intellectual property rights in an age of electronics and

Intellectual Property Rights in an Age ofElectronics and Information

April 1986

NTIS order #PB87-100301

Recommended Citation:U.S. Congress, Office of Technology Assessment, lntellectual Property Rights in anAge 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 DocumentsU.S. Government Printing Office, Washington, DC 20402

Foreword

This report examines the impact of recent and anticipated advances in com-munication and information technologies on the intellectual property system. Itfocuses primarily on the Federal copyright system, and on the continuing effec-tiveness of copyright law as a policy tool in the light of technologies such as audio-and videorecorders, computer programs, electronic databases, and telecommuni-cations networks. To obtain a comprehensive view, the study examined the intel-lectual property system from a number of perspectives: the constitutional basisof intellectual property policy; the system’s goals, laws, and economics; the crea-tive 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 theintellectual property system. Moreover, because we are only beginning to moveinto the era of electronic information, the full impact of new technologies will notbecome fully apparent for some time. Fundamental changes are occurring in in-formation technologies that will antiquate many of the policy mechanisms nowin force, and bring new intellectual property problems requiring new solutions.Thus, even if Congress acts now in response to current problems, it will need tobe prepared to act again within the next decade.

The report was requested by Senator Charles McC Mathias, Jr., Chairmanof the Senate Judiciary Committee, Subcommittee on Patents, Copyrights andTrademarks; and by Congressman Peter W. Rodino, Jr., Chairman of the HouseJudiciary 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 byOTA staff and contractors, the comments of participants at seven OTA work-shops held to discuss issues, the results of two public opinion surveys conductedby Yankelovich, Skelly & White, and conversations between OTA staff and over130 interested individuals. Drafts of the report were reviewed by the OTA advi-sory 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 fromlaw firms, public interest groups, trade associations, private industry, andacademia.

OTA appreciates the participation of the advisory panelists, workshop par-ticipants, Federal agency officials, and interested citizens, without whose helpthis report would not have been possible. The report itself, however, is the soleresponsibility of OTA, not of those who ably advised and assisted us in its prep-aration.

Director

,..{II

Intellectual Property Rights in an Ageof Electronics and Information Advisory Panel

Paul Goldstein, ChairmanProfessor of Law, Stanford Law

Jon BaumgartenPartnerPaskus, Gordon & Hyman

Charles BentonPresident of the BoardBenton Foundation

Stanley BesenEconomistRand Corp.

Honorable Stephen BreyerJudge of the U.S. Court of Appeals

Stan CornynSenior Vice PresidentWarner Records

Oswald GanleyProfessor and Executive DirectorProgram on Information Resources PolicyHarvard University

Gustave HauserChairman and Chief Executive OfficerHauser Communications, Inc.

Mitchell KaporPresidentLotus Corp.

Robert LekachmanProfessor of EconomicsLehman College

William Lilley, IIIVice President for Corporate AffairsCBS, Inc.

George MinotSenior Vice PresidentCompuServ, Inc.

School, Stanford University

Dorothy NelkinProfessor of SociologyCornell University

James NelsonState Librarian and CommissionerKentucky Department for Libraries and

Archives

John ShattuckVice President for Government Community

and Public AffairsHarvard University

Oliver SmootExecutive Vice PresidentComputer and Business Equipment

Manufacturers Association

Patricia SturdivantAssociate SuperintendentHouston Independent School District

Sherry TurkleAssociate Professor of SociologyMassachusetts Institute of Technology

Jack ValentiPresidentMotion Picture Association of America,

Inc.

Vivian WeilSenior Research AssociateIllinois Institute of Technology

Martha WilliamsProfessor of Information ScienceUniversity of Illinois

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

iv

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Intellectual Property Rights in an Ageof Electronics and Information Assessment Staff

John Andelin, Assistant Director, OTAScience, Information, and Natural Resources Division

Fred W. Weingarten, Program ManagerCommunication and Information Technologies Program

Project Staff

D. Linda Garcia, Project DirectorConceptual Framework and Societal Analysis

Lauren AckermanInternational and Institutional Analysis

Earl DowdyTechnology and Economic Analysis

Paul GoldwhiteSummer Intern

Robert KostLegal Analysis

Arati PrabhakarCongressional Fellow

Linda G. RobertsAnalysis of Creative Environment and Public Outreach Activities

Susan WaltonContractor, Editorial Assistance

Administrative Staff

Liz Emanuel Audrey Newman Shirley Gayheart*

Renee Lloyd Patricia Keville

Contractors and Consultants

James BenigerDepartment of SociologyPrinceton University

Cliff BergNational Academy of Public

Administration

Stanley BesenRand Corp.

Anne Wells BranscombAttorney

Deborah BucknerYankelovich, Skelly & White, Inc.

Christopher BurnsChristopher Burns, Inc.

Herbert DordickDepartment of CommunicationsTemple University

Jose-Marie GriffithsKing Research, Inc.

Roland HornetCommunications Law and Policy

Consultants

Donald KingKing Research, Inc.

Kenneth L. KraemerIrvine Research Corp.

Leslie KingIrvine Research Corp.

Patricia MartinChristopher Burns, Inc.

L. Ray PattersonSchool of LawEmory University

W. Curtiss PriestCenter for Policy AlternativesMassachusetts Institute of Technology

Carroll PursellProfessor of HistoryUniversity of California, Santa Barbara

David RichardsonYankelovich, Skelly & White, Inc.

David SchetterIrvine Research Corp.

A. Allan SchmidDepartment of Agricultural EconomicsMichigan State University

Harold SeidmanNational Academy of Public

Administration

Petra ShattuckDepartment of Political ScienceCity University of New York

Richard SolomonMassachusetts Institute of Technology

Jane YurowJane Yurow Associates

vi

Legal Workshop ParticipantsRoy FreedPartnerBrown, Rudnick, Freed & Gesmer,

Counselors at Law

Leon FriedmanAttorney

Morton GoldbergPartnerSchwab, Goldberg, Price & Dannay

Paul GoldsteinProfessor of LawStanford University.

Henry Jones, I I IGeneral CounselAshton-Tate

Irwin KarpGeneral CounselAuthors League

Michael KeplingerAttorney AdvisorOffice of Legislative and

International AffairsU.S. Patent and Trademark Office

John LautschChairmanABA Computer Law Division

Arthur LevinePartnerLevine, Lupo & Lippman

Sue MartinChairperson of Copyright CommitteeAmerican Library AssociationDirector of Milton S. Eisenhower

LibraryJohns Hopkins University

Christopher MeyerSenior AttorneyCopyright officeLibrary of Congress

Melville NimmerProfessor of LawUCLA Law School

Ron PalenskiStaff AttorneyAssociation of Data Processing

Service Organizations

Marybeth PetersSenior AttorneyCopyright officeLibrary of Congress

Mark RotenbergPresidentPublic Interest Computer Association

Pamela SamuelsonProfessor of LawUniversity of Pittsburgh

Cary ShermanAttorneyArnold & Porter

Eric SmithPartnerPaskus, Gordon & Hyman

Raymond WeisbondCounselWarner Communications, Inc.

Technologies for InformationCreation Workshop ParticipantsRonald EricksonEducational and Technical AdvisorMuseum of Holography

Robert EwaldDirector of Education Industries

(Universities)Cray Research, Inc.

Harold HosackProject Director of the CCD Imager

and Camera ProjectTexas Instruments, Inc.

Michael KowalskiWriter and Freelance Computer

ProgrammerPost Industrial Productions, Inc.

Steve MayerChairmanTake One Partners

Mark SchubinFreelance Technological Consultant

Jim St. LawrenceProducer in Residence and Director

of the Interactive TechnologiesLaboratory

New York Institute of Technology

Information Storage andDatabase TechnologiesWorkshop Participants

Larry BernsteinDirectorDiagnostic Operations Systems

LaboratoryAT&T Bell Labs

Robert CastrignanoVice President for Information

Storage Systems TechnologyCBS Technology Center

Charles GoldsteinChief, Information Technology BranchLister Hill National Center for

Biomedical ResearchNational Library of Medicine

Fred KilgourFounder TrusteeOnline Computer Library Center

Nick RoussopouloisProfessor of Computer ScienceUniversity of Maryland

Christopher WeaverVice President for Disk ResearchVideomagic Laboratories

Robert WorsingVice President for Corporate SecurityControl Data Corp.

Display, Printing, andReprographic Technologies

Workshop ParticipantsIfay ChangManager of Exploratory:. Display

TechnologyT.J. Watson Research CenterIBM Corp.

Richard GreenSenior Vice PresidentBroadcast operations and

EngineeringPublic Broadcasting Service

Edward McIrvineManager, R&D PlanningCorporate Research GroupXerox Corp.

Melvin PrueittLos Alamos National Laboratory

Information Technology andIts Impact on the Creative

Process Workshop ParticipantsTheodore BikelActor and President EmeritusActors Equity

Milton GlaserGraphic Artist

Richard GreenMusician

Joyce HakanssonPresidentHakansson Associates

James HammersteinStage Director

David McCuneWriter, Software Designer, and

PresidentThe Proteus Group, Inc.

Ann-Byrd PlattAuthor

Federik PohlAuthor

Anna SofaerArtist and Independent Film Producer

Bill WeemsPhotographer

George David WeissSongwriter and PresidentThe Songwriters Guild

vii

Mini-Economic WorkshopParticipants

Stanley BesenEconomistRand Corp.

Christopher BurnsConsultantChristopher Burns. Inc.

Robert LekachmanProfessor of EconomicsLehman College

Patricia MartinConsultantChristopher Burns. Inc.

W. Curtiss PriestCenter for Policy AlternativesMassachusetts Institute of Technology

A. Allan SchmidProfessor of EconomicsMichigan State University

Students’ Perceptions of theIntellectual Property RightsIssue Workshop ParticipantsLisa Feldman10th GraderMagruder High School

Carl Fletcher12th GraderBallou High School

Eugene Gholz9th GraderGeorgetown Day High School

Nick Landau11th GraderGeorgetown Day High School

Eric Martinusen11th GraderGeorgetown Day High School

Michael Meredith12th GraderGeorge Mason High School

Robert Salsbury9th GraderGeorge Mason High School

Elinor Scully11th GraderGeorge Mason High School

Clare Shannon10th GraderGeorge Mason High S

Ron Smith10th GraderRichard Montgomery

Wyvonella Spratt11th GraderBallou High School

Deborah Van Lenten11th GraderWooten High School

hool

High School

Marty White12th GraderBallou High School

External ReviewersChapter 1: Conceptual Framework

for Analyzing IntellectualProperty Issues Rights

Bernard BarberProfessor of SociologyColumbia University

Jack CopelandPresidentNational Educational Media, Inc.

Elizabeth EisensteinProfessor of Social HistoryUniversity of Michigan

Jack GolodnerDirectorDepartment for Professional EmployeesAFL-CIO

Stanley GortikovPresidentRecording Industry Association

of America, Inc.

John HerseyAuthor

L. Ray PattersonProfessor of LawEmory University

David PeytonDirector of Government RelationsInformation Industry Association

Mike RemingtonChief CounselHouse Subcommittee on Courts, Civil

Liberties, and the Administrationof Justice

Daniel TooheyAttorneyDow, Lohnes & Albertson

Chapter 2: Intellectual PropertyGoals in a ChangingInformation Environment




Stanley GortikovPresidentRecording Industry Association of

America, Inc.

John HerseyAuthor

David LiebowitzAttorneyWiley & Rein



Petra ShattuckProfessor of Political Science and

Public LawCity University of New York



Bruce H. TurnbullAttorneyWeil, Gotshaf & Manges

Chapter 3: The Accommodationof Intellectual Property Law toTechnological Change

Charles BoilerExecutive DirectorAmerican Copyright Council

Duncan DavidsonAttorneyCambridge Venture Partners

Edward FrankelComputer Law Specialist

Hugh GibbonsProfessor of LawFranklin Pierce Law Center

John HerseyAuthor

John LautschPresidentComputer Law Division of the

American Bar Association

Melville NimmerProfessor of LawUniversity of California-Los Angeles


Marybeth PetersSenior Attorney and Policy Planning

AdvisorU.S. Copyright Office


Manny PokotilowAttorneyCaesar, Riuse, Berstein & Cohen, Ltd.



David LeibowitzAttorneyWiley & Rein

David RichtmanCambridge Technology Systems

Jim St. LawrenceDirector of the Interactive

Technologies LaboratoryNew York Institute of Technology

Edward McIrvineManager of R&D PlanningXerox Corp.Robert Rines

AttorneyRines & Rines

George David WeissSongwriter and PresidentThe Songwriters Guild

L. Ray PattersonProfessor of LawEmory UniversityPamela Samuelson

Professor of LawUniversity of Pittsburgh


Chapter 6: Technology, IntellectualProperty, and the Operationof Information MarketsBob Shaw

Attorney and President of thePatent, Trademark, and CopyrightResearch Foundation

Barbara PolanskyCopyright AdministratorAmerican Chemical Society

Marjorie BlumenthalEconomistGeneral Electric Information

Services Co.Robert SternAttorney



Duncan DavidsonPartnerCambridge Venture Partners


Henry GellerDirectorWashington Center for Public

Policy Research

Allen WagnerUniversity CounselUniversity of California, Berkeley

Chapter 5: Impact of Technologyon the Creative Environment


Chapter 4: Impact of Technologyon Enforcement of IntellectualProperty Rights

Duncan MacRaeProfessor of Political ScienceUniversity of North Carolina

Theodore BikelActor and President EmeritusActors Equity

Bruce M. OwenEconomistEconomists Inc.

Fritz AttawayVice President and CounselMotion Picture Association of

America, Inc.Ann Byrd-PlattAuthor Curtiss Priest

Research AssociateMIT Center for Policy Alternatives

Ivan BenderAttorney Jack Copeland

PresidentNational Educational Media, Inc. Mike Remington

Chief CounselHouse Subcommittee on Courts, Civil


Larry BernsteinDirectorDiagnostics operations Systems

LaboratoryAT&T Bell Laboratories

Susan DoohaExecutive DirectorGraphics Artists Guild


Michael RubinOffice of the Assistant Secretary for

Productivity, Technology, andInnovation

U.S. Department of Commerce

Robert CastrignanoVice President Information Storage

Systems TechnologyCBS Inc. Richard Green

Senior Vice PresidentBroadcasting Operations and

EngineeringPublic Broadcasting Service

Edward ConklinVice PresidentFORTH, Inc.

Fred SmithPresidentCompetitive Enterprise Institute

Stanley GortikovPresidentRecording Industry of America, Inc.

John HerseyAuthor

A. Allan SchmidProfessor of EconomicsMichigan State UniversityNancy Marshall

Associate Director of UniversityLibraries

University of Wisconsin-Berkeley

Frederick KilgourFounder TrusteeOr-dine Computer Library Center

Lester C. ThurowProfessor of Management and

EconomicsMassachusetts Institute of TechnologyMichael Kowalski

Writer/Freelance ComputerProgrammer

Postindustrial Productions, Inc.

Edward McIrvineManager for R&D PlanningXerox Corp.

Anita WalgrenNational Telecommunications and

Information AdministrationU.S. Department of Commerce

Barbara NessinProfessor of LawEmory University

Jim St. LawrenceDirector of the Interactive

Technologies LaboratoryNew York Institute of Technology

David WatermanProfessor of CommunicationsUniversity of Southern California

Barbara NessimGraphic Artist

Bernard LechnerStaff Vice President for Advanced

Video Systems ResearchRCA laboratories

Lawrence WhiteProfessor of EconomicsNew York University


ix

Chapter 7: New Technologies andthe Intellectual Property Bargain


Nancy BucWeil, Gotshall & Manges


Roy FreedAttorneyBrown, Rudnick, Freed & Gesner

Leon FriedmanProfessor of LawHofstra University

Henry GellerDirectorWashington Center for Public

Policy Research

John HerseyAuthor

Nancy MarshallCounselNational Library Association

Maurice MitchellDirectorAnnenberg Schools

Program


David Peyton

Washington

Director of Government RelationsInformation Industry Association

Michael RemingtonChief CounselHouse Committee on the Judiciary

Mark RotenburgPublic Interest Computer Association



Ray WeisbondAttorneyWarner Communications, Inc.

Chapter 8: Impact of Technology onthe International IntellectualProperty System

Norman AltermanVice President and Deputy General

CounselMotion Picture Association of

America, Inc.

Fritz AttawayVice President and CounselMotion Picture Association of

America, Inc.

x


Robert BruceAttorneyDebevoise & Plimpton

Marsha CarowVice PresidentHarcourt Brace Jovanovich, Inc.

John ClementsDirector of Governmental AffairsAmerican Federation of Information

Processing Societies

Stanley GorkikovRecording Industry Association of

America, Inc.

Jacques GorlinConsultant

Eileen HillInternational Trade AdministrationU.S. Department of Commerce

David LeibowitzAttorneyWiley & Rein

Marybeth PetersSenior Attorney and Policy Planning

AdvisorU.S. Copyright Office


Barbara PohanskyCopyright AdministratorAmerican Chemical Society

Carol RisherDirector of Copyright and New

TechnologyAssociation of American

Publishers, Inc.


Gary SlaimanAttorneyWeil, Gotshal & Manges


Harvey WinterDirectorOffice of Business PracticesU.S. Department of State

Alice ZalickAssistant General CounselOffice of the United States

Trade Representative

Chapter 9: Federal Role in theAdministration of IntellectualProperty Rights

Robert CasslerChief CounselCopyright Royalty Tribunal

John ClementsDirector of Governmental AffairsAmerican Federation of Information

Processing Societies

Roger GarciaGovernment DivisionCongressional Research ServiceLibrary of Congress

Judy GoansOffice of Legislation and

International AffairsU.S. Patent and Trademark OfficeU.S. Department of Commerce

Ronald MoeGovernment DivisionCongressional Research ServiceLibrary of Congress

Harold RelyeaGovernment DivisionCongressional Research ServiceLibrary of Congress



Petra ShattuckProfessor of Political Science and

Public LawCity University of New York



Anita WalgrenNational Telecommunications and

Information AgencyU.S. Department of Commerce

Harvey WinterDirectorOffice of Business PracticesU.S. Department of State

List of Other ContributorsRaymond AhlbergIndustry SpecialistU.S. Department of Commerce

David AltschulVice PresidentWarner Records

Stella AlvoCo-ownerThe Video Bus

Nicholas ArcomanoVice President and CounselSESAC, Inc.

Moses AschFounder and PresidentFolkways Records

Russ BachVice President, WEAWarner Records

Len CutlerDirector of the Instruments and

Photronics LabHewlett Packard

Steve FlutyEditorViewtext Magazine

Steve FoxAssociate Director of Patents

and LicensesHewlett Packard

Donald BarrPresidentBarr Films

Joan DesensLexica Corp.

Jean DexheimerDirector, Inter-University

Consortium for EducationalComputing

Carnegie Mellon University

Barbara BayahClassroom TeacherCupertino Union Public Schools

Sarah FrankBBC-TV Co-Productions

Michael FranklinExecutive SecretaryDirector’s Guild of America

Paul BenderDeanArizona State Law School Thomas DiRenzo

Vice President, Direct Marketingand Communications

Institute for Scientific Information

C.E. GallivanDirector of MarketingHewlett Packard

Paul BortzManaging DirectorBrowne, Bortz & Coddington, Inc.

Hugh DonaghueVice PresidentGovernment Programs and

International Trade RelationsControl Data Corp.

Kit GallowayPresidentMobile Image

Gene BoucherExecutive DirectorAmerican Guild of Musical Artists

Eugene GarfieldPresidentInstitute for Scientific Information

Robert BramsonAttorneySchnader, Harrison, Segal & Lewis George Dummer

DirectorOffice of Sponsored ProgramsMassachusetts Institute of Technology

Clifton H. GarrettDeputy District AttorneyCounty of Los AngelesMajor Frauds DivisionElectronic Crime Section

Barry BronsonMember of the Technical StaffHewlett Packard Moria Egan

Assistant to the President forGovernment Relations

New York Public Library

Toni Carbo-BearmanExecutive DirectorNational Commission on Libraries

and Information ScienceAndrew GerberStudentMassachusetts Institute of TechnologyAlan Eisenberg

Executive Secretary,Actors Equity Association

Charles ButtsVice PresidentHoughton Mifflin Co.

Ric GiardinaGeneral CounselMicroPro InternationalWilliam Eldridge

Director of ResearchFederal Judical Center

Doug CarothersPatent AttorneyXerox Palo Alto Research Center

Steven GilbertDirector, Computer Literacy ProjectEDUCOMRobert Enenstein

PresidentEducational Microcomputer

Associates, Inc.

Felix ChamberlainArtists and RepetoireWarner Records

Terry GilbrethDirectorElectronic and Media PublishingHolt, Rinehart & WinstonRobert Churchill

PresidentChurchill Films

Paul FaganChief EconomistASCAP Michael Glen

AttorneyIntel Corp.Sandy Cohen

AttorneyWeil, Gotshal & Manges

Laurie FailesTeacherLexington, MA, Public Schools Mel Goldberg

Former Vice PresidentABCRoger Cole

Assistant Director forAdministration

Eastman-Kodak Co.

Leonard FeistHarry Fox AgencyNational Music Publishers

Association, Inc.Mary GoldscmidtVice PresidentLotus Corp.

Howard ColsonAssistant Vice PresidentPublic RelationsBroadcast Music, Inc.

Lee FelsensteinPresidentGolemics, Inc.

Jack GolodnerDirectorDepartment for Professional EmployeesAFL-CIOEamon Fennessy

PresidentCopyright Clearance Center, Inc.

Edward ConklinVice PresidentFORTH, Inc.

Ed GoodeChairmanComputer Science DepartmentLexington, MA, High School

LeRoy FinkelComputer CoordinatorSan Mateo County Office of

Education

Edward CramerPresidentBroadcast Music, Inc. Bobby Goodson

PresidentInternational Council on Computers

in EducationBill CrowellVice President for ResearchMicroPro International

Frank FischerUrban Institute

Andrew FlugelmanPresidentFreeware

Karla GraueNational Cable AssociationCally Curtis

PresidentCurtis Films

xi

Peter A. GrossPresidentLexica Corp.

Lyn GubserExecutive DirectorAssociation for Educational

Communications & Technology

Marianne HallCommissionerCopyright Royalty Tribunal

Mel HarrisPresidentParamount Corp.

W.B. “Trip” HawkinsPresidentElectronic Arts

Richard H. HershVice President for ResearchUniversity of Oregon

Alexander HoffmanVice PresidentDoubleday & Co., Inc.

Vivian HomerElectronic Media ConsultantFormer Vice President for Program

DevelopmentWarner Communications

Lucy HammerAmbassador Dougan’s OfficeU.S. Department of State

Dov JacobsFree-lance Software Developer

Nick JohnsonUniversity of Iowa Law School(formerly FCC Commissioner)

Alan KentAssistant DeanSchool of Library and Information

ScienceUniversity of Pittsburgh

Daniel KlassenPresidentInformation Technology Design

Associates

Walter KoetkeDirector of TechnologyScholastic Publishing Co.

Bernard KormanChief CounselASCAP

Dan LacyVice PresidentMcGraw Hill, Inc.

Jim LardnerReporterThe New Yorker

Edith LeonianPhilip LeonianAdvertising Photographers of AmericaSociety of Photographer and Artist’s

Representatives, Inc.

David LevineExecutive DirectorDramatists Guild

Del LipertVice PresidentDigital Equipment Corp.

Beth LewdComputers in Education SpecialistLexington, MA, Public Schools

William H. McAllisterDirector, Patents and LicensesHewlett Packard

Scott MaceReporterInfoWorld

John MallinsonDirectorCenter for Magnetic RecordingUniversity of California, La Jolla

Rick ManningExecutiveData Courier

Andrew ManshellCounselBirch Tree Group

Ernest R. (Bodie) MarxVice PresidentMindscape, Inc.

Gene MaterVice PresidentCBSInternational Group

Donald McCoyVice President and General ManagerCBS Technology Center

Al McPhersonEngineerWarner Records

Gloria MessingerManaging DirectorASCAP

Steve MetalitzStaff Director and Chief CounselSenate Subcommittee on Patents,

Copyrights, and Trademarks

Mark MeyersVice President for Research and

Director Webster Research CenterXerox Corp.

Timothy MilesIndustry SpecialistDepartment of Commerce

Maurice MitchellDirectorThe Washington Program in

Communications Policy StudiesAnnenburg Schools

Gerald MossinghoffPresidentPharmaceutical Manufacturers

Association

Robert NahoryManager Optical Properties of

semiconductors ResearchBell Communications Research

William NixVice President and Deputy

General AttorneyMotion Picture Association of

America, Inc.

Dan OelhsenEditor-in-ChiefElectronic PublishingSimon & Schuster

Greg OlsenFounder and CEOEPITAXX, Inc.

Ralph OmanChief CounselSenate Subcommittee on Patents,

Copyrights, and Trademarks

Ken OrsatiExecutive DirectorScreen Actor’s GuildDon ParkerVice President for ResearchQMS, Inc.

Janice PattersonDirector, Computer OperationsWisconsin Center for Education

ResearchUniversity of Wisconsin

Kenton PattieVice PresidentNAVA/ICIA

Russell PipeTransnational Data Reporting Service

Abe PolonskyScreenwriter

Dave PoltrackVice President for ResearchBroadcast GroupCBS, Inc.

Linda ProwseEngineering Management Training

ManagerHewlett Packard

Sherrie RabinowitzMobile Image

James RatcliffeDirector of Public AffairsR.R. Donnelley and Sons, Inc.

Retta RichardsonExecutive DirectorSouthern Educational

Communications Association

Susan RifkinU.S. Patent & Trademark OfficeOffice of Technology Assessment

and Forecasting

Humberto RiveraPresidentGeoVision, Inc.

Seymour RubensteinPresident EmeritisMicroPro International

Marie SalahTeacherWatertown, MA, Public Schools

Carol ScheleSmithsonian Institution

Karen SheingoldDirectorCenter for Children and ComputersBank Street College of Education

William SkokOffice of Business PracticesU.S. Department of State

Alan SmithVice President, AdministrationBroadcast Music, Inc.

Bob SpielvogelLexica Corp.

Richard SternAttorneyStern & Roberts

Erwin C. SurrencyLaw LibraryUniversity of Georgia

Rene TegtmeyerAssistant CommissionerU.S. Patent and Trademark Office

Gail ThackeryAssistant District AttorneyPhiladelphia, PA

Victor VyssotskyExecutive Director for ResearchInformation SciencesAT&T Bell Laboratories

Eric WalterVice President of OperationsElectronic Arts

Robert WesslundVice President for Technology ExchangeControl Data Corp.

Savan WilsonDirector of EducationMississippi Authority

Educational TV

Ethel WinantProducer

for

Metromedia Producers, Inc.

Sanford I. WolffNational Executive SecretaryAmerican Federation of Television

and Radio Artists

Charles WoodConsultantInformation Integrity Investments

Delbert YocamExecutive Vice PresidentApple Computer, Inc.

John van RaalteSenior ScientistAdvanced Display TechnologiesRCA Laboratories

Isa ZimmermanAssistant SuperintendentLexington, MA, Public Schools

OTA ReviewersBen Amick, Analyst

Clyde Behney, Program Manager

Audrey Buyrn, Program Manager

Richard Dalbello, Analyst

Jim Dray, Research Analyst

Gretchen Kolsrud, Program Manager

Nancy Naismith, Program Manager

Robert Niblock, Program Manager

Lisa Raines, Analyst

. .X111

Contents

Chapter Page

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3I. 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 TechnologicalChange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 ofInformation Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

7. New Technologies and the Intellectual Property Bargain . . . . . . . . . 187

8. Impact of New Technologies on the International IntellectualProperty System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..., ..., . 213

9. Federal Role in the Administration of Intellectual Property Rights. . . . . . . 25710. Strategic Choices for Congress . . . . . . . . . . . . . . . . . . . 285

Appendix A: List of Contractor Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,299

xiv

Summary

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Contents

Capabilities and Problems Posed by the New Technologies . . . . . . . . . . . . . . . .

What Are The Stakes?. . . . . . . . . . . . . . . . . . . . . .Economic . . . . . . . .Social and PersonalPolitical. . . . . . . . . .

Policy Uncertainties .

Agenda for Congress

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. . . . . . . . . . . . . . . . . . . . . . .‘What Policy Goals To Pursue . . . . . . . . . . . . . .Whether and When To Act . . . . . . . . . . . . . . . .What Legal Framework To Use . . . . . . . . . . . .How Broadly To Define the Problem . . . . . . . .Within What Institutional Framework Should

Be Resolved . . . . . . . . . . . . . . . . . . . . . . . . . . .

The OTA Study . . . . . . . . . . . . . . . . . . . . . . . . . . .

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FiguresFigure No.

S-1. Simplified Chart of Developments, Uses, andInformation Technology . . . . . . . . . . . . . . . . . .

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Impacts of. . . . . . . . . . . . . . . . . . . . . . . .

S-2. Information Industry and Its Related Industries. . . . . . . . . . . . . . . . . . . . .S-3. Trends From 1960 to 1980 Volume and Costs of Communication

by Media: USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Summary

Domestic intellectual property law—princi-pally the law covering patents, copyrights, andtrademarks–is rooted in the United StatesConstitution. Under the law, the governmentis authorized to grant intellectual propertyrights not as rewards but as inducements toauthors and inventors to create and dissemi-nate intellectual works. The statutory natureand purpose of the constitutional authoriza-tion is stated explicitly in the 1909 CopyrightAct:

The enactment of copyright legislation byCongress under the terms of the Constitutionis not based on any natural right that theauthor has in his writings, for the SupremeCourt has held that such rights as he has arepurely statutory rights, but on the groundthat the welfare of the public will be servedand progress of science and useful arts willbe promoted . . . Not primarily for the bene-fit of the author, but primarily for the bene-fit of the public such rights are given. Notthat any particular class of citizens, howeverworthy, may benefit, but because the policyis believed to be for the benefit of the greatbody of people, in that it will stimulate writ-ing and invention to give some bonus to au-thors and inventors.

The mechanisms by which the intellectualproperty system worked in the past werestraightforward. The government grantedrights to an author or inventor. From this pointon, the government’s role was relatively mi-nor. Rewards were determined in the market-place. In order to benefit from copyright, anauthor had to publish his works, thus makingthem available to the public. In order to ob-tain a patent, the inventor had to reduce hisideas to useful applications. The holders ofcopyrights and patents holders were respon-sible for detecting infringements and prevent-ing unauthorized use of a work. Enforcing one’sright was not unduly burdensome. This wasparticularly true in the case of copyright. Giventhe expense and the organizational require-ments needed to reproduce works there wereonly a limited number of printers, and thus it

was relatively easy to keep track of theiractivities.

Today, however, technology is complicatingthis process and undermining many of themechanisms that governed the system in thepast. This trend is likely to continue; as shownon figure S-1, today’s technologies are the be-ginning, not the end, of the information revo-lution. Computers, two-way interactive cable,fiber optics, optical disks, communications sat-ellites, and other devices are becoming stead-ily more sophisticated and powerful, and theiruses are expanding almost daily. The great-est impact, however, will come not from sin-gle technologies, but rather from their use incombination.

Although Congress has always had to reckonwith technological change, the new informa-tion and communications technologies avail-able today are challenging the intellectual prop-erty system in ways that may only be resolv-able with substantial changes in the systemor with new mechanisms to allocate both rightsand rewards. Once a relatively slow and pon-derous process, technological change is nowoutpacing the legal structure that governs thesystem, and is creating pressures on Congressto adjust the law to accommodate thesechanges. The pressures are coming from a num-ber of different parties, and they are motivatedby a wide range of concerns:

● Authors, publishers, film makers, and pro-ducers; representatives of the recording in-dustry; and other copyright holders whoseworks can be delivered electronically: Thisgroup is concerned that technologies suchas tape recorders and videocassette re-corders are so widely used that they un-dermine their ability to enforce their copy-rights. They are calling on Congress toadopt stronger enforcement measures. Al-ternatively, some group members wouldlike Congress to provide new ways to pro-tect their incomes, such as imposing taxesor 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

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Designers and producers of computer soft-ware and other functional works that do notfit comfortably into existing categories ofintellectual property law: This group is con-cerned that, given the uncertainties in thelaw, their works will be inadequately pro-tected. They are calling for more explicitand extensive protection under existingor under new laws.Database producers, information analysts,and others who package existing informa-tion for specific uses: This group opposesrestrictions on the use and reuse of copy-righted materials. They also want incen-tives to be reallocated so that they receivea greater financial return for the value thatthey add to information by analyzing, re-organizing, and packaging it.Manufacturers of equipment capable ofcopying, reproducing, or recording (papercopiers, satellite antennas, videocassetterecorders, and audio tapes): Members ofthis group oppose the imposition of taxesor royalties on tapes and any other actionsthat might increase the cost of their prod-ucts to the consumer, or that make themless convenient to use. They claim thatthey aid copyright holders by creating newmarkets for products and so should notbe penalized by having taxes imposed.Educators and scientists: Members of thisgroup generally oppose extensions of thelaw, arguing that such extensions wouldmake the resources and materials theyneed to do their work prohibitively expen-sive. Some members of this group seek toexempt educational uses from the law.Others are calling for licensing agreementsthat would allow them to use copyrightedmaterials at reduced rates.The general public: Many people are be-coming increasingly accustomed to hav-ing new technology available at low costto use as they please in their homes andoffices. They want assurance that they cancontinue to copy films, records, and otherinformation for their private use.Developing countries: Many developingcountries want to use American intellec-

Summary ● 5

tual property products to further their so-cial, economic, and political development.These nations believe that the UnitedStates and other industrialized nationsshould relax intellectual property protec-tion so that they can afford to make useof these new products and services.

These competing interests give rise to pol-icy questions that resist quick, simple answers.Part of the problem is that new technologiesare bringing new parties into the intellectualproperty debate, many of whom hold valuesand attitudes that differ from those of moretraditional players—the authors, printers, andpublishers, for example. The extreme case ofthis is the so-called computer “hacker” whobelieves that software and other forms of in-formation should be shared freely. Holding lessextreme but more common views are thosemembers of the public who believe that theyshould be able to continue to use the new tech-nologies to copy materials, at home, for theirown personal use. In addition, there are thosesecondary information providers-informationbrokers and database producers, for example–who, in contrast to the original creators of in-formation, want fewer restrictions on the useand reuse of information.

Complicating intellectual property issueseven further is the fact that technology is alsochanging the roles that people involved in thecopyright system play. In fact, taking advan-tage of the new technologies, many people nowplay multiple roles, and their attitudes aboutintellectual property protection may vary ac-cordingly.

The relationship among traditional playersare also changing, breaking down old alliances,and generating some new ones. Working onan electronic network, for example, the authorof a book can now edit, print, publish, and dis-tribute his works; tasks that were traditional-ly within the purview of the publisher. Underthese circumstances, the author may be lessinclined to assign his rights to the publisher.Similarly, because it provides new outlets fordistribution 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 filmchanging 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 BYTHE NEW TECHNOLOGIES

To understand the legal and political pres-sures that new technologies place on the intel-lectual property system, one needs to under-stand their unique capabilities. A few examplesconvey the scope and pace of technologicalprogress and the problems that it poses:

A problem of identifying authorship: Agroup of authors using personal comput-ers connected by a telephone network cancollaborate in writing an article, a pieceof software, or a database. This work canexist in various forms, in different places,and can be modified by anyone having ac-cess to the network. This networking tech-nology provides new opportunities to com-bine talents, resources, and knowledge.Also, using satellite technology, authors,scholars, or other creators from all overthe world can work together simultane-ously on the same project.

However, this same networking capa-bility might create problems for the intel-lectual property system. Copyright, for ex-ample, is granted to “original” works of‘‘authorship. In a world where there aremany authors of one work, worldwide col-laboration, and ever-changing materials,a law based on the concepts of originalityand authorship may become too unwieldlyto administer.A problem of identifying infringements andenforcing rights: The increased communi-cations capacity (in terms of speed, band-width, and distance) made possible by fi-ber optic technology will allow computerusers to rapidly transmit incredible amountsof information at a rate of 100 averagelength pages in a second. Such a capabil-

ity could permit the creation of central-ized libraries with universal access.

On the other hand, these high-speedcommunications media, combined withlarge capacity optical disk storage tech-nologies, will also pose enforcement prob-lems for the intellectual property system.They allow individuals to trade vast quan-tities of copyrighted materials without theknowledge or permission of copyrightholders. With these technologies, the sit-uation is no longer simply one of an indi-vidual trading or giving away a book tosomeone else; rather, it is one in which in-dividuals can inexpensively and privatelyshare the contents of an entire library.

● A problem of private use: At the end ofWorld War II, copyrighted informationflowed into American homes through threechannels-print publications, radios, andphonograph records. And although peo-ple could enjoy these works freely, theycould not copy them conveniently and atlow cost. Today, the situation has changedradically. Americans can now receive amuch greater amount and variety of copy-righted materials via a whole host of newmedia-satellite, cable and broadcast tele-vision, computers, videocassette record-ers, and telephone lines, to name a few.Moreover, using computer networking tech-nology, they can now easily and inexpen-sively reproduce and transmit copyrightedworks.

This remarkable state of affairs raisesseveral problems for the copyright sys-tem. First, if a private citizen copies in-formation–a film or record, for example–should this be considered an infringement

Summary ● 7.— —

of copyright? At present, the law giveslittle guidance in this area; nor, until re-cently, did it need to. Such private use wasso limited it posed no threat to industryprofits. Second, if it were decided thathome copying infringed copyright, howcould a ban against it be enforced? Sincemany people could be engaged in this kindof behavior in the privacy of their ownhomes, their activities would be impos-sible to track.

• A problem of functional works: At one timea writer wrote solely to communicatemeaning to his readers. He did so in nov-els, biographies, news stories, scientifictreatises, and even in recipes. Today, how-ever, a writer can write for a machinerather than a human audience. He doesso when he writes computer software-in-structions that tell the machine what todo. A computer program can also createnew programs, and even control industrialprocesses. In the future, information it-self will play a similar functional role. Apiece of information entered into a data-base, for example, may automatically re-tool one of several manufacturing fa-cilities.

