of reprographic technol- national treatment, on which the entire inter- ogies offers another example of how new tech- national intellectual property system is built, nology is complicating the harmonization of 65 is seriously undermined. The principle of na- national intellectual property law at the inter- tional treatment is challenged because the com- national level. The increasing use of these tech- pensation for the reproduction right does not nologies has undermined owners’ rights to col- arise from a copyright, and thus foreigners can- lect remuneration for the reproduction of their not collect compensation for use of their works. works. To cope with these problems, many na- In general: tions have legislated new rights enabling creators to collect compensation for the use of If that device is generally used by govern- their works. The Federal Republic of Germany, ments when dealing with the new uses of for instance, has dealt with the problem by copyright material arising from new technol- amending its copyright law to include a com- ogy and new means of communication, the pulsory license that allows authors to collect fundamental principle of national treatment equitable remuneration for the commercial re- and with it the [international] copyright conventions based on it, could be seriously eroded production of their works. In contrast, France in the near future. has introduced a tax on the sale and importa- 66 tion of all reprographic copying machines in Another problematic situation arises from its 1976 Finance Act. Part of the collected rev- applying patent law to activities in outer space. enues from the tax are paid to the copyright Domestically, the National Aeronautics and owners. This law applies only to French copy- Space Administration (NASA) has adopted a right holders, even though France is a mem- —— ber of both international copyright con- “Another example of how a right to remuneration has been ventions. taken out of the copyright sphere can be seen in the rights many countries have granted to enable creators to receive remunera- Although both of these solutions aim to en- tion from home taping activities. In the case of home taping, sure rights owners remuneration, they are le- a levy on recording equipment or blank tape can be treated as royalty to be divided among copyright holders as in West Ger- gally inconsistent with one another, and thus many or Austria. However, it can also be treated largely as a will cause difficulty for international agree- tax, as in Sweden, where 90 percent goes to public funds and 10 percent goes to the rights owners (authors, performers, and ——— phonogram producers). Public lending rights (although an in- “The fact that WIPO’S 1978 proposed draft Treaty for the direct response to the introduction of reprographic technologies), Protection of Computer Software (which includes rules for the which entitle authors of literary works to receive a royalty when minimum protection of software that are closely related to those their books are borrowed from a library, have also caused difficul- of copyright and unfair competition) has not been ratified illus- ties for international harmonization. For example, in the Fed- trates the problems of finding an adequate protection for soft- eral Republic of Germany this right is granted in their copy- ware that can be agreed on internationally. The draft Treaty right law, and therefore as the Federal Republic of Germany proposed that in view of the large degree of uncertainty generis a member of both the Berne and UCC Conventions, foreign- ally related to the existence and form of protection under copy- ers are entitled to remuneration if their books are borrowed. right, that a special system of protection of software similar The Scandinavian countries and the United Kingdom, however, to copyright should be set up at national and international levels. which also grant a public lending right, have chosen to do so The draft Treaty, moreover, calls for the international deposit by separate legislation outside of the copyright laws and thereof software. Some individuals believe, however, that Article 11 fore are not bound to grant the right to foreigners; although of the Berne Convention is applicable for the international pro- like the Federal Republic of Germany, they are also members tection of software. Cynthia L. Mellema, “Copyright Protec- of both conventions, Stephen Stewart, The Law of Intematiomd tion for Computer Software: An International View, Syracuse Cop~”ght and Neighboring Rights (London: Butterworth & Co. Journaf of International Law and Commerce, vol. 11, summer (Publishers) Ltd., 1983), pp. 42-43, 282. 1984, p. 90. ‘Ibid., p. 43. Ch. 8—Impact of New Technologies on the International Intellectual Property System • 235 . clear policy of providing maximum protection fullest possible extent in international intel- for intellectual property rights to encourage lectual property fora so that it can both influ- the use of and commercialization of NASA- ence international decisions and keep abreast supported and developed technology. How- of national and international developments. ever, as more research, particularly interna- The United States, moreover, might need to tional cooperative research, is performed in take greater account of how its domestic in- space, it may become more difficult to deter- tellectual property legislation could affect or mine which national legal jurisdiction of pat- be affected by the international system. ent protection applies to it. For example, sections 102 and 104 of the U.S. Code 35 state As discussed above, the extent of U.S. par- that the factors used to determine patentabil- ticipation in international intellectual property ity under U.S. law or to establish priority in organizations is relatively limited because of international conflicting claims to invention its withdrawal from UNESCO and its absti- include where an invention was conceived, re- nence from the Berne Convention. This lack duced to practice, or used. In addition, under of participation might seriously impede the the U.S. patent law patents protect use or man- United States from monitoring developments ufacture only in the United States. As more in international agreements. Moreover, it may U.S. and international research and develop- also weaken the U.S. ability to influence deci- ment is performed in space, the question arises, sions about which rights might be incorporated therefore, as to how to obtain and enforce U.S. into the international agreements with respect patent rights in space.67 to new technologies.

Policy Implications In addition to its lack of international participation, recently proposed and already legis- The speed and scale of technological change, lated U.S. intellectual property policies might now and in the future, together with the rapid be inconsistent with international intellectual development of national and international law, property norms. The recent passage of the are likely to heighten the pressures for the de- Semiconductor Chip Protection Act of 1984 velopment of international intellectual prop- (Public Law 98-620), for example, created a sui 68 erty law. As technological change prompts generis protection for semiconductor chips. Al- more need for rapid international consensus, though this new type of protection maybe well greater international action and coordination suited for the functional nature of chips, there will become necessary. Consequently, the is a trade-off with respect to its consistency United States might have to participate to the with the system of international agreements. Because the Semiconductor Chip Protection ‘“’’The Applicability of U.S. Patent Laws in Outer Space, ” Act of 1984 is a sui generis approach and does Telecom Highlights, June 19, 1985, p. 4; and Barbara Luxen- berg (Special Assistant to the Assistant Secretary and Com- not fall under the rubric of copyright or pat- missioner of Patents and Trademarks, U.S. Department of Com- ent law, there is no international agreement merce), “Protection Intellectual Property in Space: Policy under which the protection of chips can be Options and Implications for the United States, ” presented to the Georgia Institute of Technology Conference, 1985, Inter- organized at the international level. Moreover, national Space Policy: Options for the Twentieth Century and section 902 of the act states that foreigners Beyond, May 16, 1985. may only receive protection if their nation also ‘After approximately a century without any major copyright reform, the reform of national copyright laws to adjust protects mask works. This reciprocity clause the law to advancing technology has speeded up considerably is inconsistent with the principle of national in the last three decades. For example, new copyright acts passed treatment which requires all nations to pro- in France in 1957, the United Kingdom, 1956; India, 1957; the Scandinavian countries, 1959/1960; Germany 1965; Australia, vide foreigners with the same protection as 1968; Japan, 1971; the Soviet Union, 1973; and the United their citizens. Exacerbating these problems, States, 1976; and many Latin American countries, 1970s are some nations, such as the United Kingdom, evidence of this trend. Stephen Stewart, The International La w of Copyright and Neighboring Rights (London: Butterworth disagree with the sui generis approach, con- & Co. (Publishers) Ltd., 1983), p. 281. sidering chips to be protected under copyright 236 ● Intellectual Property Rights in an Age of Electronics and Information —— law.69 To date, only one other nation, Japan, on works of foreign origin, it impedes U.S. ad- has legislated a sui generis protection for semi- herence to the Berne Convention. For to join conductor chips. the Berne Convention, member nations cannot impose formalities as a condition of copy- The International Software Protection Act right. The manufacturing clause has also been of 1985 (S. 339, 99th Congress) is another ex- the subject of complaints of unfair trade prac- ample of a proposed policy that might cause tices by the European Economic Community problems for the present system. This bill (EEC), and found to be an import restraint that would amend the U.S. copyright law to pro- is inconsistent with Article XI of the General tect a foreign nation’s computer software only Agreement on Tariffs and Trade (GATT) .7’ Be- to the extent that such a nation protects cause it restricts the protection of foreign software-the so-called “rule of the shorter works and precludes the United States from term. ” It also stipulates that, if a nation pro- ratifying the Berne Convention, this clause tects software for a period of less than 25 years, might also lead other nations to believe that the U.S. will suspend all protection for that the United States is disingenuous in its at- nation’s software. Like the reciprocity clause tempts to convince other nations to ratify in- of the Semiconductor Chip Protection Act, this ternational intellectual property conventions. conflicts with the principles of national treatment called for in the international intellectual If the United States proceeds with policies property agreements. that are incompatible with either international agreements or other nations’ domestic laws The recently proposed renewal of the manu- and practices, it might jeopardize its ability facturing clause also illustrates how a U.S. in- to incite other nations to protect U.S. intellec- tellectual property policy might negatively ef- tual property products. For unlike many other fect U.S. international intellectual property items of international trade, the financial re- relations. First introduced in the 1891 Copy- turns from intellectual property products are right Act, this clause required that literary largely dependent on other nations’ laws and works be printed in the United States in order enforcement actions. Therefore, the United to enjoy U.S. copyright protection. The gen- States must ensure other nations’ cooperation eral purpose of the manufacturing clause was and support for the international protection to protect those who feared that granting un- of intellectual property rights. A coercive ap- restricted copyright protection to foreign (spe- proach or the imposition of U.S. policies on cifically British) authors would enable foreign other nations might not necessarily serve to publishers to dominate the U.S. book market. elicit other nations support for the interna- Recognized by many as a type of “xenopho- tional protection of intellectual property, as bic trade barrier” the manufacturing clause has one copyright analyst points out: been weakened over time, and most recently was set to expire in July 1986 (Public Law 97- Of course it would be pure folly to expect 215). 70 However, Congress is currently consid- all nations of the world, including the new ering legislation that would extend the manu- ones, to introduce at the present stage the facturing clause or make it permanent (S. 1938, same copyright regime as we and other well- S. 1822, H.R. 3465, H.R. 3890, 99th Congress). endowed old-timers are-or, in the case of the Soviet Union, should be–willing to accept. The manufacturing clause has created sev- We should recall that in 1891 that this coun- eral difficulties for U.S. international intellec- try, claiming to be a have-not, provided no tual property relations. Because it imposes for- legal protection whatever for the published malities (the requirement of U.S. publication) works of foreigners. When our legislation of —1891 .finally did grant rights to such works, “R. Hart, “Legally Protecting Semiconductor Chips in the “’Ralph Oman, Register of Copyrights, Library of Congress, UK, ” European Intellectual Property Review, vol. 9, 1985, pp. testimony on “Bills To Make Permanent the Manufacturing 258-263. Clause of the Copyright Act, ” before the Subcommittee on Pat- “’Benjamin Kaplan, An Unhurried View of Copyright (New ents, Copyrights, and Trademarks, Senate Committee on Judi- York: Columbia University Press, 1967), p. 124. ciary, .Jan. 21, 1986, p. 7. —

Ch. 8—Impact of New Technologies on the International Intellectual Property System ● 237 —

it was on the condition, in the case of books While facilitating the international exchange among certain other productions, that man- of intellectual property, new communication ufacture be carried out in the United States and information technologies have also under- . . . . But I have brought in the manufactur- mined the traditional ways of enforcing intel- ing clause to suggest by example that har- lectual property rights. The same technologi- monization is bound to have its difficulties cal advances contributing to economic growth, and, beyond that, to propose that we [the United States] ourselves should take another trade, and international access have also made step toward international pacification.72 it easy and inexpensive to reproduce and pirate intellectual property .73 Moreover, these Ratifying the Berne Convention and rejoin- technologies, such as satellites, cable, photo- ing UNESCO are possible to options to bring copying, recording audio and video devices, U.S. law into line with international intellec- computers, and electronic storage, retrieval, tual property law. As previously discussed, and distribution systems, are more powerful these options would have both positive and than their predecessors, engendering problems negative effects on the U.S. position in the in- of enforcement that are much larger and more ternational intellectual property system. international in scope. Another option to address the legal issues The level of legal protection for intellectual raised by new technologies would be to estab- property in many nations also contributes to lish a critical review of how proposed legisla- international piracy of U.S. copyrighted works. tion would affect and be affected by the inter- The problems U.S. copyright owners face abroad national system; accordingly, legislation might with respect to these conditions can be classi- be modified to that effect. However, similar fied into three categories: to the negative outcomes associated with joining the Berne Convention, conforming U.S. 1. nonexistent (ineligibility) copyright pro- laws and practices to international intellectual tection in a foreign country; property norms might threaten the integrity 2. inadequate protection in a foreign coun- of traditional U.S. intellectual property laws try; and and practices. 3. ineffective copyright protection in a foreign country .74 Increasing Difficulty of Enforcing The growing problem of international en- Intellectual Property Rights Caused forcement is exemplified in the apparent rapid by Emerging Information and increase of international piracy of protected Communication Technologies works. Many U.S. industries have reported large losses due to foreign private copying, Traditionally, nations granted intellectual commercial piracy, and counterfeiting of their property rights on the assumption that they intellectual property products.75 The U.S. In- could, in fact, be enforced. In the past, this was “’International Intellectual Property Alliance, “Internation- true; copyright holders could more easily col- al Intellectual Property Alliance: U.S. Government Trade Pol- lect for uses and detect infringements of their icy: Views of the Copyright Industries, 1985, p. 10. “’Subcommittee on Patents, Copyrights, and Trademarks, works. This was the case because uses of crea- Senate committee on the Judiciary, “Oversight on International tive works were easily monitored, and infringe- Copyrights: How To Protect the Nation’s Creativity by Pro- ments easily detectable, and because the geo- tecting the Value of the Intellectual Property, ” Sept. 25, 1985, graphic scope of use was generally confined p. 86. “Although piracy and counterfeiting each constitute theft within national boundaries. of intellectual property, there are small differences in their meaning. In addition, private copying, which is not clearly defined as a legal or an illegal practice under most nations’ laws, also has a potential impact on the sales of intellectual property products. Piracy refers to unauthorized reproduction for commercial gain of literary, musical, artistic, and other copyright works. “’Benjamin Kaplan, “An Unhurried View of Copyright (New Because pirates do not pay royalties and bear no development York: Columbia University Press, 1967), pp. 123-124. costs, they can easily sell their products more cheaply than the

(continued on next page) 238 . Intellectual Property Rights in an Age of Electronics and /formation ternational Trade Commission estimates U.S. is generally gathered indirectly: by measuring domestic and foreign sales losses due to pat- the increase of sales and availability of hard- ent and copyright infringements at between ware that permits easy and inexpensive copy- $6 billion and $8 billion per year.76 Figure 8-4 ing; the increase of sales of blank audio and shows the level of infringing activities and video tapes; the decreasing sales of published, some frequently counterfeited products. The audio, and video works; the decreasing num- International Anti-Counterfeiting Coalition ber of journal subscriptions in different coun- and the U.S. Customs Service place losses due tries; the widespread availability of unautho- to the infringement of intellectual property rized copies of American creative works; or the rights closer to $20 billion annually .77 Another level of ineffectiveness or inadequacy of pro- survey undertaken by the International Intel- tection offered in different countries. These lectual Property Alliance of the losses due to measurements, however, do not directly indi- piracy of U.S. copyrighted records and tapes, cate what percentage of the purported piracy motion pictures, and books in 10 selected na- is of U.S. products. In other instances, when tions estimates annual losses at $1.3 billion overall estimates of revenues lost to piracy are (see table 8-3). A poll of the motion picture and presented, the methodology or definitions of television, prerecorded entertainment, and harm used to extrapolate such figures are often publishing and advertising industries also re- inconsistent throughout the calculations or are vealed that 100 percent of the executives sur- not readily apparent. For example, much of the veyed cited intellectual property rights in- survey data on the effects of unauthorized fringements abroad as a major barrier to sales copying on producers must be carefully inter- of their products in international markets78 (see preted in light of the way in which harm is table 8-4). defined: Although these estimates provide a general Two possible definitions [of harm] are sug- approximation of the extent of the piracy prob- gested. Under the first, harm is measured by lem, there are relatively few data on specific the reduction in profits of the producer be- industries in individual countries and on the low their level prior to a new unauthorized actual amounts of revenue lost due to private use. Under this definition, harm does not occur if the unauthorized use leaves profits from copying, commercial piracy, and counterfeit- all previous uses unaffected. . . Under a sec- ing. Evidence of private copying and piracy ond definition, harm occurs if the new use re- (continued from previous page) duces profits below the level they would have rights owners. Counterfeiting refers to unauthorized duplica- reached had the producer been able to exploit tion of a product’s trademark to give a similar appearance of the market served without authorization. . . a specific product. In addition to directly undercutting the origi- Clearly, these alternative definitions can give nal rights owner’s market, counterfeiters by producing lower quality imitations of products may also damage the products very different answers to the question of quality reputation and further undercut the original market. whether an unauthorized use has harmed the Although not illegal, private copying generally refers to home property owner. The distinction between copying of intellectual property products solely for individual them must be kept in mind when examining consumption. It has resulted from the ready availability to the the various claims of harm.79 consumer from 1964 onwards of magnetic tape reproduction equipment coupled with blank cassettes, videotape recorders The definitions of piracy also vary greatly coupled with blank cassettes, personal computers coupled with blank software, etc. See Gillian Davies PrivateCopying of Sound from nation to nation, and they are generally and Ad”oviswd Recordings (Oxford: ESC Publishing Limited), dependent on each country’s intellectual prop- 1984. erty laws and on international norms. It would “U.S. International Trade Commission, “The Effects of Foreign Product Counterfeiting on U.S. Industry” (Washing- seem, therefore, that because American prod- ton, DC: U.S. International Trade Commission, January 1984). ucts garner a relatively large percentage of for- “Eileen Hill, “Intellectual Property Rights: Commerce De- eign markets, foreign piracy of U.S. intellec- partment Program Seeks Greater Protection for U.S. Intellec- tual Property Rights, ” Business America, Mar. 18, 1985, p. 4. ““CBS, Inc., “Trade Barriers to U.S. Motion Picture and “Stanley Besen, “Economic Issues Relating to New Tech- Television, Prerecorded Entertainment, Publishing and Adver- nologies and Intellectual Property, ” contract prepared for OTA, tising Industries, ” September 1984, p. iii. Dect!mber 1984, pp. 45-55. Ch. 8—Impact of New Technologies on the International Intellectual Property System “ 239 — . —.—— — — - ——.— —

Figure 8-4.—The Level and Location of International Counterfeit Activity of U.S. Products

Semiconductors Canada I

1.uxury goods Aircraft Machine Electronic \ y~~’ parts United States parts {

L uxury goods Sporting Mexico goods

porting goods Brazil

,/ Most active Moderate ❑,/ Light Minimal

SOURCE International Trade Commission. as cited in Business Week, Dec. 16, 1985 tual property products is also sizable. These of communication technologies with electronic uncertainties notwithstanding, the major avail- information storage and retrieval systems, able statistics on piracy and counterfeiting in which has led to more and faster international the publishing, recording, motion picture, and software industries are summarized below. words, numbers, or other verbal or numerical symbols or indi- cia, regardless of the nature of the material objects, such as The Publishing Industry books, periodicals, manuscripts, phonorecords, film, tapes, disks, or cards, in which they are embodied. ” According to publishing industry officials, Internationally, literary works are protected under the UCC the introduction of technologies such as pho- of which the United States is a member: “Each Contracting tocopying, and new electronic storage and State undertakes to provide adequate and effective protection of the rights of authors and other copyright proprietors in liter- print technologies has led to vast international ary, scientific, and artistic works, including writings, musical, piracy and private copying of texts and liter- dramatic, cinematographic works, and paintings, engravings, ary works.80 Compounding this is the marriage and sculpture. Article I, Universal Copyright Convention, Paris, 1971. Literary works enjoy a higher international level 80 Literar~ works are defined in § 101 of the 1976 Copyright of minimum protection under the Berne Convention of which Act as “. . . works other than audiovisual works, expressed in the United States is not a member. 240 • Intellectual Property Rights in an Age of Electronics and /formation

m m al c ‘3 :

❑ — -—

Ch. 8—Impact of New Technologies on the International Intelectual Property System Ž 241 —

exchanges of printed works, The third factor An estimate of at least 560 titles from refer- contributing to piracy is the lack of adequate, ence, professional, trade, personal computer effective, or indeed, any legal protection for and college textbooks have been pirated in U.S. literary works in many nations. Taiwan with approximately 48,000 pirate copies in English and Chinese. . . [in addition] The Association of American Publishers, Taiwan is illegally exporting pirated books Inc. (AAP) estimates that the industry loses to Australia. The books are business and com- $1 billion each year to piracy of English-lan- puter-related and are published by well-known guage books worldwide. Of this, AAP esti- American publishers.” mates that U.S. works account for 70 percent. In addition to pirating of domestic sales, Tai- The AAP also suggests that estimates of lost wan as well as other A SEAN countries pirate revenues would be greater if calculated on the products to export to other nations.83 Approx- basis of U.S. legitimate prices instead of on — the basis of estimated revenues earned by pi- ‘“ Ibid~, ‘p~6. “ASl?AN (Association of Southeast Asian Nations) coun- rates. The publishing industry has also com- tries are Brunei, Indonesia, Malaysia. the Philippines, Singa- pleted a country-by-country analysis of the pore, and Thailand. piracy of published or literary works.” Al- “In January 1983, the Taiwanese police seized a container bound for Nigeria, purportedly carrying water filter cups and though the AAP does not calculate direct evi- crash helmets. Hidden inside were 54,000 copies of five British dence of actual harm to the industry, its re- titles that had not been authorized by the copyright holders port indicates that piracy is more common in for export from Taiwan. The cargo was valued at $48,000. (Its selling price in Nigeria would have been at least $250,000). Af- some nations than in others. The majority of ter long and expensive litigation the penalty for this offense the piracy reported takes place in developing was 1 year’s imprisonment, but the sentence was suspended. or newly industrializing nations. For example, The infringing cargo was destroyed, but no printing plates were confiscated and only a small fine was assessed for false declara- over 27 U.S. publishers reported evidence of tion. If 20 to 40 such shipments are smuggled out of Taiwanese piracy of their materials in Taiwan: ports each month, then the export value of these shipments at pirate prices would amount to a figure between $60 million and $120 million per year. ” Association of American Publishers, ‘ .4ssociation of American Publishers, Inc., “Piracy of CopJT- Inc., “Detailed Information on Worldwide Piracy of Copyrighted righted Material: A Report Prepared at the Request of the U.S. Material and the Copyright Laws and Penalties, ” June 11, 1985, Department of State,” 1985. pp. 19-20. 242 . Intellectual Property Rights in an Age of Electronics and Information

Table 8-4.—Countries and Regions That Infringe Copyrights of U.S. Motion Picture and Television, Prerecorded Entertainment, Publishing, and Advertising Industries Copyright infringement