Writings of this kind are becoming cen-tral to the economy because they can effi-ciently substitute for labor and mechani-cal processes. It is, however, precisely thecapability of substituting for machineprocesses that causes problems for the tra-ditional intellectual property system.

Intellectual property law provides twobasic forms of protection–patent andcopyright. These schemes reflect a basicdistinction between invention and author-ship. Inventions are essentially useful de-vices or processes, whereas works of au-thorship convey information and ideas.And although both schemes encourage theproduction and dissemination of ideas,they do so in two different ways. Patentrequires disclosure, and copyright as-sumes that in order to profit from a work,an author must publish it. Moreover, the

types of protection granted reflect thedifferences between writings and inven-tions. Copyright prevents commercial copy-ing; patent prevents commercial use.

With the development of computer soft-ware and other functional works, the cleardistinction between inventions and writ-ings is beginning to break down. These de-velopments raise questions about whethernew information-based products can be ac-commodated within the old legal frame-work, and whether efforts to do so will un-dermine the original intent of the law.

● A problem of derivative use: A major news-paper maintains its index on computer.A user of this index takes the informationin it and analyzes it for another client, giv-ing him up-to-date, timely informationthat is precisely tailored to his needs.Using electronic technology, a researchchemist can search all bibliographic dataon a particular chemical in a matter ofhours, instead of the weeks it once wouldhave taken. An investor who must makea snap decision about whether to buy orsell can call up a constantly updated data-base, and use the information to pursuehis profits.

The new information technologies,which allow for this kind of customizedinformation on demand, are creating awide range of new opportunities to expandthe variety, scope, and sophistication ofinformation-based products and services.In fact, a whole new industry has devel-oped to provide these services; and it isnow one of the fastest growing sectors inthe economy.

As the opportunities to create deriva-tive works increase and as this sectorcomes to play a larger role in the economy,questions arise about what kinds of infor-mation can legally be used to create sec-ondary information products. Under ex-isting intellectual property law, copyrightholders have the right to benefit from allsubsequent works based on their originalworks. If interpreted broadly, it is possi-

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

ble, however, that this approach will in-hibit the production and use of secondarymaterials.A problem of intangible works: In theirhomes, people can now receive electroni-cally a broad range of information-basedproducts and services—e.g., shopping,stock market and banking information,educational software, videogames, films,and musical works, to name a few. In thelong run, however, individual access toinformation may be more costly and thusmore limited as intellectual work becometransmitted in intangible forms.

Publication and dissemination of intel-lectual works were fostered under the tra-ditional copyright scheme because authorshad to publish copies of their work in or-der to profit. Although the author retainedthe right to print and publish a work, heno longer controlled the copies after thefirst sale. Since public dissemination wenthand in hand with profit-making, this sys-tem promoted the interests of both thepublic and the author.

As more and more works are trans-mitted electronically, however, public ac-cess to information, originally built intothe copyright system, may in fact becomemore limited. Not only may the individ-ual price of information be higher; nowpeople may have to pay for it every timethey wish to use it.

When printing was the dominant tech-nology, this was not the case. Once a per-son bought a copy of a book or magazine,he owned it. It became his personal prop-erty. He could consult it repeatedly, with-out additional cost. He could share it, rentit, or resell it, without the proprietor’s per-mission. Copyright holders, therefore, didnot control the market for their works.Their monopoly was limited. Booksellerscompeted for sales, not only with the pro-prietor, but also with one another. Infor-mation, therefore, was available frommany sources at a competitive price.

With the electronic distribution ofworks, however, proprietors have morecontrol. Because their works need not be

sold in hard copies, and because it is ques-tionable whether individuals can legallycopy them, they do not have to competewith resellers, wholesalers, or others whomight drive down the price of their prod-ucts. As the only source of distribution,people must come to the copyright holderon his own terms. Now controlling accessto their works, copyright holders can re-strict it in order to enhance their profits.If they were to do this, copyright lawwould no longer perform the function itwas designed for under the Constitution.Moreover, once copyright serves to limitaccess, it raises issues for communicationspolicy as well as for copyright.A problem of meeting educational goals:The intellectual property system was orig-inally designed to enhance learning andthe useful arts. This goal is more difficultto meet today because of the increasingmarket value of intellectual properties.The technologies provide numerous op-portunities for educational use. However,because software development is often ex-pensive, it is in the interest of the devel-oper to concentrate on products for cus-tomers who can pay the most—businesses,not schools. The schools then have thechoice of doing without software, divert-ing money from other equally needed ed-ucational materials, or developing theirown software, since they cannot legallycopy copyrighted works. The copyrightproblem in this situation is simple: Copy-right, designed as a policy tool to enhancelearning, fails to meet its goal.A problem of integrity: Assisted by thecomputer, a film maker can create scenesthat were never actually filmed, or takeexisting images and place them in entirelynew contexts. These capabilities open newavenues for creativity. But at the sametime, they may be used to misrepresenta work or undermine its integrity. An un-scrupulous artist, for example, might usetechnology to distort a well-known pieceof art for his own purposes or profit with-out the knowledge of the original artist.In this electronic environment, creators

Summary ● 9

may become as concerned about the in-tegrity of their works as they are abouttheir profits. To be effective, intellectualproperty law may need to take into ac-count the problem of artistic integrity, aswell as that of financial rewards.An international problem: All of the capa-bilities and problems that characterize do-mestic use of the new technologies areequally prominent—sometimes more so—when they are used internationally. Sat-ellite technology permits global commu-nication, but it also beams in program-ming that nations may not want. Satellitescollect valuable agricultural and environ-

mental information about the developingworld. But once it has been analyzed bya commercial company and copyrighted,it may be priced too high for developingcountries to afford. A nation near theUnited States is able to pick up and un-scramble satellite programming that view-ers want—and do so without paying thefee charged by the company. Domesticcompanies have no way to monitor use orenforce their copyright claims. These prob-lems are exacerbated by considerable dis-agreement among nations about intellec-tual property issues.

WHAT ARE THE STAKES?The new technologies are extremely power-

ful tools. For the United States, therefore, thestakes of identifying the best laws and policiesfor their use are very high. These stakes fallinto three general categories: 1) economic, 2)social and personal, and 3) political.

Economic

Information technologies and information-based products and services are becoming cen-tral to the economy as a whole. The new tech-nologies and the information they embody canbe used to improve efficiency, increase produc-tivity, and thus engender economic growth. In-formation is reusable, and unlike capital re-sources, such as steel or iron, it can be producedand distributed using few physical resources.Not only is information an efficient substitutefor labor, it can also be used to improve theoverall efficiency of the production process.Businesses, for example, are now applyingcomputer technology to almost all of theiractivities: from recruiting to laying off work-ers, from ordering raw materials to manufac-turing products, from analyzing markets toperforming strategic planning, and from in-venting new technologies to designing appli-cations for their use. To serve these needs, awhole new industry has been spawned. (See fig-ure S-2. ) One of the fastest growing sectors of

the economy, this industry is spearheading theNation’s economic growth and enhancing itscompetitive position in the international mar-ketplace.

The economic stakes raised by the new tech-nologies are particularly high for the copyrightindustries—publishing and other industriesthat rely on the legal protections provided bycopyright law. It is estimated that in 1982, thecombined sales of these industries constitutedapproximately 5 percent of the gross nationalproduct. Estimates suggest that more than 2.2percent of the labor force is affected by tradein intellectual property. The amount of finan-cial damage that these industries suffer dueto infringements of intellectual property rightsis extremely hard to estimate. Very few inde-pendent, quantitative data are available, andexisting analyses often contradict each other.

Social and Personal

Information is a dominant force in our lives.In the United States, an enormous amount ofinformation is communicated in the form ofwords through electronic media. In the 1970s,for example, it was estimated that the Amer-ican population was exposed to about 8.7 tril-lion words each day through electronic mediasuch as radio; television; and print media such

Figure S-2.— Information Industry and Its Related Industries

Sectors

Information processor> I n format I c I producer> I n for rTl at Iorl d I >tr bu tors

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Summary ● 1 1.—

as newspapers, books, and magazines. This fig-ure is rising; each year, the number of wordscommunicated increases at an average rate of1.2 percent per year. And, as is illustrated infigure S-3, the fastest growing media for trans-mitting and receiving information are elec-tronic.

Information, in all forms, is essential to allfacets of our lives. It is the principal resourcewe use to meet our personal needs: coping withday-to-day problems; dealing with life’s trau-mas and crises; supporting religion, family life,and cultural heritage; and accommodating ourrecreation, entertainment, and leisure timeneeds. Never in history have we had the op-portunity to be so fully and currently informedabout world, national, and local affairs.

Given the central importance of information,the public has high stakes in decisions aboutintellectual property rights. Moreover, the pub-lic has high expectations about how technol-ogy can serve its information needs. A surveyconducted for OTA confirmed that many peo-ple believe they have the right to use thesetechnologies as they please, although theydraw the line at using them for commercialgain. The generation now in the schools hasgrown increasingly accustomed to the bene-fits of technology. Many youth view their tel-

Figure S-3.— Trends From 1960 to 1980 Volume andCosts of Communication by Media: USA

(plotted on log by log scales)

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SOURCE: Ithiel de Sola Pool, Hiroshi Inose, Nozomu Takasaki, and Roger Hur-witz, Communication Flows (Tokyo University of Tokyo Press or NewYork Elsevier 1984) Reprinted with permission

ephones and tape recorders, videocassetterecorders, and other electronic devices as anintegral part of their lives.

Political

In democratic societies, citizens must be wellinformed about issues, candidates for office,and local affairs. Similarly, a democratic pol-ity requires a well-informed citizenry. Increas-ingly, information and communications tech-nologies serve these information needs.

The government regularly needs hugeamounts of information to make complex leg-al and policy decisions. Many governmentagencies would find it hard to conduct theirdaily business without resorting to customizedinformation on demand. The Internal RevenueService and the Social Security Administra-tion, for example, require large automated in-formation systems to handle the accounts ofhundreds of millions of clients. And the oper-ation of national defense depends on the useof complex communication systems both forday-to-day management of the military estab-lishment and for the command and control ofsophisticated weaponry. The government’sbudget for information technology has risenfrom $9.2 billion in fiscal year 1982 to an esti-mated $15.2 billion in fiscal year 1986.

Citizens’ groups and political parties are alsorelying more heavily on the new technologiesto achieve their aims. Technology, for exam-ple, is being used to target voters and poten-tial supporters, communicate with voters,manage information, and even to design cam-paign strategies. Computers are also beingused as lobbying tools. To illustrate the long-term effects of population growth, one lobby-ing group, for example, uses a portable com-puter and interactive software to inform Mem-bers of Congress about its point of view.

In each of these realms—economic, social,and political—the stakes in the intellectualproperty debate are rising as fast as the tech-nologies are becoming more technically sophis-ticated and widely used.


POLICY UNCERTAINTIES

In designing new laws or policies on intel-lectual property, the government will have tocontend with a number of uncertainties. Theseinclude:

● The peculiar characteristics of informationas a commodity: Information has specialcharacteristics that distinguish it fromother economic commodities and confoundour understanding of how informationmarkets work. Information is, for exam-ple, simultaneously an economic commod-ity and a societal resource. Since it is in-herently leaky; it is hard to own or control.And although costly to produce, informa-tion is inexpensive to copy. Given theseunique properties, economists are only be-ginning to understand the role of informa-tion in the market place. They have yetto determine, for example, how to meas-ure value or identify when value is addedto an information-based product or serv-ice—both needed to resolve issues of de-rivative use. Moreover, the few availabledata are fragmentary, nonquantitative,and often subjective.

• The increased complexity of the intellectualproperty system: The new technologies areincreasing the complexity of the intellec-tual property system, and so creating newuncertainties for policy makers. The num-ber and variety of information providers,kinds of information-based products andservices, ways of using information, andtypes of information users are prolifer-ating, giving rise to new relationshipsamong the parties involved. These changesare occurring in very unpredictable ways.Thus, in the future, Congress will need tohave more information about the intellec-tual property system.

● The changing nature of the technology: Theelectronic age has just begun. Today, newtechnologies are multiplying the kinds ofmedia that can be used to package, store,deliver, and use intellectual works. Overthe long run, however, the increased con-vergence of information and communica-tion technologies may reverse this trend.Packaged, stored, and delivered electron-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 CONGRESSFaced with a growing number of requests

for action, in addition to a ubiquitous and rap-idly changing technology, Congress confrontsthe problem of trying to take into account themagnitude and the scope of technologicalchange, while also balancing interests and re-sponding to present concerns. In consideringhow Congress might proceed, OTA identifiedfive major strategic choices:

1. what policy goals to pursue,2. whether and when to act,3. what legal framework to use,4. how broadly to define the problem, and5. within what institutional framework is-

sues should be resolved.

What Policy Goals To Pursue

OTA found that the intellectual propertysystem may no longer serve social, economic,and political goals with the same ease in aninformation age, given the enhanced value ofinformation in all realms of life. It is likely,therefore, that Congress, when designing newintellectual property laws and policies, willhave to choose more explicitly among policygoals. Alternatively, Congress could use pol-icy mechanisms other than the granting of in-tellectual property rights to foster some goalsnot supported by the present system. In thepursuit of economic goals, for example, othereconomic incentives—such as subsidies or taxexemptions—might be granted. Unlike the ex-tension of intellectual property rights, suchmechanisms would have few negative conse-quences for learning and the creative envi-ronment.

Whether and When To Act

Decisions about when to act are clearly re-lated to decisions about whether to act, and

to decisions about whether to deal with prob-lems separately or in a comprehensive fash-ion. In considering these choices, OTA foundthat technological developments are, indeed,affecting all aspects of the intellectual prop-erty system. Moreover, because we are onlybeginning to move into an electronic era, thefull impact of the new technologies will not be-come completely apparent for some time. Fun-damental changes in technology are occurringthat will antiquate many of today’s solutionsand bring new kinds of problems requiring newkinds of solutions. Thus, even if Congress de-cides to act now in some areas, it will need tobe prepared to reconsider these actions withinthe next decade.

Some problems are particularly pressing be-cause stakeholders are seeking immediate leg-islative action, societal stakes are particularlyhigh, or technological change is occurring sorapidly that Congress must act sooner ratherthan later if it wants to deliberately channelits impact. OTA identified four such problems:enforcement, private use, functional works,and the international intellectual propertysystem.

Other problems, although equally important,are less ripe for immediate action. Engenderedby technologies still in their infancy, theseproblems are only now just emerging, and ourunderstanding of them is severely limited. Ex-amples of such problems include assigning val-ue and distributing rewards in cases of deriva-tive use, protecting the integrity of works inan electronic environment, and attributing andassigning authorship when works are gener-ated by interactive or electronic processes.

Although it may be too early to determinelong-term solutions to these problems, OTAconcluded that some steps will need to be taken


now if they are to be adequately dealt with inthe long run. One approach might be to beginnow to systematically collect data about, andenhance our understanding of, informationneeds, information users and producers, andinformation-based products and services. Thisapproach might require institutional changes,since, at present, no agency within the Gov-ernment is set up to carry out such a task.

What Legal Framework To Use

The intellectual property system was care-fully designed to balance the public and theprivate interest. OTA found, however, that be-cause the new information and communicationtechnologies do not fit neatly within the ex-isting framework of the law, the balance maybe harder to achieve in the future.

OTA identified functional works as a par-ticularly serious problem in this regard. Theanalysis found that the distinction betweenwritings and inventions is indeed breakingdown with respect to functional works suchas computer software and semiconductor chipmasks. Because there are many works of thistype, they may require their own frameworkfor protection. If it were based on the distinc-tive characteristics of these works, the lawmight be more accurately targeted to achievespecific policy outcomes, thus serving as amore robust policy tool. With a new categoryof law, both producers and users would faceless uncertainty each time a new type of workwere introduced. OTA’s analysis suggests, too,that a fruitful basis for a revision along theselines might be found in the distinctions be-tween works of art, works of fact, and worksof function.

How Broadly To Define the Problem

OTA found that intellectual property policycan no longer be separated from other policyconcerns. Because information is, in fact, cen-tral to most activities, decisions about intel-lectual property law may be decisions aboutthe distribution of wealth and social status.Furthermore, given the unlimited scope of thenew technologies and the growing trade in in-

formation-based products and services, U.S.intellectual property policy is now inextrica-bly tied to international affairs. Communica-tions policy, too, is becoming more linked tointellectual property policy, as more and moreintellectual works are being transmitted by me-dia such as cable television, telephone lines,and communication satellites. Today, intellec-tual property issues also give rise to privacyconcerns as copyright holders seek technicalmeans to monitor use. In making decisionsabout intellectual property policy, therefore,Congress must consider a whole new range ofissues, and decisionmakers in all these areaswill need to strive for greater coordination.

Within What Institutional FrameworkShould Intellectual Property Issues

Be Resolved

OTA found that intellectual property issuescannot be resolved without dealing with thequestion of institutional capabilities andchange. In the absence of institutional change,the courts will increasingly be called on to re-solve highly complex and technical issues andto make policy in this area. The judiciary, how-ever, may not be suited for this role.

The pace of technological change will con-tinue to put pressure on existing institutionalarrangements. To the extent that Congress,in responding to these changes, adopts legis-lation requiring a more active Governmentrole, new institutional arrangements will prob-ably be required. If this were to be the case,Congress might want to expand the responsi-bilities of existing agencies, or it might estab-lish a new central agency to address intellec-tual property issues. Such an agency’s missionmight include monitoring technological changeand assessing how the law might deal with it,providing the necessary expertise to deal withcomplex technological issues, and collectingand analyzing data about information marketsand use. Such an agency might also assumeadditional regulatory functions, such as dis-tributing rewards or adjudicating disputes. Fi-nally, it might coordinate intellectual propertypolicy with policy in related areas.

Summary “ 15

THE OTA STUDYThe request for this assessment, Intellectual

Property Rights in an Age of Electronics andInformation, was made by Senator CharlesMcC. Mathias, Jr., Senate Committee on theJudiciary, and by Congressmen Peter W. Rodino,Jr., Robert W. Kastenmeier, Hamilton Fish,and Carlos Moorhead, House Committee onthe Judiciary.

In thinking about how the new communi-cation and information technologies mightaffect intellectual property rights, OTA hasadopted a broad approach, looking at the kindsof stresses that technology might be placingon the intellectual property system as a whole,and on each of its parts. Such an approach wasrequired because the new technologies do not

necessarily have a direct effect on intellectualproperty rights. Rather, more often than not,their influence on the law is felt indirectly, asa result of such things as technologically in-duced changes in norms, values, and expecta-tions, as well as in the ways in which intellec-tual works are created, produced, marketed,and distributed.

Such an approach is also useful because, giventhe political intensity and high economicstakes of the intellectual property debatetoday, it is extremely important to view theentire situation as all one piece. Those involvedin the policy debate often define issues solelyin terms of their own interests and world views.

Chapter 1

Conceptual Framework forAnalyzing Intellectual Property

Rights Issues

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Nature of Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Intellectual Property System and Its Relationship to Social and TechnologicalChange: A Framework for Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Intellectual Property System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Intellectual Property System as a Dynamic System:

The Impact of Technology . .The Approached and Outline of the

Emphasis on Copyright . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

20

2121

23

2525

l-1. Characteristics of Information Technologies and the Uses ofIntellectual

l-2. Framework

Figure No..

Property....of Analysis..

1-1. The Intellectual

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

FigurePage

System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Chapter 1

Conceptual Framework for AnalyzingIntellectual Property Rights Issues

INTRODUCTION

An intellectual property system is made upof laws and practices and the relationships theygenerate among individuals and institutions.A system of this kind reflects the larger soci-ety of which it is a part. For, although intel-lectual property rights have been recognizedin natural law, historically, governments havegranted such rights to achieve a variety of pol-icy goals. This is equally true today. Whichpolicy goals a particular intellectual propertysystem is designed to serve depends, in largemeasure, on history, circumstances, and theoverriding needs of society.

Technological change has been one factorthat has had an especially significant influenceon both social systems and the intellectualproperty systems that arise from them. Today,it is posing a formidable challenge to the in-tellectual property system. Developments ininformation and communication technologyare threatening to outpace previous technologi-cal advances in both speed and scope. Theyare stressing the intellectual property systemto the point of raising fundamental questionsabout the system itself. This chapter presentsa theoretical overview of the intellectual prop-erty system, and identifies how technologymay influence it. It is deliberately abstract,intending to lend perspective to questionswhose political and economic significance maymake objectivity difficult to achieve.

The U.S. system of intellectual propertyrights and practices evolved in a way thatbalances social, political, and economic inter-ests. The system has been modified, both for-mally and informally, in response to events andcircumstances. Its basic framework was set inSection 8, Article 1 of the Constitution, whichauthorized Congress to grant exclusive own-ership rights of writings and inventions for alimited period of time. The purpose was two-

fold: 1) to foster the progress of science andthe useful arts, and 2) to encourage the crea-tion and dissemination of information andknowledge to the public.

Although this framework was originally de-signed to deal with the problems and opportu-nities afforded by the invention of printing—the information technology that dominated the18th century–it has proven flexible enoughto accommodate a variety of new technologies.Today, however, advances in technologies suchas microelectronics, fiber optics, and satellitesare testing the limits of this flexibility. Devel-opments in areas such as biotechnology] arealso influencing the system, but they are be-yond the scope of this study.

Bringing swift changes in computers, com-munications, and other information technol-ogies, these technological advances are likelyto have a major social impact, carrying us fur-ther into a new “information age. ” The newtechnologies transmit information dramatical-ly faster, and they can collect, store, manipu-late, and transmit larger amounts of it. Withthese new technologies, more people can gainaccess to information, which they can morereadily use to trace past actions and predictor influence future events. In the next fewdecades, as these technologies continue to bedeveloped, they will be used for an ever-ex-panding number of activities and tasks. This

‘Although biotechnology has many similarities to informa-tion technologies in terms of its having a direct impact on theintellectual property system, this report does not discuss theseimpacts in detail. (; ii’en the magnitude of the impact that thedevelopment of biotechnology might ha~re on society’, any dis-cussion in this report, which focuses on information technol-ogies cannot do justice to this topic. For a discussion of someof these issues, see [J. S. Congress, Office of Technology Assess-ment, Commercial lliotwhnoio~”.. .4n International.4 na!.~’sjs,OTA-BA-218 (J$’ashington. 1)(’: LJ.S. (;o~ernment Printing of-fice, ,Januar? 1984).

19


advance of technological frontiers will change, areas ofin equally significant ways, the structure of likely tothe social, economic, and political orders. nounced

intellectual property law, they arehave the most immediate and pro-impact on copyright, the area of in-

Just as the technologies of the 18th centuryshaped the intellectual property system as weknow it today, so too are the new informationand communication technologies likely to altersignificantly how society views intellectualproperty, the mechanisms employed to protectit, and the value that society places on intel-lectual properties, both as market goods andas public resources. Although information andcommunication technologies will touch all

tellectual property law that has been most con-cerned with the flow and use of informationin society. Moreover, to the extent that tradi-tional legal categories cannot accommodatethese technologies, new kinds of intellectualproperty law may be required.

This report examines how technological de-velopments might affect the intellectual prop-erty system. Each chapter focuses on one partof the system.

THE NATURE OF TECHNOLOGYTechnology can be defined in many ways,

both broad and narrow. Some older definitionslimit technology to mean specific tools or ma-chines. Other theorists define technology morebroadly as know-how: ‘‘a system of knowledgeintended to have a practical bearing."2 Beyondthis, one can also include in a definition of tech-nology the human processes and relationshipsrequired to bring a scientific idea to lifes

People chose their definition of technologyto suit the question they are asking and theproblem they must solve. Scientists and engi-neers, for example, may have less need to con-sider human factors, and so their definitionsconcentrate more on machines and physicalstructures—roads, airports, and nuclear re-actors.4 But a purely mechanical definition oftechnology would be inadequate for a studyanalyzing how technology affects the intellec-tual property system. Technology touches thissystem directly and indirectly, affecting its

‘,Jay Weinstein, .%ciolog>’ Technolom’: Foundations of Post-,4 cadem”c Sciemv ( N“ew Brunswick, London: Transaction Books,19821, p. X 1. For this view, see also J.K. Fiebleman, “PureScience, Applied Science, Technology Engineering: An Attemptat Definitions, ” TtJchnolog~’ and Culture, fall, 1961, pp. 305-3 17; and C’, Susskind, [Understanding Technology (13altimore,MD: Johns Ilopkins Uni\’ersity Press, 1973).

‘For a discussion of technology understood as “a form of so-cial organization, see Todd R. La Porte, Technology’ as SocialOrganization, Institute of Governmental Studies, N’orking Pa-per #84-1, (Jni\’ersit}r of California, Berkeley.

‘Ibid.

laws and rules and influencing the social andeconomic conditions in which relationshipstake place. To illustrate the potential effect oftechnology in both these spheres, we mustbroaden the focus of the analysis and includein it the areas where physical objects and peo-ple meet. As Todd La Porte has said, one mustlook at “who is technology,” as well as “whatis technology.”5

This report defines technology broadly, in-corporating relationships and transactions be-tween creators, publishers, distributors, andusers of intellectual property as well as thehardware they use. To maintain this view,while also allowing for independent analysisof machines, tools, and techniques, we will con-sider technology a "package’ that, to borrowfrom Langdon Winner’s categories, comprises:6

apparatus: the physical devices of tech-nical performance such as tools, instru-ments, machines, etc;

techniques: the technical activities, suchas skills, methods, procedures, and rou-tines that people engage in to accomplishtasks; and

‘I bid., p. 8.‘) For a study that conceitres of technology as a package, see

James N. Danziger, William H. Dutton, Rob Kling, and Ken-neth 1.. Kramer, Computers and Politics: Iligh Technology’ inAmerican I,ocal (~o}-ernments (New York: Columbia Univer-sity Press, 1982).

Ch. 1—Conceptual Framework for Analyzing intellectual Property Rights Issues ● 2 1

social arrangements: the relationshipsthat are established and the transactionsthat take place allowing people to carry outtechnical processes and to give physicalform to their ideas. 7

Using this definition, this and subsequentchapters are based on a broad model of the re-lationship between technological and socialchange. 8 In this model, technology is consid-

‘I,angd{)n \l’innt>r, 1 utonomou.s l’echnolog}.: Technic.s-(lut-of-(’ ontrol a.~ a 7’henw c)f l)~)liti[’al ‘f’hou~rht ((’an] hridge, NI,!and 1,ondon, J{nglan& the NI IT l)ress), pp. 11-12,

“Th[’ study {)t t(’chnolog~ and s(xiet? has a long histor~’ g(J-ing back two cwnt,uries to the works of Adam Smith, Henri Saint-

ered to be one of many factors influencing so-ciety, while society is viewed as affecting tech-nological development through its structures,laws, and practices.

Simon, and Karl Marx. In fact, it was the growing interest intechnological de~’elopments that ga~’e birth to the field of soci-olo~’. Interest has intensifiwl in recent ~’ears, as both scholarsand policy makers have sought to anticipate and ameliorate theunintended consequences of the deplo~-ment of technolo~’. Onceagain, these interests ha~’e gi~’en rise to a new field of stud>’,that of technology assessment. For two accounts of the historyof ideas about technolo~’, see Weinstein, op. cit., and W’inner,op. cit.

THE INTELLECTUAL PROPERTY SYSTEM AND ITSRELATIONSHIP TO SOCIAL AND TECHNOLOGICAL CHANGE:

A FRAMEWORK FOR ANALYSIS

The Intellectual Property System

Theoretical models and actual systems oftendiffer significantly. In the real world, the formand structures of intellectual property systemsare worked out in the political arena. Seldomis a system a well-conceived and well-designedconstruct; it is more likely to take shape hap-hazardly, reflecting the political compromisesand historical events that went into its mak-ing. The American intellectual property sys-tem is a product of such compromises, andstrong forces are still shaping it today. Thoseinvolved in the debate often define issues nar-rowly, in terms limited to their own interestsand world views. But, given the magnitude ofthe technological changes occurring, and theirpotential impact on the intellectual propertysystem, it is extremely important to view theentire situation as a whole, in terms of theinterrelationships of its parts.

In looking at how technology might affectthe intellectual property system, it is usefulto conceive of the system as a set of incentivesand rewards designed to affect the behaviorof individuals or organized groups engaged increative or inventive activities. This systemis divided into five interrelated parts:

1. policy goals that it seeks to accomplish,

2.

3.4.

5.

The

property rights that provide incentivesand rewards,operating rules,mechanisms by which policy goals areachieved, andthe realm of people and activities that thesystem is designed to influence.

intellectual property system can be visual-ized as shown in figure 1-1. As this diagramillustrates, the outputs of the system providefeedback about how effectively the system isworking.

Policy goals are the ends towards which theintellectual property system is directed; theymirror the goals of the society. Thus, as illus-trated in chapter 2, time and social change mayalter intellectual property goals. As the goalschange, other parts of the system are likelyto change in response.

Property rights are granted as incentives andrewards. A property right might include, forexample, one or any number of the followingrights:9

‘These terms were borrowed from Lawrence Becker, “TheMoral Basis of Property Rights,. "Property J. Roland I]envorkand tJohn 11’. (’hapman (eds. ) (lNew’ York: New York Uni\rersit3TPress, 1980), pp. 189-190.


Figure 1-1.— The Intellectual Property System

Intellectual property aystem goals

I

[ ISystem feedback mechanism

SOURCE Office of Technology Assessment

1.

2.3.

4.5.6.7.8.9.

the right to possessor physically controlsomething,the right to use or enjoy its benefits,the right to manage or decide how it is tobe used,the right to receive income from it,the right to consume or destroy it,the right to modify it,the right to transfer it,the right to distribute it, andthe right to exclude others from using it.

Rights may be granted only under certainconditions, or they maybe limited in their ap-plication. For example, to claim a patent in theUnited States, an inventor must demonstratethat his invention is useful, nonobvious, andnovel. To receive a copyright, an author’s workmust be original.10 Neither right offers perma-nent protection. Patent rights generally lastfor 17 years, and copyrights are granted to in-dividuals for life plus 50 years and to corpora-tions for 75 years.

Together, these rights, incentives, and theconditions under which they are granted con-stitute the operating rules of the intellectual_10The word “work’ is a general term referring to any intellec-tual creation. It is used in the legal sense to distinguish par-ticular copies from what is protected by copyright.

property system. The rules make demands oneveryone involved in the system. The grant-ing of a right to one party, for example, mayin effect create a corresponding obligation orliability on the part of another. Structuring theway the parties relate to and depend on oneanother, these rights and incentives serve asthe rules governing the behavior of individualsinvolved in the creation, production, distribu-tion and use of works, products, and servicesdesignated as intellectual properties.

Different intellectual property systems maydefine intellectual properties differently, andeach may attach different rights, responsibil-ities, and benefits to them. The structure ofrights will be determined, in part, by the pol-icy goals of the system, and by the mechanismschosen to achieve them. Thus, a system de-signed primarily to encourage learning and in-vention, as is American patent law, may re-quire inventors to disclose information. Incontrast, a system designed principally to reg-ulate economic relationships, such as tradesecret law may, in fact, prohibit disclosure.Similarly, a copyright system with the chiefgoal of fostering the dissemination of informa-tion might grant rights only in publishedworks; whereas one aiming to reward author-

Ch. 1 —Conceptual Framework for Analyzing Intellectual Property Rights Issues ● 23

ship might protect works before they are madepublicly available.

Similarly, the mechanisms used to achievepolicy goals—the way in which the systemoperates-can vary among and within systems,depending on the kind of work to be protected,the nature of the activities to be influenced,the kinds of rights to be granted, and the pol-icy goals to be achieved. For example, a sys-tem that grants rights on the condition of anact such as publication, or on the condition ofqualities such as usefulness or novelty, mightrequire a very different administrative appa-ratus than a system with no such conditions.We see, for example, that because patents aregranted under more stringent conditions thancopyrights, the Patent and Trademark Officehistorically has had more resources and admin-istrative responsibilities than the CopyrightOffice has had.

The people, institutions, and activities that theintellectual property laws aim to influence arealso crucial elements in the system. What ac-tivities these people do, as well as the socio-economic constraints under which they oper-ate, determine whether a particular incentiveor reward might achieve its intended policygoal. To be most effective, rewards and incen-tives must match the motivations, needs, andperceptions of the people they are designed toinfluence, and they must accurately reflect thekinds of activities that they pursue. If an in-centive miscalculates the economics of creat-ing, producing, and distributing an intellectualproperty, it will not motivate people to keepcreating. In addition, because people creatingdifferent forms of intellectual property oper-ate in different environments and have vary-ing concerns, they may respond best to differ-ent kinds of inducements.

The outputs of the intellectual property sys-tem—such as the amount, quality, and diversityof works—reveal, in part, how well it is work-ing. But a number of difficulties arise in anyeffort to evaluate a system’s performance.First, there are problems in selecting criteriathat best measure effectiveness-that is, whichresults to note and which to ignore. Second,

—.

one cannot easily determine whether these cri-teria are being met. Finally, evaluating andassessing the accuracy and independence ofthe information needed to analyze the systemis fraught with difficulty. At present, most ofthe information about such things as the ex-tent of infringement, the potential economicdamages of infringement, or the uses made ofinformation-based products and services isavailable only from the stakeholders them-selves.

The Intellectual Property Systemas a Dynamic System: The Impact

of Technology

The dynamic nature of the intellectual prop-erty system further complicates its analysis.It exists within society, and shifts in responseto social, political, and economic circum-stances. Thus, when society values change,so may the motives and attitudes of creators,inventors, and users of intellectual properties.Similarly, changes in economic conditions canalter relationships and positions between andamong individuals and groups in the system,redistributing their shares of financial obliga-tions and rewards.

Of the many factors that might affect theintellectual property system, technologicalchange is likely to have the greatest impact.We can see this clearly in examining the ef-fects of new technologies on the intellectualproperty system.

Electronic information technologies are fun-damentally different from print technology ina number of ways. For example, broadcastingtechnologies (radio, television) make a worksimultaneously available in the homes of somany users that arrangements for paymentsfor the transfer of works to them is often pro-hibitively expensive. Other technological ad-vances, such as photocopiers and audio andvideo tape machines, have so reduced the costand decentralized the process of copying worksthat rights holders are no longer assured thatthey have control over the production and in-tegrity of their intellectual property. As infor-


Table 1-1 .–Characteristics of Information Technologies and the Uses of Intellectual Property.—

Technica l character is t ics Technica l character is t ics

of works Uses of works of works Uses of works

Mechanical printProduced in tangib le “un i ts”(but requires expensivemachines and special skillsto copy in large quantities)

Fixed in tangible copies(one ‘canonica l ” form of“ the work” ex is ts)

Analog electronic print“Originals” sold in tangiblecopies

Reproducib le at moderatecost (e. g., xerograhic copies,audio and video tapes)

Decentralized

Technology-bounded

Analog electronic broadcastSimultaneously available(one “intangible copy”)

Publishers, printers, andbooksellers cooperate to publishwork and sell units to individualsor Iibraries, authors received per-copy royalty on first sale of acopy; copyright holder retainsrights to print and publish “thew o r k "

Individuals read, scholars quote orcite; owner of a copy may copyparts of it by hand, or sell, rent, ordestroy his copy

E g , audio recordings andvideocassettes are initiallymanufactured and sold somewhatIike traditional, mechanicallyprinted books

Small works, or parts of largeworks, are often copied privatelyby users with machines, ratherthan by hand, copies of copies arepoorer in quality than copies oforiginalsMany Individuals have equipmentand skills to make copies

Different media and equipmentusually needed to use and copydifferent types of works

Advertisers may pay for work toa t t rac t po tent ia l cus tomers totheir product, alternatively, usersmay pay (e g , public broadcasting,subscr ip t ion te lev is ion)

——

mation technologies become computerized, thecopy, transfer, and manipulation of works arebecoming even more decentralized, speedy, andinexpensive.

At a basic level, the very definitions on whichintellectual property rights are based take onnew meanings, or become strained and evenirrelevant, when applied to the context createdby new technologies. They raise questions, forexample, about what constitutes a‘ ‘derivativework’ when works are made available throughintangible electronic waves or digital bits;about what constitutes a “work”; and aboutwho owns the right to it when it is interactive,and when creators have combined their effortsto produce it.

Digital electronicSimultaneously available

Reproducible at very lowcost

Versatile

Decentralized and pervasive

Interconnected

Dynamic

Processible

Autonomous

Many Individuals may access acentral store of works, a “database”

Prices for magnetic and opticalstorage media will continue tofall; media are very high incapacity, and very fast in makingreproductions: perfect copies canbe made from copiesMany types of works (e, g , text,music, video-taped or filmedpictures) may be stored andcommunicated digitally

Highly capable machines arebecoming ubiquitous in homesand offices

Machines may be privately Iinkedby switched telephone circuits:works can be transfered withImpunity; and joint authorship IS

not restricted by the physicalseparation of the authors

Work may be Interactive orconstantly evolving; one“canonical” copy may not exist

Machines may be programmed totransform and manipulate works,perhaps masking evidence oforiginal authorship

Works may be functional, ratherthan only meaningful, as aretraditional copyrightable works

—

The characteristics that differentiate the newtechnologies from the old, and that create po-tential problems for the system, are summa-rized above in table 1-1.

Changing technology may influence eachpart of the system directly, or it may affectit indirectly by modifying the larger social envi-ronment in which the intellectual property sys-tem operates. New technologies, for example,may affect the boundaries of the system andthe nature of the rights that it provides. Indoing so, they may change the “rules of thegame” by which it operates. As discussed inchapter 3, each new technology has broughtquestions about whether and where it shouldfit into the existing system. Most recently, for

Ch. 1—Conceptual Framework for Analyzing Intellectual Property Rights Issues ● 25

example, Congress, borrowing from both copy-right and patent law, adopted a new suigenerislaw, I that established a separate niche for com-puter chip technology in the intellectual prop-erty system.

Technological developments may also changethe mechanisms used to achieve intellectualproperty goals. Chapter 4 points out that dem-onstrating ‘‘authorship’ or ‘‘originality as acondition for receiving property rights, whilerelatively straightforward in a print culture,is much more complicated in an age of elec-tronic technology. Similarly, as illustrated inchapter 7, a system that assumes copyrightholders can enforce their own rights againstinfringement may operate unsuccessfully if de-

centralized reproduction and electronic trans-mission prevents identifying where and wheninfringements take place.

Because technology brings about new kindsof interactions between people, as well as newtechnological apparatus and new processes andtechniques, it is also likely to affect the peo-ple, institutions, and activities that are partof the realm of the intellectual property sys-tem. As noted in many of the following chap-ters, new technologies not only affect what peo-ple do and how and why they do it, they alsomay restructure the socioeconomic opportu-nities available to them and the constraintsunder which they operate. And, in creating amultitude of new opportunities for application,use, and profit-making, issues may arise amongthe parties in the system the resolution ofwhich, over the long run, may prompt changesin the goals, the boundaries, and the structureof the system itself.

THE APPROACH AND OUTLINE OF THE REPORTUsing the above model, this assessment ana-

lyzes the impact of the new information andcommunications technologies on the U.S. in-tellectual property system. Table 1-2 outlinesthe problems to be analyzed.

In this table, six major criteria are suggestedto evaluate how well the system is function-ing. Corresponding to these criteria are a num-ber of research questions that might be askedto determine how well the criteria are beingmet, and some possible indicators of the sys-tem’s effectiveness. The broad scope of the ta-ble illustrates the magnitude and complexityof the problem. It also suggests some usefulquestions around which to build an analysis,many of which serve as starting points in thefollowing chapters.

The Emphasis on Copyright

In general terms, intellectual property lawincludes any law that grants rights in the prod-ucts of the intellect. As such, it is a generic

term that covers patent, copyright, trademarklaw, and the Semiconductor Chip Act, as wellas trade secrets and tort misappropriation law.There are two major reasons for this empha-sis. First, since copyright is concerned primar-ily with the use and flow of information andinformation-based products and services, it isthe area of intellectual property law that willbe most affected by advances m communica-tion and information technologies. Second, itis to copyright rather than to other provisionsthat the creators, developers, producers, anddistributors of new information technologiesare looking in their efforts to gain legislativeprotection for their works.

This emphasis notwithstanding, we havetried to look broadly at the impact of technol-ogy on the entire intellectual property system.This broad perspective allows us to addressnot only the problem and opportunities thatthe new technologies present for the copyrightsystem itself, but also to consider alternativeways, including some entirely new ones, of ad-dressing them.

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

Table 1-2.— Framework of Analysis

Evaluative criteria Questions for research

7. Effectiveness in meetingoverall systems goalsA. Creation and dissemination Degree of creativity

of creative, informational,and scientific works

Availability

Congruence of incentives

B. Enhancement ofthe learningenvironment

C. Economic growthand development

Degree of scientificand technologicaldevelopment

State of the arts andentertainment

Overall condition of education

Growth of information-basedindustries

International competitiveness

2. Efficiency in achieving goals Costs and benefits of grantingrights

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

Ž

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

indicators/types of Informationthat might be collected

Evaluations of creators, critics, usersOutput of worksNumber of prizes offered in these fieldsNumber of people engaged in these fieldsInteractions of members of the creative en-vironmentNumber and variety of informational resourcesEvaluations of creators, publishers, producers,usersDiversity of worksPrice of worksOpportunities for accessEvaluations of creators, publishers, and producersLevel of outputEmergence of new fieldsNumber of scientists/technologistsNumber and quality of scientific publicationsInteractions between members of the scientific/technical communityPatents issuedAwards grantedEvaluations by members of the scientific/technicalcommunityEmergence of new fieldsNumber of creatorsCondition of production/distribution industriesAvailability of resources for creation/production/distributionAwards grantedMarket for creative worksEvaluations by national educators/businessmen/parents/National Science Foundation/etc.Literacy ratesTest scoresAvailability and qualifications of faculty/teachersQuantity and quality of educational materials/information-based resourcesInteractions among members of the educationalcommunityDevelopment of new industries and profit-makingopportunitiesPercentage of employmentNumber of firmsContribution to gross national productUse of information-based products and services innon-information industriesBalance of trade

Institutional costsTransactional costsSocial costs in terms of achieving systems goalsBenefits measured in terms of achieving systemgoalsEstimates of harm due to infringement/lack ofintellectual property protectionProfit marginsIndustry competitionEstimates of economic value of intellectualproperty rights to proprietors

Ch. 1—Conceptual Framework for Analyzing Intellectual Property Rights Issues ● 27

Table 1-2.—Framework of Analysis—Continued—

Indicators/types of informationEvaluative criteria Questions for research that might be collected

Costs and benefits ofalternative measures forachieving system goals

3. Enforceability Extent of Infringement

Ease of detection

4. System durability

Legitimacy of the system

Flexibility in the face ofchange

Legitimacy of the system

Ability to resolve conflicts/harmonize interests

Reliability/predictability as aguide to action

Robustness of principles

5. Precision as policy tool Predictability of outcome

independence/compatibilitywith respect to other policyareas

Sensitivity to differencesamong different kinds ofinformation-based productsand services

6. Congruence with international Ability to resolve conflicts -

and other national systems

Harmony with other intellectal property systems

Compatibility with other inter-national regimes—i.e.,GATT, UNESCO

SOURCE Office of Technology Assessment—

● Institutional costs● Transactional costs● Social/economic costs/benefit in terms of achiev-

ing system goals

● 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 tech-nologies

• Technological capabiIities to preclude authorizedaccess/use

● Transaction costs● Technological capabiIities to monitor access/use● Public attitudes/support for the system

• Frequency of legislative revision/amendmentŽ Resort to alternative forms of protection● Consensus in cases of first impression● Consistent/coherent application of law• Public attitudes/support for the system● Extent of infringement● Acceptance of decisions by parties in dispute—i.e.,

number of appeals● Extent of unresolved issues — I.e., fair use,

copyrightability of computer softwareŽ Internal coherence/consistency of law. Resort to other forms of protection● Overlap with other law

● Quality, quantity, independence of available infor-mat ion

● Number of agencies involved● Cross-cutting issues• Interested congressional committees. Convergence of stake holder Interests● Intensification of issues● Roles of different kinds of Information-based

products and services● Economics of different kinds of information

markets● Public attitudes toward different types of

information-based products and services● Technological characteristics of different

information-based products and services

● Enforcement mechanisms● Level of infringement● International court cases● Resort to other policies mechanisms to deter

infringement— i.e., trade sanctions● Level and participation in International regimes● Scope of International treaties. IncompatibiIities with international law — i.e., infor-

malities● Policy conflicts and inconsistencies

Chapter 2

Intellectual Property Goals in aChanging Information Environment

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . 32Evolution of the Concept and Practice of Granting Intellectual Property Rights. . . . 33Emergence of the Concept of Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . 33Copyright as a Mechanism for Censorship and the Regulation of Trade . . . . . . . . . . . 34Copyrights To Prevent Monopoly Practices: The Idea of Author Rights . . . . . . . . . . . 35Traditional Goals of the U.S. Intellectual Property System . . . . . . . . . . . . . . . . . . . . . . 37

Opportunities and Policy Choices in an Information Age. . . . . . . . . . . . . . . . . . . . . . . . . . 39Three Realms of opportunity . . . + ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ● . . . . . . . ● ● . 40Opportunities in the Techno-Economic Realm. , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40New Opportunities in the Political Realm ... , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Opportunities in the Cultural Realm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

The Potential for Conflict in the Use of New Technologies . . . . . . . . . . . . . . . . . . . . . . . . 53

Implications for the Intellectual Property System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

FiguresFigure No. PageZ-I. The Evolution of Information Occupations . . . . . . . ., ....... . . . . . . . . . . . . . . . . . 412-2. Uses of Information Technology Within the Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422-3. Information Industry and Its Related Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442-4. Development of Custom Targeting Database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482-5. Carnegie Mellon Flowchart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Chapter 2

Intellectual Property Goals in aChanging Information Environment

FINDINGSIn an information age, decisions about the

granting of intellectual property rights areLinked to other information policy decisions,and in making them, we are making decisionsabout the nature of society itself. Given theconvergence of these issues, it may be neces-sary to establish clearer priorities about thegoals towards which intellectual property pol-icy is directed.

The new information and communication tech-nologies create, for both individuals and societyas a whole, new cultural, economic, and politi-cal opportunities, as well as new information re-quirements and needs. These technologies arecapable not only of generating, storing, andprocessing vast amounts of information; theycan also provide greater access to information,enhance the environment for learning and crea-tivity, generate new opportunities for profit-making and economic growth, and facilitateparticipation in political and social affairs.

Insofar as they afford new socioeconomic op-portunities, the new information and communi-cation technologies will assume a greater rolein society, and in the economy, giving rise to pub-lic policy issues about their use. Issues willemerge, for example, with respect to which in-formation needs will be met; which opportuni-ties will be developed; and which parties willbenefit from them.

Concerned primarily with the use and flow ofinformation in society, intellectual property lawhas historically served in the United States todecide many of these issues. In resolving them,an effort has been made to strike a suitablebalance between the needs of creators, produc-ers, and distributors of intellectual propertiesand the social, economic, and political needsof the nation as a whole. In such a fashion, in-tellectual property law has been able to simul-

taneously serve a wide variety of social andeconomic public policy goals.

The ability of intellectual property law tostrike such a balance was not particularly diffi-cult in the past, when the social and economicstakes in information were lower than todayand when relatively few and well-defined play-ers were involved in the intellectual propertyprocess. Information-based products and serv-ices were peripheral to the performance ofmany social and economic activities, and peo-ple had lower expectations about their use andthe level of profit that might be derived fromthem. As a result, issues involving the grant-ing of intellectual property rights could beworked out among the major players withoutmuch public involvement or concern.

The resolution of these issues in an informa-tion age, however, will be more problematic, re-quiring that more stakeholders be taken into ac-count and that decisions be made about thedistribution of incentives and rewards. Giventhe variety of opportunities that the new tech-nologies afford, the increased value of infor-mation, changing relationships among the tra-ditional participants in the intellectualproperty system, and rising expectationsabout the benefits of these technologies, thenumber of stakeholders with disparate inter-ests and competing claims on the system willbe greater than ever before. In such a context,the granting of intellectual property rights, in-stead of mutually serving a variety of differ-ent stakeholders, and equally fostering a broadset of diverse policy goals, may pit some stake-holders and goals against one other. Moreover,given the ease of access to the new technol-ogies, members of the public are now majorstakeholders in the system, and as such theirattitudes and behavior are likely to have agreater impact on policy choices and outcomes.

31

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

INTRODUCTIONAlthough intellectual property rights have

been recognized in natural law, historically,governments have granted such rights toachieve a variety of policy goals. This is equallytrue today. In the West, the granting of copy-right, for instance, is viewed primarily as amechanism for encouraging the disseminationof information. But in Eastern bloc countries,the policy goals differ and it is regarded chieflyas ‘an instrument for the management of cul-tural processes.”1

Which policy goal a particular intellectualproperty system is designed to serve depends,in large measure, on the history, circum-stances, and overriding needs of a society atthe time the system is first set up. Develop-ing countries, for example, which must importmost cultural and scientific materials, haveoften been unwilling to extend protection toforeign works. This was true of the UnitedStates during its first 100 years, and is the casein many Third World countries today.

Despite their varying goals, however, all in-tellectual property systems basically concernpolicies involving the use and flow of informa-tion. This is especially true of the copyrightsystem, which was established specifically todeal with the social and economic changesbrought about by what, historically, hasproved one of the most “world shaking” in-formation technologies-the printing press.Characterizing copyright role in structuringinformation flow, Edward Plowman and L.Clark Hamilton wrote:

In a wider perspective, a number of basicdimensions of the nature and function ofcopyright may be distinguished. In an over-all, cultural perspective, the stated purposeof copyright is to encourage intellectual cre-ation by serving as the main means of recom-pensing the intellectual worker and to protecthis moral rights. In an economic sense, copy-

right can be seen as a method for the regula-tion of trade and commerce.

Copyright thus serves as a mechanism bywhich the law brings the world of science, art,and culture into relationship with the worldof commerce. In a social sense, copyright isan instrument for the cultural, scientific andtechnological organization of society. Copy-right is thus used as a means to channel andcontrol flows of information in society. [em-phasis added].2

The patent and trade secrets systems alsoinvolve the flow of information. The patent sys-tem is designed primarily to foster scientificand technical information. Although patentlaw permits only the inventor or patent holderto make, use, or sell his invention, it also re-quires that the inventor disclose to the worldthe information necessary to enable others toreconstruct the invention after a 17-year periodof protection has elapsed. Patent law, there-fore, seeks to encourage the distribution of in-formation by making disclosure a condition ofprotection. The trade secrets system, in con-trast to the patent system, is designed to dis-courage the widespread flow of certain typesof information. Secrecy is maintained in orderto give the holder of the trade secret a com-petitive advantage in the marketplace.

Like the printing press, the new informationtechnologies also affect society. They arechanging the way people work and conducttheir business; how they interact and relate toone another; the way they learn, create, andprocess information, and their needs and ex-pectations. In fact, these new technologies arealtering the way man views himself and hisplace in the world.3

Together, the development and widespreaduse of these new technologies have helped tousher in what some social observers charac-terize as a “post-industrial,” or “information”

‘Puscher, “Copyright in the German Democratic Republic,”Copyright IMZetin of the LEA, vol. 10, No. 3, 1976, as citedin Stephen Stewart, The Law of Internati”omd Copyright andNeighboring ~“ghts (London: Butterworth & Co. (Publishers)Ltd., 1983), p. 10.

‘Edward W. Plowman and L. Clark Hamilton, Copyright:Inteflectmd Property in the Information Age (London: Rout-ledge and Kegan Paul, 1980), p. 25.

‘Sherri Turkel, The Second Self: Computers and the HumanSpirit (New York: Simon & Schuster, 1984),

Ch. 2—Intellectual Property Goals in a Changing Information Environment ● 3 3

society.4 In this society, the creation, use, andcommunication of information plays a centralrole. Not only will the amount of informationcontinue to increase, but people will also relyon it in more and in different circumstances.The changes brought on by the new technol-ogies will generate new social, economic, andcultural opportunities and choices, which willbring with them the need for major policydecisions.

Because intellectual property policy, and es-pecially copyright policy, serve as a policy toolthat structures the use and flow of informa-tion, it is likely to play a major role in an infor-mation age. How the intellectual property sys-tem is structured will determine not only whichindividuals and groups benefit from the newopportunities afforded by the new technol-ogies, but also in what ways and the extentto which, as a society, we might take advan-tage of them. Furthermore, if the enhancedvalue of information creates conflicts betweeneconomic, political, and cultural goals, thestructure of the system will establish some ofthe rules that determine whether informationwill be treated as an economic commodity ora societal resource.

Given the relationship between intellectualproperty goals and social change, and the prob-able influence of the copyright system in aninformation age, the question arises of whetherthe policy goals of the United States intellec-tual property system, established in an agrar-ian society and when print technology domi-nated, are still appropriate for today.

Evolution of the Concept and Practiceof Granting Intellectual Property Rights

Social, economic, political, and technologi-cal factors all influence the nature of intellec-

4For discussions and characterizations of the “ InformationSociety. ” See, for example, U.S. Congress, Office of Technol-ogy Assessment, Computer-Based National Information Sys-tems, OTA-CIT-146 (Washington, DC: U.S. Government Print-ing Office, September 198 1); Susan Artandi, “Man, Information,and Society: New Patterns of Interaction, Journal for the Amer-

ican Society for Information Science, January 1979; and DanielBell, The Coming of Post Industrial Society (New York: BasicBooks, 1973).

tual property systems and the goals that gov-ernments have sought to promote by grantingthose rights. The connection between these fac-tors and intellectual property systems is clear-ly visible if one examines the concept of intel-lectual property as it evolved over time. In-tellectual property rights began in a autocraticperiod, as a tool of monarchs to stimulateinvention, regulate trade, reward favorites,establish patronage, and control and censor thedissemination of ideas and information. Twohundred years later, in a democratic context,this tool evolved into a system designed to fos-ter freedom of expression and the creation anddissemination of new ideas.

Emergence of the Concept ofIntellectual Property Rights

The birth of the idea of intellectual propertyitself demanded certain social conditions. Itrequired a centralized political authority anda government that intervened in economic af-fairs; the development of trade and commerce;a market for literature, art, and invention; andthe growth of the idea of, and respect for, theindividual as creator. Only in the late MiddleAges did such conditions develop, and onlythen did the concept of intellectual propertyrights, as we know it today, emerge.5

In addition to these societal changes, tech-nological change-and in particular, the devel-opment and widespread deployment of theprinting press— also created the need for in-tellectual property protection. Before the de-velopment of printing, inventors, embodyingtheir ideas within their own persons, did notneed to concern themselves with the prospect— ---- - -----

‘Bruce W. Bugbee, Genesis of American Patent and Copy-right Law (Washington, DC: Public Affairs Press, 1967). Thislatter condition existed in Roman times where the social cli-mate was supportive of individual attribution and payment forintellectual activities. In a number of texts from the period, forexample, there are references to individuals as authors and tothe terms of payment for intellectual contributions. Moreover,plagiarism was clearly considered to be unethical. There is noevidence, however, that such attitudes and procedures were inany way sanctioned by law. Conditions radically changed dur-ing the Middle Ages, however, when monasteries and other re-ligious institutions began to assume primary responsibility forintellectual and creative pursuits. As in pre-Roman times, theidea of individual, as author, lost support. Plowman and Hamil-ton, Copyright, pp. 9-11.

34 ● Intellectual Property Rights in an Age of Electronics

of others reaping the financial rewards of theirwork. They simply went from town to townselling their intellectual wares. However, oncetheir ideas were recorded and widely distrib-uted in print, the inventors lost this controland, hence, their economic bargaining power.The problem created by the printing press waseven greater for authors whose profits werederived not from their ideas but from what sub-sequently was even more easily duplicated, thewritten word itself.

The first intellectual property rights weregranted as patents. Characterized by one au-thor as being “the idea of progress appearingin the law, patents were associated with tech-nological development from the start.6 Offeredby sovereigns and local governments as partof their overall economic policies to stimulatecommerce and technological advance, theywere, essentially, monopolies designed to en-tice artisans and inventors into their Statesor localities.7

Copyrights-or the granting of rights in liter-ary property—did not develop in either con-cept or practice until the 15th century. Evenmore than patent rights, copyright can be iden-tified with one specific technology, the print-ing press.

The printing press brought about major so-cial, economic, and political changes.8 By great-

‘Significant inventions of the late Middle Ages includedvarious processes that would increase the efficiency of artisans,such as textile-making equipment, textile dye processes, glassmanufacturing, stained glass processes, mining and metallurgy,windmills, and ship-building designs. Bruce W. Bugbee, Gene-sis of American Patent and Copyright Law (Washington, DC:Public Affairs Press, 1967), pp. 12, 167.

‘The city-state of Venice, with its important role in worldcommerce and its strong central government, became the firstgovernment to grant patents. The importance that the Vene-tians attached to the goal of economic development is reflectedby the fact that a patent right granted in a work had to be relin-quished if it did not prove to be commercially successful. Astowns and commerce revived, technological development acceler-ated, and political centralization increased, this practice of grant-ing patent rights spread throughout Europe.

‘For a detailed and in-depth discussion of the social changesbrought about by the advent of printing, see Elizabeth L. Eisen-stin, The Printing Press as an Agent of Change: Communica-tions and cultural transformations in early modem Europe, vol.I and 11 (Cambridge, England: Cambridge University Press,1982); For a discussion of the more general impact of communi-cation technology on society, see Harold Innis, The Bias of Com-munication (Toronto: University of Toronto Press, 1951).

and Information— — .

ly increasing the speed and reducing the costsof reproduction, printing made it much easierto disseminate ideas. By increasing the gen-eral level of literacy, it also made more peoplesusceptible to, and eager to partake of, suchideas. As a result, the market for informationproducts and literary works grew, and theireconomic value was greatly enhanced. In fact,one might say that printing was the growthindustry of the time. Later, as books andmanuscripts ceased to be isolated on mones-tary shelves, and became available to manypeople simultaneously, they began to serve asan important forum for public discussion.

Occurring at the time of religious and polit-ical turmoil, printing presented the monarchsof Europe with both a political threat and aneconomic opportunity. The law of copyrightwas developed to deal with this threat, as wellas to take advantage of this opportunity. Theshape the law took reflects its dual purpose:censorship of the press and regulation of trade.Although copyright systems were establishedacross Europe, England provides the most use-ful illustration of how the system worked, sincethe American system was derived from Eng-lish experience.

Copyright as a Mechanism forCensorship and the Regulation of Trade

As in most European countries, England’sneed for copyright protection arose with theinvention of the printing press, and it had itsorigins in the English censorship laws. Theseacts included the Star Chamber Decrees of1566, 1586, and 1637, as well as three actspassed in the 1640s during the Interregnum,and the Licensing Act of 1692. Together, theyprovided for such things as the granting of pat-ents for specified works, the confinement ofprinting to authorized presses, the licensingof books before publication, and the use oftrade organizations and special governmentagencies for enforcement.9

While direct censorship was the most effec-tive means of confronting the political threat

‘Benjamin Kaplan, An Unhurried View of Copyright (NewYork and London: Columbia University Press, 1967).

Ch. 2—Intellectual Property Goals in a Changing Information Environment ● 35.

brought about by the new technology, it alsostifled the printing industry, and thus limitedthe government economic benefits from print-ing. Seeking to both end the dissemination ofheretical and seditious literature, but stillprofit from the burgeoning printing trade, theEnglish Government aligned itself with pub-lishers. In exchange for an agreement to en-force the censorship laws, the governmentgranted the publishers’ guild, known as theStationers, a monopoly right to print, publish,and sell works—a copyright. ’”

The effectiveness of this arrangement cameabout, as Ithiel de Sola Pool has noted, because“the printing press was a bottleneck where cop-ies could be easily examined and controlled."11

The arrangement was also beneficial to pub-lishers. It not only provided them with a mon-opoly; but also, as partners with government,they were free to manage their own affairs,12

Thus, through their bylaws, they regulated thebook trade. ’3

Copyrights To Prevent MonopolyPractices: The Idea of Author Rights

In the period following the Restoration, theGovernment’s major concern was no longerpress censorship. Instead, there was a grow-ing wariness about the publishers’ monopoly— . —

“’The copyright was limited to members of the Stationers’guild so that only registered members could print books. Oncea publisher entered the title of a work, his name, and the dateof publication into the company register, he obtained a perpetualcopyright in it. With what was essentially an economic rightdesigned to protect his investment from competition, the pub-lisher could also trade in rights. He could buy copyrights, sellthem, or assign them to any other member of the company. Whencases of copyright infringement and disputes among publishersarose, they were decided by the company courts. The Stationers’copyright remained in force for over 150 years, when the condi-tions underlying the system changed significantly. StephenStewart, Law of International Copyright, and NeighboringRights (London: Butterworths & Co. (Publishers), Ltd., 1983).

‘‘ Ithiel de Sola Pool, Technologies of Freedom (Cambridge,MA: Belknap Press, 1983), pp. 16-17.

“Originating as a craft guild in the early 15th century, theStationers were established as a company by Henry VIII in1557. They consisted of members of the book trade—printers,book binders and booksellers. For a discussion of the historyof the Stationers’ Company and its role in the development ofcopyright, see Lyman Ray Patterson, Copyright in HistoricalPerspective (Nashville, TN: Vanderbilt University Press, 1968).Chapter IV.

“Stewart, The Law of International Copyright, p. 18.

of the book trade. By buying up all of the rightsto copy books, the publishers had effectivelylimited their competition, restricted the sup-ply of books, and artificially raised prices. Nolonger in favor of blatant censorship,14 or sym-pathetic to monopoly, the Parliament foundthis situation unacceptable. In 1695, it failedto renew the Licensing Act of 1692, thus al-lowing the Stationers copyright to lapse.

The result was confusion in the book trade.Piracy became commonplace. The Stationersaggressively appealed to Parliament to re-establish order with a new copyright law. AsLord Camden later described it:

They–the stationers (whose property bythat time) consisted of all the literature of theKingdom, for they had contrived to get allthe copies into their own hands-came up toParliament in the form of petitioners, withtears in their eyes, hopeless and forlorn, theybrought with them their wives and childrento excite compassion, and induce Parliamentto grant them a statutory security. ’5

Responsive to the Stationers’ petitions toreestablish order in the book trade, but op-posed to excessive monopolies, the Parliamentpassed legislation in 1709 that was supposedto meet both concerns. This was the Statuteof Anne. Characterized as the first moderncopyright law, it served as the model for copy-right law in the United States, and all otherEnglish-speaking countries.

Although the Statute of Anne resembled theStationers’ copyright in some ways, it was de-signed to end their monopoly of the book tradeand included several provisions to assure thisend. Copyright would no longer be exclusive;the statute made it available to everyone.Moreover, it was limited to a period of 14

—-.—_.———“It should be noted that the repression of the press did not

end in 1693. Instead of using copyright as a mechanism to con-trol the press, the British Government used a tax policy. Thegovernment imposed taxes, for example, on newsprint, ads, andon newspapers. one newspaper The Spectator, folded in 1712,as a result of increased publication costs due to heavy taxa-tion. de Sola Pool, Technologies of Freedom, p. 15.

“’’Donaldson v. Becket” (H.L. 1774), as reported in 17 Han-sard, Parh”amentary History of England, 953, 995 (1813), asquoted in Kaplan, Unhurried View, p. 7.


years. ’G As a concession to the Stationers, theact allowed them to maintain their existingcopyrights for a period of 21 years, after whichthe works attached to them would be returnedto the public domain.

Entitled “A Bill for the Encouragement ofLearning and for Securing the Property of Cop-ies of Books to the Rightful Owners Thereof,"the new statute stated clearly that copyrightshould benefit authors. The law advanced theidea of authors’ rights, absent from the Sta-tioners’ copyright, although authors had pre-viously been paid for their works. 17 In the newpolitical and economic context, however, par-liamentary leaders viewed the granting ofcopyright to authors as a good device to breakthe publishers’ monopoly, although not nec-essarily inherently virtuous.18

The legitimacy of the claim of authors’ rightsalso found support within the larger society.In 1690, John Locke argued in his TWO Trea-tises on Civil Government that the author hasa natural right in his work since he had ex-pended his own labor in creating it. ” At thesame time, European thinkers and jurists putforth similar views.20 The public and the courts,—. . -. -

“The statute allowed a second’ term of 14 years if theauthor was alive. Even if he had sold his copyright, the authorcould claim it back after 14 years.

“Manuscripts were generally bought from authors for somelump sum. Once the authors sold his material to the publishers,it was the publishers who had the right to make multiple co-pies, Kaplan, Unhurried View, 1967.

‘“Ironically, in the end, the publishers were the most effec-tive and outspoken constituency in generating acceptance forthe idea of authors’ natural rights in their work, and it was theywho benefited most from it. The previous statutes, it shouldbe remembered, provided publishers with an economic right,which protected only the economic benefits derived from thepublication and sale of copies. The issue of who owned the workwas not involved. However, with the growing acceptance of theidea that the author had a natural right in his work, the notionof what the right protected was considerably expanded. Sinceauthors routinely assigned their copyrights to publishers, hav-ing no other recourse to distribute their works, it was the pub-lishers, and not the authors, who benefited over the long runfrom this expanded right. Patterson, Historiczd Perspective,p. 18.

“John Locke, Two Treatises on Civil Government (Cam-bridge, England: Cambridge University Press, 1967).

“’European jurists conceived of authors rights as being nat-ural to the way things are. In France this attitude was incorpo-rated into two basic decrees granting authors: 1) the right topublic performance (1791 ), and 2) the right to copy and repro-duction (1793). These two decrees served as the mainstay ofFrench copyright law for over 160 years. Plowman and Hamil-ton, Copyright, p. 16.

too, were generally more willing to reward theauthor for his special contribution to society.As Kaplan has pointed out, there was a grad-ual moving away from the Elizabethan per-spective that imitation was admirable and in-novation dangerous, and a growing apprecia-tion of the role of the creator.21

These developments, notwithstanding, copy-right in England remained a statutory right,reflecting its origins as a privilege granted bygovernment to achieve a particular public pol-icy purpose. The issue of authors’ common lawrights was tested in two major court decisions.In the first, Millar v. Taylor (1769), the pub-lishers’ and authors’ point of view prevailed:the court ruled that the author had a commonlaw copyright in perpetuity. Five years later,however, this position was reversed with thedecision in the case of Donaldson v. Becket de-livered by the House of Lords in 1774. Whilerecognizing the author’s common law right toprint, publish, and sell his work, and his rightto assign his copyright to another, the Houseof Lords held that this right was supplantedby the Statute of Ame. Thus, while the authorhad a right to decide whether to publish or not,once he had chosen to do so, his copyright wasa statutory one and it was limited by the termsof the statute.22

As this brief account suggests, the conceptof intellectual property rights emerged at a par-ticular time when socioeconomic conditionswere ripe for it. It emerged as a public policydevice to deal with the problems and enhancethe benefits of the rash of technological inno-vations that occurred in the late Middle Agesand early Renaissance. The law of copyright,in particular, was related to the advent of onetechnology, the printing press.—-———— —

“As Kaplan notes, “From the classical writers as ex-pounded by critics of the Italian and French Renaissance, theElizabethans had received the notion that artists’ excellencelay in imitating the best works of the past, not in attemptingfree imitations. All they needed, indeed, all the possible sub-jects and materials for literary production were already disclosedin existing writings, the “publica materia ” to which Horace re-ferred. What was required of an author was to give an expres-sion compatible with his own time. ” Kaplan, Unhurried View,p. 23,

“Ibid., p. 14; see also discussion by Patterson, which sug-gests that if the common law courts had had a role in the earlydevelopment of copyright, the English might have adopted astronger position in favor of the author. Ibid., p. 16.


While the structure of the laws and the goalsto which they were put have changed with timeand historical circumstance, intellectual prop-erty law has essentially remained a mechanismgovernment can use to structure and channelthe societal impacts of technological change.In the Elizabethan era, intellectual propertylaw was used to control the flow of informa-tion. But when transplanted to the UnitedStates, it was conceived of not only as an in-strument to foster the creation of new inven-tions and ideas but also to encourage their dis-semination among the public.

Traditional Goals of theU.S. Intellectual Property System

Although the ruling monarchs of Europe hadregarded the widespread dissemination of in-formation with considerable alarm, the oppo-site view prevailed in the United States. Build-ing a nation required the establishment ofcommunication links, the development of a uni-fied market, the forging of a common culture,and the building of a democratic polity. Thewidespread flow of information was essentialto accomplish these tasks, and the establish-ment of an intellectual property system, theybelieved, would aid the creation and spread ofinformation. Appreciative of the potential thatinformation held for fostering national devel-opment, the Founding Fathers saw the grant-ing of intellectual property rights, not as a nat-ural right, but as a statutory, or positive right,in this case granted to promote learning.

To understand the import attached to theidea of learning, one must consider the histori-cal context of the times. The writers of the Con-stitution were products of the enlightenment.Their views and attitudes reflected the increas-ingly pervasive awareness of the power ofknowledge to affect social change. As the his-torian Peter Gay has described it:

In the century of the enlightenment, edu-cated Europeans awoke to a new sense of life.They experienced an expansive sense of pow-er over nature and themselves; the pitiless cy-cles of epidemics, famines, risky life and earlydeath, devastating war and uneasy peace—

the treadmill of human existence—seemed tobe yielding at last to the application of criti-cal intelligence. Fear of change, up to thennearly universal, was giving way to fear ofstagnation; the word innovation, traditionallyan effective term of abuse, became a word ofpraise. 23

Looking at the concept of learning in thiscontext it is clear that, to the FoundingFathers, learning was more than an end in andof itself. It was the hope of an age, the meansto achieve a whole range of goals. With knowl-edge and learning, virtually anything was con-sidered to be possible.

That knowledge should be fostered and dis-seminated was also a paramount belief of thetimes. The age of enlightenment was, accord-ing to Gay:

. . . an age of academics—academics of medi-cine, of agriculture, of literature, each withits prizes, its journals, and its well attendedmeetings. In the academies and outside them,in factories and workshops and coffeehouses,intelligence, liberated from the bonds of tra-dition, often heedless of aesthetic scruples orreligious restraints, devoted itself to practi-cal results; it kept in touch with scientists andcontributed to technological refinements.24

Given this general mood of the age, it is easyto understand why the idea of granting intel-lectual property rights was so popular. Cor-rectly anticipating acceptance of such a right,James Madison, wrote in The Federalist, forexample, “The utility of this power will scarce-ly be questioned.”25 He was right. There waspractically no discussion of intellectual prop-erty rights at the Constitutional Convention,even though provisions for granting such rightsmerited a prominent place in the Constitution.The convention was convened in early May1787, and was adjourned in mid-September.The issue of intellectual property rights, how-ever, did not arise until August 18th, whenJames Madison and Charles Pinckney each put

‘{Peter Gay, The Age of Enlightenment: An Interpretation.The Science of Freedom (New York: W. W. Norton & Co., 1977),p. 3.

“Gay, Age of Enlightenment, p. 9.‘“As quoted in Bugbee, Genesis, p. 130.


forth proposals to include among Congress’powers the right to grant intellectual propertyrights. And the idea was not considered againuntil September 5th, when the Conventionunanimously approved without discussion acommittee proposal to adopt a constitutionalclause empowering the Congress “To Promotethe Progress of Sciences and Useful Arts, bysecuring for limited Times to Authors and In-ventors the Exclusive Right to their respec-tive Writings and Discoveries.”26

That the enhancement of learning was thepurpose of this clause–Article 1, Section 8 ofthe Constitution—can be reasonably discerneddespite the lack of debate at the convention.Two intellectual property rights proposalswere submitted, one by Madison and one byPinckney. Although introduced independentlyof each other, they both were couched amongother proposals aimed at advancing the stateof science and learning. Both proposals alsoauthorized Congress, for example, to:

grant charters of incorporation in caseswhere the public good may require them;establish a university;encourage by premiums and provisions,the advancement of knowledge and dis-coveries; andestablish public institutions, rewards, andimmunities for the promotion of agricul-ture, commerce, trade and manufacture.27

Because all of these proposals were submittedjointly, one can assume that they shared a com-mon intent.

Just as it was clear from the time of the Con-stitutional Convention that intellectual prop-erty law was intended to serve the goals of edu-cation and learning, so it was also plainlyunderstood that intellectual property rightswere to be considered statutory rights, grantedto fulfill a public policy purpose. This idea isapparent in the first Federal copyright act of1790 insofar as it excluded nonresidents fromthe benefits of copyright. It was reaffirmed,moreover, by the Supreme Court in the famous

————“Ibid., 128-130.“Patterson, Historical Perspective, ch. 12.

case of Wheaton v. Peters which, drawingheavily on the British case of Donaldson v.Becket, concluded that copyright was a stat-utory construct to the point of requiring com-pliance with the formalities of the law as a con-dition of protection.28 It is clearly laid out againin the legislative committee report on the 1909Copyright Act, which describes the purposeof copyright as follows:

The enactment of copyright legislation byCongress under the terms of the constitutionis not based on any natural right that theauthor has in his writings, for the SupremeCourt has held that such rights as he has arepurely statutory rights, but on the groundthat the welfare of the public will be servedand progress of science and useful arts willbe promoted . . . Not primarily for the bene-fit of the author, but primarily for the bene-fit of the public such rights are given. Notthat any particular class of citizens, howeverworthy, may benefit, but because the policyis believed to be for the benefit of the greatbody of people, in that it will stimulate writ-ing and invention to give some bonus to authorsand inventors.

The Founding Fathers’ hopes for the intel-lectual property system were well founded. Inthe century and a half after its establishment,there was not only a great flourishing of crea-tive, technological, and scientific works; butalso, many of these works were designed withthe needs of society and the common man inmind. Edward Riddle noted how much Amer-ican technology reflected a concern for the pub-lic welfare in his report to the commissionerof patents about the 1851 technology exhibitat the Crystal Palace in London. Comparingthe U.S. contribution to those of other Euro-pean states, he said:

The Russian exhibition was a proof of thewealth, power, enterprise, and intelligence ofNicholas; that of the United States an evi-dence of the ingenuity, industry, and capac-ity of a free and educated people. The one wasthe ukase of an emperor to the notabilitiesof Europe; the other the epistle of a peopleto the workingmen of the world. . . . We

‘HKaplan, Unhurried View, p. 26.

— .

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

showed the results of pure democracy uponthe industry of men. 29

This close association of technology withdemocracy was widespread throughout Amer-ica in the first 100 years of its development.30

A democratic polity was thought to be a pre-requisite to advancement in applied science,while technological achievements were ex-pected to provide the physical means of achiev-ing the democratic objectives of political, so-cial, and economic equality. Visiting Americain 1831, Alexis de Tocqueville, the well-knowncommentator on American society, observedthis linkage. Describing the relationship be-tween technology and democracy, he wrote:

. . . the extreme social mobility in Americawas fertile soil for progress in technology, be-cause democratic peoples were ambitious,never satisfied with their status, and-aboveall—were always free to change it. . . . Youmay be sure that the more a nation is demo-cratic, enlightened, and free, the greater willbe the number of these interested promoters

— -.‘Wdward Riddle, “Report on the World’s Exposition, ” Re-

port of the Commissioner of Patents for the Year 1851, HouseExec. Docs., 32 Cong., 1 sess., No. 102, Part 1, pp. 484-85, ascited in Hugo A. Maier, “Technology and Democracy, 1800-1869, ” Journal of American History, vol. 43, p. 625.

“ Meier, Technology & Democraq’, p. 618.

of scientific genious, and the more will dis-coveries immediately applicable to productiveindustry confer gain, fame, and even poweron their authors. 3 1

This enthusiasm for learning and the beliefthat it is linked to technological developmentand socioeconomic progress is less apparenttoday. One can particularly see this in the areaof intellectual property law. Unlike the found-ers of the intellectual property system, whosaw the law as mutually serving both educa-tional and economic goals, many people nowsee these goals as competing with one another.A number of people fear, for example, thatwidespread public access to the new technol-ogies will limit industry’s ability to exploitfully the economic potential of these technol-ogies. Emphasizing that economic growth anddevelopment is to the benefit of all individuals,they urge that the law be restructured to fa-vor business needs over individual ones, andeconomic goals over social ones. As the follow-ing discussion points out, conflicts such asthese are likely to become more prevalent inan information age.