.— . —-— ..—— 1 Algeria...... Japan ...... Andean Pact ...... Kenya ...... Argentina ...... Korea ...... ■ Australia ...... [1 Lebanon ...... [1 Austria...... Malaysia ...... ■ Belgium...... Mexico ...... [1 Brazil ...... Netherlands ...... 9 Canada ...... New Zealand ...... ■ Caribbean Region ...... Nigeria ...... ■ Chile ...... Norway ...... Colombia ...... Pakistan ...... , . . ■ Denmark ...... People’s Republic Dominican Republic ...... of China ...... ■ Eastern Block...... 11 Peru ...... ■ EEC ...... Philippines ...... ■ Egypt ...... Portugal ...... ■ Finland ...... [1 Saudi Arabia...... France...... Singapore ...... ■ Germany, Federal South Africa...... L Republic of ...... Spain ...... ■ Greece...... Sweden ...... [1 Hong Kong ...... Switzerland ...... ■ India. ..., ...... Syria ...... Indonesia ...... Taiwan...... ■ Iran ., ...... Tanzania ...... Iraq ., ...... Thailand ...... ■ Israel ., ...... United Kingdom...... ■ Italy ...... , . . Venezuela ...... ■ Jamaica ...... —.-— — —— . — ■ -- Primary problem country or region identified by interviewed executive = Primary problem country or region identified in literature reviewed

SOURCE Columbia Broadcasting Co., lnc, “Trade Barriers to US Motion Pictures and Television, Prerecorded Entertainment, Publishing and Advertising Industries," 1984 imately 16 American publishers reported in- and other costs-not to mention royalties— fringement activity in Korea: that original publishers do pay. They provide books to stores on consignment, making it It is estimated that pirates sell at least $100 easy for retailers. They also sell directly from million of books annually, and sales are ris- catalogs. One such catalog distributed in Ko- ing each year. Importers’ sales are an esti- rea, entitled Il Won Books Information, lists mated $5 million to $8 million annually, but over 8,000 pirated books.84 are plunging. Foreign book pirating flourishes because it is legal. This country hasn’t signed Other countries where American publishers any international copyright convention and have discovered infringements include Argen- local law does not protect copyrights of for- —“Ass~ciation of American Publishers, Inc., “Pir~cy of eign publishers. Korean publishers can copy Co~yrightedMaterial:A Report Prepared attheRequest of the books without paying advertising, promotion U.S. Department of State,” 1984, pp. 2-3. Ch. 8—Impact of New Technologies on the International Intellectual Property System ● 243 tina, Australia, Brazil, Chile, China, Colombia, Because many of the developing and newly Costa Rica, the Dominican Republic, Ecuador, industrializing countries do not afford ade- Egypt, West Germany, Greece, Holland, Hong quate protection for U.S. sound recordings, Kong, India, Indonesia, Iran, Iraq, Jamaica, these countries also are the sites of the major- Japan, Malaysia, Mexico, Nigeria, Pakistan, ity of piracy and counterfeiting of these works. Panama, Peru, the Philippines, Saudi Arabia, Singapore is an excellent example of the Singapore, Thailand, Venezuela, and the So- 85 magnitude of the problem, where it is esti- viet Union. mated that 70 million counterfeit and pirate sound recordings were exported in 1984. This The Recording Industry incredible total, plus an additional 15 million As in the publishing industry, recording counterfeit units produced in Singapore for companies report widespread international in- internal consumption, accounted for 90 per- fringements of sound recordings. The introduc- cent of sound recordings manufactured or sold in Singapore last year. A large percent- tion of broadcasting and of less expensive, age of the unlawfully duplicated products was high-quality duplicating hardware have led to U.S. owned. This situation exists despite increased international piracy, counterfeiting, 86 energetic efforts of the IFPI (International and private copying of sound recordings. Federation of Phonogram and Videogram 88 Another major contributing factor to this Producers) to combat the problem. piracy is the lack of adequate or effective pro- Several Latin American countries are also re- tection for U.S. audio works in many countries. sponsible for large numbers of pirated and Half of the member countries of the United counterfeited U.S.-owned audio works: Nations, for example, do not yet recognize the In Panama, as much as 80 percent of the reproduction right in sound recordings. Many musical tape market is dominated by coun- of the nations that do not provide adequate terfeit and pirate goods. In Peru, the percent- protection for U.S. literary works are also those 87 age of illicit tape recordings is approximately that do not protect U.S. sound recordings. 70 percent. Bolivia and Chile both report that approximately 50 percent of the tape record- ..— . —— “’Association of American Publishers, Inc., “Piracy of ings manufactured and sold there are coun- Copyrighted Material: A Report Prepared at the Request of the terfeit or pirate, The huge Mexican market U.S. Department of State, ” 1984. had a 40 percent penetration of counterfeit “ Under U.S. law sound recordings were first explicitly pro- and pirate tapes in 1982—equaling approxi- tected by a 1971 amendment (Public Law 92-140, 85 Stat. 391) mately 11 million units of $30 million in lost and under § 101 of the 1976 Copyright Act are thus defined: 89 “material objects in which sounds, other than those accompany- sales. ing a motion picture or other audiovisual work, are fixed by any method now known or later developed, and from which the In addition to citing specific problems in sounds can be perceived, reproduced, or otherwise communi- different nations, the Recording Industry of cated, either directly or with the aid of a machine or device. America, Inc. (RIA) has reported overall sta- Internationally, sound recordings are protected under the 1971 Convention for the Protection of Producers of Phonograms tistics on the extent of foreign piracy and coun- Against Unauthorized Duplication of Their Phonograms of terfeiting of U.S. sound recordings. The esti- which the United States is a member. The 1961 International mated total sales of counterfeit and pirated Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, better known as U.S.-owned sound recordings overseas in 1982 the Rome Convention, protects sound recordings internation- was, according to the RIA, well over $250 mil- ally, as a neighboring right. The United States, however, is not lion. Based on worldwide market shares for a member of this Convention. “-These countries include Argentina, Bolivia, Brazil, Chile, Cyprus, Egypt, Greece, India, Indonesia, Italy, Korea, Kuwait, ‘Statement of the Recording Industry of America, Inc., be- Lebanon, Malaysia, Mexico, Morocco, Nigeria, the Netherlands, fore the U.S. Department of State International Copyright Panama, Peru, Philippines, Portugal, Saudia Arabia, Singapore, Panel, “The Piracy of Copyrighted Sound Recordings in For- Taiwan, Thailand, Tunisia, Turkey, and Venezuela. Statement eign Countries, Mar. 22, 1985, p. 2. of the Recording Industry of America, Inc., before the U.S. De- **Statement of the Recording Industry of America, Inc., be- partment of State International Copyright Panel, “The Piracy fore the U.S. International Trade Commission, “The Impact of Copyrighted Sound Recordings in Foreign Countries, ’ Mar. of Foreign Product Counterfeiting on the U.S. Recording In- 22, 1985, pp. 2-8. dustry,” Sept. 19, 1983, p. 10. 244 Ž Intellectual Property Rights in an Age of Electronics and Information —— — different nations’ music, it is probable that ap- The relatively recent advent of satellite tech- proximately 50 percent of the estimated $515 nology has had the greatest impact on inter- million in counterfeit and pirate sales outside national video piracy.94 Although terrestrial of the United States in 1982 relates to record- broadcasting has permitted some spillover into ings originally created and owned by U.S. re- other countries of U.S. copyrighted materials, cording companies, performers, lyricists, and the scope of the satellite footprints is much composers. 90 greater and allows other nations greater unauthorized access to U.S. works.95 Although The Motion Picture Industry technical advances are improving the accuracy Like the publishing and recording industries, of the satellite beams, it will never be possible to shape the beams so precisely that they fol- the motion picture industry is also experienc- ing international private copying, piracy, and low the contours of a given country.” Conse- counterfeiting of U.S.-owned audiovisual works.91 quently, U.S. satellite signals are poached by The Motion Picture Association of America, owners of earth station receivers or by cable Inc. estimates, for example, that worldwide systems, which retransmit them to relatively losses due to film and video piracy are now approaching $1 billion per year.92 In addition to tellectmd Property in An Information Age (London: Routledge the lack of adequate legal protection of audio- & Kegan Paul, 1980), p. 153. visual works in many nations, the major fac- The various forms of film and video piracy can be grouped tor leading to international infringements of into three main categories: 1 ) film to tape transfers, 2) duplication of legitimate prerecorded videocassettes and videodisks, U.S.-owned audiovisual works is the introduc- and 3) videotaping off television. Additional types of film and tion and increased use of information and com- videcl piracy include the unauthorized distribution of film prints, munication technologies. Used individually or the unauthorized public performance of a legitimately owned film print or videocassette or disk, and the unauthorized inter- together, videocassette recorders (VCR), sat- ception of subscription TV programming. Motion Picture Asso- ellites, and cable technologies have been re- ciation of America, Inc., “Film and Video Piracy: Manual for ferred to by some analysts as an electronic Investigators and Prosecutors, ” 1984, p. 6, “’Copyrighted programs carried via satellite are protected triad, or the unholy trinity, for copyright internationally by the Convention Relating to Distribution of 93 holders of motion pictures. Programme-Carrying Signals Transmitted by Satellite of 1974. On Oct. 12, 1984, the United States ratified this Convention — — — —.— without any amendment to domestic law. Commonly referred “Statement of the Recording Industry of America, Inc., be- to as the Brussels Satellite Convention, it obligates contract- fore the U.S. Department of State International Copyright ing states to take adequate measures to prevent the unauthorized Panel, “The Piracy of Copyrighted Sound Recordings in For- distribution of programming carried by satellite on or from their eign Countries, ” Mar. 22, 1985, p. 1, 6. territories. The Convention leaves each state free to choose its “Motion pictures and other audiovisual works are a protect- own method of implementation, including designation of the able subject matter under the U.S. Copyright Law and were specific beneficiaries of protection. The Convention, however, defined under the 1976 Act in § 101 as “. . . works that consist exempts signals that are intended for direct reception from sat- of a series of images which are intrinsically intended to be shown ellite by the general public; these broadcast satellite signals are by the use of machines or devices such as projectors, viewers, generally already regulated under the copyright or neighbor- or electronic equipment, together with accompanying sounds, ing rights regimes of most nations. It also does not apply to if any, regardless of the nature of the material objects, such individual reception of satellite signals for purposes of private as films or tapes, in which the words are embodied. ” viewing. Because there are currently only nine contracting states Internationally, motion pictures and audiovisual works un- to this Convention, the international effectiveness of this treaty der Article 1 of the Universal Copyright Convention (1952 and remains questionable. 1971 texts) of which the United States is a member: “Each Con- “’Satellite footprints are defined as “the area of the earth’s tracting State undertakes to provide adequate and effective pro- surface in which satellite transmissions can be received. . . Note tection of the rights of authors and other copyright proprietors that a footprint is a fluid concept and not a static one. Its size in literary, scientific and artistic works, including writings, mu- will depend on the technical characteristics of the receiving dish sical, dramatic and cinematographic works, and paintings, en- and environmental conditions. Therefore, a particular satellite gravings and sculpture. ” Audiovisual works are also protected transmission will have one footprint when 10-foot earth-based internationally under Article 2 of the Berne Convention for Liter- dishes are being used and another one when 3-foot dishes are ary and Artistic Works of which the United States is not a being used. ” Motion Picture Export Association of America, member. Inc., “MPEAA Memorandum on the Uses of Satellite Technol- “Motion Picture Association of America, Inc., “Film and ogy, ” 1984, p. 9. Video Piracy: Manual for Investigators and Prosecutors, ” 1984, ‘Edward W. Ploman and L. Clark Hamilton, Copyright: Zn- p. 3. tellect ual Property in An Information Age (London: Routledge ‘{Edward W. Ploman and L. Clark Hamilton, Copyright: 1n- & Kegan Paul, 1980), p. 155. Ch. 8—Impact of New Technologies on the International Intellectual Property Systern “ 245 large audiences without compensation to U.S. As with nearly every other island in the Car- copyright holders. ibbean, there is wholesale video and signal piracy in Jamaica. . . Many homes and com- Canada, for example, takes advantage of its mercial facilities such as hotels have Televi- geographic proximity to the United States and sion Receive Only dishes that intercept sat- the availability of American satellite signals: ellite signals without authorization. One of these has been operated by the Jamaica Canadian cable systems under court decisions Broadcast Company, a government-owned have no copyright liability under Canadian operation that has intercepted motion picture law for their stock in trade, their distribution programming and rebroadcast it to the en- to their paying subscribers of copyrighted tire island without charge. The impact of such works contained in the broadcast signals, practices is self-evident.99 both Canadian and American, which they capture from the air.97 In many countries, the widespread consumer Piracy of American signals is also a wide- use of videocassette recorders has joined inadequate or ineffective legal protection in spread problem in Central America. Costa Rica promoting increased piracy of American audio- and the Dominican Republic, for example, visual works. These pirated copies are, in turn, pirate large amounts of U.S.-owned pro- sometimes rebroadcast on cable or local broad- gramming: casts. Many of the countries where piracy of The most compromising form of piracy in literary and musical works is rampant also are this country [Costa Rica] is the unauthorized responsible for widespread video piracy. retransmission of cable TV signals. These signals carry a wide variety of copyrighted ma- Several ASEAN countries, for instance, are terial. Cable Color, a pirate cable system lo- major centers of piracy of U.S. audiovisual cated in the capital city of San Jose, has a works. In addition to pirating for domestic subscriber count of approximately 10,000, sales, many of these nations export large while a similar cable TV system, Supercanal, amounts of pirated and/or counterfeited copies. transmits to 3,000 subscribers. Television Re- Both Korea and Indonesia are well known for ceive Only (TVRO) dishes as well as unautho- these activities: rized public performances also present a serious problem to the American motion picture, Due to the absence of adequate and effec- cable, and television industries. tive copyright legislation in relation to for- The theatrical and television markets for eign works, the videocassette piracy problem feature films and television programming in Korea is serious. Pirated copies of Amer- continue to be severely affected by the sig- ican films are widely available and service a nal theft practiced by cable TV Dominican 550,000 VCR population in South Korea. Many and Telecable National. These two pirate ca- of these are reputed to come from U.S. mili- ble TV systems cumulatively service 20,000 tary bases in the country. Some hotels are subscribers in the capital city of Santo using videocassettes for in-house entertain- Domingo, as well as the second largest Do- ment without licensing agreement, and there minican city, Santiago. Television Receive is unauthorized use of American films by Only dishes can be found in large numbers broadcast television stations. . . . throughout the city.98 In a country with 600,000 videocassette recorders, the piracy of American motion pic- Many Caribbean nations are also responsible tures is 100 percent. This is due to the absence for pirating U.S. programming by satellite. of adequate and effective copyright legisla- Jamaica is a prime example: tion which, in turn, inhibits legitimate market entry. ’no ———— ‘ CBS, Inc., “Statement of CBS Inc. Before the Canadian Motion Picture Association of America, Inc., "Brief De- Parliamentary Standing Committee cm Communications and scription of Film Piracy, for U.S. Department of State Inter- Culture, ” April 1985, pp. 1-2. national Cop}’ right Panel, Mar. 22, 1985, p. 3.1 “Motion Picture Association of America, Inc., “Brief De- ‘ “’Motion Picture Association of America, Inc., “Brief De- scription of Film Piracy, for U.S. Department of State Inter- scription of Film Pirac~r, for CJ, S. Department of State Inter- national Copyright Panel, Mar. 22, 1985, pp. 1-2. national Copyright Panel, Mar. 22, 198.5, p. 3. 246 . Intellectual Property Rights in an Age of Electronics and Information

Other countries where video piracy occurs in- pected growth of foreign demand for comput- clude Brazil, Canada, Costa Rica, Cyprus, the ers and computer products, the piracy of soft- Dominican Republic, Egypt, France, Hong ware abroad may soon become a larger concern Kong, Indonesia, Israel, Italy, Jamaica, Ko- to U.S. software manufacturers. Consequently, rea, Malaysia, Mexico, the Netherlands, Nige- over the long term more in-depth analysis and ria, Pakistan, Panama, Peru, the Philippines, documentation can be expected. With such in- Saudi Arabia, Singapore, South Africa, Spain, formation, U.S. software manufacturers might Sweden, Taiwan, Thailand, Turkey, United more effectively deter international piracy. Kingdom, Venezuela, and West Germany.101 Policy Implications The Software Industry Although these statistics can only measure Because few major studies of the problem the harm from private copying and piracy in- have been undertaken, there are few data on directly, they make it clear that piracy is a more the extent of foreign piracy of U.S. software 102 serious problem at the international level than products. This is so largely because software at the domestic level. Because of the increas- is a relatively new industry, and also because ing importance of information-based products microcomputers are much less widely used 103 and services to the U.S. economy and interna- abroad than in the United States. Recently, tional trade, deterring foreign piracy of U.S. however, the International Intellectual Prop- intellectual property products will most likely erty Alliance undertook a major study on the become a high priority for the United States. extent of international piracy of U.S. software As new technological developments erode tra- products. This study found that the U.S. soft- ditional enforcement mechanisms and permit ware industry is losing significant annual sales greater international dissemination of such because of copyright violations in Brazil ($35 products, the United States will need to seek million), Egypt ($3 million), Korea ($20 million), to improve enforcement of U.S. intellectual Malaysia ($7 million), the Philippines ($4 mil- property rights abroad. Moreover, given the lion), Singapore ($20 million), Taiwan ($34 mil- inadequacy of enforcement abroad, the United lion), and Thailand ($2 million).104 States might want to pursue ways of ensur- Given the precedent of foreign piracy of other ing that countries strengthen their legal pro- U.S. intellectual property products and the ex- tection and enforcement mechanisms for both foreign and domestic works.

“’lElizabeth Greenspan, “Film and Video Piracy, ” Interna- Currently, the United States is taking some tional Media Law, 1983. action to ensure adequate protection. It is, as ‘()’Published anecdotal evidence of foreign software piracy is previously discussed, using the granting of also rare. Some examples, however, have been cited by the AAP: “Pirated software [in Taiwan] is sold for 1 percent of the U.S. trade preferences as an incentive for the estab- list price, or $3.50 for a best-selling U.S. software product like lishment of legal protection and increased en- VISICALC or WordStar or others that sell for approximately forcement efforts to protect intellectual prop- $350 in the United States. Often the pirate gives away 5 or 10 pieces of software with a Pineapple (or pirated Apple) comput- erty products. Moreover, the United States has er. Pirated computer books may also be included in this pack- begun a series of bilateral discussions with age. ” Other countries where software piracy occurs include Bra- other nations concerning international enforce zil, Greece, Korea, and Singapore. Association of American Publishers, “Piracy of Copyrighted Material, ” a Report Pre- ment. These include discussions with Japan pared at the Request of U.S. Department of State, ” Mar. 22, on the protection of software under Japanese 1985. copyright law; discussions with Canada on the ‘(’’’The Software Publishers Association informally estimates that for every legitimate copy of U.S. software abroad there issue of protecting cable retransmissions of are approximately 5 to 10 pirated copies, telephone conversa- U.S. broadcast programming; and discussions tion, July 8, 1985. with Caribbean nations on the unauthorized ‘“’ International Intellectual Property Alliance, “Piracy of U.S. Copyrighted Works in Ten Selected Countries: A Report interception and retransmission of U.S. sat- by the International Intellectual Property Alliance to the United ellite-transmitted motion pictures and other States Trade Representatives, ” August 1985. programming. These meetings have proved Ch. 8—impact of New Technologies on the International Intellectual Property System ● 247 successful: Japan has decided to protect soft- and the Federation Against Copyright Theft ware under copyright; Canada is considering (FACT).107 the copyright status of cable retransmissions; The United States might also expand cur- and the Jamaican broadcasting authorities are 105 rent talks with developing countries on intel- beginning negotiations. lectual property law and piracy of U.S. prod- The United States is also initiating educa- ucts. These seminars, which might be either tional seminars on intellectual property rights bilateral or sponsored through a multilateral for industry and government representatives, agency, could provide developing countries local attorneys, and educators of developing with information on how to construct adequate countries. In early 1985, for example, U.S. dele- and effective intellectual property laws and en- gations from the Copyright Office, the Patent forcement mechanisms. They might also be and Trademark Office, and the Department of used to outline the importance of protecting State went to Indonesia, Malaysia, and Thai- intellectual property rights for developing na- land to present lectures on crucial international tions as international trade partners, as well intellectual property legal issues and the need as for the growth of their domestic intellectual to provide adequate and effective laws and en- property industries. forcement mechanisms to deter infringement. A more coercive option would be to impose These have been particularly useful because trade sanctions or other retaliatory measures each of these nations is considering revisions on nations that do not enforce U.S. intellec- to its copyright laws and is examining how to tual property rights. This option, however, en- best protect new technologies, such as com- 106 tails trade-offs in terms of the political dis- puter software. In addition, the U.S. Gov- cordance that such sanctions might provoke ernment has recently begun to offer training between developing nations and the United programs for patent, copyright, and trademark States. Some trade experts, for example, warn administrators of other nations. “that with no international consensus on how There are also other options the United to defend intellectual property rights, any at- States might pursue to mitigate international tempt to impose U.S. views on others could piracy. The United States, for example, could jeopardize efforts to improve agricultural and more actively participate in international in- manufacturing trade. ’’108 tellectual property for a, the positive and negative aspects of which have already been dis- Growing Convergence of International cussed. Intellectual Property Issues With To complement these efforts, the United Other International Issues States could also encourage U.S. industry, both producers and users of intellectual prop- Nations have come to view information and erty products, to participate more actively in information-based products and services as international associations that fight interna- components for improved productivity and tional piracy. Such associations include, for example, the International Federation for Phono- ‘“7A current example of industry efforts to reduce interna- gram and Videogram Producers (IFPI), the tional piracy of U.S. prcducts is Ashton Tate’s cooperation with the International Trade Administration, the Association of Data Federation Against Software Theft (FAST), Processing Service Organizations (ADAPSO), Lotus Develop- ment Corp., MicroPro International, and other software com- ‘f’r’Michael Kirk, Assistant Commissioner for External Af- panies to develop a series of seminars on intellectual property fairs, United States Patent and Trademark Office, Department rights and regulations for exporting software. They are also of Commerce, testimony on “Copyright Enforcement, before considering the establishment of ‘{an industry-financed war chest the Subcommittee on Patents, Trademarks, and Copyright, Sen- to provide funds to fight piracy through Iegal channels as weII ate Committee on the Judiciary, Apr. 17, 1985, p. 7. as through public education. “ “Ashton-Tate Fights at Home ‘ “’For a good case study of U.S. bilateral efforts to reduce and Abroad, ’ Download, March 1986, pp. 11-12. piracy in a nation, see “Protection From Commercial Counter- ‘“’Bruce Stokes, “Intellectual Piracy Captures the Atten- feiters in Taiwan for U.S. Firms, ” Law and Policy in Interna- tion of the President and Congress, ” National Journal, Feb. 22, tional Business, vol. 16, No. 2, 1984. 1986, pp. 443-445. 248 . Intellectual Property Rights in an Age of Electronics and Information international competitiveness, international Because of these new combinations, new uses trade, and as a means to achieve major socie- and distribution channels are developing that tal goals. As a result, international intellectual may have been unanticipated by the legal sys- property issues are increasingly tied to inter- tem. Consequently, two traditionally unrelated national competitiveness, trade, development, legal or regulatory regimes are now in contact and political issues. These linkages, together with each other. Conflicts may arise when these with the growing convergence of communi- regimes have mutually exclusive policy ob- cation and information technologies, are cre- jectives. ating new intersections between international intellectual property issues and other interna- A case in point is the unavoidable satellite spillover or footprints that cut across national tional issues, such as space and telecommuni- frontiers. While this spillover is not materially cation issues. different from spillover in terrestrial broadcast- The convergence of information and infor- ing, it is, however, much greater in scope and mation-based products and services and com- subject to different legal protections and re- munication technologies is largely due to the gimes. Under the Radio Regulations of the In- overall goal shared by many nations to build ternational Telecommunications Union (ITU), information infrastructures for both social and space is considered common property, for ex- economic development.109 As information and ample, which cannot be owned by individuals, information-based products and services are corporations, or governments.111 Although increasingly used with electronic communica- such regulations recognize the privacy of trans- tion systems, the communication policies that missions, there are no enforcement mecha- govern such systems intersect with intellec- nisms or remedies for the violation of rights. tual property policies. Thus, products and serv- Not finding this spillover acceptable and want- ices that have traditionally been regulated ing to enforce their rights, rights owners have separately are now used in new combinations: insisted on extended protection. Their demands, however, conflict with the internation- Current changes in technology are producing new patterns, with traditional services be- ally agreed upon principle of the law of the coming combined into unexpected hybrid shapes mons, which has developed in the context of and uses, in defiance of the established cate- space and telecommunications law. Thus, ef- gories. . . Cable systems can be combined forts to protect the intellectual property em- with terrestrial broadcasting, and either one bodied in satellite signals may need to be han- or both of these with satellite systems. The dled in widely differing legal and regulatory combination of technical systems corre- contexts. 112 sponds to an integration of services: television and facsimile combine in telefacsimile; Also exemplifying the multifaceted nature the data bases used for electronic photocom- of intellectual property issues is the increas- posing can also be used for information re- ing number of institutions that deal with such trieval. The combination of television and issues. At present, the World Intellectual Prop- telephone is at the origin of the videophone, erty Organization deals with the administra- and these, together with computerized data tion of rights; the United Nations Educational, systems, result in teletext and videotex serv- Scientific, and Cultural Organization oversees ices. In fact, certain videotex services already international information flows for the bene- represent a combination of telecommunications, computer, broadcasting, print, and in- fit of education, science, and culture, and de- formation systems.110 velops communications policies for the development of infrastructures; the International ‘@In an information society, such that it is envisioned, there Telecommunications Union allocates frequency will be a greater interdependence between information and communication technologies as nations seek to construct what the French Government calls “the entire nervous system of social “’see Article N28/7 of the Radio Regulations, also the Final organization. ” Simon Nora and Alain Mine, The Computeriza- Acts of the World Administrative Radio Conference—Broad- tion of Society (Cambridge, MA: MIT Press, 1980). casting Satellites, 1977. ““Edward W. Ploman and L. Clark Hamilton, Cop~ight: “’Edward W. Ploman and L. Clark Hamilton, Copyright: lnt.elkctuaf Property in an information Age (London: Routledge Intelkctual Property in the Information Age. (London: Rout- & Kegan Paul), p. 151. ledge & Kegan Paul, 1980), p. 155. ——

Ch. 8—Impact of New Technologies on the International Intellectual Property System ● 249 — bands and promulgates technical standards in international conventions, and advising Con- the area of telecommunications; the United Na- gress and the Administration on developing tions Centre on Translational Corporations international intellectual property policy. oversees transborder information-related serv- The National Telecommunications and In- ices; and the United Nations Conference on formation Agency (NTIA) plays an important Trade and Development and the General Agree- role in the protection of copyrighted material ment on Tariffs and Trade regulate the trade transmitted outside the United States via tel- of some information-based products and serv- ecommunication technologies. It also partici- ices.113 pates in negotiations of international agreements on the use of satellites for rebroadcast Policy Implications materials. Because the present set of international le- For trade-related international intellectual gal and regulatory regimes and institutions are property issues, the U.S. Trade Representa- generally linked to a particular technology, new tive plays a major role. Its responsibilities in- combinations of older technologies might, like clude monitoring foreign nations’ efforts to new technologies, create inconsistencies be- protect intellectual property and then, accord- tween traditionally separate policies and in- ing to such an analysis, recommending whether stitutions. To deal with such cross-cutting such nations should be eligible to receive trade issues, the international protection for intel- preferences. The International Trade Admin- lectual property may need to be considered in istration also monitors international enforce- a larger social, legal, and technical context. The ment of intellectual property rights and pro- United States, therefore, might want to de- vides this information and counseling on velop an integrated approach or policy to deal export opportunities and problems to the busi- with the cross-cutting nature of international ness community. The U.S. International Trade issues. In addition, it may need to improve the Commission is an independent quasi-judicial coordination among domestic agencies that are agency that determines whether unfair trade responsible for international and intellectual acts related to imports, which often involve property issues. patent, trademark, or copyright infringements, are harmful to U.S. industries. Currently, there is no agency in the U.S. Gov- ernment that has centralized responsibilities The U.S. Information Agency takes primary for dealing with the cross-cutting international responsibility for culturally oriented intellec- intellectual property issues. Instead, various tual property policy. It oversees the distribu- Federal agencies perform different and sepa- tion of U.S. intellectual property products such rate functions with respect to international in- as films, books, and music to other nations for tellectual property rights. ’l’ the promotion of better understanding the The Department of State plays a lead role United States and its citizens. in coordinating other Federal agencies and rep- Recognizing the fragmentation of policy resenting the United States at multilateral and responsibilities for international intellectual bilateral intellectual property negotiations. property issues within the Federal Govern- Both the Patent and Trademark Office and the ment, several policy coordination groups for Copyright Office are responsible for monitor- intellectual property policy have been recently ing international legal developments, repre- formed. These groups include the Cabinet senting the United States in their respective Council on Commerce and Trade (Working Group on Intellectual Property), the Trade Pol- —— “‘Gregorio Garzon Clariana, “Legal Framework for Interna- icy Committee (Subcommittee on Intellectual tional Information, ” Translational Data Report, vol. 8, No. 2, Property), and the Senior Interagency Group pp. 101-107. on Communication and Information Policy “’These agencies are each described in more detail in Chap- (Working Group on Copyright and Intellectual ter 9, “The Federal Role in the Administration of Intellectual Property Rights. ” Property). 250 . Intellectual Property Rights in an Age of Electronics and Information — —

These efforts to coordinate area good start Such an agency would also have centralized towards recognizing the many issues involved in-house capabilities to analyze the effects of in international intellectual property policy. new technological developments on the inter- However, given the increasing legal, social, po- national intellectual property system and the litical, and economic factors affecting intellec- U.S. position in relation to the system. Using tual property rights, the current U.S. Govern- this analysis, it could advise Congress on pos- ment organization for international intellectual sible domestic and international intellectual property issues might make it very difficult property strategies. to address these multifaceted issues in a com- At the same time, the establishment of such prehensive fashion. an agency has several drawbacks. The consoli- To deal with these cross-cutting issues, the dation of responsibility for intellectual prop- United States might establish a governmental erty rights, for example, would take expertise agency responsible for both domestic and in- on intellectual property rights from agencies ternational intellectual property rights. This that need it, such as the Department of Com- agency would subsume all the administrative merce and the Library of Congress. Similarly, responsibilities of the Copyright Office, the consolidation might also inhibit existing ac- Patent and Trademark Office, and the respon- cess to expertise on legal, trade, and foreign sibilities of other agencies involved with intel- policy, made possible by multi-agency involve- lectual property rights. Internationally, it ment. Finally, such a proposal would probably would represent the United States on all mat- meet resistance from the agencies themselves. ters that relate to intellectual property rights.

IMPLICATIONS FOR FUTURE U.S. INTERNATIONAL INTELLECTUAL PROPERTY POLICY As described throughout this chapter, the Strategies designed to focus on political issues, United States is undertaking and considering moreover, do not readily address international many options to address international intel- intellectual property trade issues. lectual property issues. Table 8-5 summarizes In fact, many policy strategies designed to some of the major policy strategies available address specific issues may exacerbate other to the United States for dealing with many of stresses on the international intellectual prop- the international intellectual property issues erty system. Treating intellectual property, for brought about by new technologies. It further example, solely as international trade issues gives major examples, issues or stresses that could provoke problems of international polit- would be addressed, and suggests both posi- ical relations, even to the point of inciting tive and negative outcomes of such strategies. retaliation from other nations; but focus on international political relations might foreclose There is no single, clear-cut strategy that the export opportunities for the U.S. domestic in- United States could adopt to comprehensively tellectual property industry. Similarly, treat- address all of the international intellectual ing international intellectual property issues property issues engendered by new technol- as separate from other international policies ogies. A policy strategy designed to deal with might lead to conflicts with international in- international trade and enforcement issues, formation and communication policies and such as those already legislated (sections of other foreign policies. the Trade and Tariff Act of 1984 and the Carib- bean Basin Economic Recovery Act), for ex- Although many of the policy strategies for ample, fails to address any of the international addressing international intellectual property political issues presented by new technologies. issues are not mutually exclusive, the United Table 8-5.—Policy Options for Addressing International Intellectual Property Issues

Issues or stresses PoliCY action Examples to be addressed Possible positive outcomes Possible negative outcomes Ratify the Berne Convent Ion Internationalization U.S. would appear more genuine in its support Disrupts traditional U S intel - for the Protection of of intellectual for international Intellectual property pro- Iectual property laws and Literary and Artistic Works property tection, and consequently it might be more practices, such as registra- Political effective in convincing other nations to tion and deposit Legal enact legal and enforcement measures for Enforcement Intellectual property protection and to ratify International intellectual property agreements U.S. might have more political strength from which to Influence International Intellectual property policy development. Rejoin United Nations Internationalization U.S. would appear more genuine in its support U S would need to make eco- Educational and Cultural of intellectual for international Intellectual property pro- nomic and political conces- Organization (UNESCO) property tection, and consequently it might be more sions particularly to address Political effective in convincing other nations to the concerns of developing Legal enact legal and enforcement measures for nations Enforcement Intellectual property protection and to ratify Requires additional funding international intellectual property agreements U.S. might have more political strength from which to influence International Intellectual property policy development U.S. might Increase its ability to Influence the number and subjects of studies on copyright and new technologies undertaken by the UCC Negotiations, education – Provide other countries with an understand- Requires additional funding seminars, and training property could organize seminars and train - ing of the importance of protecting intellec- programs on intellectual iIng programs for foreign officials responsi- tual property rights. property rights for ble for the administration of Intellectual Promote international harmonization of na- other nations property rights, such as those already tions’ domestic Intellectual property laws undertaken in Indonesia, Malaysia, and Thailand. Bilateral intellectual property Where countries are not members of interna- Legal Permit the establishment of Intellectual prop- Disrupts Integrity of traditional agreements with nations that tional Intellectual property conventions, the Enforcement erty relations with countries that are cur- system of international lntel- are not members of any United States could establish specific rently not members of any international In- Iectual property ageements. international Intellectual bilateral Intellectual property agreements, tellectual property agreements property agreements such as those already established with Romania, South Africa. and Thailand.

Legislation with specific Domestic Iegislation that would make specific Legal Provide leverage to induce other nations to Disrupts integrity of traditional international reciprocity intelIectual property rights in the United Enforcement enact adequate and/or enforce international system of international clauses States available to foreign nationals only if intelIectual property rights Intellectual property their nation granted comparable rights to agreements U S nationals, such as those reciprocity clauses in the Semiconductor Chip Protec- tion Act (Public Law 98-620) and the proposed International Computer Software Protect Ion Act of 1985 (S. 399, 99th Congress) Table 8-5.— Policy Options for Addressing International Intellectual Property Issues—Continued

Issues or stresses Possible positive outcomes Possible negative outcomes Policy action Examples— to be addressed Trade preferences contingent Where countries receive trade preferences Trade and Economic Provide leverage to induce other nations to Provokes new difficulties for on nations’ laws and efforts and/or foreign aid and do not have adequate Enforcement enact adequate legal protection and/or en- U.S. international political re- to enforce International laws or enforcement measures for the pro- force International Intellectual property Iations Intellectual property rights tection of Intellectual property, the United rights States could make the receiving of such benefits contingent upon the improvement of Intellectual property laws and enforcement efforts, as called for in the Trade and Tariff Act of 1984 (Public Law 98-573) and in the Caribbean Basin Economic Recovery Act (Public Law 98-67). Trade sanctions against Information-based products and services Trade and Economic Provide a retaliatory mechanism against na- Provokes new difficulties for nations which do not could be included in international trade Enforcement tions that do not have adequate legal pro- U.S. International political re- respect international agreements that have trade sanction penal- tection and/or do not adequately enforce in- Iations and/or retaliation Intellectual property rights ties already in place, such as in the General ternational intellectual property rights. from other nations, particu- Agreement on Tariffs and Trade (GATT), Iarly from developing Imposition of trade penalties on nations that nations import goods that infringe U.S. intellectual property rights, such as the penalties called for in the Process Patent Amendment (S.1543 and H R. 1069, 99th Congress). Strengthen U.S. Government- Increased funding with focus on–developing Political Promote International political and cultural Requires additional funding sponsored information countries’ specific needs for information - understanding. distribution programs based products and services, such as those Provide incentives for countries to respect in- distibution programs sponsored by the ternational Intellectual property rights. U S information Agency (US! A), the Peace Corps, and the Library of Congress. Foreign aid to nations for Funding for developing countries specifically Political Promote International political and cultural Requires additional funding. purchase of Intellectual earmarked for the purchase of information - understanding. property products based products and services. Provide incentives for countries to respect international Intellectual property rights. Promote the development of domestic intellectual property industnes in other nations. Permanent coordinating body Standing coordinating body that would con- Institutional Provide a forum for better coordination among Complicates decisionmaking for all government sist of representatives from all agencies in- the governmental agencies responsible for process for International in- agencies involved with volved with Intellectual property rights Is- various aspects of international intellectual tellectual property policy by intellectual property issues sues, such as the working groups of the property protection decentralizing Individual Cabinet Council on Commerce and Trade, agencies’ policymaking the Trade Policy Committee, and the Inter- responsibilities agency Group on Communications and In- formation Policy Establishment of government Combining under the jurisdiction of one gov- Institutional Provide a mechanism for presenting a more Loss of direct access to exper- agency for Intellectual ernmental agency alI of the responsibilities united U.S. position on international intel. tise or Intellectual property property for the administration of Intellectual prop- Iectual property issues. protection needed by individ- erty rights, includlng all International intel- Provide a mechanism to centralize expertise ual government agencies lectual property policies, on foreign policy and Intellectual property within the Federal Government. SOURCE Office of Technology Assessment Ch. 8—Impact of New Technologies on the International Intellectual Property System ● 253 —

States must recognize the trade-offs involved egies accordingly. Such decisions are likely to in choosing one policy strategy over another, become more important in light of the enhanced or the possibility that two policy strategies role of the new technologies in economic and might conflict. Given such potential policy con- social development. Decisions about interna- flicts, the United States will need to make fun- tional intellectual policy, moreover, will need damental decisions about how it wishes to view to be made in conjunction with many other intellectual property (for example, as an item aspects of U.S. foreign policy—from interna- of trade, an item to enhance its foreign diplo- tional issues of defense, trade, and foreign aid matic relations, etc.) and design its overall in- to issues of international information and com- ternational intellectual property policy strat- munication policy. Chapter 9 Federal Role in the Administration of Intellectual Property Rights — .—————

Contents

Page Findings ...... 257 Introduction ...... 257 Development of U.S. Intellectual Property Policy ...... 258 Goals for Granting Intellectual Property Rights ...... 258 Federal Role in the Administration of Intellectual Property Rights ...... 259 Early Development of the Governmental Institutions for the Administration of Intellectual Property Rights ...... 260 Present Institutional Arrangements for the Administration of Intellectual Property Rights ...... 262 Patent and Trademark Office ...... 262 Copyright Office ...... 263 Copyright Royalty Tribunal ...... 264 Other Supporting Agencies Within the Federal Government ...... 265 Federal Courts...... 268 Non-Federal Agencies: Collecting Societies ...... 269 Emergence of New Technologies and Their Implications for the Present Federal Institutional Arrangements for the Administration of Intellectual Property Rights...... 271 Rapidity of and Uncertainty With Respect to, Changes in Information and Communication Technologies ...... 271 Growing Demand for Nontraditional Copyright Solutions Requiring a Regulatory Approach ...... 272 Need for Greater Understanding of and Information About the Processes By Which Intellectual Properties Are Created, Published, Distributed, and Used ...... 273 Development of Technologies That Do Not Correspond to Traditional Intellectual Property Categories, and the Creation of Sui Generis Intellectual Property Legislation ...... 274 Growing Convergence of Intellectual Property Issues With Other International Issues...... 275 Growing Convergence of Intellectual Property Issues With Other Information Policy Issues...... 276 Implications for Future Institutional Arrangements for the Administration of Intellectual Property Rights...... , ...... 276 No Action: Leave Major Decisions to the Courts ...... 276 Encourage the Use of Collecting Societies...... 280 Strengthen and Increase the Responsibilities of Existing Agencies ...... 281 Establish a Central Federal Intellectual Property Agency ...... 282 Considerations for the Choices of Institutional Arrangements ...... 282 Chapter 9 Federal Role in the Administration of Intellectual Property Rights

FINDINGS Assuming that the granting of exclusive designed, can adequately cope with new tech- property rights to individuals would automat- nological developments and the new responsi- ically lead to the creation and public dissemi- bilities that may be placed on them. nation of information, the Nation’s first leg- To manage these stresses, Congress has sev- islators ascribed to government a relatively eral options that it could pursue. These options inactive role in the intellectual property sys- range from leaving the agencies as they exist tem. Accordingly, the Federal role and cor- to completely restructuring them. Before con- responding institutions have evolved to perform sidering institutional arrangements for the minimal regulatory functions. The system was administration of rights, however, Congress designed to be self-enforcing; the government must first make overall decisions about the in- institutions granted rights, registered works, tellectual property system itself. Congress and the individual creators and users were re- must determine which goals it wishes to pro- sponsible for protecting their rights and en- mote, which laws and practices to establish, forcing them through the courts. and how to balance competing interests in light Today, however, the emergence of new in- of the effects of new technological develop- formation and communication technologies is ments. It must also determine whether the role placing new demands on governmental insti- of government in the intellectual property sys- tutions responsible for the administration of tem should be regulatory or nonregulatory. intellectual property rights. The question Only after such decisions are made, can Con- arises, therefore, of whether existing Federal gress begin to construct institutional arrange- institutional arrangements for the administer- ments for the administration of intellectual ing intellectual property rights, as initially property rights.

INTRODUCTION The granting of intellectual property rights tual property policy as a means to promote the can be viewed as a public policy tool designed progress of science and the useful arts, and to to achieve policy goals. Historically, govern- disseminate such knowledge to the public, ments have granted intellectual property They believed, moreover, that public dissemi- rights to meet different policy goals. Such nation of information would help to meet the goals, for example, have included economic de- other overriding societal needs of the time— velopment or industrial policy, regulation of to develop an industrial base, create a national trade, censorship, promotion of public learn- literature, and maintain the level of knowledge ing, and the development of a national culture. among citizens required to sustain a demo- The particular role governments play in intel- cratic polity. lectual property systems depends to some ex- Assuming that the granting of exclusive tent on the goals the policy is designed to property rights to individuals would automat- foster. ically lead to the creation and public dissemi- Early in the evolution of the United States, nation of information, the Nation’s first leg- the Founding Fathers clearly viewed intellec- islators ascribed to government a relatively 257 258 ● Intellectual Property Rights in an Age of Electronics and Information — inactive role in the intellectual property sys- arrangements for administering intellectual tem. This role corresponded to their preference property rights, as initially designed, can ade- for a free market approach, and alleviated their quately cope with new technological develop- fears of overly centralized government. Ac- ments and the new responsibilities that may cordingly, the Federal role and corresponding be placed on them. institutions have evolved to perform minimal To examine the current Federal role in the regulatory functions. The system was designed intellectual property system and how it may to be self-enforcing; the government institu- change in response to new technology, this tions granted rights, registered works, and the chapter will: individual creators and users were responsible for protecting their rights and enforcing 1. describe the development of the goals and them through the courts. rationale for the Federal role in the intellectual property system and under what Today, however, the emergence of new in- conditions it worked effectively; formation and communication technologies is 2. characterize the current Federal institu- placing new demands on governmental insti- tional arrangements for dealing with in- tutions responsible for the administration of tellectual property issues; intellectual property rights. In reaction to the 3. describe how technological developments development of new technologies, for example, may be stressing such arrangements; and policymakers have passed legislation that calls 4. explore the implications for future institu- for government to take on new or increased tional arrangements. responsibilities. This raises the question, there fore, of whether existing Federal institutional