“Alexis de Tocqueville, Journey to America, translated byGeorge Lawrence, J.P. Mayer (cd. ) (New York: Anchor Books,1971).

OPPORTUNITIES AND POLICY CHOICESIN AN INFORMATION AGE

The development of new technologies createsopportunities for society as a whole, as wellas for individuals and groups. The new infor-mation and communication technologies willalso create such opportunities. These technol-ogies are capable not only of generating, stor-ing, and processing vasts amounts of informa-tion; they can also provide greater access toinformation, enhance the environment forlearning and creativity, generate new oppor-tunities for profit-making and economic growth,and enhance the decisionmaking process aswell as facilitate participation in political andsocial affairs.

Whether and how people develop technologi-cal opportunities offered by recent advances,

and who will benefit from them, depends onan array of societal variables. The directiontechnology takes, for example, might be af-fected by such factors as the role of govern-ment and policy makers, cultural mores, the ex-tent of existing technological infrastructure,or the structure of the economic system.

As we have seen, one way that governmentshave historically sought to structure and chan-nel the direction of technological change hasbeen through the intellectual property system.To understand how intellectual property pol-icy might affect the development of the newinformation and communication technologiesand the distribution of the opportunities thatthese technologies afford, it is necessary, first,


to briefly identify these opportunities andpoint out where the realization of one may com-plement or preclude the development ofanother.

Three Realms of Opportunity

Examining how society has evolved in theface of technological development, the sociol-ogist, Daniel Bell, characterizes modern soci-ety as being divided into three distinct realms:the techno-economic, the political, and the cul-tural.32 In preindustrial societies, these realmswere relatively indistinct from one another.However, with the advance of technology andthe specialization that it imposes, they havebecome increasingly differentiated. Today,each has its own rhythm of change, its ownset of values, and its own corresponding modeof behavior. Moreover, because the forces thatdrive each of these realms are no longer com-plementary, they are generating a growingnumber of conflicts between them.33

Bell’s framework for anaylzing advanced in-dustrial societies is a useful tool for identify-ing the kinds of economic, political, and cul-tural opportunities that the new informationtechnologies provide. Because it describes howeach realm operates and the values that it sup-ports, it can help to pinpoint the particularneeds that the new technologies might serve.Moreover, insofar as it identifies the areaswhere there may be conflict between realms,it may suggest circumstances under whichthere might be competition for information re-sources, and hence conflicts about intellectualproperty goals.

Opportunities in theTechno-Economic Realm

The techno-economic realm is organized pri-marily to produce and distribute goods andservices. The principle value underlying thisrealm is that of ‘functional rationality’ ‘—thatis to say, according to the rule that each indi-

“Daniel Bell, The Cultural Contradictions of Capitalism(New York: Basic Books, 1976).

“Ibid,, p. 10.

vidual and each group in the system carry outrationally conceived, specified roles which,when taken together, are designed to maximizeproduction. The principle means of achievingthis value is by economizing; decisions aremade on the basis of cost/benefit analyses, andtechnology is applied to substitute less effi-cient processes with more efficient ones. De-signed to further this kind of rationality andefficiency, the techno-economic realm is struc-tured in a bureaucratic, and hierarchical fash-ion. 34

Today, the new information and communi-cation technologies provide numerous ways ofenhancing the values of the techno-econom.icrealm: they can improve efficiency, increaseproductivity, and thus they can engender eco-nomic growth. Information is, for example, re-usable and, unlike capital resources such assteel or iron, it requires very few physical re-sources for its production and distribution.35

Moreover, information can now be used notonly to substitute more efficiently for labor;it can also be used to improve the overall effi-ciency of the productive process itself. And,as productive processes become increasinglycomplex in advanced industrial societies, thelargest reserve of economic opportunities willbe in organizing and coordinating productiveactivity through the process of informationhandling.” Given these characteristics and ca-pabilities, information is likely to become moreimportant as a resource in the techno-economicrealm.

This growing importance of information tothe economy is evident from the continuedgrowth of the information sector of the econ-omy, a trend that, as can be seen from figureZ-I, has been paralleled in other advanced in-dustrial societies. In fact, it was to highlightsuch changes that terms such as the “infor-mation society” and the “information age”

“Ibid., p. 11.“Harlan Cleveland, “The Twilight of Hierarchy: Specula-

tions on the Global Information Society, ” Bruce R. Guile (cd. )Information Technologies and Social Transformation (Wash-ington, DC: National Academy Press, 1985), p. 56.

“Charles Johnshur, “Information Resources and EconomicProductivity, Information Economics and Policy I (North Hol-land: Elsevier Science Publishers, 1983), pp. 13-35.


Figure 2-1 .—The Evolution of Information Occupations

I n f o r m a t i o n o c c u p a t i o n s a s p e r c e n t a g e o f

t h e l a b o r f o r c e

45

40

35

30

25

20

15

10

5

0

I I 1 1 1 1

1950 1955 1960 1965 1970 1975 1980

Year

NOTE Data for Finland was derived from two separate sources:aI. P i e t a r i n e nbThe 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(Center for Integrative Studies, SUNY at Buffalo), Facts and TrendsThe Changing Information Environment An Information Chartbook(Rome Intergovernmental Bureau for Informatics, 1985), p 32

were first employed.37 A recent analysis esti-mates that the information sector constitutes

“Fritz Machlup was one of the first to note these changesand to measure the information sector in his pioneering work,now a classic, entitled The Production and Distribution of Knowl-edge in the United States. Others have followed this tradition.By far, one of the most ambitious efforts to date has been theinnovative work of Marc Uri Porat for the Office of Telecom-munications in the U.S. Department of Commerce. In 1967, ac-cording to Porat, information activities accounted for 45.2 per-cent of the GNP—25. 1 percent in the “primary information”sector (which produces information goods and services as finaloutput) and 21.1 percent in a “secondary information” sector(the bureaucracies of non-information enterprises).

34 percent of the gross national product (GNP),and accounts for 41.23 percent of the nationallabor force.38

The changing economic role of informationcan also be seen by examining how informa-tion technologies are being used by businessand industry. Businesses are now applyingcomputer technology to almost all of theiractivities: from recruiting to laying off work-ers, from ordering raw materials to manufac-turing products, from analyzing markets toperforming strategic planning, and from in-venting new technologies to designing appli-cations for their use.39 These technologies,moreover, are being applied not just to tradi-tional tasks; the diffusion of the new technol-ogies is also being used to reconfigure the na-ture of the business process itself.40 Figure 2-2,for example, identifies how new technologiesmight be used to rationalize all of a firms activ-ities. As a result, some economists are suggest-ing that in the future, whether or not a businsswill be competitive, will depend on the extentto which it can find creative applications forthese technologies.” Representatives of indus-trv agree. As Airlliam H. Gruber, President

“ -

of Research and Planning, Inc., described it:

The difference between now and five yearsago is that then technology had a limitedfunction. You weren’t betting your companyon it. Now you are.43

. . . . . . . . .3RMichael Roger Ruben and Mary Taylor Huber, The

Knowledge Industry in the United States: 1960-1980. This vol-ume updates work done by Fritz Machlup. In their breakdownof the information sector of the economy, Rubin and Huber notethat, leaving education aside the contribution of knowledge production to the GNP increased from 17.9 percent in 1967 to 24.5percent in 1980. The contribution of education, on the other hand,fell from 16.6 percent to 12.0 percent during the same period,a decline that accounts for the fact that knowledge production’soverall contribution remained relatively stable at about one-third of the GNP.

‘Theodore J. Gordon, “Computers in Business, ” Guile, 1n-forrnation Technologies ami Social Transformation, p. 154.

‘“’’Information Power: How Companies Are Using NewTechnologies To Gain a Competitive Edge, Business Week, Oct.14, 1985, p. 108.

“Michael E. Porter, Competitiw Advantage: Creating andSustaim”ng Superior Performance (London: Free Press, 1985).

431bid.


Figure 2.2.—Uses of Information Technology Within the FirmProcurement

Technologydevelopment

I

Human resourcesmanagement

Firminfrastructure

I 1 technology - 1 IInbound Operations Outbound Marketing &logistics logistics sales

SOURCE Michael E Porter, Competitive Advantage: Creating and Sustaining Super/or Performance (London: Free Press, 1985),

Many businesses are already successfullyemploying technology to their competive ad-vantage. Merrill Lynch & Co., for example,used computers to identify and automaticallyinvest funds that were idle in checking, sav-ings, credit card, and security accounts: In sodoing, it was able to attract billions of dollarsin assets from other places. Even though com-petitors were soon to-follow suit with their ownservice offerings, Merrill Lynch, with its headstart, was able to maintain almost 70 percentof the market.44 Similarly, the America Hos-— . . — . . —

“Ibid., p. 109.

Service

pital Supply Corp. gained a competitive advan-tage by being the first to communicate directlywith its customers via computer terminals. Asa result, it was not only able to provide servicesat less cost than its rivals, it could also usethe data collected in the process to more ac-curately analyze trends and customers needs.45

Because of its new economic and managerialimportance, information is becoming muchmore commercially valuable. Businesses havealways been willing to pay for information such

“Ibid.

Ch. 2—Intellectual Property Goals in a Changing Information Environment . 43

as market research and economic forecasts.Today, however, they are not only buyingmore; they are willing to pay much higherprices for it. Consider, for example, the highprice that a consortium of Japanese engineer-ing companies was willing to pay to understandwhat went wrong on Three Mile Island. Theyoffered to contribute $18 million to assist inthe clean up in exchange for access to all ofthe pertinent documents and records relatedto the accident.46 On a more routine basis,American business firms might pay $800 peryear for a monthly professional informationservice, or perhaps $15,000 for a market re-search report shared by others in the indus-try.47

Today even private information can havecommercial value. The direct mail business isa good example. Packaging data about indi-vidual credit ratings, security clearances, andbackground checks together with demographicdata, this $13 billion industry sells individualnames to magazine publishers and local serv-ice companies for prices as high as $1 pername.48

The new technologies provide new ways andnew opportunities to meet these burgeoninginformation needs. They allow information tobe processed in a whole variety of new ways,adding value to it from the point at which itis created or composed to the point at whichit is assimilated or used. For example, a bookmay be produced with paper and ink, on audiocassette, or on optical disk; its content maybe adapted into a television “mini-series” oran interactive game that can be distributed ina variety of forms.

As the opportunities for creating new infor-mation products and services have increased,so too has the number of commercial providers.Taking advantage of the increased demand forinformation, the new technologies have spawneda rapidly growing information industry, the—-——— — ——

“Christopher Bums, "Three Mile Island: Information Melt-down, ” Information Management Review, May 1985.

‘-Christopher Burns, Inc., The Economics of Information,contract report prepared for the Office of Technology Assess-ment, U. S. Congress, 1985.

‘“Ibid.

scope of which can be seen in figure 2-3. De-veloping hand in hand with the new technol-ogies, this industry is relatively young. Morethan half of the companies that comprise itwere formed since 1970. Nevertheless, it is oneof the fastest growing industries in the econ-omy. In 1984, there were nearly 2,500 onlinedatabases. Based on an Information IndustryAssociation survey of 1982, it is estimated thatthese services accounted for revenue of $3.6billion. 49 By 1985, the number of data baseshad grown by about 12 percent.

In addition to service providers, new indus-tries have also been established whose sole pur-pose is to provide information-on-demand.With estimated revenues of $660 million, thisindustry consists of small research companiesand a few major libraries that have made abusiness out of finding documents and copy-ing them for users. In the private sector, theseare called “fee-based libraries, ’ “on-demandcompanies, or sometimes ‘information brok-ers.” They also include 5,000 special researchlibraries in the United States supported by afew inter-library loan networks such as the On-line Computer Library Center and the BritishLending Library.50

Given its increased value, information willmost likely be exchanged less freely. Instead,it will be treated more and more like a com-modity, to be bought and sold in the market-place. In fact, the rush for profits in informa-tion products and services is so pronouncedthat it might reasonably be compared to theCalifornia Gold Rush, a metaphor used mosteffectively by the information industry as thetheme for its 1985 annual conference.

New Opportunities in thePolitical Realm

The polity is the realm of power. It is thearea of social activity where disputes are re-solved and social justice is defined, and whereresources and values are allocated in accord-ance with the general idea of justice. The basic

“Ibid.“’Ibid., p. II-8.

Figure 2-3.—lnformation Industry and Its Related Industries

Information Industryand Its related industries

● ●

I

Data processing related industries

I I-

, Computer Computer salesIn d u s t r y a n d l e a s e

P e i p h e r a l Maintenanceequipment Service

industryData

E q u i p m e n t p a r t stransmission

and supplier Industry

Sectors

Personnel W ucat ton drl dpersor r~el c~tspatrh

Machine timeservice

J oh order- proc~sslng

service

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serwce

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sc, v I ce

Inquiryserwce -

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8

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6rOdCt CdSt Ing

Ne.vsp~per

pLlbl lsh I nq

,01Educat Ionresearch anddevelopment

Ldwyt?rdccountan t

etc

I n forma! I or) processor> Information producers I n format Ion Infrast ructure Information distributors

. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I n puts Th~ response may be 10mac 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 t h e 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 IAd 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 ● 4 5

.

Courtesy of Information Industry Association

value that maintains the polity is “legitimacy”—the general adherence of the people to theconception of justice embodied in the society’straditions or constitution, and acknowledge-ment of the authority that governs on its be-half.51 Whereas in the economic realm changetakes place in a linear fashion through in-creased specialization and economization, inthe political realm change comes about morehaphazardly, through the competition forpower and influence. In a democratic polity,the means of bringing about change is partici-pation and persuasion; individuals and groupsseek to gain access to resources and values byshaping attitudes and beliefs about what con-stitutes justice. To be effective, they must haveaccess to both the means to influence as wellas the means to be influenced. They must havethe right to obtain information as well as theright to distribute it. In contrast to the bureau-cratic structure of the economic realm, the po-litical realm in a democratic society is decen-tralized and open.”

Communication and information pervade po-litical life.” Without them there can be no na-

“Bell, Cultural Contradictions, p. 1.“’Ibid.‘“In the discussion that follows, the term communications

refers to both the information and the process by which infor-mation is shared and exchanged.

tion. For it is through the process of commu-nications that people first develop a sense ofcommunity and a shared set of values that le-gitimize political authority.54 By magnifyingand amplifying some actions, the communica-tions process, moreover, distinguishes betweenwhat is a private act and what is a public af-fair. It organizes what may seemingly be ran-dom activities to show how individuals andgroups are related to one another in the pur-suit of power, providing individuals who wantto influence the course of political events a roadmap to guide them.55 Citizens rely on the com-munications process to gather information, toidentify like-minded people, to organize theirforces, and to articulate their political prefer-ences. Furthermore, because it generates acommon fund of knowledge and information,the communication system facilitates produc-tive and rational debate. Without some knowl-edge and understanding of how others are in-formed, and of what they believe, individualscould not make reasoned and sensible argu-ments and decisions. 56 The communicationsprocess also provides guidance to politicalleaders. Because communication channels flowin two directions, communications serve notonly to inform citizens about political events,they also provide feedback to political leadersabout the values and attitudes of their constit-uents.57

Given this intimate relationship between thecommunications and political processes, it isnot surprising that, just as the new technol-ogies afford opportunities in the economicrealm, so they create new political opportuni-ties. Capable of sending a vast amount and a

54Karl Deutsch, IVa tionalisrn and Socia) Communication(New York: Free Press, 1963).

‘5Lucien W. Pye (cd.), Communications and Political Devel-opment, Studies in Political Development [Princeton, NJ: Princeton University Press, 1965), p. 6.

5’Ibid.57Mass media communicators, for example, interpret public

attitudes, They adjust their materials to take into account howthe public reacts to their descriptions of news and events. Thosein position of political power, in turn, adapt their behaviors toconform to the media’s portrayal of the public’s mood at anyone time. For a discussion of this theory see, Elihu Katz, “TheTwo Step Flow of Communications: An Up-To-Date Report onthe 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 atunprecedented speeds, these technologies al-low entire populations to experience major public and political events in common, therebyfostering a sense of national community. Be-cause they are also interactive, these technol-ogies can play a greater role in helping politi-cal leaders to communicate to the public andto assess its mood, thus helping to reinforcethe legitimacy of the political system. More-over, given the decentralized distribution ofmany of the new technologies, and their capac-ity to store, copy, manipulate, retrieve, andsend information, they can be used to fosterparticipation, helping individuals to gain ac-cess to information and other political re-sources, to locate parties holding similar posi-tions, to articulate and widely disseminatetheir views, and to more effectively and effi-ciently organize their political involvement. Al-ready we see evidence of the new technologiesbeing used in several of these ways.

In the past few years, for example, a grow-ing number of political leaders are beginningto use the new technologies to communicatemore effectively with their constituents. Anumber of senators and representatives nowproduce their own news clips and interviews,which they transmit via satellite to their localtelevision stations. This technique allows themto speak directly to the public, without otherscommenting on, or interpreting, their remarks.58

Computer technology also provides newways to enhance the efficiency of political com-munications. Using the mass media, for exam-ple, politicians have to spend considerablemoney and effort to send a message’ that willhave enough overall appeal to pay for the ef-fort. Using the new electronic media, on the

—.————‘“Paul West, “The Video Connection: Beaming It Straight

to the Constitutents, ” Wasfu”ngton Journalism Review, June1985, pp. 48-50. Congressmen have always appealed to the publicdirectly through newsletters, questionnaires, and other frankedmaterials. However, some observers consider the use of satel-lite technology as a different kind of development, which maygive cause for alarm. Unlike the previous kinds of appeals, whichwere sent to individuals and which were clearly identified asbeing politically oriented, the new video materials are often dis-tributed as part of local news broadcasts, and thus their originand intent might be misconstrued.

other hand, whether it be cable, teletext, or thecomputer, politicians can “custom target”their messages to those who are the most likelyto be responsive to it. In this manner, they canmore efficiently allocate their time and re-sources, focusing them on those voters whoare the most likely to give them support.59

The new technologies, moreover, have poten-tial to aid citizens in acquiring the informa-tion about government that they need in or-der to participate effectively in political life.A growing number of communities and govern-ment agencies, for example, now allow individ-uals to access their computerized records usingpublic terminals.60 Moreover, some people hopethat, in the future, individuals will not onlybe permitted to access an agency’s data butalso the computer software used to analyze thisdata. With such information, citizens wouldbe able to rerun agency decisionmaking mod-els, using their own assumptions or data.61 In

6 2 a n d t e l e t e x t6 3 p r o v i d eaddition, cablecasting—-.——59 Kevin L. Kramer and Edward J. Schneider, “Innovations

in Campaign Research: Finding the Voters in the 1980s, ” RobertG. Meadow (cd.), New Commum”cation Technologies in Politics:The Papers for a Conference, The Washington Program, An-nenberg School of Communications, 1985. See also William C.Paley and Shelly Moffett, “The New Electronic Media-InstantAction and Reaction, ” (knpm”gns and Elections, C. 4, 1984,pp. 4-12.

~he idea of government databases, accessible to the pub-lic, has existed since the 1960s and early 1970s. At that time,many people hoped that the automation of government opera-tions would produce vast stores of information about the gov-ernment and community which could be made available to in-terested citizens through remote computer terminals. Althoughthe ideal of remote access never materialized, today use of pub-lic terminals for access to these databases within governmentagencies is common, and becoming more so. Kenneth L.Kraemer, John Leslie King, and David G. Schetter, innovativeUse of Information Technology in Facih”tating Public Accessto Agency Decisionmak”ng: An Assessment of the Experiencein State and Local Governments, final report prepared for theO~~~;:;f Technology Assessment, March 1985, pp. 35-36.

“Utilization of these channels by local government is gener-ally low. Most cities have only about two cable applications forgovernmental affairs programming. These have mainly beenlimited to a variety of one-way services that require a minimalproduction effort, such as for broadcasting city council meet-ings, for community bulletin boards, and for calendars and shortlocal news items. Ibid., p. 35.

“There is considerable potential to provide public access toinformation related to government decisionmaking via teletextand videotex services. At present, the kinds of information pro-vided generally are limited to such things as notification aboutschedules for hearings, meetings, etc., or to the posting of theresults of such activities. Ibid.

Ch. 2—intellectual Property Goals in a Changing Information Environment ● 4 7

new channels for public access to governmentaldecisionmaking by increasing the levels of pub-lic awareness, interest, and knowledge aboutgovernmental affairs.

To effectively champion one’s views, indi-viduals, however, do not just act alone; theyact in concert. The new technologies, with theircapabilities to store, manipulate, retrieve, andnetwork are optimally suited to help them inthis regard. With a personal computer and amodem, individuals can collect and store in-formation related to their concerns; they canmaintain lists of potential supporters and con-tributors and target specific messages to them;they can match organizational resources withorganizational needs; and they can gain con-stant feedback about the progress being made.Figure 2-4 below illustrates, for example, howthe new technologies can manipulate and struc-ture information in a way that will improveboth the efficiency and effectiveness of a po-litical campaign.

Clearly one need not be a seasoned politicalactivist to take advantage of these new capa-bilities. Acting on his own, one man in ColoradoSprings, for example, led a successful cam-paign to block a local ordinance placing restric-tions on home-based entrepreneurial activities.Surprised that he was the only citizen to at-tend the first hearing on the ordinance, hebrought the issue to the community’s atten-tion by publishing it together with a list of hisconcerns on his computer bulletin board. Asmall notice in the local newspaper helped toadvertise his plan. A number of people contrib-uted their comments via the computer net-work. When, several weeks later, a second hear-ing was held, 175 people appeared to defeatthe ordinance.64

Information technologies can even be usedto lobby. Lobbyists for the EnvironmentalFund, for example, carry a personal computerwhen visiting congressional offices. Their spe-cially designed interactive software allows con-gressmen to look at population projections

“’Dave ~ughes, “The Neighborhood ROM, Computer-AidedLocal Politics, ” 45, Whole Earth Ret’iew, March 1985, p. 89.

using a range of different assumptions. Accord-ing to lobbyist Casy Dinges, this kind of in-teraction is not only effective in informing con-gressmen of an organization’s point of view;it also provides them with a memorable experi-ence, thereby engaging their interest in the is-sues over the long term.65

Because of their effectiveness as politicaltools, the new technologies are becoming es-sential to all those who aspire to influence thepolitical process. For, just as these tools areoften the critical competitive factor in the eco-nomic realm, so too are they in the politicalrealm. Thus, politicians and politically activecitizens, like their businessmen counterparts,are hurrying to establish their own informa-tion bases. This move towards technology isvery apparent, for example, at the level of na-tional politics. Trying to catch up with theRepublican Party, which began very early toincorporate technology into its campaign oper-ations, the Democratic National Committee isnow endeavoring to equip itself with an infor-mation infrastructure that will include a na-tional bulletin board, that is capable of trad-ing political information between the nationaloffice and key House candidates.66

With the numerous possibilities that the newtechnologies afford, attention is becoming, fo-cused on the politics of information. In the in-ternational arena, for example, Third Worldcountries now assert that the control over in-formation within their national boundaries isvital to their economic, political, and socialwell-being. To achieve their ends, they are call-ing for a new World Information Order, thatwould allow them to select the information thatenters their nations and that would assurethem access to the information they requirefor development.67

“Interview with Casy Dinges, Lobbyist, EnvironmentalFund, 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-mation Order, Information and Society Series (Amsterdam:Chartwell-Bratt Ltd., 1984).


Figure 2-4.— Development of Custom Targeting Database

Work flow

.

Survey Census Electiondata data returns

.

Derive Derive neighborhood Derivecustom 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 leastattractive on vote intention

. Select best “neighborhood” targets● Determine appropriate message appeals

I

w

Registered voter fileI

● 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 listsforms Precinct walk lists Mailing labels Precinct lists

Clerical needsb &

SOURCE Kevin L Kramer, Edward J. Scheneider, “Innovations in Campaign Research, Finding the Voters in the 1980s, ” New Communications 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 ● 4 9—

Political observers in advanced industrial-ized societies are also considering how the newtechnologies might affect political life. Amongthem, they have developed two quite distinctand contradictory scenarios. One of theseposits “the rise of the computer state."68

According to this scenario, government andlarge corporations will use the centralized stor-age and processing capabilities of computertechnology to consolidate their control and tomonitor and manipulate behavior. The secondscenario, in contrast, envisions the oppositestate of political affairs. Characterizing the newtechnologies as “technologies of freedom, ” thisview of the future postulates that, given theirdecentralized use and increased availability,these technologies will lead to a dispersal ofpolitical power and permit enhanced participa-tory democracy.”

Evidence can be found to support both ofthese contentions. As has already been pointedout, some local communities are taking stepsto increase the public’s access to information.On the other hand, taking advantage of themonitoring and processing capabilities of thenew technologies, government is looking morefavorably at the prospects of employing suchdevices as electronic surveillance, computermatching, and polygraph testing.70 In the longrun, the political outcome will depend less onthe technology itself and more on the legal andsocial structure that determines how the newtechnologies will be used.

Opportunities in the Cultural Realm

Culture is the realm of “sensibility of emo-tion, moral temper, and of the intelligence[that] seeks to order these feelings.’’” Provid-ing a consistent moral and aesthetic frame ofreference, it serves to develop and sustain the

‘“See, for example, David Burnham, The Rise of the Com-puter State: The Threat to Our Freedoms, Our Ethics, and OurDemocratic Process (New York: Random House, 1984).

‘‘Ilarlan Cleveland, “The Twilight of Hierarchy: Specula-tions on the Global Information Society, Bruce R. Guile (cd.),Information Technologies, p. 61.

U.S. Congress, Office of Technology Assessment, Federal(;o~ernment Information Technolog~’: Electronic Sur\’eillanceand (’i~rif I.iberties, OTA-C IT-293 (J1’ashington, DC: U.S. Go\r-ernment Printing (Mice, October 1 985).

Bell, Cultural Contradictions, p. 12.

identities of both individuals and societies.72

This realm comprises all of those imaginativeand spiritual activities—such as painting, po-etry, or music, as well as litany, liturgy, andritual—whereby men and women seek to un-derstand their natures–who they are, theirrelationships to others and to God.73 Althoughthe ways that people have dealt with these ex-istential concerns have changed considerablyover time and in different eras, the themes thathave preoccupied mankind–death, tragedy,love, sacrifice, heroism, obligation, and re-demption–have remained constant. Thus newart forms and new ideas do not replace old ones;they become apart of an ever expanding sourceon which individuals can draw to recreate andreinterpret aesthetic and religious experience.The cultural realm, then, is governed by theprinciple of communal sharing and exchange.74

Communication is the process by which cul-ture is developed and maintained. For it is onlywhen people develop language, and thus a wayof communicating, that a culture can, in fact,emerge and be imparted.75 Information, thecontent of communications, is the basic sourceof all human intercourse.7’ Over the course ofhuman history, it has been embodied and com-municated in an ever expanding variety ofmedia, including among them spoken words,graphics, artifacts, music, dance, written text,film, recordings, and computer hardware andsoftware. Together, these media and the chan-nels through which they are distributed, con-stitute the web of society, which determine thedirection and pace of social development. Seenfrom this perspective, the communication of in-formation permeates the cultural environmentand is essential to all aspects of social life.77

Linked as they are to all social activity, thenew information and communication technol-ogies provide endless opportunities to enhancethe cultural realm. Given their networking ca-

“Without a cultural tradition, individuals interactionswould be meaningless. For, in order to define themselves andto take purposeful action in different situations and in relation-ships to others, individuals need reference to a relatively stableconstruct of shared symbols. Talcott Parsons, The Social Sys-tem (Glencoe. IL: Free Press, 1964), pp. 11-12.

“Bell, Cultural Contradictions, p. 12.“’Ibid. p. 15.“ Ibid.“Pye, Political lle~’elopment. p. 4.

Ibid.

50 c /intellectual Property Rights in an Age of Electronics and Information

pabilities, they provide an expanded infrastruc-ture for information sharing and exchange.They can be used, moreover, not only to gen-erate greater amounts of information and newkinds of cultural forms, but also to make thisknowledge more accessible and to provide itin more convenient and suitable ways. In addi-tion, because they are decentralized and widelyavailable, they open the way for many new peo-ple to become actively involved in creativeactivities. Finally, given their ability to storeand retrieve vast quantities of information,they can serve as a storehouse of cultural re-sources, making them accessible and availablefor generations and civilizations to come.

Many of these opportunities are already be-ing developed. Most prominent is the oppor-tunity to provide more and more information.Between 1960 and 1977, for example, the wordssupplied in all media grew at a rate of 8.7 peryear, which is 5 percent faster than the rateof growth of the the GNP (measured in con-stant dollars). The total number of wordsproduced has increased from 1.07 X 109 in 1960to 3.36 x 109 in 1977.78 And individuals areconsuming, on the average, 1.2 percent morewords each year. As already noted in figureS-3, the largest proportion of this growth isattributable to electronic media.

Moreover, this information can now be pro-vided in a much greater number of forms,giving people the opportunity to have morecontrol over, and choice about, the kinds of in-formation and cultural works that they enjoy.One new technology that will increase infor-mation channels, for example, is videotex. Bytaking advantage of television’s full channelcapacity, this technology can augment thenumber of information outlets 100-fold.79 Othernew technologies that increase the availablesources of information are videocassette re-corders, optical disks, direct broadcast satel-

——‘81thiel de Sola Pool and Roger Hurwitz, “Methodological

Issues in the Measurement of Information Flows, ” Workshopon Measurement of Information, Sponsored by the NationalScience Foundation, Research Program on Communications Pol-icy, Massachusetts Institute of Technology, July 1982, p. 8.

“’Irving Louis Horowitz, “New Technology, Scientific Infor-mation and Democratic Choices, ” Information Age, vol. 5, No.2, April 1983, p. 69.

lites, and computer bulletin boards, to namebut a few.

The new technologies also allow people toreceive information specifically tailored to theirneeds. Today many newspapers, for example,use computer technology to create and distrib-ute special editions for different geographicalaudiences .80 Similarly, community, religious,and citizen-based organizations use technol-ogy to select the audience for whom their mes-sages would be most relevant. Using hometechnologies, people can also select the infor-mation they desire. They might, for example,choose bibliographic data or financial informa-tion from on-line databases such as the Sourceor CompuServ. Or, they might just place aquery on their electronic bulletin boards.

With the new technology, people can, more-over, use information at times and under con-ditions that are most convenient for them.With an audio or video recorder, they can lis-ten to or watch programs at a time other thanwhen they were originally aired. Moreover,they can rent or buy an ever growing numberof tapes and programs to enjoy at their leisurein their homes. Such flexibility not only allowsviewers the choice of when and what to watch;because it permits them to record program-ming for later viewing, it also allows them toexpand their repertoire of home entertainment.

The power of the new technologies to en-hance the cultural realm are evident not onlywith respect to the quantity, variety, and ac-cessibility of the information that individualscan receive in their homes. Of equal, if notmore, significance is the fact that these tech-nologies are interactive. As such, they en-courage active, not passive, behavior.81 More-over, given their ability to copy, store, andreprocess information, and to transmit it tolarge audiences, they make it possible for or-dinary individuals to carry out activities thatonce required the skills of a specialized elite.82

Now conceivably, everyone can be a creator

‘“Anthony Smith, Goodbye Gutenberg: The NewspaperRevolution in the 1980s (Oxford: Oxford University Press, 1980),pp. 51-61.

“Horowitz, Information Age, p. 69.“’Ibid.

Ch. 2—lntellectual Property Goals in a Changing information Environment ● 5 1

and a publisher. Each person can actively con-tribute to his culture, and not just partake of it.

The ability of technologies to help individ-uals reach out to the community is no wherebetter illustrated than in the case of videotex.Although this technology has not yet takenhold in the United States, the French experi-ence with it provides a clue about what a na-tional system such as this might entail. Es-tablished by the French Government in 1981,the French system, Teletel, now consists of 1.4million terminals—called Minitels —operatingin households and businesses throughout thecountry.84 Using le Kiosque, Teletel’s mostpopular feature, the French people can selectfrom over 200 different kinds of informationservices. Many use the system simply to “chat”with Minitel friends. Farmers rely on it for information about the weather and commodityprices. In addition, the government is now be-ginning to expand the system to provide hu-man services. Already, pilot programs areunderway to develop networks for such groupsas diabetics, victims of AIDS, parents ofepileptic children, and battered wives.85

Although the use of videotext has been muchless popular in the United States than inFrance, Americans are also reaching out toothers on electronic bulletin boards. Becom-ing increasingly popular among the public,bulletin boards not only allow individuals toaccess information from their homes; they alsohelp them to contact others in similar situa-tions or with similar needs, to discuss and shareinformation, or even to collaborate with themon-line. Groups, such as the disabled, who havetraditionally been isolated from society, havefound in networking a new way of socializing.”

The new technologies also serve as catalystsfor social action. Still eager to learn, manyelderly people have found computing to be avery engaging past time. In fact, because com-puting is an activity that does not require phys-

“Nadine Epstein, “Et Voila! I.e Minitel, ” The ,Vew YorkTimes i$lagine, Mar. 9, 1986, pp. 48-49.

‘ Ibid.“Sherry SonLag, “For Disabled, Computers Are Creating

New I,i\es,” The ,Vew York !l’imes, vol. 134, p. l(n) and 1(1).

ical prowess, and which can be done at home,a number of senior citizens are thinking aboutusing their newly acquired skills to begin a sec-ond career. Recognizing this potential inter-est, some communities have begun programsto get the elderly more involved.” The LittleHouse Senior Adults Center in San Mateo,California, for example, has been so success-ful with its computer programs that its direc-tors are now thinking about building a com-puter network for the elderly.

In the same way that individuals benefitfrom the new technologies, so too will culturalinstitutions such as libraries, schools, andmuseums. Using technology, these institutionswill be able not only to reach out into the com-munity to provide information and culturalworks to those who would otherwise not haveaccess to them, but also to help people to par-ticipate in cultural activities. Thus they serveto replenish the cultural store.

As documented in a previous OTA study,Informational Technology and Its Impact onAmerican Education, the computer and otherinformation-related technologies can helpeducational institutions play a major role inproviding people with the knowledge and skillsthey need to participate in and enjoy the ben-fits of an information age.88 The interactive na-ture of computer technologies allows studentsto become actively involved, and thus, moreengaged, in their own learning process. Usinga videodisk to simulate laboratory experi-ments, for example, students can view on amonitor the explosion that would take placeif they were to mix incompatible chemicals .89Videocassettes are also being successfully usedfor educational purposes. The film company,Education and Learning, for example, has re-

“’Kathy Chin, “The Elderly Learn To Compute, ” Infoworki,May 7, 1984, pp. 24-29.

‘*U.S. Congress, Office of Technology Assessment, Informa-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-ogy is already beginning to play an important role in providingeducation and training in some sectors, and that it is likely tobecome a major vehicle for doing so in the next few decades.

“Jim Bartimo, “Classrooms To Utilize Videodisc Technol-ogy, ” Infoworld, Mar. 12, 1984, p. 40.


cently compiled a Video Encyclopedia of the20th century, comprising 75 one hour video-cassettes that cover major events from 1893to 1985. Students can randomly access thesetapes to witness famous historical events, suchas the Scopes trial, or to view periodic piecesdescribing such things as the costumes of aparticular era.90

Universities, too, are also taking advantageof new technologies. Over the past few years,for example, many universities and collegeshave been experimenting with ways of in-tegrating computers into their course curric-ula. At Stevens Institute of Technology, forexample, interactive calculus programs areused to assist students in learning to do math-ematical analysis. In chemistry, computers areused for graphic simulations and for drill andpractice. In introductory computer graphicscourses, computers serve as electronic draw-ing boards, and in the labs they are being usedto assemble data, provide interface with equip-ment, and stimulate experiments that mightotherwise be unfeasible, too expensive, or toodangerous.91

Of particular benefit to universities will bethe development of computer networks, whichcan connect students and faculty members toa wealth of information, both on and off cam-puses. These networks, still in their infancy,are modeled after ARPANET, the researchnetwork developed by the Department of De-fense. Carnegie Mellon University in Pitts-burg, Pennsylvania, has already taken majorsteps to develop such a network. By the endof this year, they plan to link all of their stu-dents’ personal computers into a time-sharingfile system. This system will not only providefor point-to-point communication and elec-tronic mail; it will also allow the user to browsethrough all of the databases on campus.92 Otheruniversities such as MIT and Rensselear Poly-technic Institute are following suit.93 Most im-— ..——

“’Fred M. Hechinger, “Video Cassettes Bring History toI.ife, ” The IVew York Times, Jan. 14, 1986.

“Donna Osgood, “A Computer on Every Desk, ” BJ’te,June 1984.

‘“Ibid.“MIT network system is being developed through Project

Athena, a $70 million effort to create a single operating system

portant of all, universities are now thinkingabout expanding their networking efforts tolink their own systems to those that connectresearchers and research throughout theUnited States.94

As institutions that acquire, store, manage,and disseminate information, libraries are alsowell suited to take advantage of the opportu-nities that new technologies afford. And, infact, these technologies have affected allaspects of library services. Software is nowcommercially available for practically all li-brary operations: circulation, inventory, acqui-sitions, periodicals, cataloging, and reserves.Moreover, using these technologies, librarieshave developed networks that can access na-tional databases, allowing users faster andmore efficient access to information.

Considering all of these opportunities to-gether, the new technologies would appear tohave been designed especially for a modern agesuch as ours, which seeks self-fulfillment andself-realization. They offer convenience andpersonal choice. They can promote self-discov-ery. And with them, people can enter newrealms, mental as well as physical.

Whether or not these opportunities are fullyexploited is, of course, uncertain. For just asthere are two opposing scenarios about politi-cal life in an information age, so too are theretwo visions of the impact of technology on theindividual, one more favorable than the other.While acknowledging their potential, some peo-pie, for example, are concerned lest these tech-nologies serve to further divide the world be-tween the information rich and the informationpoor, reinforcing or even exacerbating exist-ing social and economic differences. In fact,the more powerful the technology, the widerthe gap might be.

that will allow programs available on one part of the systemto be available on all others. Similarly, Rensselaer PolytechnicInstitute is planning a system that will not only be geared toproblem-solving and calculations, but that will also serve to pro-vide electronic mail, word processing, on-line libraries, and com-munication among faculty and students. Ibid.