DEVELOPMENT OF U.S. INTELLECTUAL PROPERTY POLICY Goals for Granting Intellectual early legislators also recognized the impor- Property Rights tance of a democratic polity, which required public dissemination of knowledge to function In the United States a unique set of social, adequately. 3 Because the United States was political, economic, and technological factors a developing country, its policy makers also gave rise to a specific set of policy goals that wished to stimulate industrial growth, particu- intellectual property rights were designed to larly in light of the burgeoning industrial rev- achieve. These factors, moreover, shaped the olution taking place in England.4 design of the Federal role in the administration of intellectual property rights. ’ The Framers of the U.S. Constitution recognized that the granting of intellectual prop- During the early history of the United erty rights was one way to achieve such basic States, the Founding Fathers adhered to the social, political, and economic ideals. They be- belief in the right of the individual to own prop- lieved that granting these rights would pro- erty and pursue his intellectual interests.2 The ‘These beliefs originated from the ideas of John Locke and ‘See ch. 2 for a discussion of how different historical circum- Jean Rousseau. See, for example, John Locke, Second Treatise stances influenced governments’ use of intellectual property on Civil Government, 1690, and Jean Jacques Rousseau, So- rights to achieve varying economic, political, and social goals, cia) Contract, 1762. Gordon Wood, The Creation of the Amer- ‘John Locke, for example, was one of the most influential ican Republic, 1776-1787 (North Carolina: University of North philosophers on the Framers of the U.S. Constitution. Locke Carolina Press, 1969), pp. 53-65; and Bruce Bugbee, The Gene- stated, for example, that “Every man has a property in his own sis of American Patent and Copyright Law (Washington, DC: person. The labor of his body and the work of his hands we may Public Affairs Press, 1967), pp. 84-125. say are properly his." Garry Wills, Inventing America: Jeffer- ‘Hunter Dupree, Science in the Federal Government: A His- son Declaration of Independence (New York: Doubleday & tory Policies and Activities to 1940 (Cambridge, MA: The Co., Inc., 1978), pp. 229-239; and Bruce Bugbee, Genesis of Amer- Belknap Press of Harvard University Press, 1957); and Bruce ican Patent and Copyright Law (Washington, DC: Public Af- Bugbee, Genesis of American Patent and Cop~ight Law (Wash- fairs Press, 1967), pp. 84-125. ington, DC: Public Affairs Press, 1967), pp. 84-125. Ch. 9—Federal Role in the Administration of Intellectual Property Rights “ 259

vide incentives for creators or industries to the power to grant such rights if it thinks best. produce and disseminate works, which would Not primarily for the benefit of author, but pri- promote public education and industrial marily for the benefit of the public, such rights are given. Not that any particular class of citi- growth. To provide an initial framework for zens, however worthy, may benefit, but be- this policy, the Framers included the clause cause the policy is believed to be for the bene- in the U.S. Constitution: fit of the great body of people, in that it will To promote the Progress of Science and use- stimulate writing and invention to give some ful Arts, by securing for limited Times to Au- bonus to authors and inventors.’ thors and Inventors the exclusive Right to their respective Writings and Discoveries. Federal Role in the Administration of 5 (Section 1, Article 8, clause 8.) Intellectual Property Rights In The Federalist, James Madison clearly The Federal role in the administration of establishes the overall purpose of granting rights evolved in a way that clearly reflected rights to individuals, which was the automatic the goals of the U.S. intellectual property sys- promotion of the public good: tem. Similar to the development of the goals The utility of this power will scarcely be of intellectual property rights, political, eco- questioned. The copyright of authors has been nomic, and technological factors influenced the solemnly adjudged, in Great Britain, to be a type of role that Congress designed for the gov- right of common law. The right to useful in- ernment in the administration of such rights. ventions seems with equal reasons to belong to the inventors. The public good fully coin- First, Adam Smith’s ideas of a free market, cides in both cases with the claims of individ- non-interventionist approach that could pro- uals. The States cannot separately make ef- vide economic incentives and an efficient mech- fectual provision for either of the cases, and anism for markets and economic growth were most of them have anticipated the decision of increasingly accepted.8 Reacting against the this point, by laws passed by the insistence 6 English Government which used excessive reg- of Congress. ulatory controls, Americans also favored the A later, more definitive interpretation of this Jeffersonian notion of a government with as overall purpose—the stimulation of the crea- few regulatory functions as possible.’ Addi- tion and dissemination of information to the tionally, the major technology of the time, the public—was stated in a legislative report on printing press, allowed the granting of rights the Copyright Act of 1909: to lead automatically to the dissemination of information. This was so because works had The Constitution does not establish copy- to to be published in order to enjoy protection. rights, but provides that Congress shall have Moreover, in the absence of inexpensive repro- “The inten~e~ goals of this clause become very apparent duction technologies of today, publishers could when the original two proposals concerning intellectual prop- more accurately estimate the returns on their erty which were proposed during the Constitutional Conven- investments and, thus had more direct eco- tion are examined: nomic incentives to publish works. Rights Madison’s proposals envisioned a national legislature with the authority to ‘To secure literary authors their copy rights for a limited time, To establish a University, To encourage by premiums and provisions, The advancement of useful knowledge and 7House Report No. 2222, 60th Cong., 2d sess., as cited in discoveries’; The other set of proposals was offered by Charles Alan Latman and Robert German, Copyright for The Eighties Pickney, and included the following contemplated powers: ‘To grant charters of incorporation, To grant patents for useful in- (Charlottesville, VA: Michie, Bobbs-Merrill, 1981), p. 12. ventions, To secure to Authors exclusive rights for a . cer- “Charles Beard, An Econonu”c Interpretation of the Constr tain time, To establish public institutions, rewards, and immu- tution of the Um”ted States (New York l%= press, 1965); and nities for the promotion of agriculture, commerce, trades, and Adam Smith, The Wealth of Nations, 1776 (New York: The Mod- manufactures. ern Library, 1937). Bruce Bugbee, The Genesis of American Patent and Copyright ‘Alexander Hamilton, James Madison, and John Jay, The Law (Washington, DC: Public Affairs Press, 1967), p. 126. Federalist Papers, No. 39-46 (New york: The New American ‘Alexander Hamilton, James Madison, and John Jay, The Library of World Literature, Inc., 1961), pp. 240-300; and Julian Federalist Papers, No. 43 (New York: The New American Li- Boyd (cd.), The Papers of Thomas Jefferson (Princeton, NJ: brary of World Literature, Inc., 1961), pp. 271-272. Princeton University Press, 1950).

58 – 922 :1 – 86 – 10 260 ● Intellectual Property Rights in an Age of Electronics and Information

owners could also enforce their rights them- of 1790.11 The Patent Act established a Patent selves because infringements were relatively Board, which was made up of the Secretary easy to detect. of State, Secretary of War, and the Attorney General. Referring to themselves collectively Under these circumstances, the early legis- as the “Commissioners for the Promotion of lators believed that the intellectual property Useful Arts, ” the members of the board were system could function adequately with mini- empowered to issue a patent for any device or mal government intervention if left to its own process “if they shall deem the invention suffi- devices: ciently useful or important. The statute also When printing was the only information established a Register of Patents, to be kept technology of any significance, eighteenth cen- by the Secretary of State.12 The Copyright Act tury policy makers conceived of an arrange- required the local District Courts (nearest to ment for knowledge-dissemination and com- where the person seeking protection lived) and pensation in society that was elegant in its the Secretary of State to register and serve absence of centralization and administration. as depositories of creative works.13 And the Lawyers set up the machinery for granting exclusive rights to copy to those who wrote and courts, of course, served to interpret any problems rights owners or users might have enforc- to those who controlled the presses; Adam 14 Smith’s “invisible hand” took care of the de- ing their rights. tails. As Madison noted, copyright provided an efficient means of achieving the constitu- Early Development of the Governmental tional goal of promoting science and the use- Institutions for the Administration of ful arts because it was one of the fortuitous policies in which the ends of the individual cit- Intellectual Property Rights izen and the goals of the collectivity could be Since 1790, several factors have affected the made synonymous. Copyright, in short, was not a bad idea at the time.10 evolution of the governmental institutions set up to administer intellectual property rights. Consequently, the legislators of the Patent These include the increasing number of crea- and Copyright Acts of 1790 designed a relatively inactive role for the Federal Government —— in the intellectual property system. These Acts “Before such institutional arrangements were established, clearly delineated the exclusive rights to be Congress was responsible for granting both copyrights and pa- granted and the conditions under which they tents on a case-by-case basis. Increases in numbers of creators would be granted, and established the role of seeking protection for their works was a major impetus for Con- gress to establish institutions to register and deposit works. government as simply a register of works seek- ‘iBruce Bugbee, Genesis of Patent and Copyright Law ing protection. The acts also required creators (Washington, DC: Public Affairs Press, 1967), p. 149. who wanted to protect their works to publish “’’The copyright law of 1790 stated that an author desiring protection thereunder was to deposit a copy of his work with them in local newspapers. The registration the clerk of the District Court where he lived, but he was also function, like the publication requirement, required to send a second copy of his production to the LT. S. closely corresponded to the goals of intellec- Secretary of State within six months. The clerk of the District Court was to record this work according to a detailed form tual property policy. For the repositories of prescribed in the statute, and could charge a sixty-cent fee for submitted works and the publication of those this service. Duplicates under seal could be issued at sixty cents works in public institutions were primarily for each, and the grantee was required to publish, within two months, a copy thereof in at least one newspaper for a four week the public to access and learn from, thus ful- period–an interesting carry over of a feature which the Senate filling the original intent of the granting intel- had dropped from the general patent bill prior to its passage. lectual property rights. Bruce Bugbee, The Genesis of Patent and Cop~”ght Law (Wash- ington, DC: Public Affairs Press, 1967), p. 147. 14, , The institutional arrangements for register- . . The courts at the beginning construed the Act (the Copj’right Act of 1790] very strictly and hence the author was ing works were also created by the legislation obliged to proceed with the utmost caution along the tortuous copyright route lest any slip prove his undoing. ” Alan Latman “Nicholas Henry, Copyright, Information Technology, Pub- and Robert German, Copyright for The Eighties (Charlottes- lic Policy (New York: Marcel Dekker, 1967), pp. 56-57. ville, VA: Michie, Bobbs-Merrill, 1981), p. 5. Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 261 tors seeking protection for their works and the the changes made in the patent system, the growing number of types of works that Con- transfer of the registration and deposit func- gress has included as protectable subject mat- tion to a centralized library clearly reflected ter under intellectual property law. the wish to promote public dissemination of 16 In response to such changes, Congress has, intellectual creations. over time, transformed the original institutions into larger, more distinct governmental agen- Patents cies with increased responsibilities, admin- A few years after the Patent Board was es- istrative or otherwise. In spite of these modifi- tablished in 1790, the large numbers of pat- cations, these government agencies responsible ent applications became too time-consuming for intellectual property rights have remained for the board members whose primary respon- largely nonregulatory, their role being to reg- sibilities were as members in the Cabinet.17 To ister and deposit works, and to disseminate remedy this situation, Congress, in 1789, knowledge to the public. dropped the requirement that inventions be sufficiently useful or important to receive a pat- Copyrights ent, and replaced the examination process per- Like the patent system, the copyright sys- formed by the Cabinet members with simple tem of 1790 was amended soon after its crea- registration. In 1802, Congress enacted legislation that created a Patent Office as a distinct tion. The major change expanded the types of 18 subject matter to be protected under U.S. copy- division within the Department of State. right law. Such expansion of the law to cover Dissatisfaction with this process and the in- new types of works added increasing respon- creasing number of applications for patents led sibilities to the Federal institutions which reg- to legislation in 1836 that enlarged and ele- istered works.15 vated the status of the Patent Office to a sep- Reflecting such increases, the Federal copy- arate bureau within the Department of State. right institutions grew in size and administra- The statute also authorized the President to tive functions. In 1859, the responsibility of appoint a Commissioner of Patents, who in registering works was transferred to the De- turn was to appoint a full-time staff of ex- partment of the Interior. Then in 1870, when aminers and other clerks and assistants. It also Congress was enacting patent legislation, it reinstated the process of examining patent ap- undertook a major reform of the copyright sys- plications for novelty, utility, and invention. tem. Congress assigned the registering of As under the laws of 1790 and 1793, applica- copyrights and the depositing of works to the tions were to be submitted with specifications, Library of Congress, which had been estab- drawings, and when necessary, models. The lished in 1800. Under this statute, the Librar- statute further directed the Commissioner to ian of Congress received and maintained all display the models in a gallery open to the pub- copyright records and deposit copies, which lic, thus further promoting the public dissem- the District Courts had held under the old, de- ination of knowledge. centralized system. In 1897, a separate Copy- right Office was established within the Library —— of Congress, where it remains today. Much like “’The Thomas Jefferson Building of the Library of Con- gress, for example, was established by the Copyright Act of 1870 to house the growing collections that were being acquired “Over time, legal protection, for example, has been ex- as a result of the copyright deposit system. tended to include: designs, engravings, and etchings (1802); mu- “For example, under the Patent Act of 1790, approximately sical compositions (183 1); dramatic compositions (1856); pho- 57 patents were granted: 3 in 1790,33 in 1791, 11 in 1792, and tographs and negatives (1865); statues and models (1870); all 10 in the early weeks of 1793. Bruce Bugbee, Genesis of Ameri- writings of an author (1909); motion pictures (1912); sound can Patent and Copyright Law (Washington, DC: Public Af- recordings (1972); original works of authorship (1976); computer fairs Press, 1967), p. 149. software (1980); and mask works (sui generis protection) for semi- ‘“Bruce Bugbee, Genesis of American Patent and Cop~ight conductor chips (1984). Law (Washington, DC: Public Affairs Press, 1967), p. 150. 262 • Intellectual Property Rights in an Age of Electronics and Information

In 1849, the Patent Office was transferred nally, in 1925, the Patent Office was placed to the newly created Department of the In- in the Department of Commerce, where it re- terior. In 1870 the Commissioner of Patents mains today. was authorized to register trademarks.19 Fi-

“The Supreme Court held such legislation to be unconstitu- registration of trademarks was permissible under the power to tional because trademarks did not cover a product of author- regulate commerce. Gustavus A Weber, The Patent Offi”ce (Bal- ship or invention. Subsequently, the Supreme Court found that timore, MD: The Johns Hopkins University Press, 1924).

PRESENT INSTITUTIONAL ARRANGEMENTS FOR THE ADMINISTRATION OF INTELLECTUAL PROPERTY RIGHTS Although the U.S. intellectual property laws deal more effectively with the growing inter- have been revised many times since 1790, the nationalization of intellectual property issues, basic institutional arrangements have, with all of the institutions individually and jointly, minor changes, remained intact—performing have increased their international activities. minimal, indirect regulatory functions. These Fourth, in reaction to the increasing complex- institutions administer basic laws, register and ity of new technologies (particularly cable) that deposit works, and provide support services.20 have given rise to new stakeholders, a new They have, moreover, shown a remarkable re- agency has been established that departs from siliency to technological change, thus far. the traditional role of government regarding intellectual property rights.21 And finally, the In adjusting to technological development, courts have become increasingly burdened many of the institutions have undergone sim- with cases involving more complex technical ilar changes. First, each of the institutions has issues. A brief characterization of the principal increased in size, reflecting the growing num- institutional actors involved with the admin- ber and types of works to be protected. Sec- istration of property rights and some of the ond, each has begun to use information tech- current issues they face are provided below. nologies to perform more efficiently. Third, to Patent and Trademark Office ‘“Donald Curran, Acting Register of Copyrights, for example, speaking before the Patent, Trademark, and Copyright Sec- The U.S. Patent and Trademark Office (PTO) tion of the American Bar Association, said that “the Federal Government does not now in any but the most tangential way is located within the Department of Commerce. ‘‘regulate’ the copyright industries. . . ‘‘ Information Hotline, Similar to the Copyright Office, PTO has no vol. 17, No. 10, November 1985, p. 4. jurisdiction over questions relating to enforce- Regulation can be defined as: Federal laws or rules which impose government standards and ment of patents, nor over matters that con- significant economic responsibilities on individuals or organiza- cern the promotion or the utilization of patents. tions outside the Federal establishment. . . Regulation is carried out by Federal agencies through such means as setting or PTO's major function is to administer the pat- approving prices, rates or fares, profits, interest rates, and wages; ent laws as they relate to the granting of pa- awarding licenses, frachises, certificates, and permits; or establishing and enforcing standards of behavior such as worker safety tents. It examines applications for patents to rules, air quality levels, public disclosure of financial information, or prohibitions of price, racial, religious, or sexual discrimination. —— Although almost all government activities involve a rule or a “The functions have become more regulatory in the sense regulation, there are varying degrees of regulation. The admin- that the government is actively deciding the value of royalties istration of intellectual property rights, for example, relies on for intellectual works. The first time that an exception was made the law to define property rights and lets those who possess to the traditional copyright approach was in the Copyright Act them negotiate their value either in the marketplace or in a pri- of 1909 which required copyright proprietors of musical works vate, decentralized fashion. A more regulatory approach would to license their use in mechanical recordings for a royalty of rely on public authorities to directly determine and allocate the 2 cents. Since 1909, three other exceptions have been made for value of intellectual property. Domestic Council Review Group cable retransrnissions, musical recordings used in juke boxes, on Regulatory Reform, “The Challenge of Regulatory Reform: and noncommercial broadcasters use of music and other crea- A Report to the President” (Washington, DC, 1977), p. 47. tive works. . —— -——

Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 263 . ascertain whether the applicants are entitled Office, through its deposit requirement, col- to patents under the law and grants the pa- lects copies of all the works it receives which tents when they are so entitled. PTO also it then makes available to the Library of Con- administers the trademark laws and reviews gress’ collections. This function, sometimes re- trademark applications to determine whether ferred to as “America’s cultural policy, ” has they meet statutory criteria for registration.22 been critical in developing the Nation’s storehouse of intellectual material.25 The Library Furthering the goal of increasing public ac- of Congress in turn supplies the Copyright Of- cess to knowledge, PTO also publishes issued fice with administrative support. This coop- patents and various publications about patents erative arrangement has existed for over 150 and patent laws. It also maintains public search years and helps to accomplish a major goal of rooms for the public to use to examine issued intellectual property protection—the dissem- patents and records and supplies copies of 26 ination of knowledge to the public. records and other papers on demand. The divisions of the Copyright Office are In addition to the examining groups, PTO has organized by function. In addition to the a number of sections, divisions, and branches Register’s Office, there are six operational di- that perform various other services, such as visions: receiving and distributing mail, receiving new applications, handling sales of printed copies 1. the Acquisitions and Processing Division of patents, copying of records, inspecting draw- —which performs the general housekeep- ings, and recording assignments.23 ing and accounting work of the office and the enforcement of the mandatory deposit PTO has grown tremendously since it was provisions of the copyright law; first established. At present, it has approxi- 2. the Examining Division—which deter- mately 3,100 employees, of whom about half mines whether the requirements of the law are examiners and technical and legal staff. have been met for materials submitted for over 100,000 patent applications are received registration; annually. Because of the large number of ap- 3. the Cataloging Division—which catalogs plications, there is a 25-month backlog of all copyright registrations and recorded 440,000 cases. To remedy this situation, PTO documents; is in the process of automating its search files. 4. the Information and Reference Division The goal is to complete automation by the early 24 —which provides the public with general 1990s. information on copyright, conducts searches for the public in the Copyright Office cat- Copyright Office alogs, and produces on request certified The U.S. Copyright Office is located in the copies of office records; Library of Congress. As noted earlier, its loca- 5. the Records Management Division— tion is important to both the Library and the which maintains the records of the Copy- Copyright Office, representing a symbiotic right Office; and relationship between the two. The Copyright 6. the Licensing Division—which deals with payments made to the office under the —. — compulsory licensing provisions of the law “’U.S. Department of Commerce, Patent and Trademark Of- fice, “General Information Concerning Patents: A Brief introduction to Patent Matters’ [ Washington, DC: U.S. Government ‘r’ Discussion with Donald Curran, Acting Register of Copy- Printing Officer 1984), p. 5. rights, March 1985. “U.S. Department of Commerce, Patent and Trademark Of- ‘hFor an interesting discussion of the relationship between fice, “General Information Concerning Patents: A Brief intro- the Copyright Office and the Library of Congress, see Donald duction to Patent Matters” (Washington, DC: U.S. Government Curran,-’’The Copyright Office and the Library of Congress, ” Printing Office, 1984), p. 5. remarks of Donald Curran, acting Register of Copyrights to “Discussion with Donald Quigg, Acting Commissioner of the American Bar Association, Section Patent, Trademark, and Patents, March 1985. Copyright Law, Washington, DC, July 9, 1985. 264 ● Intellectual Property Rights in an Age of Electronics and Information

that relate to coin-operated phonorecord Ž the use of music on phonorecords.30 players (jukeboxes) and cable systems.27 CRT has six responsibilities for the admin- The number and types of works registered istration of the four compulsory licenses: have grown enormously since the Copyright 1.. adjust the compulsory license rate for re- Office was established. For example, between transmission by cable systems of distant, 1790 and 1869 a total of 150,000 works were non-network broadcasts by television registered. Today, approximately 500,000 stations; works are registered annually with the Copy- 2. determine the distribution of fees de- right Office. 28 The staff of the Office has grown 29 posited with the government by cable to 561 with an annual budget of $16.2 million. systems; In addition to expanding its organization with 3. determine the compulsory license paid to increased registrations, the Copyright Office the Register of Copyrights for the per- has recently begun to use information technol- formance of non-dramatic musical compo- ogies to automate many of its functions. This sitions by jukebox owners; has greatly improved its efficiency, particu- 4. determine the distribution of fees depos- larly in the registration process. ited with the government by jukebox owners; Copyright Royalty Tribunal 5. adjust the mechanical compulsory license The Copyright Royalty Tribunal (CRT) is the rate on the sale of non-dramatic musical most recently established government agency works embodied in phonorecords (these that deals with intellectual property rights. It fees are paid to copyright owners without was established by the 1976 Copyright Act as government involvement, via the Harry an independent agency within the legislative Fox Agency); and branch. CRT was created to administer sev- 6. determine reasonable terms and rates for eral compulsory licenses that Congress, partly public broadcasting entities’ use of musi- in response to new technological developments, cal, pictorial, graphic, and sculptural works (these fees are paid without govern- also set forth in the 1976 act. A compulsory 31 license permits the use of copyrighted mate- ment involvement) . rial under certain circumstances without the Five appointed commissioners are respon- permission of the copyright owner, provided sible for holding hearings to determine rates a government-set payment is made to the copy- and distribute royalties. right owner. Such licenses are: Because CRT performs functions that are ● retransmissions by cable systems of dis- much more regulatory in nature—that is, its tant broadcast signals by television and rulemaking proceedings to set royalty rates radio stations; and its adjudication function which entails dis- ● the use of musical records in jukeboxes tribution of collected royalties to claimants-it for profit; diverges sharply from the traditional role of ● the use of music and certain other creations by noncommercial broadcasters; and —.—- “Statement of Wilbur Campbell, Deputy Director, Account- ing and Financial Management Division, General Accounting office before the Subcommittee on Courts, Civil Liberties, and the Administration of Justice, Committee on the Judiciary, U.S. House of Representatives, “The Operation of the Copyright Royalty Tribunal, ” June 11, 1981, p. 3. “’’86th Annual Report of The Register of Copyrights, 31 Statement of Wilbur Campbell, Deputy Director, Account- 1983” (Washington, DC: Library of Congress. 1984), p. 1. ing and Financial Management Division, General Accounting “’86th Annual Report of the Register of Copyrights, 1983” Office before the Subcommittee on Courts, Civil Liberties, and (Washington, DC: Library of Congress. 1984), pp. 32, 34. the Administration of Justice, Committee on the Judiciary, U.S. “Appendix to the Budget of the United States Government House of Representatives, “The Operation of the Copyright for Fiscal Year 1986. Royalty Tribunal, ” June 11, 1981, p. 4. Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 265 .—

the Federal Government in the administration National Telecommunications and Informa- of intellectual property rights. For this reason, tion Administration. NTIA is the executive CRT has recently run into some sharp criti- branch agency principally responsible for the cisms. 32 development of domestic and international telecommunication and information policy. Other Supporting Agencies Within The agency also manages the various govern- the Federal Government ment agencies’ use of the electromagnetic spectrum and has research laboratories for techni- Department of Commerce cal support. Because of the close relationship between telecommunications and intellectual Four offices and agencies within the Depart- ment of Commerce support intellectual prop- property and its role in developing informa- erty activities in various ways. The growing tion policy, NTIA participates in U.S. Govern- need for support reflects the increasingly comment delegations to international intellectual plex technical, political, and economic dimen- property negotiations. NTIA also makes rec- sions of intellectual property rights issues ommendations on legislative and regulatory brought about by technological development. issues regarding intellectual property and com- Such support draws on the industrial, techni- munication issues. cal, and scientific expertise of the following National Technical Information Service. NTIS agencies. serves as a government clearinghouse for tech- International Trade Administration. The In- nical information. NTIS issues notices to the ternational Trade Administration (ITA) was public that a government agency has applied established by the Secretary to strengthen the for a patent. Private organizations and individuals can then determine whether to apply U.S. international trade and investment posi- for a license. tion. ITA provides counseling to members of the business community on export opportuni- NTIS acts as an agent in support of the pat- ties and problems. ITA offices abroad help to ent process for nine departments and agencies. identify potential markets. A recent reorga- These are the Departments of Commerce, nization along lines proposed by the Grace Health and Human Services, Interior, Agri- Commission has brought together industrial culture, Army, Air Force, Transportation, Vet- specialists in such areas as computers and erans Administration, and the Environmental telecommunications with trade promotion Protection Agency. NTIS makes special pro- staff to bring more specialized knowledge to motional efforts to encourage licensing and trade negotiations.33 ITA administers the Ex- also licenses those agencies’ patents. port Administration Act to ensure that export activity is consistent with national security Office for Productivity, Technology, and In- and foreign policy objectives. A current pri- novation. OPTI, headed by an Assistant Sec- ority is prevention of the illegal transfer of tech- retary of Commerce, was created to develop nology. Control of technical data poses enforce- measures to improve the competitive position ment problems because such intangibles as of the United States in world markets. The pas- consulting arrangements and training of for- sage of legislation (Public Law 96-517) in 1980 eign nationals are covered. In issuing export provided nonprofit organizations and small licenses, clearances are routinely required from businesses with the first right of refusal to ti- the Departments of State and Defense. tle in inventions made under government contracts and grants. Authority to implement this —. “See for example, hearings held before the Subcommittee policy was transferred to OPTI from the Of- on Courts, Civil Liberties, and the Administration of Justice, fice of Federal Procurement Policy of the Of- Committee on the Judiciary, U.S. House of Representatives, fice of Management and Budget by Public Law ‘(The Copyright Royalty Tribunal, ” July 11, 1985. “President’s Private Sector Survey on Cost Control, “Re- 98-620. A Presidential memorandum issued in port on the Department of Commerce” (Washington, DC: U.S. 1983 directed agencies to permit all contrac- Government Printing Office, 1983), p. 24. tors and grantees to take title in inventions 266 ● Intellectual Property Rights in an Age of Electronics and Information

to the extent permitted by law. Implementa- Committee on International Intellectual tion of this directive is monitored by OPTI, Property. which works with agencies in preparing procurement regulations. OPTI is also develop- Office of the U.S. Trade Representative ing policy to cover the ownership and the use The Office of the U.S. Trade Representative of technical data arising from federally sup- (USTR), created by statute in 1975 in the Ex- ported research and development. This is a ecutive Office of the President, is responsible highly controversial area with little precedent for setting and administering trade policy. for guidance. USTR also administers part of the Trade and Tariff Act of 1984, which refers specifically to Department of Justice the protection of intellectual property. Under The Antitrust Division of the Department this act, the President is authorized to deter- of Justice includes an intellectual property mine which developing countries may export section that monitors the interface between an- goods to this country duty free, on the basis titrust and intellectual property matters. The of each country’s efforts to protect U.S. intel- section helps develop legislation with poten- lectual property products as well as other cri- tial antitrust implications, such as the recently teria. USTR is also responsible for issuing a passed National Cooperative Research Act, statutorily required annual report to Congress which removes certain antitrust barriers to co- on trade problems, including a report on na- operative R&D. It also provides the Adminis- tions that are not respecting U.S. intellectual tration’s position on intellectual property mat- property rights. ters to other regulatory agencies, and presents International Trade Commission the Administration’s opinion to the courts, if requested in a pending case. The International Trade Commission (ITC) is an independent quasi-judicial agency that The Department of Justice also represents determines whether unfair acts related to im- the Patent and Trademark Office in civil cases ports harm U.S. industries. Investigations when, for example, it is alleged that the agency often involve allegations of patent, trademark, acted improperly in approving or refusing a or copyright infringement. The intellectual patent application. It also represents the Copy- property owner or licensee usually initiates ac- right Office in similar circumstances. tion by making a complaint to ITC. ITC may then conduct hearings before an administra- Department of State tive law judge. A final decision is rendered by The Department of State’s international ac- the Commissioners. The agency is authorized tivities in the protection of intellectual prop- to issue orders excluding goods from entry erty are carried out through its Office of and/or cease-and-desist orders. Exclusion orders Business Practices. The Department of State are enforced by the Bureau of Customs. ITC coordinates U.S. participation in the interna- works closely with the Department of Com- tional intellectual property treaties to which merce’s International Trade Administration, the United States is a party, such as the Con- which maintains information on industries that vention for the Protection of Industrial Prop- might be harmed by unfair trade practices. erty and the Universal Copyright Convention. Within the Federal Government, the Depart- Policy Coordination ment of State initiates or participates in the Reflecting the growing number of economic, approval of papers circulated among agencies political, social, and international factors sur- to achieve coordinated positions in multilateral rounding intellectual property issues, various and bilateral negotiations on intellectual prop- Federal agencies have recently begun to coordi- erty issues. To elicit industry viewpoints, the nate their efforts to deal with these multi- Department of State has created an Advisory faceted questions. Responsibility for policy co- Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 267 ordination on intellectual property is mainly 1. identifying the kinds of trade barriers vested in four interagency coremittees that are that result from protection of intellectual described below. property; 2. identifying the policies and practices of Cabinet Council on Commerce and Trade. The individual countries that cause serious Cabinet Council on Commerce and Trade is problems in the United States; chaired by the Secretary of Commerce, who compiling information in support of bi- has appointed the Commissioner of Patents 3. lateral negotiations; and and Trademarks as Chairman of its Working 4. preparing the annual report to Congress Group on Intellectual Property. The basic task of the Working Group is to coordinate the po- that highlights problem areas and U.S. efforts underway to improve them. sitions of Federal agencies, especially in developing U.S. positions in foreign negotiations. Senior Interagency Group on Communication Seven agencies of the executive branch are rep- and Information Policy. The Senior Interagency resented on the working group. The Copyright Group on Communication and Information Office representative also participates in the Policy was created in 1980 and is co-chaired meetings. by representatives from the Departments of State and Commerce. Its Working Group on The working group is concerned with both international and domestic issues that require Copyright and Intellectual Property, which includes representatives from nine government a unified government position. These have in- agencies, is chaired by a representative of the cluded: Department of Commerce’s National Telecom- 1. obtaining a coordinated position for the munications and Information Administration. Brussels Satellite Convention, which was The task of this working group is to coordi- subsequently ratified; nate and exchange information on each of the 2. proposing controls for imports from third agency’s efforts to improve international pro- parties that do not respect U.S. trade- tection for U.S. intellectual property rights. marks; 3. recommending changes in the Freedom of The working group has recently been working Information Act to protect trade secrets; to ensure that U.S. programmers receive re- 4. coordinating agencies’ positions on the remuneration for the cable retransmissions of their material by Canadians and Mexicans. A cently passed semiconductor chip legislation; and separate Working Group on Transborder Data Flow, chaired by a representative from the De- 5. assessing needed changes in the “first sale” doctrine. partment of State, coordinates U.S. positions in the Organization for Economic and Commu- Trade Policy Committee. The Trade Policy nity Development (OECD) Committee on In- Committee is chaired by the U.S. Trade Rep- formation, Computer, and Communication resentative and has a subcommittee on intel- Policy. lectual property chaired by USTR. In compli- Federal Coordinating Council for Science, ance with the Trade and Tariff Act of 1984, it examines international protection of intel- Engineering, and Technology. The Federal Co- lectual property as a trade barrier. In trade ordinating Council for Science, Engineering, matters, the committee’s focus is on bilateral and Technology is chaired by the director of negotiations. Seven executive branch agencies the Office of Science and Technology Policy are members of the subcommittee. (OSTP). Its Working Group on Intellectual Property is chaired by the Assistant Secretary The subcommittee facilitates cooperation of Commerce for Productivity, Technology, among agencies in carrying out responsibili- and Innovation. This group addresses issues ties assigned to USTR under the recent legis- that arise in the process of carrying out legislation. These include: lative and administration policy on the owner- 268 ● Intellectual Property Rights in an Age of Electronics and Information —

ship of intellectual property created during information and communication technologies.34 government-sponsored research and develop- The volume of legislation dealing with tech- ment. Nineteen agencies are represented on the nological intellectual property is growing rap- working group. idly and is likely to be matched by an increasing volume of litigation.35 The economic stakes This working group is used by the Assistant involved in the allocation of technological prop- Secretary to help coordinate the execution of erty rights by the courts are large and will as- responsibilities assigned to Commerce by Pub- sure the availability of extensive resources for lic Law 98-620. Guidance is provided to agen- litigation. 36 The resulting surge of scientific and cies that are drafting Federal Acquisition technological disputes into the judicial arena Regulations that authorize vesting title to in- is likely to put substantial strain on the institu- tellectual property in small businesses and non- tional resources of the judiciary and to raise profit organizations performing research and questions about judicial expertise in resolving development for the government. Similar efforts are underway pursuant to the Presiden- tial directive that encourages all government 34Judicial decisions on the allocation of proprietary rights in contractors and grantees to take title to the new information technologies and on access to new forms of extent permitted by law. The working group communications occupy position of singular importance. What Justice Cardozo said about the’’ preferred position’ of the First is drafting guidelines for the disposal of tech- Amendment–’’that it is the matrix, the indispensable condi- nical data arising from government-supported tion, of nearly every other form of freedom’ ‘–may well be said research and development, and is preparing about access to information and the means of its communication. At a time when the dimensions of advance in these tech- model agreements that include provisions for nologies are seen as equal in importance to the advent of the intellectual property for use by government industrial revolution and when the potential for the monopoli- laboratories undertaking cooperative efforts zation of control they embody surpasses anything organized societies have known so far, the power of courts to demarcate with private companies. rights of ownership in and access to knowledge is the power to decide whether or not the new information and communica- Federal Courts tion technologies will be used to increase the public dissemination of information. The shortcomings of intellectual property rights adjudication must be seen against that challenge. See From the very beginning of Federal intellec- Palko v. Connecticut, 302 U.S. 319 (1937). tual property protection, courts have played “l~or a comprehensive list of legislation in the 98th Con- a central-albeit not highly visible—role in the gress dealing with various aspects of the new information technology, see Report, 8th Amual Copyright Law Conference, Mar. implementation of intellectual property laws. 7, 1!385, Washington, DC. The volume of litigation over ques- Although the availability of courts for the reso- tions of copyrightability has increased dramatically. Although lution of private disputes is generally taken the available data on copyright litigation does not distinguish between traditional copyright disputes and those involving new for granted, and not often considered part of technologies, the number of copyright cases filed in Federal the system, it is clear that access to the Fed- courts increased from 899 in 1976 to 2,226 in 1983. Annual Re- eral judicial system has always been a crucial port of the Director of the Administrative Office of the United States Courts, 1984. element of intellectual property policy. As fo- ‘In 1982, an estimated 2.8 million personal computers were rums for intellectual property dispute resolu- sold in the United States. Another 5 million, for a total of more tion, courts have: 1) developed doctrines defin- than $24 billion in sales, were expected to be sold in 1983, By the end of the century 80 million personal computers will be ing the scope of protections; and 2) provided in use. Estimates of total software revenues for 1982 run as official sanctions for misallocation of rights high as $45 billion, by 1987 packaged personal computer soft- and rewards under intellectual property law. ware sales alone are expected to reach $4.8 billion. In 1984, gross revenues from the sale or license of computerized databases sur- The role of the courts in resolving private passed $3 billion. Pamela %rnuelson, “CC)NTU Revisited: The Case Against Copyright Protection for Computer Programs in disputes and in developing legal doctrines may Machine Readable Form,” Duke Law Journal, No. 4, 1984, pp. become more central with the advent of new 705-712. Ch. 9—Federal Role in the Administration of Intellectual Property Rights c 269 novel and ever more complex scientific and eco- What copyright owners lacked in the face nomic issues raised by the regulation of new of these new opportunities for performance and intellectual property .37 profit was an efficient mechanism for collecting the money to which the law entitled them. Non-Federal Agencies: To setup such a system, a group of prominent Collecting Societies composers formed the American Society for Composers, Authors, and Publishers (ASCAP). Traditionally, many copyright owners have Established to collectively license use of mu- licensed use of their literary, dramatic, musi- sical works and to monitor performances and cal, and artistic works, as well as other forms infringements of the law, ASCAP was success- of intellectual property, on the basis of trans- ful in lowering the cost and simplifying the action contracts worked out between individ- process of licensing transactions. uals. The introduction of commercial broad- A second, much smaller, collecting society casting technologies, beginning in the 1920s, was founded in 1930 by Paul Heinecke. Called gave copyright owners new opportunities for the Society of European Stage Authors presenting their works and new difficulties in (SE SAC), the organization’s membership was collecting fees for use. Copyright owners have made up mostly of Europeans. Today, SE SAC found it increasingly difficult to control or has a large repertoire of American music. administer their rights on a case-by-case basis. Users also have faced difficulties in iden- In 1940, a dispute between ASCAP and a tifying and remunerating creators of works. group of broadcasters produced the third mu- As described below, these problems provided sic collecting society, Broadcast Music Inc. significant pressure for the establishment of (BMI). The broadcasters charged that ASCAP’s systems of administering rights on an ag- licensing fees were too high, and so split off gregate basis through collecting societies. to form their own society. BMI supplied its member broadcasters with music from sources Music not controlled by ASCAP. Although the broad- The use of a collective system of adminis- casters resolved their dispute with ASCAP in tering intellectual property rights in the mu- 1941, BMI continued to operate and is still a sic industry was prompted by two events. major competitor to ASCAP. First, the 1909 revision of the Copyright Act extended to the owners of music copyrights Print the exclusive right to authorize the public, for- In print publishing, the pressure for a col- profit performance of their works. Soon after, lective approach began to build in the 1950s, radio extended once-local performances to a when authors and publishers saw a threat to much larger audience. Film and television fol- their traditional sources of income from pho- lowed, bringing further increases in the scale tocopying technologies. Micrography was the and scope of public musical performances. first such technology, and it was followed in the 1960s by advances in photocopying techniques and mechanical paper-handling ca- ——-—.— —— pacity. ‘“The practical value of the categorical copyright protection During the process of revising the Copyright for computer software, for example, will be determined largely Act, Congress suggested that publishers and by judicial decisions on the copyrightability of particular forms and types of programs and by judicial definition of the scope authors might set up a cooperative mechanism of the protections that will be accorded by software copyright. for collecting and disbursing revenues. Upon 270 . Intellectual Property Rights in an Age of Electronics and Information

passage of the 1976 act, a group of publishing To accomplish these objectives, each collect- and other associations formed the Copyright ing society performs similar functions. For ex- Clearance Center (CCC). Established in 1977, ample, each has a department responsible for CCC was designed to monitor and collect from licensing users of copyrighted works. They try consumers who want to photocopy copyrighted to identify new users and see that both new works and to distribute revenues to the copy- and established users are properly licensed and right holders. pay the required fees. Their responsibilities also include convincing users that they must Film in fact pay user fees; this is sometimes difficult. In some cases, some collecting societies With the introduction of cable and satellite have resorted to lawsuits to exact payment and transmission, the film industry followed the 39 enforce licensing terms. Although the blan- example of the music and publishing industries ket license entitles users to access to all of the and set up a collecting society. Before that society’s works, the fees charged vary accord- time, the reproduction of film prints was ex- 40 ing to particular classes of use. The negotia- pensive, and profitable exhibition was gener- tion of fees is conducted with various indus- ally visible, so illicit use was easily discouraged. But with satellite and cable, the film industry try groups, such as the American Hotel and faced greater difficulties, particularly in for- Motel Association, the National Association eign countries, in collecting fees for use of their of Broadcasters, the Association of American Publishers, and the Authors League of Amer- works. ica. Each collecting society has some mecha- In response to these new technologies, an nism for adjudicating disputes in cases where international collecting society called L’Associ- users feel the fees are too high. ation de Gestion International Des Oeuvres Audio-Visuelles (AGICOA) was organized in In addition to maintaining lists of licensees, 1982. The society was founded to negotiate use the collecting societies have departments that of films between national collecting societies are responsible for recording and updating the list of works registered with the society. Most and copyright holders, to monitor the use of of the collecting societies maintain these files films, to collect royalties from those who use in an electronically accessible database. The them, and to distribute royalties to copyright holders around the world. staff members in this section also respond to inquiries from the public, users, or rights Collecting Societies in Practice holders. Generally speaking, the main purpose of col- Because it would be uneconomical to log and lecting societies has been to alleviate the prob- monitor every use of every registered work, lems of administering individual property collecting societies generally rely on sample rights by setting up a central clearinghouse mechanism. Easing the cost and complexity of licensing is also important; users can obtain a blanket license to use any of the registered “ASCAP brings, for example, approximately 400 to 500 works.38 Collecting societies, moreover, at- such infringement actions every year. Over 99 percent of these cases are settled before trial. tempt to serve as forums for negotiations be- ‘“The musical performance rights societies, for example, use tween the various interested parties and try different methods but similar criteria for deterrnininguser license to educate the general public about intellec- fees. The criteria for broadcast users include, for example, advertising revenues and the size of their markets. For nonbroad- tual property protection. cast users such as “general establishments, ” the societies use factors such as the price of a drink, seating capacity, the frequency of music performances, and the type of rendition. Hotel ‘“In some cases, however, users prefer to pay on a per-use and motel fees take into account total entertainment expendi- basis. ASCAP, BMI, and the CCC each offer these types of trans- tures; concert rates depend on admission price and seating ca- actional licenses. AGICOA generally operates on a pay-per-use pacity; background music users such as Muzak pay a fee based basis. primarily on the number and character of subscribers. .—

Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 271 surveys of use for determining the distribu- Most of the collecting societies have sepa- tion of revenues to their creator and publisher rate international departments that have re- members.’] The exact distribution of revenues ciprocal agreements with individual collecting to individual rights owners is calculated by for- societies abroad. These agreements provide for mula.42 the exchange of revenues that foreign societies collect for American societies’ registered “’This is usually performed in a special survey department. works. Collecting societies also belong to the Although the music collecting societies and the CCC and relevant international associations. AG ICOA all use different survey methods, the ot’erall intent of the survey is similar. Upon receipt of the survey data, the societies identify writers and publishers of the registered works. After calculating the credits, the music performance rights so- Some of the societies report that the use of information tech- cieties divide 50 percent of their revenues among writers accord- nolo~” has greatly improved the efficiency of the survey and ing to the credits they earned and 50 percent to publishers ac- ident}flcation process. cording to the credits they earned. The CCC pays all of its “In the case of the music performance societies, these cal- collected revenues (less overhead) to its publisher members (who culations are made with weighting formulas, whereby different may or may not have agreements to share these revenues with uses of works earn different amounts of performance credits. authors) according to calculations made with the usage survey For uses of printed works, the CCC uses rates determined by data. Automated information systems have also greatly stream- each of the copyright holders for calculating its survey data. lined the remuneration process.

EMERGENCE OF NEW TECHNOLOGIES AND THEIR IMPLICATIONS FOR THE PRESENT FEDERAL INSTITUTIONAL ARRANGEMENTS FOR THE ADMINISTRATION OF INTELLECTUAL PROPERTY RIGHTS As illustrated above, the Federal institutions lation of the telecommunication industry, to established to administer intellectual property greatly enhance the public’s access to infor- rights have shown a resilience to technologi- mation products and services. These same two cal developments over time. Today, however, developments significantly affect the processes new information and communication technol- of creating, producing, and using intellectual ogies are of a new order of magnitude and properties. As a result, they are likely to have scope, and so are placing correspondingly a somewhat disruptive effect on the nature of greater pressure on the entire intellectual prop- the intellectual property system as it exists erty system. The present institutional arrange- today. ments were not designed to deal with the many kinds of problems generated by these technol- The unprecedented speed and unpredictabil- ogies. To explore how new technological de- ity of these changes confound efforts to design velopments are affecting the viability and ef- legislation that will continue to be relevant and fectiveness of the institutions now involved useful. It was for this reason, for example, that with intellectual property issues, a brief charac- technological gaps soon developed in the 1976 terization of such developments and their po- copyright law and its 1980 amendments were tential institutional implications is provided enacted, although the law itself was specifi- below. cally designed to take emerging technologies into account. As illustrated in the case of Ap- Rapidity of, and Uncertainty With ple Computer, Inc. v. Franklin Computer Corp., Respect to, Changes in Information for example, the law failed to address the im- and Communication Technologies portant question of whether copyright law applied to operating code that is readable for the Technological advances in, and the growing most part only by machine, or to information convergence of, computer and communication embedded in hardware. And as the case of Sony technologies, have combined with the deregu- Corp. of America v. Universal City Studios

8–92 2 “~ – 86 – 11 272 ● Intellectual Property Rights in an Age of Electronics and Information

demonstrates, the law failed to anticipate the ation.43 Directors, for example, are looking for rapid growth of the home market for videocas- ways to receive property rights protection for sette recorders (VCR) and how this widespread their individual contribution to stage and film use of VCRs might affect the intellectual prop- production. 44 The Motion Picture Association erty rights of the film industry. It is not sur- of America, moreover, is seeking the right to prising, therefore, the past few years have be paid a fee by owners of satellite dishes who brought greater demands on the courts and receive transmitted broadcasts.45 many more bills related to intellectual prop- To overcome some enforcement problems erty which seek to accommodate legislation generated by the new technologies and take with changing technologies. into account the new kinds of claims for rights, Given the rapidity of, and uncertainty with a number of laws and bills have been enacted respect to, changes in information and com- or introduced that depart from the traditional munication technologies and their impact on intellectual property scheme and require sig- the intellectual property system, the question nificant government involvement for their im- arises as to whether the existing institutions plementation. Under a compulsory licensing that were established to address intellectual scheme, for example, Section 116 of the 1976 property issues are either equipped with or are Copyright Act requires jukebox operators to capable of developing an ongoing process to pay royalties to the copyright owners of non- assess and plan for technological change. dramatic works. To execute this requirement, the law obliges the Copyright Office to register and license operators of jukeboxes and the Copyright Royalty Tribunal (which at the time Growing Demand for Nontraditional was not yet constituted) to determine which Copyright Solutions Requiring a claim for fees are legitimate and allocate roy- Regulatory Approach alty payments equitably. Similarly, the proposed Home Recording Act of 1983, designed The rapid development of information and to circumvent the problems of enforcement by communication technologies, combined with compensating copyright owners with a royalty greater public access to them, has strained payment, calls on the Copyright Office to ini- many of the traditional mechanisms for pro- tiate arbitration proceedings to determine the tecting intellectual properties. This growth and royalty schedule and requires the Copyright development has also stressed the system by Royalty Tribunal to determine and allocate the which creators, producers, and distributors of funds collected among competing claimants. intellectual properties are remunerated. For example, because many of these technologies permit decentralized access and require electronic handling of information, their use can be carried out privately and is, therefore, less sub- “’l’his is not the first time that technology has given rise to ject than in the past to monitoring and con- new kinds of rights. Looking back at the history of intellectual trol. Moreover, by generating new uses and pro~wrty laws and practices, one can see that, with the development of new technologies, pressure for the establishment of new users of intellectual properties, these technol- kinc~s of rights emerged. Recording technology, for example, ogies are convoluting the process by which in- gaw: rise to the demand for a “mechanical recording right. ” tellectual properties are created, published, dis- Unhke traditional rights which were granted to an entire class of work, such as a book or a motion picture, these new kinds tributed, and used. Similarly, they are altering of rights were designed to remunerate the specific use to which some of the traditional roles, and relationships a w(}rk was put. of actors in the intellectual property system. 440TA Workshop, “The Impact of Technology on the Crea- tive Environment, ” Apr. 24, 1985, As a result, many of those involved are seek- “~% Public Law 94-549, Communications Act Provisions ing new kinds of rights and forms of remuner- for Earth Stations. Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 273 — .