“Dennis M. Jennings, Lawrench H. Landweber, Ira H.Fuchs, David J. Farber, and W. Richards Adrion, “ComputerNetworking for Scientists” Science, vol. 231, Feb. 28, 1986,p. 950.

Ch. 2—Intellectual Property Goals In a Changing Information Environment ● 5 3

Those who are concerned fear that the poorwill be unable to afford the products of the in-formation age if they are distributed primar-ily in the market.95 They worry, moreover,about the possibility that only those who arealready skilled will be able to take advantageof the highly differentiated and individualizedservices offered by the new technologies.96

“see, for example, Carol A. Tauer, “Social ,Justice and Ac-cess to Information, ” Minnesota Libraries, vol. 27, No. 2, sum-mer 1982, pp. 39-42; see also, Stephanie Siegal, ‘‘The IIigh Costof Information, ” Freedom of Information Center Report, No.489, School of Journalism, University of Missouri at Colum-bia, March 1984, pp. 1-7.

‘E;dward Plowman, “The Communications Revolution, ”ASI.ZB Proceedings, vol. 33, No. 10, October 1981, p. 377.

They fear too that, given the growing marketvalue of information, information providersmay increasily focus on producing high costand highly profitable information products andservices and cut back on their efforts to meetthe information needs of the poor.97 Where,they ask, in the midst of the information revo-lution, is the information that ordinary peo-ple need to solve their everyday problems.98

‘“Ibid.‘“b;ugene Garfield, “Societ-y’s Unmet Information Needs, ”

.4S1S Bulletin, october No\rember 19N5, p. 6.

THE POTENTIAL FOR CONFLICT IN THE USEOF NEW TECHNOLOGIES

The new communication and informationtechnologies will play a greatly enhanced rolein all aspects of life. In fact, as we have seen,their availability and use may, in many cases,be the critical factor for success. The enhancedvalue of these technologies is reflected, firstof all, in the growing number of people who,from whatever realm of life, are striving to inte-grate these technologies into their daily activ-ities and operations. It is reflected, moreover,in the greatly increased market for informa-tion-based products and services, and theflourishing of new industries to provide forthese burgeoning information needs.

Not all of these technological opportunities,however, will be exploited. In fact, takingadvantage of some opportunities may precludethe development of others. The potential forconflict in the use of new technologies can beseen most clearly by contrasting how informa-tion is valued in the realms of economics, poli-tics, and culture. Conflicts are likely to be mostpronounced when the economic value of infor-mation is very high. For it is under such cir-cumstances that the discrepancy between theneed for exclusion, and the need for distribu-tion, sharing, and use is the most starklydrawn.

From the perspective of the economic realm,the value of information is in its exclusivity—that is to say, in the ability of its owner tobe able to exploit the difference between whathe knows and what other people do not know.99

In a horse race, for example, the value of anaccurate assessment of the horse’s chance in-creases directly with the exclusivity of thatwisdom, and the value is obviously decreasedby sharing. Similarly, an important factor inencouraging investment is the presumptionthat the investor is better informed than othersabout the outcome of the enterprise. To thedegree that all investors have equal access toinformation this potential for difference is re-duced, along with the incentive for invest-ment.100

To be supportive of democratic values, in-formation, on the other hand, cannot be exclu-sive. It must be plentiful, varied, and the chan-nels of access to it must be open. Politiciansand political advocates, for example, seek toinfluence through persuasion. To be success-ful, they must disseminate their views aswidely as possible. In contrast to the business-

“qBurns, The Economics of Information, p. III-3,““’Ibid.


man who seeks to maintain his trade secrets,the politician benefits when his cause becomesthe subject of widespread discussion. And ifthey are to be politically responsible and tohold legislators politically accountable, citizensalso need to become acquainted with and dis-cuss a wide range of political points of view.

In the cultural realm too, information ismade more valuable not by its exclusion, butrather by its perpetual use and reuse. To un-derstand a thought or an idea, people mustprocess it together with the information thatthey already have. In making use of informa-tion, therefore, they do not diminish it. Theyenhance its value.101 Moreover, even the indi-viduals who are involved in cultural activitiescan benefit from the repetitive use of theirworks. For a scholar’s reputation and prestigewill be more rapidly enhanced the more oftenhis works are cited, and will dwindle if hisworks are ignored. Similarly, a recording art-ist may seek to have his records broadcast aswidely as possible, just to establish a wide-spread reputation and a loyal following. 102

Concerned primarily with the use and flowof information in society, intellectual propertylaw has historically served in the United Statesto decide which technological opportunitieswould be developed, and thus which valueswould be served. For example, the grantingof an exclusive right to the creator or providerof an intellectual work changes the basis onwhich it is made available to society. The cri-teria to use the work becomes the ability topay. The granting of such a right, therefore,can favor the values of the economic realm overthose of the political and cultural realms. Onthe other hand, the fair use doctrine, which pro-vides exceptions to what would otherwise beconsidered a copyright infringement, has the——

‘(’’Harlan Cleveland, “Information as a Resource, ” The Fu-turist, December 1982, p. 37.

““”Harlan Cleveland, “The Twilight of Hierarchy, ” pp. 186-187. Gossip, for example, spreads rapidly among family mem-bers, friends, and neighbors. Books and magazines, and nowrecords, tapes, software programs, and films are commonlypassed along from one person to the next. Ideas are discussedand debated at social gatherings, among scholars, and in thepress. And by making information more available, and moreeasily accessible, the new technologies will foster these prac-tices even more.

express purpose of fostering the values of thecultural and political realms. In like fashion,the first sale doctrine, which limits the propri-etor’s control of a work once he has sold it, isdesigned to ensure public access to works.However, neither of these doctrines are sup-portive of the value of exclusivity.

In resolving these issues, policy makers havesought to strike a suitable balance between theneeds of creators, producers, and distributorsof intellectual property and the social, eco-nomic, and political needs of the nation as awhole. In such a fashion, intellectual propertylaw has been able to simultaneously serve awide variety of social and economic public pol-icy goals.

The ability of intellectual property law tostrike such a balance was not particularly dif-ficult in the past, when the social and economicstakes in information were lower than todayand when relatively few and well-defined play-ers were involved in the intellectual propertyprocess. Information-based products and serv-ices were peripheral to the performance ofmany social and economic activities, and peo-ple had lower expectations about their use andthe level of profit that might be derived fromthem. As a result, issues involving the grant-ing of intellectual property rights could beworked out among the major players withoutmuch public involvement or concern.

The resolution of these issues in an informa-tion age, however, will be more problematic,requiring that more stakeholders be taken intoaccount and that decisions be made about thedistribution of incentives and rewards. Giventhe variety of opportunities that the new tech-nologies afford, the increased value of informa-tion, changing relationships among the tradi-tional participants in the intellectual propertysystem, and rising expectations about the ben-efits of these technologies, the number of stakeholders with disparate interests and compet-ing claims on the system will be greater thanever before. In such a context, the grantingof intellectual property rights, instead of mutu-ally serving a variety of different stakeholdersmay actually pit one against another.

Ch. 2—Intellectual Property Goals in a Changing Information Environment ● 55

The problem is exacerbated by the fact that,as the market value of information increases,so does the pressure to treat information activ-ities in economic terms alone. Today, for ex-ample, there are a growing number of peopleengaged in information activities, which wereonce clearly considered to be outside of therealm of economics, who are now aggressivelycompeting to economically exploit their works.And, to assure that they can do so, they areavidly seeking intellectual property rights.

Not surprisingly, such rivalry for ownershipis becoming common in institutions of highereducation and research, where the potential forprofits is high. Here the claims and counter-claims of ownership are continually multiply-ing: claims of students against students, stu-dents against faculty members, faculty againstfaculty, and the university against studentsand faculty. ’03 A particularly contentious is-sue in this regard is “work-f or-hire.” Someuniversity administrators now argue, for ex-ample, that, just as companies automaticallyown the copyright on works done on companytime and with company resources, so toouniversities should have the rights to every-thing created in conjunction with their facil-ities .104 These issues of ownership will not beeasily resolved. For, as the Carnegie MellonUniversity flowchart illustrates, there are awide variety of ways in which rewards can bedistributed. (See figure 2-5.)

As the rush to make a profit in informationbecomes increasingly prevalent, many peopleare less willing to share their ideas and ex-change their views. Some teachers report, forexample, that they are unwilling to use com-puter software that they have developed in

‘r’’ Dorothy Nelkin, Science as Intellectual Property: WhoCon.tro)s Scientific Research (New York: Macrnillian Publish-ing Co., 1984), pp. 1-8.

“’’Just beginning to grapple with these issues, universitiesvary considerably in their work for hire policies. Brown Univer-sity, for example, follows a relatively liberal policy, allowingfaculty, students, and staff to share rewards. In contrast, atVirginia Polytechnic Institute lawyers for the university haverecently concluded that students’ assignments are the propertyof their professors. Ivars Peterson, ‘‘Bits of Ownership: Grow-ing Computer Software Sales Are Forcing Universities To Re-think Their Copyright and Patent Policies, ” Science News, Sept.21, 1985, pp. 189-190.

Figure 2-5. —Carnegie Mellon Flowchart

rd

p e r a g r e e m e n t

r,

,,

ownership

,

U Has firsl c Has firs!optxon to 0Pt30n todevelop develop

I I

C Receives

net

.,U Receives U Rece, ws16°0 of C S n o n e x c l u s i v e

net above risk hcense

SOURCE Richard Stern, Carnegie-Mellon University


their classrooms. Because of its high marketvalue, they fear that their local school districtwill try to copyright it.105 Similarly, many peo-ple who participate in joint projects, such aselectronic conferences, are becoming more hesi-tant about what they say. Because their ideasbring a high price, they want to reserve forthemselves the right to profit from them.106

The growing focus on protection and secur-ing ownership rights is also evident in the fieldsof art and entertainment. One extreme, but per-haps highly illustrious, example is the recentcase in Seattle, Washington, where the estateof a well-known songwriter sued a church forsinging the benediction to the tune of a copy-

“’’Discussion with participants, Workshop on EducationalPolicy, National Educational Computing Conference, summer1984.

““Ma rguerite Zientara, “Watch Your Words: Who Owns In-formation in an Electronic Conference?” Moworki, Aug. 6,1984,pp. 333-334.

and /formation

righted melody. Protesting the profit-orientedclimate of the times, one outraged churchgoerprotested saying:

Well, we do understand that the copyrightlaw becomes involved. However, to us simplefolk, it would seem that both creator andowners of [the tune] could very easily waivetheir rights and by doing so enjoy a sense ofgreat honor and deep gratification that theirsong is now a beloved hymn sung in chorusby many thousands of good people duringchurch services, rather than to threaten andcrush their own beautiful song into nearoblivion.

In these times, these fearful, unruly, ego-tistical and utterly selfish times, this actionto stop the singing of a hymn in our churchesis surely the ultimate low.

“]”Harry A. MacLaren, “Letter to the Editor, ” SeattleTimes, July 26, 1985, p. A-20.

IMPLICATIONS FOR THE INTELLECTUAL PROPERTY SYSTEMTo the Founding Fathers, the design of an

intellectual property system appeared a rela-tively simple matter. Building on a long tradi-tion, and on years of European experience, theysimply followed the British model, which wasequally well suited to meet both countries’needs. This model assumed that, by grantingeconomic rights to the creator of intellectualworks, information would be created and dis-seminated, and thus a number of other socialand economic objectives would be achieved.In this model, not only were other societal goalsunderstood to be furthered by fostering thelearning environment, these goals were alsoseen to be mutually compatible and self-en-forcing.

In an information age, the situation is morecomplex. Information is central to all aspectsof society. Moreover, the new information tech-nologies provide new opportunities to moveahead in almost all areas of activity. With theseopportunities, however, will also come new con-flicts. For, given the pivotal role that informa-

tion will play in the future, its enhanced valuewill give rise to a greater number of compet-ing claims on its use.

Given this potential for conflict, a key as-sumption on which the Founding Fathers es-tablished the intellectual property system mayno longer be valid in an information age. In-stead of equally fostering a number of diversepolitical, economic, and cultural goals, thegranting of economic incentives may, undersome circumstances, pit one kind of goal, orone societal purpose, against another. In anenvironment such as this, it is more essentialthan ever to remember that in making deci-sions about the intellectual property system,we are making decisions about the nature ofsociety itself. Therefore, in addressing thequestion of what are the most appropriategoals for the intellectual property system inan age of information, we must ask ourselvesfirst, given all of the opportunities that the newtechnologies afford, what kind of a societywould we like to live in.

Chapter 3

The Accommodation of IntellectualProperty Law to Technological Change

Contents

PageFindings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Introduction: The Law’s Race With Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Part I: Some Basic Intellectual Property Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60The Nature of Intellectual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60Intellectual Property Boundaries and Policy Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 61Idea and Expression-The Boundary Between Mine and Yours . . . . . . . . . . . . . . . . . . 62“Clear Distinction” Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62"Abstractions" Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Some Related Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Part II: The Impact of Technology on Three Varieties of Information-Based Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

An Open-Ended Protection Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Three Categories of Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Computer Programs and Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 87

Part III: Implications for Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88Option #l: Rely on the Marketplace. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89Option #2: Judicial Accommodation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Option #3: Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Option #4: Sui Generis Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Option #5: Revision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92Option #6: Alternatives to Copyright and Patent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

TableTable No. Page3-1. Who Should be Responsible for Solving Intellectual Property Problems?. . . . . . . . . 89

FiguresFigure No. Page3-1. Property Rights in Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 643-2. Types of Information-Based Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673-3. Flowchart for the ’’Minstrel’’ Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713-4. Computer Programs- "What Is Protected?".. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Chapter 3

The Accommodation of IntellectualProperty Law to Technological Change

●

●

FINDINGSThe application of a uniform system of intel-lectual property principles, such as that em-bodied in copyright and patent law, to diver-gent types of information-based products mayno longer be possible. Modern technologiesare exaggerating dissimilarities between in-formation products that were once protec-table under a single system of law, and are,in some cases, giving rise to new productsthat strain the applicability of old principlesof law. Under these new circumstances, in-formation-based products can be groupedinto three large categories—works of art,fact, and function, which are subject todifferent principles of intellectual propertyprotection.

The assumption of intellectual property lawthat intellectual property rights-can be deter-mined and remain stable over time is less andless valid. Copyright law, in particular, as-sumes that the works it protects have a fixedform, and that ownership can be determinedby protecting particular expressions of in-formation. Today, however, computer andcommunication technologies are changingthe nature of information-based products ina fundamental way, making them dynamic,interactive, and functional components ofprocesses. The present system of copyrightlaw, which evolved under the model of printpublication, may no longer serve to deter-mine the boundaries of ownership in com-puter-based methods of creation and dissem-ination.

●

Some of these technological impacts may onlyappear in the long term, when technologiesfor creating and disseminating information become more widely used. Many of the tech-nologies, such as computer networks anddigital editing, are still in the developmen-tal stage, and the intellectual property is-sues they raise are only just emerging.

Some of the effects of technology on the ade-quacy of intellectual property law, however,have already begun to undermine its useful-ness as a policy tool, In particular, neithercopyright nor patent law has successfullyaccommodated works of function, such ascomputer programs. Copyright law may pro-vide either too much or too little protectionfor them, and patent law, while available forsome novel processes that utilize computerprograms, may be unavailable or too cum-bersome to protect many types o f computerp r o g r a m s .

Alternatives to Federal intellectual propertyprotection are available, but these too havetheir drawbacks. State trade secrets law, al-though widely used for specially designedproducts, is ineffective in protecting mass-marketed products. Moreover, it may entailforegoing uniform Federal and internationalprotections, and, in some cases, it may bepreempted by Federal law.

INTRODUCTION: THE LAW’S RACE WITH TECHNOLOGYTen years after the general revision of the have raised a

United States copyright law, new technologies law’s abilityfor creating and disseminating information change. This

new set of questions about theto accommodate technologicaluncertainty comes from many

59


quarters: the judiciary, the legal community,academia, and the creators whose work the lawis designed to protect. Such doubts are notlimited to copyright law; they extend to otherareas of intellectual property law where infor-mation technologies have also left their mark. *

Although most observers agree that tech-nology is changing the way in which intellec-tual property law operates, many disagree overjust how sweeping these technological changesare, and what ought to be done in response tothem. Some suggest that the changes areoccurring primarily at the margins of intellec-tual property law, and can be dealt with in-crementally by the courts or through specificamendments to the law.2 Proponents of thisview argue that new technological develop-ments are in many ways like “old wine in newwineskins. Some observers believe that,where problems are specific, they can be dealtwith in a specific fashion, without the need tocompletely rethink or revise intellectual prop-erty law.3 The Semiconductor Chip ProtectionAct is an example of a measured, specific con-gressional response to such a problem.

Others, however, believe that recent techno-logical changes are revolutionary, and have——- -..——.——.

‘See e.g.: {~ottschafk i. Benson. 409 U.S. 63,73 (1972):If programs ar[~ to be patentable, considerable problems

are raised which only commit tees of Congress can manage.‘l’[I]n the main, it seems to me, the Copyright Act is work-

ing pretty well. There are some gaps, some parts of it that don’taddress current needs, but I don’t think it is working all thatbadly right now. ” Testimony of David Lange before the Subcom-mittee on Courts, Civil Liberties, and the Administration of Jus-tice of the Committee on the Judiciary, House of Representa-tives, 98th Cong., 1st sess. on Copyright and TechnologicalChange, July 20-21, 1983, p. 73.

“’Some specifics of copyright law may change–some mayhave to change–but the basic principles of copyright . . . will,I think, bear retention. ” Jon Baumgarten, “Copyright at theCrossroads, ” Billboard, Nov. 12, 1983, p. 1.

fundamental implications for intellectual prop-erty law. Typical of this perspective is a state-ment in a recent report by The President’sCommission on Industrial Competitiveness:

Although the application of our intellectualproperty rules has been adjusted over timein response to changing commercial practiceand evolving technologies, the continuingstream of the new scientific advances calls forrethinking the very concepts derived fromearlier centuries on which those rules arebased. New concepts of what intellectualproperty is and how it should be protected–beyond patents, trademarks, trade secrets,and copyrights—may well be needed, as wellas sweeping changes in intellectual propertylaws and the ways they are administered andenforced. 4

Advocates of this position argue that theconcepts employed in intellectual propertylaw–” authorship, ‘‘ “invention," “writing"—and related notions, are increasingly the ob-solete products of a bygone age of print.

Participants in this ongoing debate oftenconfuse the issue of whether intellectual prop-erty, as presently conceived, should survivewith the issue of whether it can survive. Thischapter does not attempt to evaluate the firstof these questions, but considers the viabilityof the present system in the light of vast tech-nological change. The question of viability canbe separated into two distinct issues: enforce-ment, which is dealt within chapter 4, and thelaw, which is the subject of this chapter.

‘Global Competition: The New Reality, The President’sCommission on Industrial Competitiveness, January 1985; Ap-pendix D, “A Special Report on the Protection of IntellectualProperty Rights, ” p. 305.

PART I: SOME BASIC INTELLECTUAL PROPERTY CONCEPTS

The Nature of Intellectual Property While personal property law determines owner-ship 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 ofdle of rights attached to the intangible form two types of property rights in the same itemof an intellectual, scientific, or artistic creation. illustrates this distinction:

Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 61

●

●

s

●

●

9

A phonorecord with“Misty" recorded on it

A copy of the localtelephone hook

A bottle of chemical Z

A microbe containing

●

●

●

●

●

●

intellectual property.

The circuit design for all BrandX television setsThe pictoral work embodied inall copies of the photograph‘ ‘ T r e e sThe musical compositionembodied in all phonorecordswith "Misty" on themThe particular arrangemcnt ofnames in the literary workknown as the local telephonebookA method of manufacturingchemical ZThe process of engineeringgene Y

Civil War, just as patent rights in a particularthermostat design could extend to all devicesthat performed similar functions.

In the United States, however, policy makershave set far more limited boundaries for copy-rights and patents. As stated in the U.S. Con-stitution, ownership in writings and inventionsis bounded by policies that will ‘‘promote theprogress of science and useful arts."5 Mark-ing off boundaries in intellectual property isessentially a policy choice which has major im-

. . . . . plications for innovation. Boundaries that areAn intellectual property right is the exclu-

sive prerogative to make tangible objects inparticular forms. At its simplest, a copyrightis the exclusive right to make copies of partic-ular tangible expressions of information, anda patent is the exclusive right to make, use,or sell a particular application of an idea.

Intellectual Property Boundariesand Policy Objectives

Any property right, whether tangible or in-tangible, must have boundaries. Property isby definition exclusive; what one owns mustbe distinguished from what is owned by others.Boundaries of tangible property are relativelyeasy to establish. A property right in a parcelof real estate, for example, refers to a specific,measurable terrain.

However, because ownership in intellectualproperty attaches to the intangible character-istics of tangible objects, the boundaries ofownership must be established in terms ofthose intangible characteristics. For example,to extend a property right to the author of abook on auto mechanics, one must specifywhich features of the book are subject to theproperty right: the precise wording of the book;the structure of paragraphs; the style of writ-ing; the organization of topics; the informationconveyed to a reader; or the practice of automechanics as described by the book. The bound-aries of intellectual property are ultimatelyagreed on by convention, and require that pol-icy makers choose where and why they are es-tablished. In theory, copyright in a book onthe Civil War could extend to all books on the

‘marked too broadly may impair the ability ofindividuals to create, innovate, or improveupon the works of others. Boundaries that areset too narrowly, or that fail to protect the mostsocially valuable aspects of writings or inven-tions, may diminish the incentive to create orinnovate. To promote science and useful arts,policy makers must strike an optimal balancebetween what belongs to a creator and whatbelongs to the public domain.

For patents, the boundaries of ownership inan invention encompass only the novel featuresof that invention. Patent ownership is estab-lished by the “claims’ made in the patent ap-plication and accepted by the Patent and Trade-mark Office, and patent law requires that theclaimed invention be distinct from previous in-ventions, which are known as the ‘‘prior art.

In contrast, copyright protection attachesto a work at the moment of its creation, andthe law requires only that the work be origi-nal-that is, not a copy of another author’swork. Copyright law does not require that anauthor claim some aspect of a writing as hisown, or that a writing be distinguished fromthe prior art. Because copyright does not havea threshold determination of ownership, theboundaries of ownership in a work are, of ne-

“Article 1, Section 8, clause 8 of the Constitution, authoriz-ing the Congress to establish intellectual property, law, reads:

Congress shal l 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~and I n~entors the exclusII’e Right to their respect I\e \\’rtt ]ng~and I)isco\.cries

The term “Science, as it was used h~’ the authors of the Con-stitution, was derived from the Latin ‘‘scientia, meaning knowl-edge, or to know.


cessity, established by limiting ownershiprights to the particular manifestation or ex-pression of information. Copyright does notprotect abstract ideas, concepts, systems, andthemes.

This assessment is concerned exclusivelywith the effects of technology on proprietaryrights in information-based products and serv-ices. Since copyright law has been the tradi-tional system of protecting these works, theboundaries most germane to this chapter arethose established by copyright. For this rea-son, copyright law’s method of defining bound-aries-the “idea/expression dichotomy" —mer-its a detailed discussion.

Idea and Expression—The BoundaryBetween Mine and Yours

The distinction between idea and expressionis one of the most fundamental yet elusive con-cepts in intellectual property law. Ideas, assuch, are neither patentable nor copyrightable.To obtain a patent, the inventor must reducethe principles on which an invention is basedto a concrete application. The photoelectric ef-fect is not patentable, although the design fora particular photovoltaic cell may be. Similarly,copyright does not protect “[i]deas, abstractconceptions and similar matters, but ratherthe “manner of treatment, expression, inci-dents and details . . . "6 The distinction is cru-

cial, since a monopoly on ideas might impairthe very goals that intellectual property lawseeks to promote. If, for example, the idea ofcombining music and drama were protectedby copyright, Gilbert and Sullivan’s playsmight well have been the last musicals pro-

‘ Loew's, Inc. v. Columbia Broadcasting System, 131F. 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 wascodified in the 1976 CopJ’right Act as follows:

In no case does copyright protection for an original work ofau t horshlp extend to any idea, procedure, process, s.},stem,method of opera t]on, concept, principle, or disco~wr.),, regardlessof the form In which it is descrl})ed, explained, illus~rated, or em-hodled in such work.

17 [J. S.C. § 102(b) (emphasis addedl. None of these terms aredefined, and the legislative commentary on the subject saysonly that section 102(b) “in no way enlarges or contracts thescope of copyright protection. S.Rep. No, 94-473, supra at 54;H.R. Rep. No. 94-1476, supra at 5 7 .

duced. Instead, we have available a vast andvaried range of musical drama.

Despite its importance, the distinction be-tween an idea and an expression is difficult todraw with certainty. Through the years, courtshave developed at least two different theoriesof what the idea/expression dichotomy means.We will refer to these theories as the “cleardistinction” test and the “abstractions” test.

“Clear Distinction” Test

Copyright scholars generally regard the caseof Baker v. Selden7 as the wellspring of mod-ern thought on the doctrine of idea and expres-sion. This case concerned an alleged infringe-ment of Selden's Condensed Ledger, or Book-keeping Simplified, a book that consisted ofa series of blank ledger sheets and an introduc-tory essay explaining their use. The unique fea-ture of Selden’s ledger was that, “by a pecu-liar arrangement of columns and headings, [it]presents the entire operation, of a day, a weekor a month, on a single page, or on two pagesfacing each other in an account book. ” In hisown account book, the defendant in this caseaccomplished a result very similar to Selden’s,using a different arrangement of columns andheadings.

The Supreme Court, although agreeing thatthe plaintiff book might be copyrighted, nev-ertheless drew “a clear distinction between thebook, as such, and the art that it is intendedto illustrate. ” “[N]o one, ” said the court,‘‘would contend that the copyright of the trea-tise would give the exclusive right to the artor manufacture described therein. ” A c o p y -right in books on medicine, art, or mathematicsgives the author an exclusive right to print andpublish those books, but the systems, ideas,or methods described in them “are the com-mon property of the whole world” and anyauthor has the right to express or explain themin his own way. Moreover, since copyright, un-like patent, requires no novelty, the grant ofan exclusive right in the art described in a book,‘‘when no examination of its novelty has everbeen officially made, would be a surprise and

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-ince of letters patent, not of copyright.”8

“Abstractions” Test

Courts have interpreted “idea and expres-sion in other ways. The “clear distinction’test distinguished copyright from patent pro-tection, but did not define the scope of copy-right protection. If copyright protects only theliteral expression adopted by an author, it al-lows others to escape claims of infringementby changing the original in only trivial or in-significant ways. The courts have avoided thisresult by treating idea and expression as a con-tinuum of similarity. Thus, in Nichols v.Universal Pictures Corp.,’ Judge LearnedHand articulated what is now known as the“abstractions test”:

Upon any work . . . a great number of pat-terns of increasing generality will fit equallywell, as more and more of the incident is leftout. . . . [T]here is a point in this series of ab-stractions where they are no longer protected,since otherwise the playwright could preventthe use of his “ideas, ” to which, apart fromtheir expression, his property is never ex-tended. Nobody has ever been able to fix thatboundary, and nobody ever can . . . As re-spects plays, the controversy chiefly centersupon the characters and sequence of incident,these being the substance.

The abstractions test differs subtly from theholding of Baker v. Selden, and points to a con-fusion in the meaning of idea/expression. Theabstractions test relies on general similaritiesbetween works that are largely a matter of de-gree. If, for example, it was alleged that MyFair Lady infringed Pygmalion, one would lookto the degree of similarity of expression in thetwo stories—the plot, the characters and their

‘Id. pp 842-44, The ruling in Baker is more subtle than itappears at first glance. The work in question was of an explana-tory, functional sort (see discussion below under works of func-tion), Unlike Furely artistic or factual works (see discussion be-low under works of art and works of fact). the accounting bookexplained a method or procedure, which thus raised the specterof patent-like protection not present in the case of art or fact.For artistic works in particular, “expression ‘‘ i.~ not limited to

the Iiteral expression of a u’ork, ‘‘else a plagiarist would escapeby immaterial \’ariations. ,Vichols t’. Unii’ersal Pictures Corp.,45 F.2d 1 1 9 (2d C’ir. 1930).

’45 F.2d 119, 121 {2d Cir. 1930), cert. denied, 282 ~J, S. 902(1931).

roles, and the dialog. The principle articulatedin Baker v. Selden, however, concerns the kindof protection afforded a writing, drawing a lineat the the manner of expression, and extend-ing to neither the underlying concepts or in-formation expressed, nor to the activities ortechniques described. These two analyses—the ‘‘abstractions’ test and the ‘clear distinc-tion” test—are often combined into the term‘‘idea/expression, but they are essentially dif-ferent, Although both limit the boundaries ofcopyright, each sets that limit in a differentway. As we shall see in Part Two of this chap-ter, neither of these two fundamental copyrightprinciples is particularly applicable to comput-er processable information.

Some Related Concepts

A number of closely related, but distinctcopyright principles can be derived from theidea/expression dichotomy (see figure 3-I). Forexample, in order to be copyrighted, a workmust be original, which simply means that itcannot have the same expression as anotherwork. The boundaries of a given original ex-pression also include the right to build uponit by creating a derivative work.11 A given copy-right is infringed when there is substantial sim-ilarity of expression between the original andanother work. The notion of a copyrightedwork emphasizes that the boundary of a givenexpression is intangible, and is distinct fromthe actual physical object–the copy–in whichit is embodied. 12 The work is the subject of in-tellectual property ownership; the copy is or-dinarily the private property of the purchaser.

—‘However, an identical, but independently created work, is

not an infringement, The ‘‘originality necessary to support acopyright merely calls for independent creation, not novelty,1 Nimmer on Cop~right, Y2,01 [A] ( 1982), originality} is, how-ever. subject to a de minirnus standard, and works ent~rely lack-ing in creativity or substance cannot be copjrrighted. Simplephrases, such as “apply hook to wall, ’ for example, maj notmeet this standard.

‘derivative work is defined in section 101 of the act as:. . a work t)ased upon one or more preexist Ing works, such asa translation, musical arrangement, drama tiTat lon, Slct Ion ali~ a-tlon, mot Ion picture version, sound recording. art reproduction,at)ridgment, condensation. or an}. ot her form in which a workmay be recast, transformed, or adapted.

‘Section 202 of the act says that “[ownership of a cop~T-right, or of any of the exclusive rights under a copyright, ISdistinct from ownership of an} material object in which the workis embodied, The material object, or copy, is usually the pri -\’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

Private propertyPublic domain

Ideas Copies

\Infringement through Infringement throughsubstantial similarity copying

\(“Abstractions” and“Clear Distinction ”

theories)

(including derivative works)


PART II: THE IMPACT OF TECHNOLOGY ON THREEVARIETIES OF INFORMATION-BASED PRODUCTS

The variety of intellectual and artistic worksprotected by copyright law in the United Stateshas grown steadily since Congress enacted thefirst copyright statute in 1790.13 As technol-ogy introduced new and unprecedented formsof expression into the commercial, artistic, andscholarly worlds, copyright law has taken eachinto its protective system of rights. Althoughthe forms of expression, media, and economicsof creation, distribution, and use varied widelyamong new types of works, copyright law ab-

sorbed each new type of creation with very lit-tle change to its underlying concepts, distin-guishing only slightly between the types ofworks that it protects.

An Open-Ended Protection Scheme

Copyright protects a vast range of works,many of which bear little similarity to eachother. Through the years, copyright has cometo protect virtually all artifacts of communi-— .

13Ch. 15, §1, 1 Stat. 12 cation: piggy banks and doctoral theses, tele-


vision programs and restaurant menus, ashtrays and news documentaries, bread wrappersand sound effects recordings, artistic photo-graphs and tablecloth designs, road maps andstock market reports, toilet paper designs andmovies, computer programs and greetingcards. Prior to the Copyright Act of 1976, awork had to fall under a category of work de-fined by statute to be copyrightable. Thus,each time technology created a new form ofexpression—photography, for example—Con-gress had to amend the copyright law.

The drafters of the Copyright Act of 1976sought to avoid the need for constant amend-ment by making the subject matter of copy-right open ended and “technology neutral."14

Instead of listing types of works, the act de-fines the attributes a work must possess to beprotected:

Copyright protection subsists . . . in origi-nal works of authorship fixed in any tangiblemedium of expression, now known or later de-veloped, from which they can be perceived,reproduced, or otherwise communicated, ei-ther directly or with the aid of a machine ordevice. 15

The act, therefore, treats all information-based products and services the same for pur-poses of copyrightability. By making the cri-teria of copyrightability nonspecific and purelyformal, the act gives the necessary and suffi-cient conditions of statutory protection appli-cable to any conceivable work, regardless ofthe technologies involved in its creation, dis-tribution, or use.

Since a work can be fixed in any tangiblemedium ‘‘now known or later developed, ” allworks fixed after 1978 are automatically copy-righted, without the earlier requirement thatthey be published or disseminated;16 and, with

“’Authors are continually finding new ways of expressingthemselves, but it is impossible to foresee th~~ forms that thesenew expressi~’e methods will take, The bill does not intend ei-t her to freeze the scope of copyrightable subject matter at thepresent stage of communication technology or to aIlmv unlim-lted expansion into areas completely outside the present con-gressional intent. Section 102 implies neither that that subjectmatter is unlimited nor that new forms of expression withinthat general area of sub]ect matter would necessaril}r be unpro-tected. 1 I. R. Rep. No, 94-1476.

17 U.S.C. §102(a),‘ 17 U.S.C. § 302(a).

some exceptions, all works are protected un-der the same basic bundle of rights. ”

Given the broad and pliable language of theact, with its emphasis on technological accom-modation, the question is how technology canaffect its continuing viability. The answer tothis lies in the very broadness of the conceptof “works of authorship, ” and in the legacyof copyright principles carried forward in the1976 Act. The 1976 Copyright Act assumesthat, by making “works of authorship’ a com-prehensive category, the copyright systemcould successfully assimilate unforeseeabletechnologically based works. However, as il-lustrated below, because it continues to useconcepts fashioned over the previous 200years, the new copyright law is, like itspredecessors, encountering some familiar prob-lems now placed in relief by modern tech-nology.

The central problem of copyright law’s con-tinued accommodation to new technologies liesin the indiscriminate application of the doc-trine of idea and expression to three fundamen-tally different categories of works: works ofart, works of fact, and works of function. Un-less the law recognizes the inherent differencesamong these types of works, technology maymake the boundaries of intellectual propertyownership difficult or impossible to establish,and less relevant to the policy goals the lawseeks to further.

Three Categories of Works

Although the copyright law adopts a uni-form approach to protected works, not all typesof information-based products are the same,nor can they be treated as if they were. A listof stock and bond prices, for example, differsfrom the musical score of a motion picture, andboth of these are distinct from a computer pro-gram. In the case of stock prices, the value isin the information itself—the number of sharestraded and the daily fluctuation in prices. Thevalue of a musical score, in contrast, lies in the

‘-17 U.S.C. §106. All works are subject to reproduction. der-ivation, and dissemination rights; some are subject to perfor-mance eights: others to display rights.


way it sounds to an audience—the appeal ofits melody, rhythm, and harmony. And com-puter programs are valued for what they do–their effectiveness at performing a given taskin a computer.

This analysis has identified three types ofcopyrightable works: works of art, works offact, and works of function. Figure 3-2 showsone way of conceptualizing this trichotomy,and gives examples of the types of information-based products and services that might fallinto each category. Although dividing lines be-tween each categories are not absolutely dis-tinct, major differences between the catego-ries do exist. It is these differences that poseproblems for the uniform application of copy-right principles to all three categories.

Works of Art and Interactive Technologies

The phrase works of art, as used in this dis-cussion, denotes works that are created fortheir own intrinsic value-whether that valueis primarily aesthetic, entertaining, or educa-tional in nature. This definition implies no ap-praisal of qualitative or artistic merit; labelsfor soup cans and recordings of symphoniesare both works of art. Although it is impossi-ble to fix firm boundaries on what constitutesa work of art, this category includes such tradi-tionally copyrightable items as fiction, paint-ings and other graphic works, sculpture, music,drama, film, and choreography. Other works,such as sculpture used as bases for lamps19 orfilm documentaries20 also fall within this cate-gory, but contain factual or functional ele-ments as well.

Traditionally, works of art have been amen-able to an analysis of idea and expression un-der the “abstractions test, ” since very oftenthe intrinsic value of the work depends heav-

‘“Copyright does not concern itself with the qualitative as-pects of a work. See: Bleistein v. Donaldson Lithographic Co.,188 U.S. 239 (1903).

‘“AS in the case of Mazer IF. Stein, 347 U.S. 201 (1954),where a statuette used as the base of a lamp, was found copy-rightable insofar as its utilitarian aspects could be separatsdfrom its aesthetic aspects.

‘(’Such as the documentary of the Hindenberg disaster inHeeling v. Um”versa.1 Cit&V Stud”os, Inc., 618 F.2d 972 (2nd Cir.),cert. denied, 449 U.S. 841 (1980),

ily on the particular expression adopted. Theintrinsic value of Duchamp’s ‘Nude Descend-ing a Staircase, for example, lies in the over-all style and manner of execution, the use oflines and solids, and the colors chosen. It isthese values that copyright protects when pro-tection is limited to the painting’s expression.

Furthermore, works of art have always hada fixity and completeness to them. Althoughtheir creation involved preliminary steps suchas drafting, sketching, and revision, they didnot change in appearance or structure, and re-tained a distinct and perpetual identity. Par-ticular works were distinguishable from oneanother because the expression was completeand final once the work was fixed. Moreover,the fixation of a work in a tangible copy al-lowed its preservation over time.