With the exception of the fledgling Copy- lisher put out a book, or one producer release right Royalty Tribunal, however, U.S. institu- a film, but rather a variety of publishers and tional arrangements for addressing intellectual producers whose economic stakes need to be property issues were designed, for the most taken into account. part, to function within a free market, non- To resolve the numerous and varied compet- regulatory framework. To the extent that new ing intellectual property claims within a regu- legislative initiatives call for a more regulatory latory framework, as opposed to within a mar- approach to solving intellectual property prob- ket framework, wiLl be very difficult. It will lems, the question is raised as to whether and require policy makers to develop an analytic as to how well the existing set of institutions rationale for the optimum charging of fees and will be able to take on new roles and adapt to the economically efficient and socially equi- a new environment. table distribution of rewards. To do so, they will need to know about all of the parties at Need for Greater Understanding of and stake in relatively great detail, and also un- Information About the Processes By Which derstand their roles in the intellectual property process, and how each might fare under Intellectual Properties Are Created, alternative scenarios. The considerations speci- Published, Distributed, and Used fied in the Home Recording Act of 1983 for Under the traditional copyright scheme, setting royalties illustrate the kinds of infor- there is little need to know the precise eco- mation that might be required to develop such nomics of the process by which intellectual a rationale. No less than 10 factors are cited, properties are created, published, distributed, including: and used. For under such a system, property ● the value to an individual of the right to rights are defined and granted to authors by reproduce copyrighted works; law, and the economic value of those rights is ● the projected effect of royalty fees on the determined and distributed by market forces. structure and financial condition of the To the extent that intellectual property law motion picture and audiovisual production is tending towards a more regulatory approach, industries and the video recording device however, more information and a greater un- or media importing and manufacturing in- derstanding of this process will be needed. dustries; and ● the relative roles of copyright owners and The widespread deployment and use of the importers and manufacturers of video new information and communication technol- recording devices or media with respect ogies has complicated the traditional intellec- to creative and technological contribution tual property process, making it difficult-but to the development of motion pictures and perhaps also more important—to know where other audiovisual works. economic value is added, and thus, how to determine economic incentives and rewards. At present, reliable information of this kind These technologies, for example, have not only is not readily available. Given the growing com- permitted more people to use intellectual prop- plexities in the intellectual property process, erties in new and different ways, they have also brought about, in part, by technological devel- extended the process and the opportunities opments, it is exceedingly difficult for exam- throughout to enhance the value of creative ple, to determine such things as authorship; and innovative works. No longer is there one the point at which new value is added on to “author,” but rather a series of “authors” an existing intellectual property and who has whose claims to intellectual property rights added it; and what actually constitutes copy- must be sorted out. No longer does one pub- ing or use and, therefore, might require re- 274 ● Intellectual Property Rights in an Age of Electronics and /formation muneration.46 Accurate estimates of damages sensations. This blurring of the boundaries has due to infringement of intellectual property raised the question of what kind of intellectual rights are also difficult to obtain. Most of those property protection is most appropriate for available are not only unsystematic in their these technologies and led to the establishment approaches; they are also somewhat suspect of sui generis intellectual property legislation. insofar as most have been commissioned by 47 Computer software was one of the first of the very parties whose interests are at stake. 11 e new information technologies to raise ques- When legislation calls for a regulatory ap- tions of this kind. Controversy surrounded the proach instead of a market approach for ad- issue of the copyrightability of computer soft- dressing intellectual property issues, provi- ware since the mid- 1960s, when the Copyright sions may be needed to increase the analytic Office first began to register programs in their and expert support available to those organi- object code form under its “rule of doubt. ” zations called on to implement and adminis- Much of the controversy was rooted in the 1909 ter the law. One recent legislative proposal Supreme Court decision in White-Smith Pub- that moves in this direction is the proposed lishing Co. v. Apollo Co., which held that a Free Market Copyright Act of 1983, which player piano roll was not copyrightable since abolishes the offices of two of the five commis- it did not embody a system of notation that sioners attached to the Copyright Royalty Tri- could be read and, thus, was not a copy of a bunal and requires the Tribunal to appoint a musical composition but rather a part of a general counsel and chief economist. device for mechanically performing music. Be- cause program object code was said to resem- Development of Technologies That ble a piano roll in its unperceptability, ques- Do Not Correspond to Traditional tions were raised as to whether it could be copyrighted. After considerable controversy Intellectual Property Categories, and and litigation, this issue was finally resolved the Creation of Sui Generis within the traditional intellectual property Intellectual Property Legislation scheme by including computer programs within the domain of copyright protection.48 The framers of the U.S. Constitution distinguished between writings and inventions, and set up separate rules and incentive systems Unlike the case of computer software, the for each. This distinction was relatively clear question of how semiconductor chips might cut as long as the term writing merely de- best be protected was resolved not within the scribed an art, rather than embodying the art framework of existing intellectual property itself. Today, however, this distinction is law, but rather with sui generis legislation. Un- harder to maintain as new technologies emerge der traditional intellectual property law, the that do not clearly fit into either one or the other category. Because information technologies allow symbols to define a process and “’The 1980 Amendments to the 1976 Copyright Act, for example, specifically included computer programs, databases, and function as part of a machine, for example, they works created by the use of computers within the realm of copy- tend to blur the boundary between writings right protection. Many of the remaining issues were resolved and inventions, between ideas and their expres- with the court case, Apple Computer Inc. v. Franklin Computer Corp., in which the Third Circuit Court of Appeals held that sions, and between functions and their repre- computer programs, whether in object or in source code, whether written or embedded in ROM, and whether an applications program or an operating systems program, are “literary works” within the meaning of the 1976 Copyright Act, and hence sub- 4hFor a discussion of these problems, see Christopher Burns, ject to copyright protection. Inc., “The Economics of Information, ” contract report prepared This is not to say that there are no alternative views about for OTA, 1985. this decision. See, for example, Pamela Samuelson, “CONTU “Stan Besen, Econom”c Issues Relating to New Technol- Revisited The Case Against Copyright Protection for Computer ogies and Intellectual Property, contract report prepared for Programs in Machine-Readable Form, ” Duke Law Journal, No. OTA, 1985, pp. 45-55. 4, 1984. —. —

Ch. 9–Federal Role in the Administration of Intellectual Property Rights ● 275 semiconductor chip was unprotected. Because dertook to regulate their copyright relations it was a utilitarian article, it did not fit within multilaterally through the Berne Convention the traditional concept of copyright. On the of 1886, the United States continued until 1955 other hand, the level of originality embodied to act bilaterally in its intellectual property in a chip mask did not meet the standards re- dealings with foreign governments.50 quired for patent protection. To provide pro- Presently, however, the new technologies tection for this new technology without under- have greatly increased the flow of information mining the integrity of the law and the and information products and services across historical principles underlying the distinc- national boundaries, thus enhancing their tions between copyright and patent protection, value in international trade. Because intellec- Congress created anew class of protection with tual property protection is needed to preserve the passage of the Semiconductor Chip Pro- this value, intellectual property policy is in- tection Act of 1984. Although similar in many creasingly being brought to bear in matters respects to existing copyright law, it differs involving international trade policy. The Trade insofar as it provides protection for only 10 and Tariff Act of 1984, for example, requires years, requires mandatory registration, per- that the protection of U.S. intellectual prop- mits reverse engineering, and excludes from erty rights be one of the elements considered protection designs that are commonplace, sta- in the renewal of the benefits of the general- ble, or familiar. Because the registration pro- ized system of preferences (GSP). Similarly, cedures resemble those for copyright, the the Caribbean Basic Economic Recovery Act Copyright Office was given the responsibility of 1983 withholds foreign aid from those coun- for administering the new law. tries who fail to honor intellectual property The organizational structure was established rights. to administer intellectual property law evolved The growing importance of information in accordance with the distinctions that had products and services has also linked intellec- been made between patent and copyright pro- tual property policy with general matters of tection. To the extent that new technologies international politics. Viewing information require intellectual property protection that technologies and information products and falls outside of the traditional realms, they may services as a means to social and economic de- require significant institutional changes. velopment, many developing countries view U.S. intellectual property policies as a barrier Growing Convergence of Intellectual to their own advancement. Property Issues With Other To the extent that intellectual property is- International Issues sues continue to converge with those of inter- Historically, intellectual property laws and national trade and international politics, ques- practices in the United States developed with tions arise as to whether the present organi- little regard for what was taking place in the zational structure, designed to consider intel- rest of the world. For example, although many lectual property from a domestic frame of refer- other countries granted copyright protection ence, is adequate or whether some more for- to foreign works or authors, the United States mal coordination among agencies dealing with withheld such rights throughout its first 100 international issues may be necessary. years.49 And while other European states un- ‘“In 1955, the United States acceded to the IJni\ersal Cop~’- right Convention {I-ICC). The UCC was created for- the express “1t was only in 1891, with the passage of the Chace Inter- purpose of bringing the United States into the international national Copyright Act that the IJ nited States extended copyr- copyright communit~’. Negotiated and established under the ight relations to any nation found and proclaimed by the Presi- auspices of U h“E SC(), it prmrided a 4 ‘low bridge to the’ Berne dent to afford adequate protection to American works--subject, (’convention b~’ a combination of minimal substanti~e require- as stated, to a domestic manufacturing requirement and \’ari- ments and the super-cession of U.S. formalities b~ a simple “[JCC ous unfamiliar forma lit ieq in this country. notice’ consisting of the~ familiar ‘‘c’ inside a circle. 276 . Intellectual Property Rights in an Age of Electronics and Information

Growing Convergence of Intellectual ing it to be consistent and supportive of the 52 Property Issues With Other Nation’s overall societal goals. Information Policy Issues [n the information society, such as it has been envisioned, information and communica- The structure and the basic assumptions tion technologies will be more interdependent, underlying American intellectual property and intellectual property issues may increas- laws and practices were designed when the ingly converge with other matters of infor- United States was an agrarian society, in which mation policy-such as telecommunication pol- communication and information use and ex- icy or privacy policy .53 Anticipating such change played relatively minor roles in society. connections, S. 786, a bill entitled the “Infor- In this society, decisions about intellectual mation Age Commission Act of 1985, was re- property could be made relatively independ- cently introduced into the Senate. If passed, ently from other policy issues. For it was as- this legislation would establish a commission sumed that, through the operation of the law, to investigate comprehensively, issues relat- social and economic goals would be jointly ing to the information age, such as intellectual served, thus maximizing the benefits to soci- 51 property rights, computer education, computer ety. crime, and privacy. Today, however, the role of information tech- To the extent that intellectual property is- nologies and information products and serv- sues converge with other information policy- ices have grown dramatically. These technol- related issues, the question is raised as to ogies and their applications are being used not whether the present set of intellectual prop- only by individuals to enrich their lives, and erty institutions are capable of dealing with by businesses to enhance their productivity; these issues as they cut across one another. they are also being used by governments as a means to achieve major societal goals. For 52Simon Nora and A lain Mine, The Computerization of So- example, the French Government likens the ciety (Cambridge, MA: MIT Press, 1980). growing connection of information-processing %ee U.S. Congress, Office of Technology Assessment, and communication technologies throughout Cor~puter-Based National Information Systems, Technology and Public Poh”cy Issues, September 1981, and OTA staff memo the world to a change in “the entire nervous ran,~um, lnstjtution~ options for Addressing Information Pol- system of social organization, ” and plans to icy [ssues: A Pdiminai-y Framework for Analyzing the Choices, play a major role in their development, direct- No~’ember 1983. For other discussions and characterizations of the information society, see, for example, Susan Artandi, “M m, Information, and Society: New Patterns of Interaction, ” “lLeon Seltzer, Exemptions and Fair Use in Copyright: The Journal of the American Society for Information Science, Jan- Exclusive Rights Tensions in 1976 Copyright Act (Cambridge, uar:{ 1979; and Daniel Bell, The Coming of Post-Industrial So- MA: Harvard University Press, 1978), p. 12. ciet, v (New York: Basic Books, 1973).

IMPLICATIONS FOR FUTURE INSTITUTIONAL ARRANGEMENTS FOR THE ADMINISTRATION OF INTELLECTUAL PROPERTY RIGHTS As described throughout this chapter, new No Action: Leave Major Decisions technologies are placing considerable burdens to the Courts on the Federal agencies responsible for administering intellectual property rights. To man- Congress, of course, does not have to act and age these stresses, Congress has several op- might leave the agencies responsible for intel- tions that it could pursue. These options range lectual property rights as they currently ex- from leaving the agencies as they exist to com- ist. Although the intellectual property system pletely restructuring them. would not experience devastating effects, the Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 277 burdens would remain and would perhaps in- Royalty Tribunal, the compensation of copy- crease over time with new technological devel- right owners through royalty payments, “work- opments. These burdens, moreover, would for-hire, ” or computer software piracy and most likely fall to the courts. counterfeiting has been enacted or is under consideration. This volume of new legislation is The ability of the courts to deal with the matched by the novelty of some of the major emerging intellectual property issues will be issues raised by it. For example, the protec- determined by several factors: tion of software under copyright law raises a 1. the increasing volume of intellectual prop- number of definitional problems that call for erty legislation and the extent to which the interpretation of statutory language and it departs from traditional legal concepts; its application to new technological and scien- 2. the limited resources available to the tific processes. courts and the confining attributes of ad- Because some of the legislation on new in- judication; and tellectual property reflects a tendency to estab- 3. the inadequacy and bias of adjudicative lish regulatory policies and institutions, courts information. will find themselves in the familiar-but nevertheless burdensome—position of having to re- Volume of New Intellectual Property Legislation and Novelty of Legal Issues view a host of administrative law issues arising out of administrative rules concerning Compared to the relative stability of copy- licensing or the mechanics of copyright regis- right law during the 66 years which elapsed tration.57 As the Copyright Office becomes the from the enactment of the 1909 Copyright Act central institution responsible for copyright to the 1976 Revision of the copyright law, legis- registration and administration, courts will lative activity on intellectual property issues have to resolve issues of regulatory policy.58 has increased significantly during the last 10 To the extent that registration of computer years. Altogether 54 bills dealing with new in- programs and computerized databases will ne- tellectual property issues were introduced in cessitate the adoption of new procedures and 54 the 98th Congress, 1983-85. The Software policies by the Copyright Office, that agency’s Copyright Act of 1980, for example, amended substantive decisions and rulemaking process Section 117 of the 1976 act to allow for the are likely to be subject to extensive challenges copyrightability of computer programs with- before the courts. out specifically enumerating computer programs.55 Another 4 years later the Semicon- Unavoidably, enforcement of copyright in ductor Chip Protection Act of 1984 established computer programs will involve courts in ad- an entirely new class of protection for an in- judication over the enforcement process itself. formation technology that does not fit com- Since it is likely that computer copyright pro- fortably into either the patent or copyright cat- tections will be less self-executing than tradi- egories of traditional intellectual property tional copyright, new enforcement schemes will law.56 Additional legislation dealing with such become necessary for the application of civil diverse new technology subjects as commer- — cial lending rights, home taping, cable copy- ‘“Inclusion of object–or machine–code within the reach of copyright protection under the Act raises novel questions about right, aspects of the operation of the Copyright the existence of a prerequisite of human interaction with copyrightable material. It poses the problem of how to recon- cile the fact that computer programs can be published with the ““OTA staff memorandum, Feb. 26, 1985; and American Bar fact that they can-at the same time–be kept secret to protect Association, 8th Annual Copyright Law Conference, Washing- their commercial value. It demands distinctions between ton, DC, Mar. 7, 1985. “utilitarian” workers and those conveying information or dis- “Jon Baumgarten, “Copyright and Computer Software, playing an appearance. Databases, and Chip Technology, ” Proceedings, 8th Annual ‘“The Semiconductor Chip Protection Act of 1984, Public Copyright Law Conference, Washington, DC, Mar. 7, 1985, p. Law 98-620, though not applying copyright protections, makes 289. the Copyright Office responsible for registration and deposit ‘Public Law 98-620, November 1984. of semiconductor chip design (mask works). 278 • Intellectual Property Rights in an Age of Electronics and lnformation — or possibly criminal sanctions.” Investigations get answers. Answers are justified by refer- of suspected infringement will affect areas pro- ence to evidence, reasoning and legal doctrine. tected by privacy expectations and fourth Once the judicial process has been set in mo- amendment guarantees and are likely to come tion, decisions must be made. within the reach of first amendment protec- Yet from a larger policy perspective the actions. Computer crime legislation-like that cessibility of the judicial process may be a enacted at the end of the last Congress-has liability. Since judges must respond to com- already been criticized by the U.S. Department plaints and reach decisions one case at a time, of Justice as too difficult to enforce. they cannot devise a coherent program or policy: they cannot await congressional action, Judicial Resources and Capacity: Attributes they cannot ask for legislative clarification of of Adjudication unclear language, they cannot anticipate the The capacity of the Federal courts to deal course of future action even where evidence with a significant increase in their workload indicates that the course of events will under- on a complex new subject is circumscribed by mine the basis of their decision.60 the limited resources of the courts, already short on machinery and staff, and already Because accessibility to particular courts is struggling with a growing backlog of cases. random, determined by jurisdictional rules and idiosyncratic characteristics of an individual In addition to the purely quantitative prob- litigant residence or business operation, and lems it poses, the increasing volume of litiga- because courts are generally not specialized tion over new intellectual property rights raises according to subject matter, different courts substantive questions of how well the special in different regions of the country may deal attributes of the adjudicatory process are with the same legal question at the same time suited to this task. Courts will have to decide without a method of coordination and consoli- copyright questions in the context of imper- dation. Until the Supreme Court chooses to de- fect information about the course of techno- cide between contradictory or conflicting lower logical change, of doubt over the economic con- court outcomes in such cases, inconsistent sequences of the allocation of new proprietary practices maybe pursued in different areas or rights in information technology, of lack of by different computer industries during the not public support or understanding, and in the inconsiderable period of time which may elapse absence of comprehensive legislative guidance. before a “unifying” Supreme Court decision Courts as Decisionmakers Without Control is reached. Over Their Agenda. The very fact that courts Judicial passivity precludes courts from do not control their own agenda explains why influencing-much less re-directing—policy de- the judiciary is sought after as a decision- velopments questionable on legal or constitu- making institution and why its decisions may tional grounds, if no litigants come forward at the same time be unsatisfactory from a large to challenge such policy. Thus the copyright- policy perspective. As long as legal questions ability of machine-readable forms of computer are presented in the right form and forum and programs became established policy despite at the right time—conditions of adjudication the fact that the Copyright Office had profound defined with precision in advance-they will questions about the statutory and constitu-

“Imposition of criminal penalties for software piracy intro- ‘% 1979, after the CONTU Final Report had been issued duces difficult factual problems about intent and innocent in- but before the Report recommendations had been enacted by fringement. Legislators themselves are concerned over the civil the 1980 Software Amendments, one court applied the 1909 liberties implications of criminal laws which grant “broad Fed- Act to hold that machine-readable versions of computer pro- eral jurisdiction that permits Federal agents to traipse about grams were not copyrightable subject matters. There was no with impunity in the data banks of individuals and corpora- way a court, equipped to see only the past, could have decided tions.” In addition computer crime legislation is likely to raise that case by reference to legislative action yet to come, no mat- Federal-State jurisdictional issues. ter how certain or how soon. ..—— —— -