It is this static, individuated, and localiza-ble quality of works of art that allows copy-right law to speak in terms of the work21 cre-ated by an author or authors22 belonging to himfrom the moment of creation,23 subject to thelaws of the country in which the work was cre-ated. 24 As we have seen in chapter 2, printingmade copyright both possible and necessary,since it permitted the existence of many iden-tical copies of a work and so shifted the pri-mary economic value in writings from theownership of a particular manuscript to theownership of a right to make copies of thatmanuscript, while it simultaneously createdmarkets for unauthorized copies. The very no-tion of a particular “expression” as the prod-uct of a particular author was to a large de-gree enabled by the invention of the printingpress. Evidence for the proprietary boundariesof a work relied on the existence of a single,unchanging artifact-the book, the painting,the sculpture.

This model of the static work of art may nolonger apply to works involving certain newtechnologies. In particular, digital computingand communication technologies pose both

“17 U.S.C. §20.’217 U.s.c. §20.‘ [1 7 U.s.c. § 3 0 .“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 Film literature

Painting (abstract)

Photographs Biography\

Recorded music drawings Clocks

Historical Recipes Computer music,

literaturegraphics

Computer Computer programsand

chartsPat ients ’

x-rays P h o t o g r a p h sRawsatelIite

data

U n c o m p i l e dstat is t ics

(as news-footage)

News stories

Telephonedirectories

databases (applications)(text) / Compu te r

I n s t r u c t i o n s zCode books ci rcu i t ry

I

Computer programs(operating systems)

Computer databases(compilations) Circuit Circuits

I diagrams

Phone\ I

bil lsS e m i c o n d u c t o r Compu te r S e m l c o n d u c t o r

The chip masks a l g o r i t h m s ch ips

ca lenda r A

/\

Cam shaft

/

Works of fact

DNA nucleotide GearsStock market quotes sequence? Microcode? A


conceptual and legal problems for copyrightlaw in this regard. If print technologies” per-mitted stasis, electronic technologies permita new dynamism that makes proprietary bound-aries for many works of art indistinct, elusive,and subject to constant change. Althoughopinions vary widely on the viability and com-mercial deployment of such things as electronic——.———

‘r’’ Print technologies”’ is used here in a very broad sense,and would include not only the methods of printing books andmagazines, but photographs, records, and motion pictures aswell.

Works of function

publishing, on-line conferencing and editing,and interactive computing, these technologieshave reasonably clear implications for the prin-ciples of ownership:

In short, the process of computer commu-nication produces multitudinous versions oftexts, which are partially authored by peo-ple and partly automatic. The receivers maybe individuals, or they maybe other machinesthat never print the words in visible form butuse the information to produce something elseagain. So some of the text that is used exists

68 ● Intellectual Property Rights in an Age of Electronics and I n f o r m a t i o n

electronically but is never apparent; some isflashed briefly on a screen; and some is printedout in hard copy, What starts out as one textvaries and changes by degrees to a new one.Totally new concepts will have to be inventedto compensate creative work in this environ-ment. The print-based notion of copyrightsimply will not work.26

Some have suggested that, for art and scholar-ship, the new technology has created an envi-ronment more like that of the Middle Agesthan of the post-Gutenberg era, resembling theoral tradition rather than the print culture. Theramifications of such a change can be exploredby considering two particular embodiments ofinformation technology as they apply to worksof art: computer networks and interactive com-puting.

Computer Networks. The advent of computernetworks may mean the loss of the identifia-ble boundaries of works on which copyrighthas relied to distinguish yours’ from “mine.In this fluid environment, works of art maylose the singular thing-like quality that madecopyright protection possible. The extent ofthe problem is hard to estimate given our lim-ited understanding of the full impact of elec-tronic networks on the creative environment.

A computer network is a collection of com-puters, called hosts, that communicate witheach other. The host computers may be micro-computers, commonly used in homes and busi-nesses, or they may be larger mini-, main-frame, or supercomputers. With connectionsbetween hosts ranging from local area net-works to satellite-mediated long-haul net-works, data in the form of text, voice, and, inprinciple, video, can be stored, modified, andexchanged by anyone anywhere on the planet.27

Computer networks offer a variety of advan-tages over centralized computing. They per-mit remote processing, which allows any hostin the network to use computer programsstored on another host in the network. Users

‘hlthiel de Sola Pool, Technologies of Freedom (Cambridge,MA: Belknap Press, 1983), p. 215.

“For a detailed description of computer networks, see: An-drew S. Tannenbaum, Computer Networks (Fjnglewood Cliffs,NJ: Prentice-Hall, 1981).

in such a network can gain remote access tosupercomputers to do advanced graphics, chipdesign (and remote fabrication), or scientificor economic computer simulation. Networksalso allow users to access remote databases.Finally, communications, such as computerconferencing, allow collaboration among usersof the network. z”

The capacities of computer networks for on-line creation and worldwide collaboration willdemand rethinking several key aspects of copy-right law.29 First, concepts dealing with the cre-ation of a work will have to take into accountseveral novel features of networks. A network,for example, allows an author to collaboratewith others in ways that are different from thepast. Collaboration may occur in a very hap-hazard and informal fashion, and each contrib-utor may be anonymous and his contributionsunrecorded. Some may be independent authors,while others may be creating works for hire.30

Imagine, for example, a network “magazine”in which the readers are also contributors, re-ceiving and perhaps modifying a different ver-sion of the text or graphics in the magazine.Under these circumstances, who has a rightto claim ownership of a work if it becomes com-mercially valuable? To which of the multitudeof different versions of the work did this per-son contribute? What share of the contribu-tion was his? What rights does this person pos-sess to insure the integrity of his work?

—— —— .‘“’’The experience of the ARPANET, which is being recon-

firmed in CSNET and other networks, is that collaboration, of~nenvisioned as the least of the three (applications), is in fact themost important. ” Peter Denning, “The Science of Computing:Computer Networks, ” American Scientist, vol. 73, 1985, pp.127-129.

“Many of the difficulties alluded to here apply with equalforce to works of fact and works of function, discussed below.This analysis of the impact of networks and interactive pro-grams on works of art is therefore cumulative. It is confinedto works of art for the sake of clarity.

“’Some textbooks have already been written (although notpublished) “on-line.” See, for example, C. Mead and L. Conway,Introduction to VLSI Systems (Reading, MA: Addison-Wesley,1980), which was written over the ARPANET.


Although copyright law allows for the possi-bility of collaborative and anonymous works,31

the application of copyright law to on-line cre-ation may become forced and arcane. Ques-tions will arise, in this regard, over what ‘‘the’copyrightable work is. If, for example, a pic-ture, a musical composition, or a story is be-ing constantly embellished, and separate ver-sions are being culled from an original andreworked over time, issues of ownership andidentification of the work become exceedinglyintricate. As with on-line computer databases(described below), the perpetual creation andmodification of works of art raises questionsabout when copyright protection begins andends. 32 The deposit and registration of fre-quently changing works is likewise compli-cated. 33

Networks also pose immense practical diffi-culties for administering the copyright system.Once in a host computer, a work can be easilyand quickly transferred to any other host inthe network. Even if the work is confined toone ‘‘closed network, 34 it can be entered intoother networks by a given host, at which pointcontrol over the work is lost. 35 Copyrightedworks, such as photographs, that exist in aclosed database library, which is itself part ofa network, may be downloaded onto one hostin the network and transferred to another net-work, where they may be excerpted or modi-fied by others with access to the network.” If.———

“17 U.S.C. §§§ 101,201, and 101, Joint works require thatthe authors intend that their contributions be merged insepa-rably into one work, but collective works are separate and inde-pendent elements of the whole (like the individual stories whichcomprise an anthology). In the case of joint works, the inten-tion of the authors may have to be inferred or constructed bya court.

‘ 17 (J, S.(’. i 1102,302,See page 7’7 of this chapter for a discussion of the applica-

tion administrative formalities for works of fact,‘Closed networks usually ha~.e proprietary access equip-

ment, which permit only those with the right equipment to ac-cess the information in the network. I.EX IS, the legal databasenetwork, and airline reservation systems are examples of closednetworks. Solomon, ‘‘I ntellectual Property and New Computer-hased Media, ” OTA contract report, Aug. 1, 1984.

of course, these acti~ities may be illegal under copyrightlaw, but lacking an “audit trail, ” and an awareness of the “leak”on the part of the copyright holder, the possibility of enforce-ment is practicall~’ nonexistent, See ch. 4 on enforcement.

“Questions concerning modification and deri~ation are per-haps the most perplexing of all. How, for example, can prop-

such “sharing” occurred in simple exponen-tial fashion at 15 minute intervals, it wouldtake approximately 8 hours to blanket the en-tire world’s population with copies. ”

The problems of administering copyright foron-line works also occur internationally, butwith an added twist. Under U.S. law, copyrightprotection of published works hinges upon thenationality of the author or the location of firstpublication. 38 But satellite data transmissionsand submarine optical fiber links may muddlethe concept of a work’s “national origin, ” andinternational collaborative efforts and thesimultaneous existence of numerous versionsof a work worldwide will preclude its easy iden-tification with a particular nation. Thus, pub-lication and location many no longer be work-able criteria when numerous versions of a workare simultaneously appearing throughout theworld .39

Interactive Computing. Interactive comput-ing refers to any creative process in which apreliminary or final version of a work is theresult of interactions between a person and aprogrammed machine. The proportion of thework that is the product of the machine, andthe proportion that is the product of a humanmay vary. In many cases, as with word proc-essing programs, the machine contributes lit-tle to the creation of a work; it is ‘ ‘transpar-ent’ to the writer’s creativity. But with someprograms, such as those that summarize (ab-stract) written articles, the processing done bythe computer could constitute “an originalwork of authorship’ if it were done by a hu-man being.40 Indeed, the machine itself is atonce a series of processes, concepts and syn-

erty rights attach to works which are intended to be modifiablecomponents of an interactive process? This question will be dealtwith presentl~’ under “ Interactive Technologies. ”

‘-232 is approximately 4.29 billion.‘“In general, a work is protected under (J. S. law if: 1 ) one or

more of its authors is a national or domiciliary of the UnitedStates or any nation which is a member of a copyright treatyto which the United States is a party, or if 21 the work is firstpublished in the United States or in a country which is partyto the Universal Copyright Convention. 17 U.S.C. § 104.

“’Publication is the distribution of copies to the public, 17U.S.C. \ 101; is transmission of digitized information to thou-sands of host computers a ‘‘distribution of copies?’

4’ Originality is the sina qua non of copyrightability, but re-fers only to the fact that a work is not a copy of another.

70 . Intellectual Property Rights in an Age of Electronics

theses of human intelligence-so mixed thatit is difficult, if not impossible, to separate itsparts from the whole.” Interactive computingtakes many forms, and cuts across many dis-ciplines. Some examples of interactive comput-ing are:

●

●

●

●

Interactive fiction is a computer-mediatedform of storytelling/writing that permitsthe user of a program to “co-author” astory by making choices about details ofthe plot as the story unfolds on thecomputer.Computer-aided design (CAD) is a technol-ogy that is widely used in science and engi-neering. Using CAD systems, engineersmay design new products, invent newprocesses, or even create other softwareprograms that are based on interactionsbetween their own experience and exper-tise with a CAD system. A program calledSYNGEN, for example, suggests poten-tially useful chemical reactions based onchemical reaction-mechanism theory. UsingSYNGEN, some completely new reactionsare “invented” that may prove importantenough to be further developed in the lab-oratory. ’zInteractive computer graphics permits acreator to use another’s images as the“grist” for computer-assisted manipula-tion in the production of further works.Creators using this technology cannotonly generate images of nature that havenever existed in reality; they can also takeimages from existing photographs orfilms, “map” them into a computer mem-ory, and bring them back to life in totallynew settings, with new movement anddialog.Computer-processed music permits theprocessing, editing, and resynthesis of

.“Richard Solomon, “Intellectual Property and the New

Computer-Based Media, OTA contractor report, Aug. 1, 1985.p. 2.

‘“James Hendrickson, “Synthesizing Chemicals by Comput-er, ” Technology’ Review, April 1984, pp. 24-27: see also R.K.I,indsay, et al., ,4pplications of Artificial Intelligence for Or-gw”c Chemistry: The DEIVDRAL Project (New York: McGraw-Iiill, 1980). In this example, similar questions might be raisedof patent law: who is the “inventor? ’’-the programmer, theoperator, or the machine’?

and Information— .—

sometimes costly preexisting works in theproduction of new works. Music can besampled and manipulated in a processknown as digital editing, and the notes andeven the work itself can be rearranged andmanipulated to create entirely new works.

The interactive capability of computersposes unique problems for the category ofworks of art. The problem is in determiningwhere the programmer’s expression ends andwhere the user’s contribution to the final formof the expression begins. This problem stemsfrom the fact that computers often mediate be-tween programmer and user, and interminglethe creative efforts of both. Indeed, the pro-gram itself may contribute substantially to acreator’s final artwork, and in ways that couldbe considered an autonomous or creative activ-ity if done by a human being.43 Because theprogrammer’s, the user’s, and even the com-puter’s expressions are intermingled in theprocess of creation, separating rights in theproducts of interaction with a program fromthose in the program itself will become increas-ingly difficult. Consequently, many interactivecomputer-based applications may generate en-tirely new questions of ownership and origi-nality. 44 Figure 3-3, which describes a hypothet-ical interactive program called “MINSTREL,”illustrates the difficulties that can arise in sort-ing out the contributions of the various par-ties to interactively produced works.

The problems of interactive computing andmachine-generated works were considered bythe National Commission on New Technologi-cal Uses (hereafter CONTU) in its 1976 Re-

“Computer programs may modify themselves based on aninteraction with the environment, and then alter the environ-ment itself. Programs now exist, for example, that permit a com-puter to “learn, ‘‘ in some sense, from its environment. A num-ber of rules for producing a given result are compared with anenvironment; generalizations are formed as a result of the com-parison; and these generalizations are then incorporated intothe rules of production. See “Learning” in Proceedings of theNational Conference on Artificial Intelligence (Los Altos, CA:American Association for Artificial Intelligence, 1983), and Slee-man & Brown (cd.), intelligent Tutoring Systems (London: Aca-demic Press, 1982), Part IV “Self-Improving Teaching Systems. ”

“There are disputes today, for example, over ownership inthe output of programs that automatically route signals throughgate-arrays, and in code that is compiled by a proprietary com-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 selectsrandom notes

Minstrel arrangesnotes into piece I Update algorithm I

I per algorithmI

1

Pieces stored in RAM

1

I Tone generatorI

T iComposer selects

a piece

I ~Composer modifies

No

piece

* -f YesSynthesizer generates

analog etude 4b

t, * I 4 t

A Composer uses a software program. named “Minstrel” which waswritten and developed by a Programmer One of the results of thisprogram, Etudes for Unaccompanied Computer, a collection of the-matic musical pieces, Is the subject of a Iawsuit between Program-mer and Corn poser

The Programmer had made no Iicense or sale agreements with theComposer for either the use or the purchase of “Minstrel. ” He ex-pected to receive no remuneration fort he Composer’s use of the pro-gram or for the computer time Indeed. the Programmer had given per-mission to the Composer to use “ Minstrel ” and the computer simply“to see what It could do “

The so f tware program “Mins t re l ” randomly se lec ts “no tes” f romthe standard twelve tone scale These notes are represented as varia-bles in the program On the basis of rules embodied in a music com-posing algorithm developed by the Programmer, these notes are com-bined into melodies and chords, and processed into pleasingharmonic, rhythmic, and thematic structures A number of pieces are

thus created and stored in Random Access Memory (RAM) The Com-poser then selects one of the pieces on the basis of his own aesthetictastes and modifies the selected piece to make improvements Thesemodifications are then incorporated into the original “Minstrel” algo-

port.” The commission found that “there isno reasonable basis for considering that a com-——

“CONTU was created by the act of Dec. 31, 1974; Public

rithm. This process is reiterated so that the program in effect “learns’”from the composer’s judgment

Etudes for Unaccompanied Computer was recorded in the follow-ing media: 1 ) the final object code (digital) version was downloadedfrom RAM onto a floppy disk; 2) a final audio (anal`ogue) version wasprepared using a commercially available music synthesizer and re-corded on magnetic tape; 3) a sheet music version was printed usinga special printer designed by the Programmer

When the Composer left the Programmer’s laboratory, he took withhim the floppy disk, the magnetic tape. and the paper upon whichthe sheet music to Etudes was printed—all of which were his person-al property. The Composer Iicensed the audio recording to the Rec-ord Company, and the sheet music to a Publishing House. This raisessome questions:

1, Who is the author of the “Minstrel” Program after it has beenmodified by Composer?

2. Who IS the author of ‘<Etudes?” The Composer? The Program-mer? The “Minstrel” program?

3. Does the Composer’s use of “Minstrel” infringe the Programmer’sright to make derivative works from ‘‘Minstrel?“

4 Is “Etudes” a work derivative of “Minstrel?”— — - . -Law No. 93-53, tit. II; 88 Stat. 1973. See, generally, The FinalReport of the National Commission on New Technological Usesof Copyrighted Works (Washington, DC: Library of Congress,1979), The Final Report was issued July 31, 1978.


puter in any way contributes authorship to awork produced through its use. The commis-sion said:

The computer, like a camera or a typewrit-er, is an inert instrument, capable of function-ing only when activated either directly or in-directly by a human. When so activated it iscapable of doing only what it is directed todo in a way that it is directed to perform. . . . The obvious answer is that the authoris one who employs the computer.46

It is misleading, however, to think of pro-grams as inert tools of creation, in the sensethat cameras, typewriters, or any other toolsof creation are inert. Moreover, CONTU’s com-parison of a computer to other instruments ofcreation begs the question of whether interac-tive computing employs the computer as co-creator, rather than as an instrument of crea-tion. It is still an open question whether theprogrammed computer is unlike other tools ofcreation. Authorities in the field of artificialintelligence (AI), although disagreeing on AInature and purpose, do agree that its aim isto produce a pattern of output that would beconsidered intelligent if it were displayed bya human being.47 One must ask, therefore,whether machines or interactions with ma-chines might produce a pattern of output thatwould be considered creative or original if doneby a human being. If machines are in any senseco-creators, the rights of programmers andusers of programs may not be easily deter-mined within the present copyright system.

If the questions raised by interactive com-puting are not settled in the legislature, thejudicial system will be called on to resolvethem. Thus far, there have been few court de-cisions on the matter of interactive computerprograms, and those that exist have been re-solved on extremely narrow grounds. Most ofthe relevant cases have concerned video games,which employ computer programs (usually re-corded in Read Only Memory, or ROM) to gen-erate video images and sounds that respondin a limited way to the game player. The case—. —. ..-—

“CONTU Final Report, p. 44.4 Howard Gardner, The Mind New Science–A Histor}’ of

the Cognitive Revolution (New York: Basic Books, 1985), ch.6. Depending on whom one talks to, AI may have in part al-ready achieved its objectives.

law has, for the most part, been built on litiga-tion involving traditional audiovisual works.48

In the only case dealing with interactivity, thedefendant asserted that, because the player in-teracted with the game, he was a coauthor ofthe video work.49 The court rejected this argu-ment, saying that a substantial proportion ofthe work was repetitive and not subject toplayer control. However, as computer pro-grams increasingly permit the user wider choicein structuring input and output, the analogiesbetween interactive computer programs andtraditional works will begin to break down.Courts will then be left with little guidance,and even less expertise, to solve these highlycomplex conceptual and technological issues.But the decisions they render will, in effect,be policy decisions affecting many aspects ofthe creative environment.

The courts may not have to react immedi-ately to the difficulties of interactive comput-ing. Creation through interactive computingis new, and is still the domain of pioneeringartists with access to the necessary comput-ing power and memory .50 However, as inter-active techniques become cheaper and morewidely available, either the legislature or thecourts will have to confront some questionsthat will be very difficult to resolve under thepresent system. These include:

● Does copyright in a program (for exam-ple, an interactive graphics program) en-title the copyright owner to the output ofthese programs? If so, under what circum-stances? If that output was unforeseen bythe programmer? When the user inputsthe data? When the work is “predominate-ly” the result of the machine program, pre-suming that authorship in outputs mightbe measured?

‘xSee, e.g., Midway Manufacturing Co. v. Arctic Interna-tional, Inc., CCH Copyright Law Reporter 125,526 (7th Cir.1983); Stern Electrom”cs, Inc. v. Kaufman, 669 F.2d 852 (2d Cir.1982); Midwa-v Manufacturing Co. v. Omni Video Games, Inc.,668 F.2d 70 (lst Cir. 1981). Courts have held video game pro-grams embedded in ROM copyrightable, and video game man-ufacturers have often copyrighted the audiovisual portion ofthe game separately. Atari, Inc. v. North American Phih”ps Con-sumer Electronics Corp., 672 F.2d 607 (7th Cir. 1982).

“t$’illiams Electronics, Inc. v. Arctic International, Inc.,685 F.2d 870 {3rd Cir. 1982).

“’’See ch. 5 for a discussion of the impact of interactive com-puting on the works of artists.


●

●

Ought protection of the program to extendto its output? Where, for public policypurposes, ought expression in a programleave off? What are the appropriate bound-aries necessary to insure that both pro-grams and their creative interactions aregiven incentive?How are legal distinctions to be appliedto this new-creative environment? Doesexpression include all of the ways in whicha program may literally express itself?Does the user’s interaction result in theproduction of a derivative work, and towhom does the derivative work belong?51

What of originality in works that arepredominately automated? Who is theauthor?

Providing answers to these questions willbecome more urgent as creative activities con-tinue to fuse with machine intelligence. Oneeffect of computer-mediated works of art oncopyright may be the blurring of the distinc-tion between the copyrighted work and itsproduct. It may no longer be possible to ascer-tain the ownership of a particular expression.Both the creators and users of a program mayhave some claim to its output. Similarly, theline between the creator and the user of a workof art may be less clear, and distinctions mayhave to be made between the creation, use, andappropriation of an expression.

Works of Fact and Computer Databases

The category works of fact, as used here, en-compasses any work whose value lies in theaccurate representation of reality. As withworks of art, works of fact is an amorphouscategory, and may include biographies anddramatized or fictionalized accounts of events,which are also works of art. Maps, nauticalcharts, news programs, documentaries, and sci-entific and scholarly literature are examplesof works of fact. Compilations, such as tele-phone directories, stock market quotations,statistical tables, and bibliographies, may alsofall into this category.——

‘‘A derivative work is a work “based upon one or more pre-existing works. ” 1 7 U.s.c. ~\lo2, 106,

Works of fact have long been copyrightable,but copyright protection in works of fact is lim-ited to the way in which facts are expressed.It does not extend to the underlying informa-tion or facts expressed. In a map, for exam-ple, protection is limited to the details, colors,and symbols chosen by the author, and doesnot extend to the terrain that is representedby the map. In a statistical table, copyrightprotects the arrangement and labeling of col-umns and variables, but not the numbers orstatistical values represented. In a news story,copyright protects the wording and the wayin which the information is expressed and pre-sented, but does not protect the informationabout events that are the subject of the newsstory.

Works of fact have always caused problemsfor copyright law because, unlike works of art,their economic value is often in the underlyinginformation, rather than in the manner in whichthat information is expressed. Copyright,therefore, does not necessarily protect the val-ue of a work of fact. This discrepancy will likelybe exaggerated by information technologies,because computers can easily manipulate theexpression of a work of fact, and communica-tion systems can quickly transfer the work.

The problems with copyright protection forworks of fact stem from two otherwise com-plementary concerns of copyright: the provi-sion of incentives to stimulate the productionand dissemination of original works, and thepolicy goal of sharing information and ideasand making them widely available.

Works of fact often take much time and ef-fort to produce, and some economic incentiveis necessary to encourage their production.Tabulating price data, covering news stories,and drafting maps, for example, require in-dependent research and investigation. If anauthor knows that a competitor may reproducehis work with impunity at little or no cost, hemay have less incentive to create the work inthe first place. Recognizing that the ostensi-bly copyrightable component of such works offact–the wording, selection, arrangement, andpresentation of information—is of little bene-


fit to a proprietor whose competitors can eas-ily change the appearance of facts and infor-mation, some courts have sought to expandcopyright protection well beyond the particu-lar form that the work takes:

. . . the test is whether the one charged withinfringement has made an independent pro-duction, or made a substantial and unfair useof the complainant’s work.52

Despite the judiciary’s tendency to expandcopyright protection in works of fact to “un-fair” appropriation by competitors, copyrightin these works is still severely limited: the in-formation or data within the work is not copy-rightable. 53 Given the imperative that copy-right should “promote broad public avail-ability" 54 of the ideas and information latentin any expression, the protection of informa-tion is anathema to copyright philosophy. Earlyin this century, the Supreme Court recognizedthe inadequacies of copyright protection forworks of fact, and sought to get around themby constructing a “quasi-property right” innews stories to address an underlying wrong-doing.55

“Toskvig v. Bruce Pub. Co., 181 F.2d 664 (7th Cir. 1950) acase that concerned a compilation, which is a work formed bythe collection and assembling of preexisting materials, or datathat is selected, coordinated, or arranged in an original way,17 U,S.C. § 101, and are particularly vulnerable to this proh-lem, See also: Leon v. Pacific Telephone & Telegraph Co,, 91F.2d 484 (9th Cir. 1937), Triangle Publications ~r. New ~jng~andNewspaper Publishing Co., 46 F, Supp. 198 (I). Mass. 1942), andQuinto v. Legal Times of Nrashington, Inc., 506 F.Supp 554(D. D.C. 198 1). As one court has said, if “protection (for compi-lations) is limited solely to the form of expression, the economicincentives underlying the copyright law are largely swept away.National Business Z~ists, Inc. v. Dun & Bradstreet, Inc., 552F. SUpp, 99 (N. D, 111. 1982). Parenthesis added.

“’This statement is truer of compilations of data, such asairline schedules or telephone numbers, but also extends to com-pilations in which the compiled material is itself copyrightable,as in the case of NEXIS, a computerized database of news sto-ries. In the latter, both the format of the compilation and thecompiled material is protectable by copyright. However, in nocase does copyright extend to the information conveyed by ei-ther the compilation or the material compiled.

“FOX Film Corp. v. Doyal, 286 U.S. 123 (1967).‘hInternational New Service v. The Associated Press, 248

U.S. 215 (1918), in which the Court said that “the news ele-ment— the information respecting current events contained inthe literary production—is not the creation of the writer, butis a report of matters that ordinarily are publicijuris; it is thehistory of the day. ” Id. at 234. This case was based on the Copy-right Act of 1909, and was implicitly overruled by the Copy-right Act of 1976. The difficulties that the court faced, how-

There is a tension, therefore, in copyrightprotection for works of fact. The tension is be-tween incentives and the public access to in-formation,” and this tension is likely to beheightened by modern information and com-munication technology. A good example iscomputer database technology.

Computer Database Technology.–A com-puter database is a compilation of stored com-puter-readable information. A database ven-dor frequently sells both the data and themeans of accessing, searching, and assemblingthat data through use of a computer program.Computerized database technology has a num-ber of characteristics that set it apart fromtraditional methods of compiling information.These characteristics have to do with the waythat information is stored, input, searched, anddistributed:

• Storage: The storage medium may takemany forms: punch card, magnetic tape,hard or floppy disk, microelectronic com-ponents within the computer, and thelaser-read optical disk. Electronic storagemedia greatly concentrate the amount ofinformation that can be stored in one loca-tion. One 5-inch optical disk, for example,is capable of storing over 10,000 pages ofprinted information.57 The informationmay be stored in any fashion: serially,chronologically, or as a hierarchy of infor-mation types. The type of informationstored may be print, audio, or still or mo-tion audiovideo. Anything that can be rep-resented digitally can be stored and ac-

—— — . — —ever, remain. A recent Supreme Court decision, Harper & Rowv. Nation Enterprises, No. 83-1632, May 20, 1985, also dealtwith the appropriation of a work of fact, but since the defen-dant copied some of the plaintiff’s work verbatim, the courtdid not have to reach the issue of idea and expression.

“’’The tension is most acute in the case of factual compila-tions which document information compiled by the government,or information that is already in the public domain, since pro-prietary rights in the information would have the public paytwice for the same data. see, e.g., Dow Jones & Co., Inc. I. Boardof Trade, 546 F. Supp. 113 (S. D.N. Y 1982).

‘ ‘The optical disk, which is presently in use in some comput-er systems and in home stereo systems, is also capable of stor-ing, in digital form, roughl~~ two hours of music or audiovisualmaterial, or thousands of stall pictures, The Library of Congress’current project utilizes all of these capabilities. At present, com-mercially available optical disks are strictly for playback, but‘‘write/erase’ versions will be available shortly.


●

●

●

cessed by computer. 58 The types of worksstored on present-day databases includefull text literary and legal works, biblio-graphic information, scientific, financial,legal, criminal, demographic, and defenseinformation. However, since a computeris indifferent to the nature of the informa-tion stored, computer programs are alsoaccessible as ‘‘data’ on a database.59

Input: Information may be input into adatabase in a number of ways: it may betyped in by a person at a computer termi-nal; it may be fed in automatically froma sensing device, such as a heat sensor ora pressure gauge; it may be read in froma typed or written document by an opti-cal character reader; systems are cominginto use that accept input from the humanvoice.Search: Information is accessed in a data-base by the use of a computer program,through which users can instruct the com-puter to search for keywords or catego-ries (fields) of information such as articletitles or authors’ names. Artificial-intelli-gence-based programs are becoming avail-able that allow searches in natural lan-guages, such as English, based on thesyntax or semantics of a query. Telecom-munications links allow users to search forinformation stored in computers in manydifferent locations throughout the world.Distribution: Once accessed, the informa-tion is typically fed to a user’s terminaland may be copied on a local storage de-vice, such as a magnetic disk. This infor-mation may be processed in the user’scomputer such that it may no longer re-semble the “original’ information. And

‘Information theory implies that anything seen, heard,smelled, or felt can be represented, encoded, and replicated bya series of 0s and 1s, although putting theory into practice hasrequired over 40 years and billions of dollars. Solomon, op. cit..p, 14. I+~\’en smells maybe represented digitallv. “Robot Noses, ”B u s i n e s s J1’eek, Ma? 13, 1985, p. 57.

‘Indeed, the de fimtion of “database’ can get quite confus-ing. For example, a current trend in the design of computer chipmanufacturing for \’ery large scale integration (VI.SI ) is throughthe use of a ‘‘design’ database that, when guided by variousalgorithms, can integrate database components in the designof a chip. Thus, to say that databases store information is tosimplify the dynamic uses to which this information may auto-matically be applied.

it may, in turn, be searched by, distrib-uted to, and processed in other computers.

These unique characteristics of computerdatabase technology may severely curtail theusefulness of copyright protection for worksof fact that are distributed on-line, since copy-right protection extends to only the work’s ex-pression. This expression may be easily andsystematically changed by a person with ac-cess to the database and the ability to ‘down-load’ and copy information from it with all evi-dence of copying erased.’” Once the informationis modified, the user may no longer be liablefor infringement, since the information, assuch, is not protected. The downloading andthe subsequent rearrangement of the informa-tion may be entirely legal, especially if thedownloading onto disk is permitted under con-tract. Since information that is rearranged andcopied by hand may be legally appropriated,61

the same rearrangement might easily be doneby the computer in real time as it is beingreceived.62

Even if copying onto disk were illegal anddid infringe the owner’s reproduction, publica-tion, or display rights, the copyright ownercould not possibly monitor and enforce all suchuses.63 Given the relatively low cost of down-

60A computer must, in some fashion, download the informa-tion in order to use it. The downloading may not be into perma-nent disk storage, but memories within the computer all pos-sess some degree of permanence. Indeed, the information mustbe stored in some way in order for a user to access it. Informa-tion that is accessible for only transient durations is very oftenof little use, since the information must in some wa~’ be sur-veyed, compared, and selected. At least one industry represent-ative cautions that: “(copyright is) a rock-bottom startingpoint. . . If nothing else, the copyright enables the negotiationof contracts providing for anticipated, and remunerated down-loading. ” Letter from David Peyton to OTA, Information In-dustry Association, Aug. 8, 1985. Copyright, in this view, maybe necessary, but not sufficient for the protection of databases.

“The status of hand copying under copyright law is uncer-tain. See Chapter 7: New Technologies and the Intellectual Prop-erty Bargain. For works of fact, such as demographic tablesor phone listings, the rearrangement of the information is notan infringement—otherwise, cop~’right would step be~’ond ex-pression and protect information.‘It might be argued that, in order to transform the infor-

mation, the computer must first cop?’ into RAM before proceed-ing with the transformation. This 1s a strained application oflaw, since the copy in RAM may be too ephemeral to constitutea‘ ‘fixation, or it may be an ‘‘essential step’ under section 117to an otherwise legal procedure.

‘ ‘See ch. 4 on enforcement.


loading, and the continuing expansion of com-puter storage capabilities, a user might easilycompete with his provider, and secure copy-right in his ‘‘new’” database. Although manydatabase services prohibit such activities bycontract, these contracts, as a practical mat-ter, may be unenforceable. The copyright hold-er may find it extremely cumbersome, if notimpossible, to detect and prove infringement,unless the contract itself provides for moni-toring.

Beyond these questions about the scope ofcopyright in works of fact, computer databasesalso raise a number of separate, but related pol-icy questions. The first is whether databasesgenerated by computers, such as LandsatEarth resources data, can and should receivecopyright protection. A second is whethercopyright should extend to all contributors toa database. Finally, there is the question of howto best administer copyright in works on a com-puter database.

The question of computer authorship has todo with a legal requirement that the item tobe copyrighted be an ‘original work of author-ship. "64 Although “originality’ requires onlythat the work not be a copy of another work,questions still exist over whether informationthat is automatically written or compiled bya computer is a ‘‘work of authorship’ withinthe meaning of the law.” As discussed at thebeginning of this section, in the absence of thecreative activity normally associated with writ-ing a novel or composing a song, copyright inworks of fact often serves to protect the laboror diligence of a researcher or compiler of facts.However, machines are increasingly replacinghuman labor involving the recognition, orga-nization, and compilation of facts and infor-mation. Electronic compilers and assemblers,for example, have taken over the process ofcompiling computer code from high-level lan-guages to machine-readable form. Work is also—

6417 U.S.C. § 102(a).“’’For example, oil production, electricity usage, or credit in-

formation may be automatically measured and compiled astransactions occur. Even in cases of full text databases, the ele-ment of authorship may consist of little more than entering in-formation at a keyboard, or using an optical character readerto scan the material and enter it into the computer.

under way on natural language processing sys-tems, which may enable computer systems to‘‘understand’ documents within a database,and then produce written abstracts of the doc-ument in response to queries from a databaseuser. Similar research is being conducted onmachine-generated translations of documentsfrom one language to another.” When the ele-ment of human labor involved in the process-ing of information is replaced by automation,the incentive of copyright protection may be-come entirely disconnected from the author-ship that it seeks to inspire. Information thatis automatically generated by a computer is‘‘authored, if at all, by a program that is in-different to legal incentives.”

If copyright is to be granted to machine-produced works, it would signal a new role forcopyright, and a departure from its traditionalrole as an incentive for authors. This raises theissue of whether copyright, in addition to pro-viding incentives for authorship, skill, or dili-gence, should also serve as a method of pro-tecting a return on capital investment in aninformation-conversion business. In the infor-mation age, copyright may increasingly becalled upon to serve as an economic regulatorydevice that establishes proprietary rights inthe products of automated processes. Accom-panying such sweeping policy changes wouldbe changes in the law. Congress would haveto consider whether computer input, process-ing, and output are legally sufficient to con-stitute an original work of authorship.

Works of fact stored in computer databasesalso pose the question of who should receivecopyright protection for the individual contri-butions to the database. Many databases con-sist of thousands of short records or entrieson a particular subject, which are typicallyproduced by many contributors. Very often,none of these contributors can copyright their

*U.S. Congress, Office of Technology Assessment, informa-tion Technology Ii&D: Critical Trends and Issues, OTA-CIT-268 (Washington, DC: U.S. Government Printing Office, Feb-Illmy 1985).

‘“The issue of whether the author of a program can claimcopyright in the output of the program is discussed in the pre-vious section on works of art.

Ch. 3— The Accommodation of Intellectual Property Law to Technological Change ● 77— — —

contributions, because the individual contri-butions are often “de minimus’’ –that is, solacking in quantity or originality as to makethem uncopyrightable, or containing expressionthat admits of so little variation as to mergewith the idea. An individual bibliographic ci-tation, for example, typically contains thename of an author, the name of a book or arti-cle, the time and place of publication, and otherfacts. This citation is probably not copyright-able, since the author of the citation contrib-uted insufficient original expression to consti-tute authorship or originality. The databaseitself, however, is a copyrightable compilationor collective work,68 and the proprietor or thedatabase owner would own the copyright. Yet,the database owner might not be the one whoexercised the skill, industry, and diligence thatcopyright in works of fact is meant to protect.Instead, countless field agents or governmentemployees perform the labor of researching andassembling the information, and they do notreceive copyright. As with machine-producedworks, the incentive of copyright in databasesis disconnected from the authorship it seeksto promote.” Copyright in many computerdatabases may increasingly play a role as secu-rity for investments, rather than simply pro-viding an incentive for authorship.

Finally, there is a question of how copyrightin computer databases that are continuouslymodified should be administered. Copyrightlaw requires that the copyright owner complywith a number of administrative formalities.In general, the copyright owner must deposittwo copies of any published work bearing no-tice of copyright protection in the CopyrightOffice within 3 months of publication.70 The

68 17 U.S.C.§§ 103, 101.“qThis issue was central to a controversy surrounding the

or-dine Computer Library Center’s (OCLC’S) bibliographic data-base. The contributors to the OCLC database are memberlibraries, some of whom objected to what they saw as an un-deserved windfall for the OCLC database proprietor. In a letterfrom one of the member libraries to the Copyright Office, a ques-tion was asked “whether it is legally or morally legitimate tocopyright a database comprising records where both the intel-lectual content, the physical record creation, and the input ofa great bulk of the records are funded with taxpayer’s dollars.Cop>’right Notices, vol. 32, May 1984.

17 U.S.C. ~407. Failure to deposit these copies may resultin a fine of the copyright owner. The Register of Copyrightsmay exempt categories of materials from deposit requirements,

copyright deposit is required in order to ac-quire copies “for the use and disposition of theLibrary of Congress."71 Indeed, much of theLibrary of Congress’ collection is a product ofmany years of copyright deposits.