Ch. 9—Federal Role in the Administration of Intellectual Property Rights “ 279 tional validity of the practice, when it first be- larger context and on the basis of nonprob- gan to register computer programs under its abilistic legal reasoning. Both factors create “rule of doubt” in 1964.61 From a policy per- gaps in decisions and make them uncertain spective the nonsystematic invocation of ju- guides for the policies they inevitably build. dicial controls not only allows procedures and The tension between the conflicting needs policies of doubtful legal validity to continue, of the judicial system for generalists able to but also judicial silence may serve as a signal address all subjects and specialists with par- of approval when, in fact, courts did not have ticular subject expertise could, in theory, be the occasion for judgment. resolved by providing judges with informational resources which would allow them to be- Inadequacy of Adjudicative Information come sufficiently expert to deal with new is- Among the resources at the disposal of in- sues as they arise. A good argument can be stitutions explicitly designed to make social made, however, that the adjudicatory process policy is the availability of expert or special- does not serve that need. ized knowledge, of procedures for the evaluation of alternative strategies or policies and The Informational Bias of the Adjudicatory of studies projecting the consequences of alter- Process. From a policy perspective information native choices. Courts lack most of these reproduced in the course of adjudication is par- sources. tial in the dual sense that it is both incomplete and biased. Information is incomplete and frag- Judicial Expertise. Judges are not experts, mented, because the judicial focus tends to be they are generalists par excellence.62 They are, delineated by the issues which the litigants by and large, “lawyer-generalists” before their choose to raise.63 Litigation over the copyright- appointment and must remain so to serve fun- ability of computer programs has produced ju- damental goals of equality and neutrality dicial decisions which holds as a matter of stat- within the legal system. To discourage judge- utory interpretation that communication with shopping, cases are assigned on a random ba- a human audience is no longer required under sis. Sitting alone in courts of general jurisdic- copyright law64 without, however, dealing at tion district judges must be prepared for any the same time with the constitutional impli- subject matter. While appellate courts oper- cations of the nondisclosure which results from ate as collegial bodies, the continuous re- registration of machine-readable programs assignment to different panels provides little only. 65 opportunity for a lasting division of labor or the development of expertise. Yet while the Adjudication does not provide mechanisms generalist judge is an essential-even neces- for routine feedback on the consequences of sary-part of the legal system, the lack of decisions and it provides only limited oppor- expert knowledge and specialization leaves tunities for locating specific issues in their judges unprepared for dealing with matters broader social context. The judicial process calling for expertise and skills in particular makes little or no provision for reviewing the fields. In part, the difficulty stems from the consequences of decisions. The contrast be- scale and complexity of technical issues. In part, it results from the fact that judges have “In the controversy over the patentability of living micro- to deal with cases quite isolated from their organisms legal arguments focused on the intended coverage of the patent laws and the distinction between a living organ- ism and an invention, but not on the consequences of extending the concept of proprietary rights to the creation and commercial use of new life forms. ‘‘CarY, “Copyright Registration and Computer Programs, ” “Apple Computer, Inc. v. Franklin Computer Corp., 714 Bulletin of tie C~p.Vrig~t Society, vol. 11. ‘No. 362, ~964. F.2d 1240, 1247-48, 3d Circuit, 1983. “Grossman, “Socml Backgrounds and Judicial Decision- “Pamela Samuelson, “CONTU Revisited: The Case Against making, Harvard Law Review, vol. 79, No. 1551, 1966, and Carp Copyright Protection for Computer Programs in Machine Read- and Wheeler, “Sink or Swim: The Socialization of a Federal Dis- able Form, ” reprinted from Duke Law Journal, No. 4, 1984, pp. trict Judge, ” Journal of Public Law, vol. 29, No. 359, 1972. 705-712. 280 ● Intellectual Property Rights in an Age of Electronics and Information .—

tween the intensive examination of antecedent mation policy issues on judicial institutions facts and the near total neglect of subsequent primarily structured to decide individual cases or consequential facts—i.e., the impact of a de- in the context of traditional intellectual prop- cision on economic, social, or scientific behavior erty law may prove detrimental to both the and developments, is striking. Judges have no courts and those with large stakes in litiga- mechanism for assessing what the conse- tion over these issues. Future changes in in- quences of keeping source codes secret are for formation and communication technology are that free flow of information which courts have likely to leave courts perpetually a step behind in the past always found to be essential in or- the task they must perform. der to promote the Progress of Science and the Useful Arts."66 Encourage the Use of Information is biased in the sense that the Collecting Societies adversary process subjects virtually all of the Congress might also encourage the use of information brought before a court to the serv- collecting societies to deal with some of the ice of stakeholders. Not all interest groups with institutional problems presented by new tech- stakes in the outcome of a particular case are nologies. A number of indicators suggest that represented and those interests which are rep- collecting societies have been quite success- resented are not necessarily balanced in the ful in meeting their goals. The longevity of the resources they can bring to bear on litigation. musical performing rights societies, and the Although conclusive data are not available, it modeling of other collecting societies after is clear that lawsuits over software copyright them, suggest that both users and creators are almost elusively fought between cor- have been generally satisfied with their per- porate interests; so far neither individuals– formance over time. Collecting societies have as creators or consumers—nor other public or also increased the size of their repertories, the private entities representing nonproprietary number of users, and the amount of revenues public interests have played a role in the deci- 68 over the years. Decreasing operating costs sive cases. The litigation pattern thus reflects and increasing efficiency further indicate that the early prominence of major corporations in 67 collecting societies are accomplishing their the registration of computer programs. stated objective of reducing transactional costs 69 Confining Conditions of Judicial Decisionmaking for both users and creators. The rapid rate and complexity of technological change aggravate the inherent liabilities of the judicial process and may make intellec- ‘Whe combined annual collections of ASCAP, BMI, and SESAC, for example, grew from $13.5 million in 1946 to $190.5 tual property law issues less manageable for millifm in 1976. BMI reports an annual increase in their reper- the courts and may, by extension, make the toire of approximately 100,000 and an increase in revenues from outcome more counterproductive from a sci- $53.1 million in 1975 to $150 million in 1984. In the year 1984- 85, the number of writer members has increased from 43,000 ence and social policy perspective. It is in this to 45,000 and the number of publisher members increased from sense that superimposing technological infor- 25,000 to 26,000. Although the CCC and AGIOCA are both too new to determine such overall trends, both currently report increases in the participation of users and proprietors. Leonard Feist, An Introduction to Popular Music Publishing in Amer- ica (N-ew York: National Music Publishers Association, Inc., 1980), p. 59; and discussions with BMI representatives, March 1985. “%ee for example, Graham v. John Deere Co., 383 U.S. 1 at 5-6, 1965. “BMI, for example, decreased its operating costs from 19 “Between 1964 and 1976, 1205 programs were registered percent of total revenues in 1975 to 15 percent in 1985. Collect- with the Copyright Office; 971 or 80 percent were owned by ing societies have been able to lower the cost per transaction corporations-IBM and Borroughs Corp, Hersey disent, Na- in part because an increasing number of users and creators are tional Commision on Technological Uses of Copyrighted Works using their services. The major factor in lowering costs, how- (CONTU), Final Report (Washington, DC: Library of Congress, ever, has been the introduction of information technology, now 1978). used at various points in their operations. Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 281

Although successful and effective in many participants in their 1976 hearing process pro- ways, collecting societies also have problems posed that a collective approach might be fea- that could limit their usefulness as a model for sible for literary works and other types of a broader range of information market situa- intellectual property where reprographic, per- tions. In particular, because collecting socie- formance, and recording rights were becom- ties administer the rights for many creative ing more relevant in light of new technologies.72 works, they have been accused of monopolizing As new information and communication tech- the markets and exercising unreasonable re- nologies give rise to new creative works and straint on trade. These concerns have prompted new uses of traditional creative works, simi- antitrust suits; since 1941, both ASCAP and lar difficulties will arise for both users and cre- BMI have been operating under consent de- 70 ators. For example, amplification of distant crees. In addition, problems of developing signals and their distribution by cable to users, sufficient transactional volume to efficiently or the distribution of computer programs via collect and disburse funds, and problems of videotex systems to users, will increase the ac- equitable representation of members with dis- cess, distribution, and use, of creative works, parate claims to compensation have plagued thus creating enforcement problems and larger their otherwise smooth and effective opera- 71 transactional costs. Given these new chal- tion. lenges to the administration of intellectual During the congressional hearings that led property rights, collecting societies may be one to the 1976 revision of the U.S. copyright law, alternative to institutional problems posed by many discussions focused on how new tech- new technologies. nologies undermine copyright owners rights. The enormous difficulties these technologies Strengthen and Increase the created for both users seeking licenses and cre- Responsibilities of Existing Agencies ators seeking remuneration for their works were usually cited as the basis for establish- Strengthening the capabilities of the current ing broader exemptions or conditions in the agencies involved with intellectual property new legislation. As an alternative, many of the rights is another option that Congress might consider. The Patent and Trademark Office, the Copyright Office, and the Copyright Roy- “ In 1941. the antitrust division of the Department of Jus- tice filed a civil complaint against ASCAP charging the organi- alty Tribunal could each be given additional zation with violations of the Sherman Act. The result was a resources for research and policy planning, and consent decree that significantly altered three components of the authority to regulate and adjudicate. Other A .SCA P‘s operations. First, .4 SC A P was prohibited from dis- agencies’ responsibilities for intellectual prop- criminating against similarl~’ situated licenses. This order was prompted by the society’s practice of withholding certain mu- erty rights could be strengthened and made sic in an attempt to extract higher fees. Second, the consent more explicit. For example, creating a position decree prohibited ASCAP from acquiring exclusive rights to of Assistant Secretary for Intellectual Prop- license members’ performance rights. Third, ASCAP was required to offer other licenses in addition to blanket licenses. erty Right within the Office of the U.S. Trade The consent decree was amended in 1950 following numer- Representative, could provide a higher level ous problems with license terms, membership restrictions, and of attention to this aspect of international uneven royalty distribution, as well as new problems arising from motion pictures and television. Among other things, these trade, within the U.S. Government and in ne- amendments gave users more options, set up procedures to han- gotiations with other nations. dle fee disputes, and established more objective criteria for distributing royalties. More amendments followed in the 1960s. ‘Collecting societies have been criticized by some copyright holders who feel that the distribution of royafties is often unfairly biased in favor of a few very popular and powerful members, Because of alleged inequities in theus~sampling or royalty- calculation methods, some believe they are inadequately represented in the bargaining process. Economies of scale enjoyed “’Leonard Feist, An Introduction to Popular Music Publish- by large, powerful societies serve as effective barriers to weaker ing in America (New York: National Music Publishers Associa- creat,ors’ formation of competing collecting organizations. tion, Inc., 1980), pp. 56-57. 282 ● Intellectual Property Rights in an Age of Electronics and Information

Establish a Central Federal Intellectual This central agency would be particularly ef- Property Agency fective in implementing any short-term solutions that Congress might choose to address To comprehensively address the new institu- current intellectual property issues. It could, tional needs, Congress might consider restruc- moreover, plan and oversee any longer term turing the institutional arrangements for in- solutions that Congress might wish to select. tellectual property rights. Congress could, for In addition to relieving many of the stresses example, establish a new Federal agency that on the Federal institutions, such an agency would administer all aspects of intellectual would also alleviate many of the continual pres- property rights. Given the new institutional sures due to rapid technological change cur- needs, this central intellectual property agency rently facing both Congress and the courts. could assume the following responsibilities: On the other hand, centralizing responsibil- all of the current responsibilities of the ities might also have negative impacts. Many Copyright Office, the Patent Office, the government agencies, for example, currently Copyright Royalty Tribunal, and other rely on the proximity of the intellectual prop- agencies that are involved with intellec- erty rights agencies for needed information and tual property rights (this would exclude, expertise. Consolidating the responsibilities for however, the deposit function of the Copy- intellectual property rights under one agency, right Office which would remain with the therefore, could deprive other parts of the U.S. Library of Congress); Government direct access to needed informa- rule-making and determination of rates tion to carry out their functions. The intellec- such as compulsory license fees and dis- tual property agencies, moreover, would be tribution percentages as required by legis- deprived of direct access not only to adminis- lative mandates; trative support but to other areas of expertise, standard administrative adjudicatory such as international affairs and trade. functions (similar to those of other government agencies) where preliminary dis- Considerations for the Choices of putes involving patent, copyright, and sui Institutional Arrangements generis protections, licensing fees, distribution percentages, etc., could be resolved; Before considering institutional arrange- administration of all sui generis protec- ments for the administration of rights, Con- tion schemes that fall between copyright gress must first make overall decisions about and patent protection; the intellectual property system itself. For as development of international policy posi- this report has shown, institutional arrange- tions and representation of the United ments must reflect the goals they are designed States at all international intellectual to promote. Congress, therefore, must deter- property rights negotiations and con- mine which goals it wishes to promote, which ferences; laws and practices to establish, and how to bal- collection and analysis of information on ance competing interests in light of the effects markets and damages, solicitation and of new technological developments. It must analysis of industry viewpoints, and solic- also determine whether the role of government itation and analysis of the public’s views in the intellectual property system should be and evaluation of their access to informa- regulatory or nonregulatory. Only after such tion products and services; decisions are made, can Congress begin to policy planning and research on techno- construct institutional arrangements for the logical developments and their effects on administration of intellectual property rights. the intellectual property system; and advice to Congress on developments in intellectual property and suggest legislation as needed. Chapter 10 Strategic Choices for Congress —

Contents

Page Problem for Congress...... 285 OTA Approach ...... 286 What Policy Goals To Pursue ...... 286 Whether and When To Act ...... 287 When To Act...... 288 What Legal Framework To Use ...... 292 How Broadly To Define The Problem ...... 294 Within What Institutional Framework Should Intellectual Property Issues Be Resolved ...... 294 —

Chapter 10 Strategic Choices for Congress

PROBLEM FOR CONGRESS The system of intellectual property rights to the information era, were of little economic and practices, as it has evolved in the United value are looking to intellectual property law States, represents a balance of social, politi- to justify for themselves a greater economic cal, and economic interests that was arrived recompense. Meanwhile, the general public, at over time and in response to changing his- having greater expectations of, and growing torical circumstances. The basic framework increasingly accustomed to, the information was provided for in Section 8, Article 1 of the products and services afforded by the new tech- Constitution, which authorized Congress to nologies, as well as their reduced costs and in- grant exclusive ownership rights, for a limited creased accessibility, are looking to Congress period of time, for writings and inventions. The to preserve these gains. purpose of the grants of rights was twofold: Faced with a growing number of requests 1) to foster the progress of science and the use- for congressional action, in addition to a ubiq- ful arts, and 2) to encourage the creation and uitous and rapidly changing technology, the dissemination of information and knowledge problem for Congress is to try to take the mag- to the public. nitude and the scope of technological change Although this system of intellectual prop- into account, while balancing interests and re- erty rights was originally designed around the sponding to present day concerns. The resolu- technologies of its time, the approach that it tion of these issues maybe more difficult than embodied was flexible enough to incorporate in the past when information-based products new technological developments as they ap- and services were peripheral to the perform- peared. Today, however, advances in technol- ance of many social and economic activities, ogies are so far reaching that they pose fun- and when people had lower expectations about damental questions about the system itself. their use and the profits that might be derived They raise issues, for example, about the appro- from them. In such an environment, issues in- priate goals of the system, the basic framework volving the granting of intellectual property of the law, the mechanisms for enforcing rights, rights were easily worked out among the ma- the criteria for granting incentives and re- jor players without much disagreement or pub- wards, as well as about the scope of the intel- lic involvement. lectual property problem itself. Today, on the other hand, given the variety Concerned about the problem that the new of opportunities that the new technologies af- technologies pose, interested parties are urg- ford, the increased value of information, changing Congress to initiate legislation to take ing relationships among the traditional par- these technological developments into account. ticipants in the intellectual property system, Holders of existing intellectual property rights, and rising expectations about the benefits of for example, concerned lest the new technol- these technologies, the number of stakeholders ogies undermine their ability to enforce their with disparate interests and competing claims property rights, are calling on Congress to pro- on the system will be greater than ever before. vide new ways to assure their remuneration. Under these circumstances, the resolution of Creators of new kinds of information products intellectual property issues will be more prob- and services are requesting Congress to extend lematic, requiring that more viewpoints be existing law to include their creative activities taken into account, and that policy decisions within its provisions. In addition, the creators about the distribution of incentives and re- and providers of goods and services that, prior wards be made much more explicit. 285 286 ● Intellectual Property Rights in an Age of Electronics and Information

OTA APPROACH It was to assist Congress in addressing these What Policy Goals To Pursue issues that the Office of Technology Assess- Which policy goals a particular intellectual ment was asked to undertake this assessment, Intellectual Property Rights in an Age of Elec- property system is designed to serve depends, tronics and Information. in large measure, on history, circumstances, and the particular needs of a society at the time In thinking about how the new communica- when such considerations are being made. Con- tions and information technologies might af- cerned primarily about building a nation, and fect intellectual property rights, OTA has thus about the need to establish communica- adopted abroad approach, looking at the kinds tion links, develop a unified market, forge a of stresses that technology might place on the common culture, and build a democratic pol- intellectual property system, as a whole, and ity, the Founding Fathers intended the grant- on each of its parts. Such an approach was re- ing of intellectual property rights to increase quired because the new technologies do not nec- the flow of knowledge and information through- essarily have a direct effect on intellectual out the country. The granting of rewards was property rights. Rather, more often than not, not considered to be an end in and of itself, their influence on the law is felt indirectly, as but rather a means to achieve the goal of a result of such things as technologically in- learning. duced changes in norms, values, and expectations, as well as in the ways in which intellec- Given the changing role of information in tual works are created, produced, marketed, society, the question is raised as to whether and distributed. a goal established for an agrarian era is still appropriate in an information age. Because in- Such an approach has also been useful be- formation-based products and services now cause, given the political intensity of the in- constitute a major source of economic growth, tellectual property debate today, and the high and are essential to our balance of trade, some economic stakes involved, it is extremely im- people, for example, are urging that the intel- portant to view the situation in its entirety. lectual property system be restructured to give Those involved in the policy debate have often priority to economic goals. They propose a defined issues narrowly, in terms limited to number of changes in the system that would their own interests and world views. presumably foster such a goal. One suggestion, for example, is to extend protection to infor- Examining how the new information and mation itself. Such protection, it is argued, communication technologies might affect the would create a whole new source of economic intellectual property system, OTA found that wealth. Another proposal, designed to induce these technologies are creating a wide variety investment in information production, calls for of opportunities and problems that, taken to- the elimination of the requirement that inven- gether, present Congress with five major stra- tions be reducible to practice, thereby allow- tegic choices: 1) what policy goals to pursue, ing for the protection of ideas. Such types of 2) whether and when to act, 3) what legal frame protection have traditionally been denied on work to use, 4) how broadly to define the prob- the grounds that they would inhibit the dis- lem, and 5) within what institutional frame- semination of knowledge and ideas. work should issues be resolved. These choices, and a description of some of the issues and op- There are others, however, who oppose changes tions that they entail, are discussed below. designed to favor economic goals. Instead of Ch. 10–Strategic Choices for Congress “ 287 — — increased protection, they prefer to see the new economic incentives, such as subsidies or tax technologies used to enhance access and the exemptions, might be granted, which would sharing of information resources. While ac- have fewer negative consequences for learn- knowledging that the development of informa- ing and the creative environment, tion-based products and services are important to the economy, opponents of stronger protec- Whether and When To Act tion point out that information is equally important for social, political, and cultural pur- In making intellectual property policy, Con- poses. Librarians and educators, for example, gress has always had to reckon with techno- are concerned that, if treated primarily as a logical change. Over time, Congress has altered commodity, information will be less available copyright law to incorporate such technologi- for learning. cal developments as designs, engravings, and etchings (1802); photographs and negatives Looking at these issues, OTA found that the (1865); mechanical recordings (1909); motion potential for conflicts among cultural, econom- pictures (1912); sound recordings (1972); com- ic, and political goals is indeed heightened in puter software (1980); and mask works for an information age. The ease with which the semiconductor chips (1984). Then, in 1976, the system has historically been able to mutually copyright law was completely revised in an ef- serve all goals is no longer possible, given that fort to deal, once and for all, with the impacts the value of information-based products and of technological change. This revision, how- services is being enhanced simultaneously in ever, failed to meet its objective. Almost as all realms of life. And even if, as some have soon as it was passed, the new law was out of suggested, increased intellectual property pro- date. tection significantly increases the production of information and information-based products With the new information and communica- and services, it is uncertain whether goods de- tion technologies, the pace of technological signed primarily with a profit motive in mind change is accelerating. Thus, once again, Con- would be the most suitable for noneconomic gress is faced with choices of whether, how, ends. Nor would their production in and of it- and when to respond. Should Congress, for ex- self lead to their widespread distribution. For, ample, do nothing? Should it respond imme- as is pointed out below, producers of works dis- diately to those needs deemed to be most press- tributed electronically do not have as much in- ing; or should it wait until it has a better centive to make them publicly available as do understanding of the long-term impact of tech- producers of works distributed in hard copy. nology on the intellectual property system? Conflict among goals may also increase be- Should Congress Take Any Action? cause, viewing information as a new source of Stakeholders in the system disagree about wealth, many people are looking for profit the extent and seriousness of intellectual prop- where they never have before. Given these erty problems, and thus about whether Con- heightened expectations of economic rewards, gress should take any action at all. Not par- the amount of economic growth that might re- ticularly affected by the new technologies, sult from extending property rights may in- many traditional copyright holders, such as deed be insufficient to eliminate conflicts about book publishers, are satisfied with the system intellectual property goals. as it presently exists. Advocates of the free In an information age, therefore, Congress market approach also prefer that Congress will most likely have to make more explicit take no action. They believe that, as markets choices among policy goals. Alternatively, develop, so too will natural solutions to the other policy mechanisms, apart from the grant- problems stemming from technological change. ing of intellectual property rights, might be Others oppose change, fearing that major al- used to foster some goals not supported by the terations in the law will be disruptive, and present system. For example, other kinds of merely lead to greater uncertainty. 288 ● Intellectual Property Rights in an Age of Electronics and Information

Holding quite a different position are those for action now; whereas those concerned about who call for specific changes in the law to be the overall system are willing to postpone ac- made in response to particular problems as tion until Congress has the information and they arise. Included in this group are, for ex- understanding required to deal with intellec- ample, people from the motion picture and re- tual property issues as a whole. cording industries who, although concerned In considering these choices, OTA found about how technology affects their ability to that technological developments are, indeed, enforce their rights, still want to profit from affecting the intellectual property system in the new home market that the new technol- all of its aspects. Moreover, because we are now ogies afford. To allow them to do so, they pro- only just beginning to move into an electronic pose a royalty on the sale of blank tapes and era, the full impact of the new technologies will recording devices. By assuring them remuner- not become completely apparent for some time ation, legislation of this sort would make their to come. Thus, even if Congress decides to act enforcement problems irrelevant. Similarly, in some areas now, it will need to be prepared television program suppliers would like to see to reconsider these actions at some point in specific changes in the law made to deal with the future. Acknowledging that this is the case, problems they deem crucial to their interests. however, it is still useful to distinguish between Believing that government rates are lower than short-, mid-, and long-term problems, because those established in the market, they propose different kinds of problems may merit differ- changes in the law that would require cable ent kinds of solutions. operators to bid for programming in the market place. Groups such as these, however, are Short-Term Problems.–A number of prob- generally reluctant to view intellectual prop- lems can be considered to be pressing on the erty problems as being linked, and to make grounds that stakeholders are seeking imme- overall, structural changes in the system. Such diate legislative action, that societal stakes are an approach, they argue, will detract from particularly high, or that technological change those problems in need of immediate solutions. is occurring so rapidly that, if Congress wants to deliberately channel its impacts, it will have Seeking more fundamental changes in the to act sooner rather than later. OTA has iden- intellectual property system are those who are tified three such problems: the problem of en- concerned lest intellectual property law be forcement, the problem of private use, and the stretched to the point where it can no longer problem of functional works. be consistently applied, or meet its intended policy goals. This view is heard most frequent- The Problem of Enforcement. –One problem ly among members of the legal and judicial that will require attention in the short term communities. Such people are most outspoken is that of enforcement. Taken together, im- in opposing the provision of copyright protec- provements in the cost, speed, and capabilities tion for computer software. Noting that re- of information technologies are undermining verse engineering may be precluded under the mechanisms by which intellectual property copyright law, they argue that the extention rights have traditionally been enforced. De- of such protection may actually serve to in- vices such as optical disk storage systems may hibit learning and innovation. allow individuals to collect entire libraries of works in their homes. Under laboratory con- When To Act ditions, moreover, fiber optic technology is now capable of transferring 100 average-length nov- Decisions about when to act are clearly reels over a distance of 150 miles in 1 second. lated to decisions about whether to act, and Such capability can be expected soon in sys- to decisions about whether to deal with prob- tems that are available to the public. Technol- lems separately, as they appear, or in a com- ogy is also making the copying, transfer, and prehensive fashion. Thus, those who favor a manipulation of information and intellectual specific piece of legislation designed to deal works more private. Personal computers can with a particular problem also tend to press store, process, and communicate the entire con- ——-——