Databases, like any other work, may be de-posited for the Library’s use and disposition.‘Many databases, however, are “dynamic”-they-are constantly updated, expanded, andmodified, so that the “work’ is never in a fixedor final form. Dynamic databases, therefore,raise a question of whether and how copies areto be deposited with the Copyright Office, andwhether the objectives of the deposit require-ments can be met.

To get around the difficulties of depositingdynamic databases, industry representativesfrom the American Association of Publishersand the Information Industry Associationhave proposed “group registration” and thedeposit of “identifying materials’ of dynamicdatabases, which would represent portions orsamples of the copyrighted database.72 Al-though the industry proposal may prove work-able for administrative purposes, questions re-main over whether the objectives of the depositrequirement will be met. If, in the future, moreand more information is stored in computerdatabases, and is subject to perpetual modifi-cation, policy makers may need to reexaminethe rationale for deposit in light of the needsof the Library of Congress and the burdens oncopyright owners. -

or modify deposit requirements. Only the first and last 25 pagesof “identifying material’ of computer programs, for example,need be deposited. 37 CFR !202.20.

“] 17 U.S.C. $407, Notes of the Committee on the tJudiciary,H.R. No. 94-1476. The fundamental criteria gmerning excep-tions to the deposit requirements are the needs and wants ofthe Library, balanced against the hardship of deposit on thecopyright owner.

250 Federal Register, 24240 (June 10, 1985), W’hile such asolution is perhaps plausible for databases which rely on a moreor less constant and overarching "selection and arrangement’of information (see discussion below), it is less plausible for worksof art. The protectable expression in many works of fact is oftenthe format or arrangement of data—the formal “receptacle” intowhich new content can be added. In works of art, however, theprotectable expression is the content itself–the way the pic-ture looks or the way that the story reads. When the protecta-ble expression is itself in flux and exists in many different ver-sions in many different places, it may not do to register thecreation in the categorical way envisioned the proposals of theAAP and the 11A,


Works of Function and Computer Programs

The category “works of function, ” as usedin this discussion, denotes those works thatuse information to describe or implement aprocess, procedure or algorithm.73 They maybe physical objects which embody proceduralinformation, such as cams or cogs in a machine,thermostatic controls, or punch cards for aloom. In general, physically embodied worksof function implement a procedure, process, oralgorithm directly by being incorporated intothe intrinsic design of the mechanism.74 How-ever, not all works of function are physical em-bodiments of information. They maybe writtenworks, such as recipes or instruction manuals,which merely describe a procedure or algorithmthat must be implemented by a human being.

Modern technology has created a new classof functional works. They are hybrids of thoseworks of function that physically implementprocesses and those that describe processes.Computer programs are hybrid functionalworks insofar as they employ words and sym-bols to implement and control a process. Al-though understandable by humans, computerprograms also initiate and control processesor procedures by operating electronic switchesin a computer. These switches may, in turn,control other machines or devices.75

Important differences exist between worksof function and works of art and fact. Unlikeworks of art, works of function are seldom val-ued for their intrinsic or aesthetic qualities.———. .-— .— .

“’rrhe Dictionary of New Information Technology (NewYork: Vintage Books, 1982) defines an algorithm as “a proce-dure, or rule, for the solution of a problem in a finite numberof steps.

“For example, a cam in a machine is a physical embodimentof the logical operation: “if there is a 3600 turn, push rod X.It implements this procedure directly when the camshaft isturned 360 . Similarly, a thermostat physically embodies thelogical operation “if the temperature rises above 70°, turn offswitch Z.” [n each case, the design of the object embodies in-formation to a surrounding physical system.

7’Recombinant DNA may also be thought of as a hybridfunctional work; encoded genetic information can be used tocontrol the production of proteins in a living, physical organ-ism. This section focuses principally on computer programs asfunctional works, and considers recombinant DNA only brief-ly, and by way of contrast with computer software. One reasonfor this is that, while both are arguably works of function, theyraise separate social, economic, and ethical issues which are be-yond the scope of this report.

A recipe, for example, is useless without thenecessary ingredients and utensils. Similarly,a step-by-step instruction manual for a non-existent machine, or a computer program with-out a computer has no value. Works of func-tion also differ from works of fact. The valueof a work of fact lies in its accurate represen-tation of reality-maps and news stories, forexample, are reports about what is. Works offunction, in contrast, are descriptions of whatcan be if a given procedure is followed.

Although copyright protection is availablefor works of function, it is subject to a veryimportant limitation: Copyright does not pro-tect the functional aspect of functional works.76

Copyright in a recipe, for example, does notgrant the copyright holder rights in the pro-cedure described in the recipe. Others are freeto bake the cake, and infringe no copyright indoing so. The functional aspects of a recipe areseparated from its descriptive aspects, whichalone are protectable.

For computer programs, the difficulty is pro-tecting their descriptive aspect—the symbolsused in the program-without at the same timeprotecting their functional aspect–what thesymbols do in a computer. Because programspossess both a symbolic and functional nature,copyright may either protect too little if thecopyrightable expression is limited to the lit-eral program code, or too much if the copyright-able expression extends beyond the programcode.

Computer Programs.77 On the basis of the rec-ommendations of the CONTU Commission,and without legislative debate, Congress de-termined that computer programs could becopyrighted as “literary works” under Section

“This is the law under Baker v. Seldon, which was dis-cussed above.

“The words “program” and “software” are often used inter-changeably, but software has, in recent years, broadened to in-clude the supporting materials which accompany the sale of com-puter programs, and even the the content of technologicallybased communications (e.g., prerecorded videocassettes are oftenreferred to as software). This chapter adopts the terminologyof the Copyright Act, and speaks in terms of computerprognwns,which are sets of “statements or instructions to be used directlyor indirectly in a computer in order to bring about a certainresult. ” 17 U.S.C. § 101.

Ch. 3— The Accommodation

102 of the 1976 Copyright Act. 78 Although theissue of whether computer programs could orshould be either copyrighted or patented wasthe subject of considerable legal controversy,it is now dormant.

In the nearly 10 years since CONTU’s rec-ommendations, the types of litigation overcomputer software have evolved through whatone lawyer has called ‘two generations."79 Thefirst generation concerned the issue of whethercomputer soft ware is or should be protectableby copyright. Except for certain details, thecourts have resolved these questions in favorof copyright protection for programs.

The second generation of computer programlitigation, still in progress, concerns what kindand how much protection will be afforded. Thequestions emerging during this generationpoint to strains within the conceptual fabricof copyright, which have existed ever since itsinception. This chapter will focus on the issueslikely to arise in this second generation liti-gation.

The 1980 amendment to Section 101 of theCopyright Act defines a computer program as‘‘a set of statements or instructions to be useddirectly or indirectly in a computer in orderto bring about a certain result."80 The courtshave interpreted this definition in a very com-prehensive fashion:

Any Medium: The set of statements or in-structions can be embedded in any medium,from paper to magnetic tape to disks to Read-Only Memory (ROM) silicon chips.81

“1 980 Computer Software Copyright Act; Dec. 12, 1980;Public I.aw No, 96-517, \ 10; 94 Stat. 3028. The amendment af-fected only $ ]101 and 117 of the code, which, respectively, con-cerned the definition of ‘‘computer program and ‘‘ I,imitationson h; xclusive R i g h t s .

‘Jon Haumgarten, “(’copyright and Computer Software: L)ata-bases and Chip Technology, ” an unpublished bibliography, 1985.

“’Title 17 ~ 101, as amended Public I.aw 96-517, $ IOia}, I)ec.12, 1980, 94 Stat, 3028. Note that “computer software’ is useddifferently than “computer program” here and elsewhere in theliterature; the former includes such ancillary material as writ-ten instruction manuals, books, and supporting documentation.

M .See Apple Computer Inc.}, Franklin Computer (’orp., 714F.2d 1240 {3d Cir. 1983), cert. dismissed per stipulation, 104S. Ct. 690; and Apple Computer, Inc. ~’. Formula International,Inc., 724 F.2d 521 (9th Cir. 1984), By implication, copyrightwould also extend to programs in Programmable-ROMs(PROMS) and Erasable-Programmable ROMs (E; PROMS).

of Intellectual Property Law to Technological Change ● 7 9

Any Form: The program may be “sourcecode, i.e., the form in which a programmerwrites the program in a particular language(such as BASIC or PASCAL or FORTRAN);or “object code, ” which is the source codetranslated into a form directly processed bythe computer. ” Any program, whether usedto govern the internal operations of a com-puter or used to interact with the user, maybe considered copyrightable.83

Any Computer: The term “computer” isquite broad, encompassing everything fromfast, specially designed Cray supercomput-ers, which may be constructed out of thou-sands of integrated circuits, to a singlemicroprocessor chip.

Computers are commonly described in termsof hardware, which is the physical machinecomponents, and software, the term for com-puter programs. In modern computer design,however, hardware and software functions arelargely interchangeable. The allocation of func-

“’This ‘(breakdown” is usually accomplished automatically!by the computer through the use of an “interpreter,” “compiler,or ‘‘assembler’ (which is itself a programl. An?’ computer pro-gram in a given language may be used as the source code foran object code in another language. ‘‘1 I igh le~rel languages,such as ‘‘1.1 SP, in their machine code form, ma~’ sertre as theobject code for a source code written in another language, suchas FORTRAN. The FORTRAN“ program can in turn functionin the presence of a “ PI, 1“ interpreter as the source code forsource code written in the language PI. 1. In this fashion, pro-grams may be layered upon programs. Object code and sourcecode are merely relational terms, designating which languagethe programmer may be working in, and which language themachine operates in, Indeed, the so-called htwdwrm-e in a givenmachine may itself be configured in 1. I SP (or any otherl ‘‘soft-ware language; the hardware software distinction is not abso-lutely distinct.

“’’Microcode,” also know as ‘‘firmware, is the most primi-tive level of programming, and embodies the sequence of pathsthat a given electrical signal is to follow between the arithmeticand logic units of the computer. Its function is to replace a "hard-wired control system that ‘‘ mediate[s] the transfer of infor-mation between the central processor, the main memor~’ units,and the various input and output devices. David Patterson,“ Microprogramming, Scientific American, \’ol. 248, March1983, p, 50. The copJ’rightability of microcode remains unest ab-lished, but it seems in principle no less “a set of statementsor instructions’ than any other form of program, although itis not usually changed, or even seen, once it is etnbedded in amicroprocessor. Microcode has been held patentable, in re Brad-IPJT, 600 F.2d 807 (C. C,P.A, 1979), tiff”d, by an equallJ cfi~icfedcourt, sub nom. Diamond ~’. Diehr, 450 U.S. 381 { 19811, anda case is pending on the issue of its copy. rightability, ,N-EC ~.Intel, Ci\r. Action No. 84-20799, A motion for summar~ judg-ment in the N F~C case has been denied, and is scheduled fortrial in April 1986.


tions between them is the result of design de-cisions that balance such factors as the speed,cost, and flexibility required in the final prod-uct. The symbols in any computer program,therefore, are ultimately substitutes for hardwiring. This interchangeability between soft-ware (symbols) and hardware (circuitry) makeprograms a paradoxical sort of “writing, sincethey are symbols expressed as components ofmachines.

Like other copyrightable works, programssymbolize information to human beings, andcan be read and understood by programmers.The CONTU Report stressed that programs,like other copyrightable works, communicateto those who can read them.84 Because com-puter programs are symbolic, they appear tobe at least as eligible for copyright as soundrecordings, which require a record player tobe understood by human beings.85 But, com-puter programs unlike previous “literaryworks, are both writings in the traditionalsense and tools for accomplishing particularresults. All traditional forms of writings areinert and purely representational. Books, mov-ies, musical compositions, paintings, or statu-ary do nothing that a user does not do withthem. They simply convey information or en-tertain a reader, viewer, or listener. But, as oneexpert in artificial intelligence says: . . .. [t]here is a qualitative difference between

the computer as a medium of expression andclay or paper. Like the genetic apparatus ofa living cell, the computer can read, write andfollow its own markings to levels of self-in-terpretation whose intellectual limits are stillnot understood.86

Computer programs also differ not only fromworks of art and fact, but also from traditionalworks of function such as cams, thermostats,instruction manuals, code books, or recipes.

“CONTU Final Report, p. 21.‘“TO accommodate the way in which technology mediates in-

formation between human beings, a provision in the CopyrightAct says that all original works of authorship are copyrighta-ble so long as they can be perceived, reproduced, or communi-cated, “either directly or indirectly with the aid of a machineor device. ” 17 U.S.C. §102(a),

“Alan Kay, “Computer Software, ” Scientific American vol.251 September 1984, p. 53.

These traditional works either describe a proc-ess to a person, who then intervenes to lendthe words or phrases their utility, or they im-plement a process without describing it. Com-puter programs, as hybrid functional works,describe and implement processes. They causephysical changes to occur in a machine, andcan interact with other programs or with anenvironment. A recipe encoded in a programlanguage cannot only tell a programmer howto bake a cake, it can “tell’ the computer, too.With the appropriate robotic apparatus, therecipe can cause the cake to be baked.

The hybrid character of computer programsraises some very difficult problems for the lawof copyright, and has prompted commentatorsto point to inconsistencies in copyright pro-tection for programs:

No one would ever advise you that the copy-right on a schematic diagram of a diode ma-trix would extend to the diode matrix, yetthat is exactly what is being done by extend-ing copyright on 1s and 0s to a diode matrixwhich it represents. Thus the same diode ma-trix could be covered by copyright on oneform of work and not the other. This is obvi-ously wrong. 87

These inconsistencies grow out of the basiccopyright distinction between unprotectableideas and protectable expressions, and they aresymptoms of a very fundamental problem withcopyright protection for computer programs.The problem is whether copyright protectioncan be limited to the “expression” of a com-puter program, without also protecting the“idea, procedure, process, system, method ofoperation, concept, principle, or discovery. ’88

Although both CONTU and Congress made

““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:Can It Be Solved?” BYTE, September 1982; and Pam Samuel-son, “CONTU Revisited: The Case Against Copyright Protec-tion for Computer Programs in Machine-Readable Form, ” 1984Duke Law Journal, 663 (1984).

“The quoted language is from 17 U.S.C. \102(b). The‘‘idea/expression dichotomy codified therein is a broader for-mulation than “ideas,” per se. It comprehends the distinctionmade in Baker v. Selden between the expression and the ‘‘artexpressed, 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 theprogrammer is the copyrightable element ina computer program, and that the actual proc-esses or methods embodied in the program arenot within the scope of the copyright law,"89

the question still remains. What is the expres-sion in a computer program?

Part of the problem is that the scope of theexpression of a computer program can varywidely, depending on how the word expressionis interpreted. As figure 3-4 illustrates, com-puter programs can be described in manyways, ranging from those descriptions that fo-cus on the precise code used to those that gen-erally describe the procedure or algorithm tobe implemented by the program. The bounda-ries of copyright protection in programs willdepend on what is considered an expressionand what is considered an idea.%’ Opinions varyon where the protectable expression shouldstop and where unprotectable ideas begin, Oneauthor believes that ‘the expression in the soft-ware does not consist of the exact writtensource code, but the specific logic and designof the program."91 others take an opposingview, and argue that copyright protection ina computer program, ‘‘is limited to the literalcode and does not extend to the structure orother nonliteral elements of the computer pro-gram."92

Regardless of how legal scholars resolve theissue of idea and expression, the Federal courts,in interpreting copyright law, will eventuallyface a dilemma; either: 1) the copyrightable ex-pression in a computer program will be limited

“‘{ l{c~~ Yfj. :144T:] , 94th (’ong., 1st sess. 1975, p. 54; and11 R R e p 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-

pl(~ ( ‘omputt’r. In(,. \ b’ranklin Computer Corp., 714 F.2d 1240~tld (’ir. 19H:;), said t haL ‘‘ .IIpplp does not seek to copyright themet hcd which in+t ructs the computer to perform it~ operatingfun(tif)n< hut {~nl} t ht instructions thcmsel~cs.’

‘ SWI [’art 1 of t hls chapter for a discussion of idea and ex-pr(’s<lon :i~ t ht. deterrn]nant of the boundaries of intellectualpropert~ OW nershlp.

I )un(an I )a~rlds{)n, ‘‘ [’protecting (’omput~~r Softvare: A(’(jmprt’h[’n~i~ e /\nal}si\, ,lurimefric.~ Journal, summer 1983.p :jt;;

< I )efend;int ilemorandum in Support of Their hlotion forNew Trial and or to Alter ,Judgment, }I”helan .Alssociates, Inc.

I’. .Jaslow l)enta] I.atmratory’, Inc., Ci\’il Action NO, 83-4583 [P;,1), I)a 1 W5), p, H; reported in 22,5 (1, S. P.Q. 156 {I<:. 1). Pa. 1985).

to the strict line-by-line program code, in whichcase the unscrupulous might easily escape lia-bility for infringement by simply varying thecode in a trivial way, or 2) the copyrightableexpression will be extended to the logic, de-sign, structure, performance or even the out-put of the computer program, in which caseone has copyrighted a “procedure, process, sys-tem, or method of operation, ” The cases thathave been decided thus far indicate that thecourts are adopting the latter alternative, andhave extended the meaning of expression incomputer programs to include the processesthat the programs implement. One opinion, forexample, suggests that a program that achievesresults similar to other programs, or even toother works of function—such as a commodi-ties trading manual— will constitute an appro-priation of a copyrighted expression. ” Thecourt in this case emphasized a similarity in“overall structure’ between one work and theother. In another case, a court found that 44out of 186,000 lines of code constituted sub-stantial similarity of expression.94 Yet anothercourt ruled that ‘‘the protectable expressionin a computer program is the manner in whichthe program operates, controls, and regulatesthe computer in receiving, assembling, calcu-lating, retaining, correlating, and producinguseful information either on a screen, print-out,or by audio communication."95

In theory, none of these rulings is permittedunder traditional copyright principles. This isnot because the courts have misinterpretedcopyright law, but because copyright law can-not be successfully applied to computer pro-grams. Unlike artistic or factual works, which

44’i4’illiams \v. .4rndt, F. Supp. (1) hftlSS., 198S1, ~().83-3397. In this case, the plaintiff’s work was a s~ep-hy-stepmethod for trading in various commodities. The defendant, with-out authorization, translated the plaintiff work into a com-puter program that achie~’ed similar results, and was found~ilt~ of infringement.

“’S,4S Institute l’, S&H C o m p u t e r S.v’stems, Inc,, F’.Supp. (M.D. Term. 1985), No. 82-3669. The court in thiscase also had before it e~’idence of actual cop}’ing b~ the de-fendant s–a fact which made the conclusion of infringement eas-ier to draw.

‘ \$”helan Associates, Inc. J, Jaslour Dental Laboratory)’,Inc., 225 (JSPQ 156 (F;.1). Pa. 1985), hut see: Q-CO, Industries.inc. ~, Iioffman, F. Supp. , N o . 85 C’i\’. 4653 RW’S(S. D. N.}’. 1985)


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

Each of items (a) through (g) represents adifferent, but equivalent expression of aprocedure for computing an average. Each ofthese expressions could act as a program forcomputing an average, depending on thesophistication of the computer operatingsystem handling the information.

If copyright protection in one of theseexpressions is broadened to include any orall of the equivalent expressions, thencopyright protection has been extended toideas or processes, and assumed patent-Iike status without stringent patentrequirements (such as novelty andnonobviousness).

If copyright protection in one of theseexpressions is limited only to that expres-sion, then copyright protection is almostuseless, because it allows others to escapeinfringement by insignificant variation ofthe expression.

The scope of patent protection in programsIS also hard to ascertain. The distinctionbetween mathematical formulae,algorithms, and computer programs, is notclear. In theory, one cannot patentmathematical formulae or laws of nature,but how is this distinction betweendiscoveries and inventions to be drawn inthe context of computer programs?

Intellectual property protection for suchfundamental procedures as computing anaverage is problematic. Proprietary rights inthe “building blocks” of computer sciencemay impede, rather than further, its pro-gress. If rights are to be granted infunctional works such as programs, at leastone question is: what is so basic as to con-stitute a “staple” item in the trade?

As computers become more sophisticatedin their ability to process natural language(conversational English, for example), theline between what counts as a protectableprogram and what constitutes user inputwill begin to blur. As this illustration shows,“program” and “algorithm” have no fixedmeanings.

(a)

To compute an average, sum the numbersin the set to be averaged, and divide by thenumber of items in the set

(b)

(c)

Get a data itemadd item to totalincrement indexif no more items, continue:

else go to getdivide total by index

(d)

10 data 10, 12, 17, 22, 6, – 1

20 read X,

30 If x = – 1 goto 7040 let Xt = Xt +X,

50 n = n + 170 average= Xt/n

80 print average

(e)

Get item x(

Ixt

= Xt +x,

I n=n+1

(f)

Call average

10, 12, 17, 22, 8

(9)

011001001101010101001001101100111001110101001100100110100110, ., .

SOURCE Off Ice of Technology Assessment


are subject to the ‘‘abstractions test betweenidea and expression, copyright in computersoftware is an either/or choice. Either one pro-tects the words or variables as they are liter-ally represented by the programmer, or one isforced to interpret those words or variables interms of the procedure they implement in acomputer system; thus protecting a procedure,process, or method of operation. ’G The “cleardistinction” made in Baker v. Selden, “betweenthe book, as such, and the art it is intendedto illustrate, collapses in a computer program,because the program embodies both “the book”and “the art. ” one cannot arrive at a “cleardistinction” between idea and expression ina computer program by using traditional copy-right analyses.

Policy Implications, The practical import ofappropriate protection for computer programslies in the public policy objectives of the copy-right system itself. For computer program pro-prietors and creators, as well as to the domes-tic and international economies, it is importantthat computer programs be adequately pro-tected. 97 If courts construe copyright protec-tion in computer programs narrowly, creatorsand proprietors may well find unprotected thevery thing that distinguishes their productfrom others–its logic and design. Equally im-portant, if only the precise code is consideredexpression, copyright protection will be oflimited use, since this expression can be easi-ly changed by competitors.

. . . —“ (’onsider the distinction logicians make between ‘‘object

l a n g u a g e and ‘‘ met a 1 anKu age (or langua~e about the objectlanguag[’~ in the context of t h[~ following >tatements:

Ilake the cak(~Fjxecute ‘‘ Ilake the (akef

The former is the object language; the latter is the meta lan-guage. This distinction collapses in computer programs, sincepropositions can be ‘ ( recursike’ i.e., they can serve as both ob-ject and meta statements. ‘( Bake the cake, ’ depending on thecon t~’ x t of use within the running of a computer program. mayeither be information to be displayed to the user, or a subrou-tine instructing the computer to bake the cake.

‘‘A major, if not the chief means of in~renting toda}’ is be-ing done in a non-engineering liberal arts mode which is aliento the historical patent-copyright paradigm, From a speechgiven by .John I,autsch, “W7hy Be Concerned About Proprie-tary I%otection of Software’?’ American Bar Association Con-ference. W’ashingt,on, 1)(’, tJuly 1985.

If, on the other hand, courts continue to in-terpret the expression in computer programsas broadly as they have in recent cases, devel-opers of computer programs may also be ad-versely affected, If copyright in computer pro-grams is held to extend to the “usefulknowledge’ ‘–the method of achieving certainresults—embodied in the program structureor algorithms, copyright may block softwareinnovators by precluding the creation of pro-grams that differ in detail, but implement andperhaps improve on copyrighted programs.’”The patent system was designed to have thiseffect, but it is inappropriate for the copyrightsystem, which was neither doctrinally nor ad-ministratively designed to protect functionalinformation. Overly broad copyright protec-tion would give the owner patent-like protec-tion over processes for a much longer durationthan patent law provides, and do so with noexamination for the program’s novelty or non-obviousness, as is required by patent law.Moreover, patent law requires that an inven-tion bean advance over the ‘prior art, requir-ing an inventor to examine previously patentedclaims before gaining patent protection. Forthis reason, the Patent and Trademark Officekeeps records of all patents that have been is-sued. But the Copyright Office does not keeprecords of “prior art, ’99 which leaves no wayof predetermining whether a program that per-forms similar functions or obtains similar re-sults will infringe a previously copyrightedprogram.

Copyright law does not distinguish betweenthe types of computer programs it protects,which may exacerbate some of the difficultiesdescribed above. The type of computer pro-gram that is copyrighted may significantly af-

“AS tJustice Bradley commented in Baker ~, Selden: “The~’er~’ object of publishing a book on science or the useful artsis to communicate to the world the useful knowledge it con-tains. But that object would be frustrated if the knov.ledge couldnot be used without incurring the guilt of piracy of the book.101 LJ, S. 841 at 103 ( 1880).

“Deposit of programs in the Copyright office is required ifthe program is published with notice. 17 U.S. C. \407. Howe\rer,only the first and last 25 pages of a program need be deposited,and these need only be sufficient to identify the program in ques-tion. 37 CFR $202.20 (c)(viii(A). These pages need not discloseany of the workings of the program,


feet the market power a copyright owner canpossess.100 For example, both operating sys-tems and applications programs are genericallycomputer programs, but crucial distinctionsexist between the two. Operating systems gov-ern the internal operation of a computer, andallow it to communicate with a range of appli-cations programs (e.g., spreadsheets, graphics,and word processing programs). The operat-ing system will, therefore, determine which ap-plications programs can run on a particularcomputer. Thus, copyright on an operating sys-tem may be a far more powerful right than acopyright on an applications package, and maygovern the market for applications packages.Indeed, this desire to make one’s applicationsprogram marketable may have been at theheart of the Apple v. Franklin case, since itwas unlikely that the 15,000 applications pro-grams written for Apple’s operative systemwould be rewritten to run on the Franklin Com-puter’s machines. ’”’

Reverse Engineering. The trend of interpret-ing expression broadly in copyright for com-puter programs may also pose problems forreverse engineering. Reverse engineering refersto the unauthorized, although not necessarilyillegal, reproduction of programs in their ob-ject or source code form for the purpose ofteaching, analyzing, or evaluating the con-cepts, techniques, or ideas embodied in the pro-gram. 102 This process promotes innovation byallowing programmers to build on the worksof others in the creation of new works. It alsoeliminates the need for redundant research anddevelopment. Reverse engineering allows ab-stract knowledge and techniques to be passedon, while prohibiting the wholesale appropri-ation and sale of another’s work.

— — - —“’”For a thorough discussion of copyright and market power,

see ch. 6.‘“’ Allan Schmid, “Intellectual Property Rights in Bio-

technology and Computxx Technology, ” to be published in Zeit-schrift fur die gmmrnte Staatswissenschaft, 1985. One writerargues, however, that this problem has been contradicted bythe facts. Duncan Davidson, “Software and the Wealth of Na-tions, ” to be published in Computer Law and Practice, 1985.

‘“’The language used in this definition is adapted from theSemiconductor Chip Protection Act, 17 U.S.C. f906.

Computer programs create unique concernsabout reverse engineering because, unlike othercopyrightable works, their expression is notdisclosed when they are published. ’03 While ajournalist can learn his craft without copying,by reading the others’ published works, a pro-grammer cannot. He must copy the programfrom its original storage medium–probablyby decompiling it into source code form–inorder to read and learn from the works of hispredecessors. This copying may give rise tocopyright liability, even though it may in noway interfere with the market value of the cop-ied software.104 The copy that is made in thecourse of reverse engineering may have rela-tively little financial value. It may bear little,if any, resemblance to the work that is allegedlyinfringed, and may even be destroyed after use.Instead of examining the work, the court looksto the “paper trail” left by the defendant inthe research and development process. The in-fringement often occurs in the process of copy-ing a program to create a new one. However,courts have used this initial copying as the ba-sis for finding that the final work produced bya defendant was an infringement, even thoughit resembled the copied program only slight-ly.105 This creates uncertainty whether anycopying, even that for reverse engineering, islegal.

As it exists, copyright law offers two con-ceivable ways of dealing with the problem ofreverse engineering. One possibility, Section117 of the Copyright Act, permits copying ofsoftware as an “essential step” in the utiliza-tion of a computer program for “archival pur-

— . .—‘r’] For a discussion of the disclosure issues surrounding com-

puter programs, see Pamela Samuelson, “CONTU Revisited:The Case Against Copyright Protection for Computer Programsin Machine-Readable Form, 1984 Duke Law Journal 665.

‘“Pamela Samuelson, “The Demise of the Right To ReverseEngineer Computer Programs: Is It Appropriate?” unpublisheddraft, Sept. 25, 1984.

‘(’’Indeed, the emphasis on the conduct of the defendant, asopposed to an assessment of the similarity in content betweenworks can be seen in several recent cases: e.g., SAS Institute,Inc. v. S&H Computer Systems, Znc. (1985 M.D. Term.), No.82-3669, Whelan Associates, Inc. v. Jaslow Dentaf Laboratory,225 U. S.P.Q. 156 (E. D. Pa. 1985), and Hubco Data ProductsCorp. v. Management Assistance, Inc., 219 U.S.P.Q. 450 (D.Idaho 1983).

Ch. 3— The Accommodation of Intellectual Property Law to Technological Change “ 85

poses. "106 This provision does not explicitly ad-dress the issue of reverse engineering. CONTU,which wrote section 117, interpreted ‘ ‘essen-tial step” narrowly, to include only the copy-ing done by a computer in the process of load-ing a program into the machine. Likewise, thecourts have followed this interpretation. 107 Abroader interpretation of “essential step”might permit reverse engineering. But becausesuch a broad interpretation of section 117 mayalso conflict with the copyright owner’s exclu-sive right to prepare derivative works,108 itseems to be a slim reed on which to facilitatereverse engineering.

Alternatively, the doctrine of fair use mayprovide for reverse engineering, because it per-mits copying for scholarship or research. 109 Fairuse, however, evolved in the context of printtechnology, and so several of its features makeit an uncertain device, at best. Two of the cri-teria used in determining the fairness of a useare: ( 1 ) the purpose and character of the use,including whether the use is of a commercialnature; and 2) the amount and substantialityof the work as a whole. 110 Because reverse engi-neering is often performed for inherently com-mercial reasons, the “purpose and charactercriterion could weigh against a finding of fairuse. Furthermore, programs must often be cop-ied in their entirety to understand their work-ings, or to study the relevant portions of code.The fair use factors concerning “amount andsubstantiality’ not only deal with the num-ber of copies of a work made, but also with theportion of a work that is copied. Hence, thefair use doctrine may not allow reverse engi-neering. However, because there has been nocourt decision on the matter of reverse engi-

‘“The relevant part of section 117 reads:

it IS not an Infringement for the owner of a copy of a cc)n)put-er program to make a cop~ or adaptation of that computerpro~am pro~ided ( 1 I that-~uch a new copy or adaptation I S

c r e a t e d a s an csw’n tlal step in the ut]hzat Ion of the computerpro~am In c o n j u n c t i o n with a rnachlne a n d t h a t It IS used Inno other manner

‘ S e e , e . g . : Midwa~’ Alanufacturing Co I’. Strohon, 564F.supp. 741 (?J. I). Ill. 1984),

“17 U.S.C, ~ 106,‘qThe doctrine of fair use is codified in Section 107 of the

Copyright Act, and is discussed in ch. 7 of this report.“17 U. SC. ~107, sections 1 and 3

neering, it is impossible to say definitivelywhether fair use will allow it.

Computer Program and Patent Law

Given the problems of applying copyrightprotection to computer programs, patent pro-tection may be a more viable alternative thanfair use. Among other things, patent law pro-tects new and useful processes,111 and computerprograms, as works of function, use informa-tion in a process. Many patents have been is-sued for computer programs.

Patent protection, however, also poses prob-lems. Some are theoretical; not all programsthat need protection will be eligible for patentprotection. Some are practical, and have to dowith how suitable the patent system is to thecommercial environment of program engi-neering.

Programs and Patent Theory. Since 1966, theissue of program patentability has been jug-gled among the Patent Office, the Court of Cus-toms and Patent Appeals (now the Court ofAppeals for the Federal Circuit), and the Su-preme Court.112 Computer programs have prov-en to be as problematic an “invention’ for pat-ent law as they have been a “writing” forcopyright law.113 For, the same characteristicsthat make programs acceptable subject mat-ter under the copyright scheme cause problemsunder the patent scheme. Whereas copyrighthas problems with the functional nature of pro-grams, patent law has difficulties with sym-bolic nature of programs. They represent proc-esses that have heretofore been mental, such

——— ——]‘ ‘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 oruseful improvement thereof, ma~’ obtain a patent on his in\ren -tion or discovery.

‘ “SW Duncan Da\ridson ‘‘ I’rotecting Computer Software:A Comprehensive Analysis, in 1983 .Arizona State I,awr Jour-nal 611, 634-650.

“ ‘One writer has suggested that ‘‘[m]uch as the distinctionis breaking down in copyright because of technological changesblurring the distinction between a product and its idea, so too-especially in the area of computer software— is the dichotom~.losing its meaning in patent law. ” James Beniger, InformationTechnolo~”es and Commodities in the De~’elopment of intellec-tual Proper.\’: Changing Rights and Practices, OTA contractreport, April 1985, p. 58.

86 • Intellectual Property Rights in an Age of Electronics and /nformation

as balancing a checkbook or searching for aword in a text.

Strictly speaking, computer programs arenot in and of themselves patentable. Atpresent:

. . . [patent protection] is available for com-puter programs that are intrinsically tied to adevice which physically and automatically ap-plies the results of the computer program. . . .The invention is not in the program: It ismerely implemented by the program (and) isactually a new method of doing something.

Patentability is determined by whether theprogram implements a physical process thatis itself the subject of invention, and meets thecriteria for patentable processes.115 For exam-ple, a method of typesetting,116 of timing thecuring of rubber,117 of searching for oil,118 orof storing and manipulating telephone signalsand records in a database 119 are patented in-ventions that include computer programs ascomponents of the invention. Programs thatare the only novel component of an otherwiseunpatentable process, 120 or that merely imple-ment an algorithm or a scientific or mathemati-cal truth,121 are not patentable.122 This is the

‘John C. Lautsch, American Standard iiandbook of Soft-ware Business I.aw (Reston, VA: Reston Publishing, 1985), p. 65.

“That is, useful, novel, and nonob~ious (35 U,S.C. \\lOl,103). Similarly, machines, methods of manufacture, and com-positions of matter that employ programs and that meet thestatutory criteria for patentability are also patentable.

‘” In r-e Freeman, 573 F,2d 1237 (CCPA 1978).“ Diamond v’. Diehr, 450 U.S. 175 (1981).“In re Taner, 681 F.2d 787 (CCPA 1982).“’I’atent No. 4,479, 196– Hyperedge E~nti~r-Relationship Data

Base Systems ( 1 984), for example.‘“’ Parker ~. Flook, 437 U.S. 584 ( 19781.

“Gottschalk ~, Benson, 409 U.S. 63 { 19’72). The SupremeCourt ruled that a program for the conversion of binary codeddecimals into pure binary numerals could not be patented, since“the patent wollld wholly pre-empt the mathematical formulaand in practical effect would be a patent on the algorithm it-self. ” 409 U.S. at 71 72 (1972).

‘“’This statement is based on the caselaw that has so far de-veloped. one observer, however, has pointed out that “[p]atentsare now being granted every week with claims covering a seriesof 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) willuphold such claims in infringement proceedings remains to beseen. ” Letter to OTA from Robert Shaw, The Patent, Trade-mark, and Copyright Research Foundation, Franklin Pierce LawCenter, Oct. 11, 1985. Many paten s have been issued for “pure”#b,programs (e.g., 4’SW’IFT-TECH” is a patented computerizeddatabase search algorithm that runs on mainframe, mini, ormicrocomputers. U.S. Pat. No. 4,270, 182).

case for a great many computerized industrialprocesses, and the majority of programs writ-ten for personal computers.

The courts’ reluctance to uphold patent pro-tection on programs in isolation from physi-cal processes points to a very fundamentalproblem with patent protection for programs.Programs are expressions of algorithms, whichare rules or procedures for achieving particu-lar results. Algorithms, like mathematical for-mulae and laws of nature, are not patentable,Yet, the algorithms expressed in programs canalso be configured in a computer in hard-wiredform.

This equivalence between algorithms inhardware and those in software raises an is-sue concerning the patent ‘doctrine of equiva-lents.” The doctrine states that a patent pro-tects equivalent configurations, even thoughthey may neither be disclosed nor actuallyclaimed, unless the equivalent configurationperforms the function in a substantially dif-ferent way.123 If, therefore, a program can bedescribed in terms of the functioning of digi-tal logic circuitry in the computer hardware,rather than in terms of algorithms embodiedin software, patents might be issued on ma-chines which if they were software, would bedenied.124

The Practical Limitations of Patent. There areadministrative and practical problems con-nected with seeking patent protection for com-puter programs. Many observers consider timeand expense to be the greatest drawback. Aclaim may be pending for 2 to 3 years and costan inventor upwards of $10,000 to prosecute. 125

Many innovators may find the time and ex-pense involved in obtaining patents for com-puter programs prohibitive, depending on therate at which software designs become obso-lete, and the amount of financial resourcesavailable to a given software innovator. Even

‘“{Duncan Davidson, “Protecting Computer Software: A Com-prehensive Analysis, ” 1983 Arizona State Law Journal 611,643, citing 4 D. Chism, Patents, $18.04 (1982)

“’Ibid.“’Larry Kahaner, “Patent Reform, Pending, ” Across the

Board, September 1984, p. 36; and conversations with RichardStern (see note 44) and Robert Shaw (see note 122). See ch. 9on institutional issues.

Ch 3— The Accommodation of Intellectual Property Law to Technological Change ● 87

after a patent is successfully obtained, it isoften found invalid when challenged in court,126

making the value of a patent to investors high-ly uncertain. The scope of patent claims in pro-grams, too, is uncertain, because of their sym-bolic nature. The actual code written by aprogrammer is seldom the subject of patentclaims. Instead, what is claimed is the proc-ess that the code implements, and the programis incidental to this process. The scope of thepatent claim may, therefore, be difficult todelineate precisely, because it does not referto a specific embodiment or tangible item.