Ch. 10—Strategic Choices for Congress • 289

tents of commercial databases without the consequences of such a law, however, might knowledge or consent of the compilers of such be to encourage private copying. works. In the face of these developments, copy- Unlike consumers, however, hardware pro- right holders are finding it harder to detect, ducers are adamantly opposed to options that prove, and stop infringements. would add a surcharge to their products. They If this problem remains unresolved, creators, argue that, before any such proposals be producers, and distributors of intellectual prop- adopted, much better estimates of damage erties may become increasingly reluctant to need to be made, and these estimates need to distribute their works in forms over which they be weighed against the benefits that copyright have little physical control. Moreover, if piracy holders gain from the new markets that hard- becomes the norm, the legitimacy of the intel- ware such as videocassette recorders provide. lectual property system may itself be called Decisions about whether or not to seek new into question, and the opportunities for poli- ways to provide incentives to creators and pro- cymaking in this area significantly reduced. ducers of intellectual works will also need to Information technologies provide proprie- take into account the Federal administrative tors with some technological options for deal- requirements and costs that such steps might ing with enforcement. Private, computerized, entail. Given the current nonregulatory climate electronic systems, for example, allow propri- in the country, and recent efforts to curtail the etors to maintain control by limiting and mon- activities of the Copyright Royalty Tribunal— itoring access. The government might provide the only Federal institution currently involved support for such options were it, for example, with distributing intellectual property royal- to provide industrywide standards for these ties—it is difficult to imagine how existing in- technologies. Standards such as these, how- stitutions might effectively administer such ever, may be very difficult to impose, since they a policy. would require a cooperative agreement between hardware and software producers, A In light of the problem of enforcing intellec- number of proprietors, moreover, would rather tual property rights, public support for the un- maintain their freedom of action than receive derlying principles of the law will become in- such support. Nor are such kinds of solutions creasingly critical. However, at present, the particularly popular among consumers, who average citizen is quite unaware of the issues feel that they would reduce the value of the involved. A recent OTA survey of the public product and perhaps constitute a threat to found, for example, that over two-thirds of their personal privacy. those surveyed said that they were not at all, or were only slightly, familiar with the sub- Recognizing that technological solutions ject. Moreover, an equal proportion felt that may make their products less appealing to the intellectual property issues had very little to consumer, a number of copyright holders are do with them personally. Notably, however, now calling on Congress to establish new ways those who owned home technology, or who of insuring their remuneration instead of new were under 40, were more aware of the issues. mechanisms for enforcing rights. The most fre- It would appear, therefore, that Congress has quently mentioned proposal of this kind is a a brief window of time in which to establish royalty, or tax, on blank audio and video tapes. policy. Under these circumstances, policymakers may want to undertake a dialog with the Based on interviews with and surveys of the public in order to ascertain its viewpoint and public, OTA found that many people would be to enhance its understanding of what is at reasonably disposed to such an option. They stake for members of the public in the present favor a law that would allow them the freedom debate over intellectual property issues. to copy, without making them personally responsible for making judgments about the pro- The Problem of Private Use.—A second priety of their actions. One of the unintended short-term problem is that of establishing pol- 290 . Intellectual Property Rights in an Age of Electronics and Information — ——. . icy for the private use of information technol- themselves, insufficient to help Congress re- ogies. As is the case with enforcement, if Con- solve the issue of who should benefit from new gress does not take the initiative in this area uses, since they presuppose—and cannot be the now, it maybe unable to do so later, when pub- foundation for–a legal right to profit from the lic attitudes and behaviors have become more new uses of copyright works made available entrenched. by technology. Whether Congress wishes to consider new uses as harmful will depend on Technology is spawning whole new opportu- the goals that it seeks to promote through nities in the development and use of informa- copyright law, and where it believes the bene- tion-based goods. A central question for intel- fits of new technologies should be allocated. lectual property law is who shall benefit from these opportunities. In the Supreme Court’s ‘‘Betamax” decision, for example, the question The Problem of Functional Works.–Func- tional works, such as computer programs, arti- was whether proprietors or users would beneficial intelligence, and algorithms also present fit, either directly or indirectly, from home problems for the law that will need to be re- videorecording capabilities. solved within a short timeframe. Neither copy- As even newer technologies affect individ- right nor patent law is entirely appropriate for uals’ ability to copy, store, and modify infor- such works. And, because they are very costly mation, such questions are likely to multiply. to develop, there is a strong incentive for in- However, because it evolved in a period when dustries to pirate them. For these reasons, it duplication and storage technologies were cen- is generally agreed that rules governing their tralized and deployed in a commercial context, protection will be required shortly, if these copyright law offers little guidance to courts works are to be developed and widely deployed. in resolving such conflicts. Neither the exist- The resolution of this issue becomes increasing framework of rights, nor limitations on ingly important, moreover, as these works those rights—such as the fair use doctrine— come to play a dominant role in domestic and clearly apply to the private use of information- international economies. Potential options for based goods. dealing with functional works are described be low, in the discussion of the legal framework. Stakeholders strongly disagree about who should benefit from new opportunities. Copy- Mid-Term Problems.–Other problems, al- right holders would like to profit from the though no less important, are less ripe for im- expanded home use of intellectual works. More- mediate action. Included in this category over, they argue that, given the new technolo- might be, for example, the problem of assign- gies, private use, considered in the aggregate, ing value and distributing rewards in cases of will cause them extensive harm. Users, on the derivative use, that of protecting the integrity other hand, view the new technologies as a of works in an electronic environment, and that boon, reducing their costs and increasing their of attributing and assigning authorship when access to intellectual works. As the OTA sur- works are generated by means of interactive vey of the public illustrates, while acknowledg- or electronic processes. ing that copying is wrong when done for profit, or as a part of a business, most people see pri- Engendered by technologies still in their in- vate copying of copyrighted works as being fancy, these problems are only now just emerg- acceptable. Producers of copying equipment ing, and our understanding of them is severely also oppose restrictions on private use. limited. Sound government policy requires an Some survey research has been conducted accurate understanding of how information on the financial benefits that would accrue to markets operate and of the role that these tech- proprietors if they were remunerated for new nologies might play in the creative environ- technological uses. OTA found, however, that ment. Yet, at present, such an understanding estimates of harm such as these are, in and of does not exist. Although there have been a few . -. --

Ch. 10—Strategic Choices for Congress “ 291 isolated efforts at collecting comprehensive companies and thousands of individual free- data about information-based commodities, lancers creating and producing software, and there is neither enough data nor sufficient providing services worth some $40 billion an- quantitative analysis on which to make sound nually. policy judgments. Most data is fragmentary, Given the growth of opportunities to create incomparable, and available only through in- derivative works, issues will emerge with re- terested parties. spect to who shall profit from them. Under As the new technologies are developed and existing intellectual property law, copyright deployed, however, these problems, and the is- holders have the right to benefit from all works sues to which they give rise, will become more based on their work. And, clearly, copyright and more pressing. New participants will en- holders want this right to extend to all new ter on the scene, as new technological oppor- uses of their work. Many of those who are sec- tunities appear. Not party to previous intel- ondary information providers, however, oppose lectual property agreements, many of them will this point of view. In an information age, they have their own distinct attitudes about who argue, the most valuable information is that should have access to works and materials, and which is the most appropriate and the most about what kinds of activities and pursuits timely. Custom designed, formatted, or pack- should be rewarded. These new stakeholders aged, this kind of information is by its nature will lobby to have their needs and their per- derivative. To encourage its development and spectives taken into account. As a result, new use, they claim, incentives and rewards must controversies about the intellectual property be provided not as they have in the past to the system are likely to arise. original creators, but rather to those who, making use of the new technologies, add new eco- The Problem of Derivative Use.—The new nomic value to intellectual works. technologies multiply the possibilities of creating new works from old ones. Using comput- The Problem of Artistic Integrity. —The ease er and video technologies to electronically snip with which information can be electronically and paste, for example, a film artist, can re- snipped and pasted raises problems for crea- arrange footage in the same way a writer re- tors, not only with respect to how they can as- arranges words on his word processor: insert- sure a profit from their works, but also with ing and deleting images, frame by frame; respect to how they can safeguard its integrity. taking whole sequences from one place and For the same images and sounds that the art- shifting them to another; scrolling through se- ist, photographer, or musician stores to be re- quences again and again. All this is done in used for his or her own purposes, can be ac- a matter of seconds. In the same fashion, all cessed, manipulated, revised, copied, and used information content can serve as the basis for in a multitude of ways by others, with or with- new derivative products and creative works. out permission. Some creators worry that, under these circumstances, a “cavalier attitude With these capabilities to store, retrieve, and will develop toward taking whatever you want manipulate information, there come a multi- and doing whatever you want with it. Such tude of new opportunities to expand the vari- an attitude is already evident in the worlds of ety, scope, and sophistication of information- advertising and publishing as well as in the based products and services. Taking advan- artistic community itself. Moreover, the scope tage of these opportunities, the information of this problem is likely to increase as these industry—database businesses, software and technologies become cheaper and more widely hardware providers, publishers, cable televi- available. sion, information analysis centers, and clearinghouses –has grown rapidly in the last few In the United States, intellectual property years. In the domestic software industry alone, law has traditionally been unconcerned with for example, there are now an estimated 1,200 protecting the integrity of a creator’s work. 292 . Intellectual Property Rights in an Age of Electronics and Information ——— —

In the new electronic environment, however, more works appear in digital form, the scope creators may become as concerned about the of today problems may expand so greatly so integrity of their works as they are about their as to alter their very nature. profits. If, in the future, intellectual property In the short term, for example, the enforce- protection is to be an effective incentive for ment problem may be amenable to a solution creativity, it may need to secure artistic in- that requires a royalty on blank tapes. Al- tegrity as well as financial rewards. though it might be difficult to establish an The Problem of Assigning Authorship and administrative structure to collect and distrib- of Measuring Value Added.—To effectively ute such royalties, the task is not an impossi- grant and to equitably distribute intellectual ble one. However, if such an administrative property rights requires that authorship or in- apparatus had to be expanded to deal with the vention can be clearly assigned, and that new increasing number of works delivered on-line, value added to intellectual works can be accu- the problems of effectively executing such a rately measured. Today, however, because of scheme may be so great as to, perhaps, negate the fluid, interactive, and functional nature of the solution itself. the new technologies, it is becoming increas- Another problem that will probably take on ingly difficult to perform either of these tasks. more importance in the future is that of ac- With intellectual works being simultaneously cess. For, as is described below, when works created, published, and communicated over are intangible in their form, copyright holders electronic networks, the possibility of discov- may, under some circumstances, be able to re- ery or invention on-line, once a vision of the strict access to them. Such a problem may not future, is now a reality. Such a development warrant legislative attention now, because its greatly complicates the process of determin- extent is limited. However, if and when intan- ing originality and authorship, and of assign- gible works become the norm, the problem, being rights. Similarly, with advances in artifi- ing cumulative, may loom much more serious. cial intelligence, computer-aided design, and computer-generated software, it will become more and more difficult to determine what cre- What Legal Framework To Use ators have actually created. Given these trends, The intellectual property system was care- it is likely that, in the future, the number of fully designed to balance the public and the controversies about the distribution of rewards private interest. Because the new information is likely to increase. Moreover, as the economic and communication technologies do not fit value of information-based products and serv- neatly within the existing framework of the ices increases, such disagreements may become law, the balance may be harder to achieve in all the more intense. the future. Questions arise, therefore, with re- Long-Term Problems.–Even if a number of spect to how the new technologies should be issues are effectively dealt with in the short dealt with according to the law, and whether term, another major revision of intellectual or not a new conceptualization of the law may property law can still be expected in the fu- be required. Two particular problems that OTA ture. Fundamental changes in technology are has identified in this regard are the problem now taking place. And, although technology, of functional works, and that of intangible for the moment, is multiplying the forms that works. works can take, and the means by which they can be transmitted, eventually all works will Patents, Copyrights, and Functional Works become available in compatible, digital, com- Traditionally, intellectual property law pro- puter-processible form. Such developments will vided two basic forms of protection: patent law not only antiquate many of today’s solutions; and copyright law. These schemes reflected a they may also give rise to new problems re- basic distinction between invention and quiring new kinds of answers. For, as more and authorship. Inventions are essentially useful Ch. 10—Strategic Choices for Congress • 293 — —— devices or processes, whereas works of author- semiconductor chip masks. Because there are ship convey information or ideas. And, al- many kinds of these works, they may require though both schemes encouraged the produc- their own framework for protection. Included tion and dissemination of ideas, they did so within this category would be works of artifi- in two different ways. Patent required disclo- cial intelligence, algorithms, firmware, and re- sure, and copyright required publication. More- combinant DNA. Like computer software, these over, the types of protection granted reflected works use information to affect a process. the differences between inventions and writ- The sui generis law for protecting chip masks ings. Copyright prevented commercial copy- might serve as one model for such works. OTA ing; patent prevented commercial use. findings suggest, however, that it might be bet- The clear distinction between inventions and ter to develop a more comprehensive approach writings is beginning to break down. With the that would treat functional works as a major, new technologies, writings act like inventions. separate class of intellectual property law. Tak- Although considered to be writings, computer ing into account the particular characteristics programs, for example, can run machines. They of functional works, the law might be more ac- can, moreover, create new programs, and even curately targeted to achieve specific policy out- control industrial processes. In the future, incomes, and thus serve as a more robust policy formation itself will play a functional role. A tool. Moreover, with a new category of law, piece of information entered into a database both producers and users would face less un- in one city, for instance, may automatically re- certainty each time a new type of functional tool a factory in another. These developments work were introduced. In addition, if the law raise questions about whether these new in- were reconceptualized now, it might be possi- formation-based products can be accommo- ble to address a much older problem in copy- dated within the old legal framework, or wheth- right—that of distinguishing between artistic er some new categories of protection might not and factual works, a problem which is becom- be required. ming more troublesome in the light of the new technologies. OTA suggests that a fruitful ba- A subject of debate since the mid- 1960s, this sis for such a revision might be found in the question has defied conclusive resolution. distinctions between works of art, works of Some people believe that a 1980 amendment, fact, and works of function. incorporating computer programs into copyright law, adequately settled the issue. This Copyright Framework and Intangible Works is the view, for example, espoused by many traditional copyright lawyers and by represent- The copyright system was based on the at- atives of the computer hardware and software tributes of a print culture: works were fixed industries. However, a number of lawyers, in a tangible medium; they were expensive to many with engineering backgrounds, now chal- reproduce on a large scale; and, in order for lenge the wisdom of this approach. They ar- the creator to profit from his work, he had to gue that computer programs are hybrid works, publish it in copies. A novel, for instance, had sharing traits of both patentable and copy- to be set in type, printed, and bound. Because rightable works. They fear that, if the law is of the expense entailed, copying was a com- not revised, not only will functional works be mercial venture. A conspicuous activity, it was inadequately protected, but also the sharing relatively easy to police. Moreover, because the of ideas and knowledge, necessary for innova- only way of selling such a work was to sell cop- tion, will be curtailed. ies, public dissemination went hand in hand with profit-making. Although the author re- Looking at this question, OTA found that tained the right to print and publish the novel, the distinction between writing and inventions he relinquished control of copies of it with each is indeed breaking down with respect to func- sale. This promoted both the interest of the tional works such as computer software and proprietor as well as that of the public. 294 ● Intellectual Property Rights in an Age of Electronics and Information

Works disseminated through electronic social status. Furthermore, given the unlimited media are different from traditionally printed scope of the new technologies, and the growing works. And their unique characteristics make trade in information-based products and serv- it more difficult to balance public and private ices, U.S. intellectual property policy is now interests through copyright. Unlike a novel, inextricably tied to international affairs. Com- a television program or a database entry need munications policy, too, is now linked to intel- not be fixed in a copy to be sold. Thus, its cre- lectual property policy as more and more in- ator or proprietor does not have to dissemi- tellectual property is being transmitted via nate ‘copies in order to profit from them. Un- media such as cable television, telephone lines, der these circumstances, the proprietor retains and communication satellites. Today, more- control over access to his work, and may de- over, intellectual property issues give rise to cide to intentionally restrict it in order to en- concerns about privacy, as copyright holders hance his profit. Were this to occur, the pub- seek technical means to monitor use. In mak- lic interest may suffer. ing decisions about intellectual property policy, therefore, a whole new range of considera- On the other hand, technology may also fa- tions will need to be taken into account, and vor the user at the expense of the copyright decisionmakers in all these areas will need to holder. New reproductive technologies, such strive for greater coordination. as audio and video recorders, are now widespread, allowing many individuals to cheaply and easily copy intangible works. If these pri- Within What Institutional Framework vately made copies compete with sales of the Should Intellectual Property Issues original works, the proprietors’ profits may be Be Resolved? significantly diminished. Traditionally the intellectual property sys- Whether, in any given situation, it is the pro- tem required little institutional support. The prietor or the public who will suffer is extreme- system was designed to be self-enforcing: the ly hard to determine. Indeed, under certain cir- government granted rights and registered cumstances, both parties may jointly benefit works, while individual creators and users were from advances in technology. Generally speak- responsible for protecting their rights. ing, however, it is clear that, given the growing number of works being distributed elec- As the previous findings demonstrate, how- tronically, it will now be harder to achieve the ever, the system is no longer so simple. Tech- balance between the public and the proprietors nology is creating new demands. Many more interest under the copyright system. people with disparate interests are making claims on the system. Technology is advancing faster than the law and institutions can How Broadly To Define The Problem adapt. More and more, laws are being proposed Historically intellectual property issues were that require that government play a regula- somewhat isolated policy concerns. Because tory role. In addition, given the growing com- information did not assume the same social and plexity and diversity of information markets, economic importance that it does today, intel- more information is needed to make sound pub- lectual property decisions were less likely to lic policy decisions. The need for policy coordi- impinge on other areas of public policy. nation is also greater as intellectual property issues converge with other issues. OTA found, however, that intellectual property policy can no longer be separated from This institutional question has not been other policy concerns. To the extent that in- widely discussed among stakeholders. In the formation is, in fact, central to most activities, current anti-regulatory climate, many are re- decisions about intellectual property may be luctant to recommend the creation of new in- decisions about the distribution of wealth and stitutions. For example, the proposed legisla- Ch. 10—Strateg(icChoices for Congress “ 295 tion to impose a royalty on blank tapes and The pace of technological change will con- recording equipment would require that the tinue to put pressure on existing institutional Copyright Office collect monies and that the arrangements. One way of dealing with such Copyright Royalty Tribunal distribute them– stress might be to establish a central govern- this despite the proposed dissolution of the mental agency to address intellectual property Copyright Royalty Tribunal. Similarly, the re- issues as they emerge. Such a step would be cent passage of the Semiconductor Chip Act consistent with an approach that deals with requires a patent-like examining procedure in immediate issues in the short term, while pre- the Copyright Office, even though it has no paring to address longer term issues later. Such such expertise, an agency might, for example, monitor technological change, and assess the ways in which OTA found, however, that intellectual prop- the law might deal with it. It might, moreover, erty issues cannot be resolved without deal- provide the necessary expertise to deal with ing with the question of institutional capabil- complex technologic issues and collect and ana- ities and change. In the absence of institutional lyze information about information markets change, the courts will increasingly be called and information use. It might even assume a on to resolve highly complex technical issues regulatory function, distributing rewards or and to make policy in this area. The judiciary, adjudicating disputes. Finally, such an agency however, may not be the best suited for this might coordinate intellectual property policy role. with policy in other, related areas. Appendix Appendix A List of Contractor Reports

Copies of the following contractor reports com- merits, ” prepared for OTA by the Irvine Re- pleted in support of this assessment are available search Corp., March 1985. from the National Technical Information Service, 10. L. Ray Patterson, “Copyright and New Tech- 5285 Port Royal Road, Springfield, VA 22161 (703) nology: The Impact on the Law of Privacy, An- 487-4650. titrust and Free Speech, ” prepared for OTA, August 1985. 1. James Beniger, “Information Technologies and 11. W. Curtiss Priest, “The Character of Informa- Commodities in the Development of Intellec- tion: Characteristics and Properties of Infor- tual Property: Changing Rights and Prac- mation Related to Issues Concerning Intellec- tices, ” prepared for OTA, April 1985. tual Property, ” prepared for OTA, February 2. Clifford Berg, “Organization for Protection of 1985. intellectual Property Rights, ” prepared for 12. Carroll Pursell, “Historical Case Studies of the OTA by the National Academy of Public Ad- Influence of Intellectual Property Laws on ministration, June 1985. Technological Change, ” prepared for OTA, Au- 3. Stanley M. Besen, “Economic Issues Relating gust 1985. to New Technologies and intellectual Prop- 13. A. Allan Schmid, “A Conceptual Framework erty, ” prepared for OTA by the Rand Corp., for Organizing Observations on Intellectual December 1984. Property Stakeholders, ” prepared for OTA, 4. Anne Wells Branscomb, “The Accommodation February 1985. of Intellectual Property Law to the Introduc- 14 Petra T. Shattuck, “The Judicial Impact of tion of New Technologies, ” prepared for OTA, Legislation Extending Copyright Protection to December 1984. Computer Software, ” prepared for OTA, April 5. Christopher Burns and Patricia Martin, “The 1985. Economics of Information, prepared for OTA 15. Petra T. Shattuck, “Public Attitudes and the by Christopher Burns, Inc., April 1985. Enforceability of Law, ” prepared for OTA, 6. Herbert S. Dordick, “Intellectual Property: June 1985. Protecting Rights and Privileges in an Elec- 16. Richard Jay Solomon, “Intellectual Property tronic Age, ” August 1984. and the New Computer-Based Media, ’ pre- 7. Jose-Marie Griffiths and Donald W. King, “Im- pared for OTA, August 1984. pact of information Technology on Informa- 17. Richard Jay Solomon and Jane Yurow, “Inter- tion Service Providers and Their Clientele, ” national Intellectual Property Issues Engen- prepared for OTA by King Research, Inc., July dered by New Technologies, ” prepared for 1985. OTA, May 1985. 8 Roland S. Hornet, “New Technologies and In- 18. “Public Perceptions of the Intellectual Prop- tellectual Property Rights: The international erty Rights Issue, ” prepared for OTA by The Dimension, “ prepared for OTA, August 1984. Policy Planning Group, Yankelovich, Skelly & 9. Kenneth L. Kraemer, John Leslie King, and White, Inc., February 1985. David G. Shetter, “Innovative Use of Informa- 19. “The Intellectual Property Rights Issue: The tion Technology in Facilitating Public Access Small Businessman’s Perspective, ” prepared to Agency Decisionmaking: An Assessment of for OTA by The Policy Planning Group, Yan- the Experience in State and Local Govern- kelovich, Skelly & White, Inc., May 1985. 0

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