Computer Programs and Trade Secrets

A trade secret is a form of intellectual prop-erty that covers any confidential formula, pat-tern, device, or compilation of information usedin a business, which gives that business an op-portunity to obtain an advantage over com-petitors who do not know or use the secret.]”Trade secret law is a viable method of protect-ing computer programs, and in some cases,seems better suited to programs than eitherpatent or copyright. Indeed, software devel-opers rely on it heavily for protecting againstthe unauthorized disclosure of competitivelyvaluable information.

Trade secret law differs substantially fromboth patent and copyright law. The law of eachState, rather than Federal law, defines whata trade secret is, and what rights the holderof a trade secret has. Unlike copyright, tradesecret protection can extend to the ideas, al-gorithms, and procedures embodied in a pro-gram, as well as to the expression adopted bythe programmer. Unlike patent, a trade secretgenerally requires no compliance with formal-ities, no waiting time to acquire, and no proofof novelty or nonobviousness. Perhaps mostimportant, trade secret is not encumbered withthe problems of fitting computer programs intosubject matter schemes of patent and copy-

“Elstimates of holdings of in~’alidity range from 50 percent(see Davidson, op. cit. ) to 70 percent (Richard Stern, “ROhlin Search of a Remedy: Can They Find It? 1 Computer LawReporter 4, 1982).

“ Restatement of Torts, $75’7, comment B

right. ]28 In trade secret cases, a court is freerto focus on the effects of disclosure on a plain-tiff’s business, and the contractual or tortiousmisdeeds of a defendant, rather than on strictstandards of infringement. 129

Trade secret protection, however, has draw-backs from both a public policy and a proprie-tary point of view. As a matter of public pol-icy, an overreliance on trade secret protectionmay hinder technological growth in the com-puter industry by “locking up” informationthat can benefit whole sectors of the industry.Unlike the patent and copyright systems, tradesecret does not further the goals of disclosureand publication. Quite the reverse: trade secretprotection is lost by unrestricted or unpro-tected disclosure of the secret. 130 Trade secretsare often enforced through contracts betweenemployers and employees that restrict the em-ployees’ rights to enter into competitive ven-tures or to subsequently become employed bycompetitor companies. Although intended toprotect employers from unscrupulous employ-ees, abuses of these noncompetition agree-

. -.““Rather than the uniqueness, novelty, or originality of the

program, a court ruling upon a trade secrets case will look tothe unique \’alue of the program to a compan~ competitivead~’antage, the company’s in~’estment in the program design,or the ‘ ‘unique logic and coherence’ of the program. See, e.g.:Corn-Share, Inc. }$. Computer Complex, Inc., 338 F, Supp. 1229(E, D. Mich. 1971) and Computer Print S~”sterns, Znc. \’, Lewis,422 A.2d 148 (Pa, Super. 1980), but see: Structural 11~’namicsResearch Corp. L’. Engineering Afechanics Research Corp., 318N. J4’.2d 691 (Minn. 1982) (“Mere \rariations in general processesknown in the field which embod~’ no superior advances are notprotected.”)

“qThe same can be said of man>’ other State law forms of in-tellectual property protection. Theories such as tortious inter-ference with contract, interference with prospecti~’e ad~rantage,misappropriation, and unfair competition law all focus on theconduct of defendants, rather than on the subject matter of theitem that is allegedly infringed.

‘“’The factors that go into an assessment of whether certaininformation is one’s trade secret include:

1. the extent to which the information is known outside ofhis business;

2. the extent to which it is known by employees and othersinvolved in his business;

3. the extend of measures taken by him to guard the secrecyof the information;

4. the value of the information to him and to his competitors;5. the amount of effort or money expended by him in devel-

oping the information; and6. the ease or difficult’ with which the information could be

properly acquired or duplicated by others.Restatement of Torts, §757, comment B.


ments may also hinder technological advanceby acting as a barrier to employee establishedstartup companies.131

Trade secret protection is of limited useful-ness to many types of software developers andvendors. Programs that are mass marketed arenot suitable candidates for trade secret pro-tection, since the trade secret status of the soft-ware is lost through disclosure, and disclosureis often the natural consequence of mass mar-keting. To avoid this problem, some vendorshave licensed, rather than sold, their programs,and required the licensees to keep the programsecret .-Depending on the number of licensees,however, these schemes may be neither legallynor practically enforceable.132 The software—— — -. —. —.

“’’These (noncompetition) suits hit the startups at theirmost vulnerable stage, when every available dollar and minutehas to be poured into the nascent company. The suits have be-come so common as to kindle suspicions that some establishedcompanies are using the courts more to suppress competitionthan to right legitimate wrongs. ” “In High-Tech Industry, NewFirms Often Get Fast Trip to Courtroom, ” Wall Street Jour-nal, Aug. 14, 1984.

‘-Davidson, “Protecting Computer Software, ” op. cit.

vendor also faces a number of other problemswith trade secret protection, including a lackof uniformity in trade secret laws from Stateto State, and difficulties in attempting to ob-tain concurrent protection through patent orcopyright law. 133

“Secrecy may be lost through copyright registration anddeposit, or through a Freedom of Information Act request uponthe Copyright office, The Copyright Office has promulgated‘‘secure deposit” regulations with respect to deposit of the Mul-tistate Bar h~xam, 37 CFR $203.40, and see ,VationaJ Confer-ence of Bar Examiners t’. .Mult,istate Legal $tu~ies, 692 F,2d478 (7th Cir. 1982), and the Freedom of Information Act hasa trade secret exemption, 5 U.S, C. $552( b)(41, but neither of theseprovisions has been construed with respect to computer pro-grams. Section 301 of the Copyright Act preempts State lawthat provides 4 ‘equivalent protection. Despite the fact thatthe Supreme Court has found that patent law does not preemptState trade secrets law, Kewanee OiJ Co. ~’. Bicron Corp., 416U.S. 470 (1974), the situation is not entirely clear with respectto preemption of State trade secrets law by Federzd copyrightlaw. See e.g., Videotronics, Inc. t’. l?end Electronics, 564 F. Supp.1471 (D. Nev. 1983),

PART III: IMPLICATIONS FOR POLICY

The application of a uniform system of in-tellectual property principles, such as that em-bodied in copyright and patent law, to diver-gent types of information-based products mayno longer be possible. Modern technologies areexaggerating dissimilarities between informa-tion products that were once protectable un-der a single system of law, and are, in somecases, giving rise to new products that strainthe application of old legal principles.

There may be no one simple solution to theproblem of accommodating intellectual prop-erty law to technological change. Being differ-ent in kind, many of the problems require dif-ferent types of solutions. Determining theproper form of protection for computer pro-grams, for example, is largely a question ofwhich aspects of programs the law should pro-tect; whereas determining ownership in worksdistributed on-line is one of finding a feasibleadministrative mechanism.

Problems also require different degrees ofchange. Copyrighting dynamic databases, forexample, may call for relatively minor changesin copyright registration and deposit regula-tions, but the difficulties that computer andcommunication technologies pose for protect-ing works of fact may necessitate sweepingchanges in the type of protection that the lawcurrently offers.

The timeframe in which problems are likelyto arise also hinders attempts to construct onecomprehensive solution. Protecting computerprograms is a problem that requires immedi-ate attention, but other issues, such as inter-active authorship, may not significantly affectthe intellectual property system until early inthe next century.

Given the complexities of formulating appro-priate intellectual property law, it is convenientto organize Congress’ policy options accord-


ing to the type of action that might be taken.A choice of one option does not necessarily ex-clude others, and the policy maker may chooseto exercise several options at once, or in se-quence over time. These options, and theirstrengths and drawbacks, are described below.

Option #l: Rely on the Marketplace

Marketplace options accommodate techno-logical change with little or no government in-tervention. Under this kind of option, privateentrepreneurs, acting individually or as groups,address problems that exist in intellectualproperty law. Solutions to particular problemswill often take the form of “technological fixes”or private contractual agreements. For exam-ple, ‘‘identifiers” electronically embedded insome works may help to solve some of the prob-lems of integrity and identity associated withworks of art that are produced and distributedon-line, and technological methods of monitor-ing use, although expensive, are available forsome database distributors of works of fact.And, where current legal protection is inade-quate for works of function, proprietors mighttry to supplement intellectual property pro-tection through the use of site licensing or‘‘shrink wrap" licensing.134

The marketplace approach to resolving intel-lectual property issues is favored by a majorityof the public, 54 percent of whom feel that busi-ness should have the primary responsibilityfor solving problems associated with intellec-tual property. (See table 3-l.) In response toa survey conducted for OTA by Yankelovich,Skelly & White, Inc., the public responded inthe following way when asked “Thinking aboutthis issue of intellectual or creative property,who would you say should have primary re-sponsibility for solving any problems createdby new technologies (like computers orvideocassette recorders)?” Manufacturers ofcomputer hardware and many established soft-ware developers, fearing that legislative efforts

“’Shrink wrap licenses, so called because they purport tobind the purchasers of mass market software to a license agree-ment rather than an outright sale, are of unproven effective-ness and legality. See ch. 6, pp. 183-184 for further discussionof shrink-wrap licenses.

Table 3-1 .—Who Should be Responsible for SolvingIntellectual Property Problems?

Familiar Not familiarwith with

To ta l i ssues issues

Business in the Informationand entertainmentindustries . . . . . . . . . . . . . . . . . 54% 54% 53%

The government ., 34 33 35Both 8 11 7Neither . . . . . . . 1 1 1Don’t Know 3 1 4

SOURCE Yankelovich, Skelly White, Inc. Public Perceptions of the Intellec-tual Propertyi Rights Issue contract prepared for OTA February1985

to adapt intellectual property law may createmore uncertainty than it resolves, would alsoprefer that Congress pursue marketplace op-tions. In some cases, private industry has al-ready taken a marketplace initiative by seek-ing to establish technical standards,135 or byprotecting their products through contractualagreements with their customers. However,not all representatives of the information in-dustry believe that the marketplace alone canprovide adequate protection for their products.Database vendors, in particular, are uncertainabout marketing their services without ade-quate and appropriate legal mechanisms.

The marketplace option has several advan-tages over others. The marketplace is morelikely to be able to respond rapidly and flexi-bly to rapid innovation. Contracts betweencomputer program sellers and buyers are likelyto address the specific needs of each party, andcan be tailored to take unique features of thetechnology into account. Technological meansof protecting information or monitoring useavoid costly enforcement and litigation. And,marketplace solutions can evolve as rapidlyas the technology.

Marketplace solutions do not solve all of theproblems that vendors of information productsface, nor do they necessarily further the pub-lic interest. Unlike intellectual property law,contracts do not ordinarily bind those not

—“’The Association of Data Processing Service Organiza-

tions (ADAPSO) has recently proposed a standard method ofcopy-protecting computer software, and the proposal has metwith some resistance from both software vendors and users.


party to the agreement. This means that, lack-ing adequate intellectual property protection,a creator or purveyor of information is oftenwithout legal recourse against third parties.

Technology-based protections may also beunworkable. Not only are they susceptible tothe diligent “hacker,’ they may also be imprac-ticable to market or difficult to standardize.Moreover, by protecting works that are pub-licly disseminated, copyright encourages dis-semination. In lieu of copyright protection, in-formation providers may be inclined to “lockup’ access to information that they previouslyhad incentive to keep open. This would notserve the public interest.

Option #2: Judicial Accommodation

Judical accommodation is an option that al-lows the Federal court system to treat intel-lectual property problems on a case-by-case ba-sis, by fitting existing law to the particularfacts before the court. By interpreting the lawin specific circumstances, courts develop rulesthat eventually have broader application.Many judicially developed doctrines, such asfair use and the idea/expression dichotomy,were later codified by the legislature.

The individuals having the strongest opin-ions about judicial accommodation are attor-neys. Those attorneys who view existing in-tellectual property law as adequate to deal withtechnological issues also feel that the judicialforum is the most appropriate method of deal-ing with technological advance. The great vir-tue of the judicial process, according to thisperspective, is its ability to adapt the broadoutlines and fundamental principles of statu-tory law to circumstances that are unforesee-able at the time law was written into statute.They also stress that many uncertainties, suchas whether computer programs are copyright-able, have already been resolved by the courts,and that a foundation therefore exists for fur-ther judicial development.

A growing minority of attorneys, many ofwhom come from a background of engineer-ing and patent law, strongly disagree. Theyargue that not only are existing methods of

legal protection inadequate, but so too arejudges’ abilities to comprehend the subtletiesof the technology and the long-range impactof their decisions. Given uncertainties in ap-plying the law to new technologies, they oftencounsel their clients to proceed conservativelyin order to avoid lawsuits. The clients, in turn,may forego potentially profitable avenues ofresearch or application. Often, there is no wayof knowing how the law will apply to them un-til they are haled into court–a prospect thatmany wish to avoid.

The legal profession’s opinions on judicialaccommodation reveal many of the strengthsand weaknesses of this option. Judicial accom-modation may be advantageous in some cases,where statutory law can be construed by thecourts so as to avoid the need for legislativesolutions. The judiciary may, for instance, beable to clarify the meaning of the fair use andidea/expression doctrines in the context of com-puter software. The courts’ role is to adapt gen-eral law to specific circumstances and, giventhe idiosyncrasies of the situations that mayarise, the flexibility of judicial accommodationgives it many advantages over attempting toanticipate future problems through legislation.In many cases, alternative causes of action—such as trade secrets, misappropriation, andunfair competition law—may also fill the gapsleft in copyright or patent law because of theeffects of technology.

Nevertheless, the courts, which are gener-alists par excellence, may be ill-equipped todeal with many of the highly technical and mul-tifaceted problems raised by some of the tech-nologies. Moreover, as this chapter suggests,many of the problems in intellectual propertylaw are fundamental, and may not lend them-selves to resolution through a case-by-case ap-plication of the law. In order to obtain resultsthat seem to them just, courts have recentlybegun to render decisions that are, in essence,policy choices.

In light of the Supreme Court’s consistentsignals to Congress that the judiciary shouldnot serve as a policymaking forum for patentand copyright law, resort to the courts to re-


solve many of these technological issues maybe tantamount to a delegation of Congress’ pol-icymaking authority. Even if the judiciary actswith restraint with respect to policymaking,the application of obsolete law to novel circum-stances may end up skewing the policy objec-tives that the statute seeks to promote.

Option #3: Amendment

Amendment is an option that allows Con-gress to modify portions of existing law in or-der to accommodate changes in the way thelaw operates brought about by technology. In1980, for example, the copyright law wasamended to include computer programs, andin 1985, it was amended to deal with the rentalof sound recordings. A bill presently beforeCongress would amend the copyright law toinclude the ornamental designs of utilitarianitems, such as semiconductor chip masks.136

Industries and organizations that rely on,or are affected by copyright protection, gen-erally favor amendment, where necessary, asan option for accommodating technology.Among these groups are the recording and mo-tion picture industries, the library and educa-tional associations, the software and computerindustries, and a variety of authors’, publish-ers’, and artists organizations. Each of thesegroups tends to have specific and unique con-cerns that are often best addressed by amend-ment. These organizations view amendmentas the best option for a number of reasons: mar-ketplace options may not be viable for achiev-ing many results, such as proposed royaltieson blank tapes; 137 litigation may produce re-sults that are unfavorable, as with Sony Inc.v. Universal studios,138

or not sufficiently com-prehensive for the group’s particular ends; andthe groups’ interests are seldom broad enoughto favor more comprehensive legislative op-tions, such as revision or sui generis legislation.

Amendment to patentor copyright law maybean appropriate solution to some of the prob-lems posed by technology, especially those

“ 1 I. R. 1900,” also known as “Th~’ Design Protection Act of19~5. Introduced b~ Represent atit’e Nlooreh{’ad.

S. 31 and 1{. R. 1030“LSOnJr Corp. I’, [ ‘ni\rersa) (’it~’ ,Studio.s< 464 (1. S. 417 { 1981).

amenable to relative}’ isolated legislativetreatment. For example, the problems of de-posit and registration for dynamic computerdatabases, the difficulties involved with thou-sands of contributors to a single database, andthe issue of the scope of protection for com-puter programs may be soluable through amend-ments to appropriate sections of the CopyrightAct. Accommodation by amendment offers theadvantage of relative timeliness in the face oftechnological change. Next to judicially fash-ioned responses, amendment is perhaps mostflexible in meeting the rapid pace of techno-logical change. Amendment also offers the ad-vantage of fitting specific technological accom-modation within a larger precedential context,thus reducing uncertainties about whether ex-isting legal principles would apply to new pro-visions.

However, insofar as problems affect the en-tire intellectual property system, accommoda-tion by amendment may be but a temporarysolution. If, for example, computer databasesand net works become a principal means of stor-ing and distributing information, copyrightlaw, both in principle and in practice, may failto protect what needs protection—algorithmsand information. Amendment may fail to ad-dress the fundamental difficulties posed bytechnological advance, since the problems lieat the conceptual core, rather than at theperiphery, of existing law. The failure of copy-right law to account for the trifold nature ofinformation—works of art, fact, and func-tion—is an example of a fundamental problemthat technology is exacerbating.

Option #4: Sui Generis LegislationSui generis is a latin phrase used to describe

any law that is ‘‘of its own kind or class. Suigeneris intellectual property law is legislationthat stands apart from existing patent, copy-right, trademark, or unfair competition law.The Semiconductor Chip Protection Act is anexample of sui generis law designed to protectthe architecture of semiconductor chips.’” Thesui generis option has also been suggested forcomputer programs.

“The Semiconductor Chip Protection .Act comprises Chap-ter 9 of Title 17, L1. S. Code.


The identity of the parties likely to favor oroppose sui generis legislation will depend onwhat the legislation seeks to protect, and onhow it proposes to protect it. In the case ofthe Semiconductor Chip Protection Act, for ex-ample, the semiconductor industry generallyfavored protecting chips through an amend-ment to the existing copyright system, ratherthan sui generis law, because of the greater cer-tainty that amendment offered. Other groups,such as the publishing and computer softwarebusiness, favored the sui generis option be-cause of possible adverse effects that amend-ment of the copyright law would have had onprotection of other types of copyrightableworks. In general, groups whose products suigeneris law is likely to affect prefer protectionunder existing copyright or patent schemes be-cause of the lag time involved in writing awhole new system of protection, and becauseof the uncertain way that courts will interpretthe new law.

The sui generis option offers the advantageof accommodating intellectual property law tothe gradual introduction of new technologies.Even with rapid technological change, manyof the traditional, print-based, methods of cre-ation and distribution will continue to form agreat part of the commerce in the informationindustry, and traditional concepts developedfor print culture may still work quite well. Asnew forms of expression grow up alongside ofexisting ones, Congress may want to considerparallel forms of intellectual property protec-tion. Indeed, the Semiconductor Chip Protec-tion Act is a good example of this parallel, suigeneris approach. Sui generis legislation canbe specifically tailored to the idiosyncrasies ofthe technologies and their markets, withoutdamaging the fabric of existing law. Wheredoubt exists over the applicability of the in-tellectual property clause of the U.S. Consti-tution, alternative constitutional authority canbe found in the commerce clause.

A sui generis law for computer programs andother works of function might be desirable formany of the above reasons, Like the Semicon-ductor Chip Protection Act, a sui generis lawfor programs and other works of function could

build in a balance between proprietary and pub-lic interests, by granting appropriate proprie-tary rights in those aspects of the work thatare valuable, by allowing for reverse engineer-ing, and perhaps by limiting the term and scopeof protection to reflect actual markets for func-tional works.

Works of fact might also be protected un-der a sui generis scheme that recognizes theimportance of protecting information per se,while at the same time balancing such protec-tions against the rights and needs of the pub-lic to that information. Compulsory license ar-rangements and alternative remedies, such asthe imposition of “reasonable” royalties forcertain types of infringement, might also betailored to the specifics of the interests atstake.

Sui generis schemes of protection are not,however, a panacea. They are costly in termsof the political investment necessary for theircreation. They may also require the creationof new administrative agencies, with appropri-ate expertise. Lacking a history of judicialprecedent, uncertainties will also exist as tothe meaning of terms and the applicability ofthe law to specific circumstances. Further-more, sui generis laws may cause great difficul-ties for international legal, economic, and po-litical arrangements. Computer programs, forexample, have only recently been incorporatedinto the the body of many of the developed na-tions’ copyright law, and only after many yearsof contention.

Option #5: Revision

Revision would entail rewriting all or a sub-stantial part of the Copyright Act of 1976 toconform to the policy goals that Congressseeks to further in a new technological context.A revision might retain the basic legal princi-ples already developed in law, as the revisionof 1976 did, or it might adopt wholly new prin-ciples.

Although many observers have commentedfrom time to time on the obsolescence of copy-right law, and although some have even envi-sioned the broad outlines of a future intellec-


tual property law,140 OTA found few advocatesof a general revision of copyright law. Indeed,most parties with whom OTA spoke indicatedthat they believed the Copyright Act of 1976is adequate for the foreseeable future.

Nevertheless, Congress will have to give con-sideration to the general revision of the copy-right laws in the course of the next decade. Inaddition to substantial and worsening enforce-ment problems,141 copyright law is becomingirrelevant to new technologies and more re-moved from the policy objectives for which itwas designed. Hence, many of the same pres-sures exerted by technology on the CopyrightAct of 1909, which required the 1976 revision,have already begun to undermine the Copy-right Act of 1976. Congress should thereforebegin now to gather the information necessaryfor the eventual revision of the copyright law.

This chapter suggests a framework for aneventual revision of the copyright law. The re-vision might be modeled on the trichotomy de-veloped in this chapter for works of art, fact,and function; and it could specify rules for theprotection of each. Under this system, worksof art, whose value is closely tied to expres-sion, might be protected in a traditional copy-right fashion. Protection for works of fact,whose value lies in the accurate representationof reality, might be tailored to reflect this value,while at the same time assuring adequate pub-lic access to socially and politically importantinformation. Works of function, which rely onalgorithms as their source of value, might beprotected along lines of patent law, with somethreshold requirements of advance over priorart and disclosure.

The copyright proprietor could register hiswork under one of these three categories, com-

‘ SW. c’ ~ \l irhael 1)~’ndleton. ‘‘Intellectual I’roperty, I n-f[)rmat]f)n- Il:iwd S{)cif,t?r. :ind a TJew I nternat ional F;con[)mic( )rcier– The I’f)licy ( )ptions’?” 2 I+:uropean i n t e l l e c t u a l l’ropert.v

R(>[rieu. ;j 1 ( 19HF)); 1 larlan (’leyeland, “ King Canute and the In-formation R(’\ource, 7’echnolog~r Retiew’, Januw-}’ 19H-1, pp.12-1 h; (;arJ’ Klueck, “The Coming ,Jurisprudence of the infor-mation Age, ‘‘ 21 San Djt’go Z.aw ftp~rit~w 1077-111 I { 19811, R.(;rant I larnrnond, “Quantum I)h}’sics, Fjconometric \lo(iels, tindI’rf)pert~ Rights to Information, ” 27 ,Ifc(iill 1,aw ,Journal 47

{ 19X1): I thiel de Sola I’(ml, ~’echnolo~n”e.~ of f“’reedonl ((’an~hridge,h! A, 13elknap [ :ni~’ersity. [)ress, 19X:\l, especial]] pp 212-217.

‘ See ch. 4

ply with the relevant formalities of each, andreceive a type of protection more closely suitedto the value and social function of the work.Traditional limitations on rights, such as fairuse, could be adapted to fit the particular na-ture of the type of work in question: for worksof art, fair use might resemble its present form;fair use in works of fact might be limited ac-cording to the social utility of permitting non-proprietors to copy or publish the work;142 andfor works of function, fair use might be shapedto meet the particular requirements of reverseengineering. Durational provisions could alsobe designed to reflect the economic “lifetime”of the particular type of information product,

Such a proposal, of course, has many draw-backs. The 1976 revision of the copyright lawwas a major political effort, requiring over 25years of study and legislative bargaining. Likesui generis laws, a revision that departed sub-stantially from the existing copyright frame-work might cause substantial domestic and in-ternational uncertainty. In addition, a revisionwould have to address concerns over enforce-ment, which would exist regardless of how care-fully protection is tailored to subject matter.

Option #6: Alternatives to

Copyright and PatentCongress may also wish to consider alter-

native options that dispense with tradition-bound ideas of intellectual property, Onescheme would be essentially distributive in na-ture, Under the distributive approach, the lawmight limit itself to prohibiting only the un-authorized duplication of works for a periodof time. Issues concerning the cumbersome andincreasingly obsolete definitions of intellectualproperty, such as what constitutes the appro-priation of an idea versus an expression, whatconstitutes a derivative work, a performance,display, and so on, would be jettisoned in fa-

‘“In Iiarper & RO W t’. ,Vation b:nterpri.s(, s, suprenlc~ (’ourt

No. 83-1632 (1985), for example, the Supreme (’ourt decided thatthe First Amendment interests asserted b~’ iN”ation .kIagazine

were essential]~r spurious, since Time h! agazine would ha~eshortl}r prol~ided the public with the (jm-ald Ford’s memoirs an?r-wa~”. I n essencei the court was passing on the balance that aw o r k s o f f a c t pro~’ision Would strike bet wren ac(’ess a n dremuneration.


vor of a law which looked to a desired outcome.The outcome might be specified in terms of re-covery of fixed costs associated with the pro-duction and distribution of, and value addedto, a particular work, plus rents limited to acertain rate of return. After rate of return ob-jectives were met, the work would enter thepublic domain. The distributive scheme has thevirtues of simplicity and adaptability, makingit resistant to technological obsolescence.

Although it departs substantially from ex-isting law, the distributive approach is notwithout precedent. The regulation of publicutilities is conducted in a very similar fashion.Moreover, many aspects of current copyrightlaw, such as royalties on cable television trans-missions, are already moving in the directionof a distributive approach. Bills presently be-fore Congress, which would impose a‘ ‘compul-sory license” on the sale of blank tapes andrecording equipment, are also essentially dis-tributive in nature.143

The distributive approach would require in-formation about information markets that ispresently unavailable (see ch. 6 on the Opera-tion of Information Markets). Moreover, thedistributive approach might be politically un-tenable, since it would essentially impose a ceil-ing on returns for a creative work. The admin-istrative mechanism necessary to make thedistributive scheme work, although presagedin some ways by the Copyright Royalty Tri-bunal, is nonexistent and would have to becarefully constructed by Congress.

Another alternative approach to the presentsystem of copyright might be called the mini-mal scheme. The minimal approach would re-move all legal protections except those abso-lutely necessary for the production of works.The problems of technological obsolescencecould be avoided by avoiding entirely the need

‘“iSpecifically, S. 31 and 11. R. 1030. Like the distributionalapproach, these bills attempt to set ‘‘fair’ rates of taxation onblank tapes, and distribute the taxes to the recording and mo-tion picture industries.

for legal categorization of subject matter andrights. Such an approach is described by JudgeStephen Breyer in an article, “The UneasyCase for Copyright."144 The minimal approachwould be particularly well suited to a techno-logical environment that is fast changing, andwhere the economic viability of creative ven-tures relies on the pace of innovation, ratherthan on legal protection for works that havealready been created. One result of the mini-mal approach might be to speed up the pro-duction and marketing of works such as com-puter programs, since those who are first tothe market with the best products are mostlikely to recoup rewards. The minimal ap-proach would also ostensibly lower prices andeliminate the costs of copyright transactions.

The minimal approach, like all other solu-tions, suffers severe drawbacks. Notwithstand-ing its likely serious political impediments, theminimal scheme relies heavily on publishers’purported advantages in lead time and abil-ity to retaliate in the marketplace-advantagesthat may be offset by the speed and low costof modern communication technologies. A min-imal approach would entail many risks to au-thorship and publishing as we know it, someof which are detailed in chapter 2.

Finally, another alternative approach woulddispense with the notion of property, per se,and instead concentrate on remuneration basedon access. Indeed, because of the advent of elec-tronically disseminated works, many publish-ers are moving to an access-based system any-way. By removing concepts of property entire-ly, the conceptual and legal difficulties withrespect to the boundaries of intellectual prop-erty that are caused by technology can beavoided entirely. The issues surrounding ac-cess-based systems are discussed in detail inchapter 7, and will not be dealt with here.

“’Stephen Breyer, “The Uneasy Case for Copyright: AStudy of Copyright in Books, Photocopies, and Computer Pro-grams, ” 84 Harvard Law Review 281 (1970).

Chapter 4

Impact of Technology onEnforcement of Intellectual

Property Rights

Contents

PageMajor Findings .....,... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

Trends in Storage Technologies: Impacts on the Right To Controlthe Reproduction of Copy righted Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Copyright Enforcement in the Early Print Environment . . . . . . . . . . . . . . . . . . . . . . . 99Impact of Reprography on Enforcement of Copyright . . . . . . . . . . . . . . . . . . . . . . . . . 99Impact of Audio and Video Taping on the Enforcement of Copyright . . . . . . . . . . . . 100Impact of Computers and Digital Information on the Enforcement of Copyright. . . 102

Trends in Communication Technology: Impacts on the Right To ControlPublication and Performance . .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Print, Live Performance, and Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104Impact of Radio and Television on the Enforcement of Copyright . . . . . . . . . . . . . . . 105Cable Television. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105Subscription Television. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105Impact of Communication Satellites on the Enforcement of Copyright . . . . . . . . . . . 106Impact of Facsimile on the Enforcement of Copyright . . . . . . . . . . . . . . . . . . . . . . . . . 107Data Communications and the Enforcement of Copyright . . . . . . . . . . . . . . . . . . . . . . 107Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109Computer Bulletin Boards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110Local Area Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110Integrated Services Digital Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Trends in Processing Technology: Impacts on the Right To Controlthe Making of Derivative Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Impact of Processing Technology on the Derivation of Text . . . . . . . . . . . . . . . . . . . . 112Impact of Processing Technology on the Derivation of Music . . . . . . . . . . . . . . . . . . . 113Impact of Processing Technology on the Derivation of Video . . . . . . . . . . . . . . . . . . . 113Impact of Processing Technology on the Derivation of Computer Programs . . . . . . . 114

Adjuncts and Alternatives to Traditional Enforcement Mechanisms . . . . . . . . . . . . . . . 116

Technological Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117Broadcast Signals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118Audio and Video Recordings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Advantages and Disadvantages of Technological Protection . . . . . . . . . . . . . . . . . . . . 119Public Relations Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120Public Attitudes and the Legitimacy of Intellectual Property Law . . . . . . . . . . . . . . . 121

TableTable No. Page4-1. Motion Picture Association of America Film Security Office

Recent Criminal and Civil Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

FiguresFigure No. Page4-1. Audio Recorder Sales, 1958-80. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1004-2. Factory Sales of Videocassette Recorders, 1977-86. . . . . . . . . . . . . . . . . . . . . . . . . . . 1014-3. The Sequence of Inventions in Telecommunications, 1840-2000 . . . . . . . . . . . . . . . . 1044-4. Trends From 1960 to 1980: Volume and Costs of Communication

by Media: USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................,....108

——

Chapter 4

Impact of Technology on Enforcement ofIntellectual Property Rights

MAJORTechnology is making it cheaper to copy,

transfer, and manipulate information and in-tellectual property. For example, devices suchas optical disk storage systems may allow theaverage person to collect entire libraries ofcopyrighted textual, musical, and visual worksin his home. Decreasing prices and increasingcapabilities of information systems will per-mit more people to make use of more works.Consequently, enforcement efforts will haveto reckon with a much larger volume of poten-tial infringements than exists today.

Technology is allowing the copy, transfer,and manipulation of information and intellec-tual property to occur more quickly. For ex-ample, fiber optic technology is currently ca-pable, under laboratory conditions, of trans-ferring 100 average-length novels over a dis-tance of 100 miles in 1 second. These capabil-ities may soon be available in offices andhomes. As a result of this and many similardevelopments, owners of rights may have lessmarketplace “cushion’ in which to realize areturn on their creative and financial invest-ments. Thus, they may have less incentive toproduce works.

Technology is making the copying, transfer,and manipulation of information and intellec-tual works more private. For example, personalcomputers can store, process, and communi-cate the contents of large commercial data-bases without the knowledge or consent of thecompilers of such works. As a result, ownersof rights face greater difficulty detecting, prov-ing, and stopping infringements. Thus, theymay have less incentive to make their worksgenerally available.

FINDINGSTogether, improvements in the cost, speed,

and capabilities of information technologies aremaking traditional proprietor-initiated (civil)enforcement largely ineffective in securing rea-sonable control over public distribution of in-tellectual works. The effect might be to makeinvestors reluctant to fund the creation of in-tellectual works. More likely, proprietors of in-tellectual property will be more hesitant to dis-tribute their works in forms over which theyhave little physical control.

The technology itself is providing proprie-tors with ways to more tightly control the dis-tribution of their works. Private, computerized,electronic systems can provide them with themeans to enforce control by limiting andmonitoring access. Policy makers may have toweigh the benefits of such control against thepotential social costs of restricting public ac-cess and monitoring private citizens informa-tion use.

As technology makes the enforcement of in-tellectual property rights more difficult, pub-lic support for these rights becomes all themore critical. At present, however, the publichas little knowledge of intellectual propertyrights as an issue. To the extent that citizensare aware of this issue, they draw clear distinc-tions between proprietors’ rights to operatein the marketplace and their own rights to useinformation as they please in their own homesand businesses. Therefore, so long as proprie-tors’ rights do not conflict with the public’ssense of privacy and fairness, the public islikely to lend support to the intellectual prop-erty system.

97


INTRODUCTION

The granting of legal rights is based on theassumption that those rights can be enforced.Intellectual property law has been based onthe premise that, by and large, rightholderswill enforce their own rights by monitoring theuse of their works and suing infringers. To dothis, they must know of specific cases of in-fringement, and they must be able to collectenough evidence to prove in court that a par-ticular person or corporation violated theirrights.

Information technologies are impeding tradi-tional enforcement mechanisms. They makethe copy, transfer, and transformation of workscheaper, faster, and more private, and thusmore prevalent and harder to detect and prove.Without effective enforcement of their rights,intellectual property owners may have less in-centive to produce and disseminate intellec-tual works. This, in turn, could jeopardize thebenefits society gains from the open dissemi-nation of intellectual works. And, insofar asthere are widespread, unimpeded infringe-ments, the legitimacy of intellectual propertylaw might itself be undermined.

The enforcement problem raises fundamen-tal questions about the nature and efficacy ofthe intellectual property system as a whole.Many of these issues are covered elsewhere inthis

1.

2.

3.

report. This chapter focuses on:

how advances in technology are reducingthe effectiveness of the traditional meansof enforcement;some of the private initiatives that propri-etors are adopting to protect their inter-ests; andpublic attitudes that bear on the enforce-ment of intellectual property law.

To understand how technology affects theenforcement of intellectual property rights, onemust begin with a central problem: As the tech-nologies for creating, distributing, and usinginformation change, the very concepts and defi-nitions that have traditionally defined intel-

lectual property rights and their boundariesbecome ambiguous. This ambiguity makes itdifficult to apply the law in a consistent fash-ion and in a way that is consonant with thegoal of promoting “science and the usefularts. In particular, controversies arise aboutwhich particular uses of new technology causedamage to creators and copyright owners, andwhether such damage significantly reduces in-centives to produce and disseminate works.

This chapter divides intellectual propertyrights into three categories, which correspondto the kinds of rights that have traditionallyattached to intellectual works: the right tocopy, the right to publish and perform, and theright to make derivative works. These catego-ries are used only to describe the new technol-ogies in terms with which policy makers are fa-miliar. Their use should not imply that theserights should be extended or enforced. In fact,one of the challenges that policy makers faceis understanding whether traditional conceptscan be employed in new technological contexts.

The impact of technological change is differ-ent for different intellectual property rights.This chapter examines trends in three catego-ries of technology, each corresponding to a par-ticular kind of right traditionally granted bycopyright law. Changes in storage technol-ogies, for example, affect the right of proprie-tors to control the copying of their works. Ad-vances in communication technologies affecttheir right to control publication and perform-ance. And new information processing tech-nologies affect the proprietors’ right to con-trol the production of derivative works. More-over, to demonstrate the effect of advancingtechnology on enforcement, this chapter willalso look at how these technologies interactwith each other in integrated computer- andtelecommunications-based systems. In the longrun, it is the convergence and interaction ofthese technologies that may prompt the mostsignificant enforcement problems for the in-tellectual property system as a whole.

. .

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

TRENDS IN STORAGE TECHNOLOGIES: IMPACTSON THE RIGHT TO CONTROL THE REPRODUCTION

OF COPYRIGHTED MATERIALInformation storage technologies are devices

and systems that fix and hold information ina reusable form. Storage technologies includepaper and ink, photographs, vinyl disks for mu-sical recordings, motion-picture film, audio andvideocassette tapes, semiconductor memorychips, and optical disks, among others.

Two recent trends in storage technology arelikely to affect the enforcement of intellectualproperty rights. First, as storage technologiesbecome cheaper and capable of holding moreinformation, it becomes harder to enforce pro-prietary rights; more people can use these tech-nologies to copy works privately. Secondly,storage technologies are becoming less special-ized to specific forms of information. They areoften part of computerized systems that han-dle many forms of information-e. g., text,graphics, music, and video. Information incomputerized, digital form is much harder tocontrol than information in traditional for-mats. Together, these two changes transformcopying into a problem of much greater scopefor proprietors than it has ever been before.

Copyright Enforcement in theEarly Print Environment

When first enacted, American copyright lawprotected expressions of information in theform of printed text and graphics: books, mapsand charts.1 Anyone seeking to fix or storethese expressions for dissemination had tomake a relatively large investment in capitalgoods: movable type, volumes of paper and ink,mechanical presses, and other equipment. Theyhad to obtain skilled labor: typesetters, print-ers, draftsmen, and others. These activitieswere difficult to conceal. They also had to of-fer copies in the open marketplace. The publicquality of these operations meant that copy-right owners could detect and stop large-scale,economically damaging infringements, thus

‘Chapter 1 15. Section 1, Statute 124, Act of 1790.

controlling the reproduction of their work withrelative ease. Copying by hand for personal useand scholarship was not a major problem. Itdid not threaten proprietors because it was nota viable means of competing with copyrightholders or of denying them sales revenues fromtheir work.

Although technology changed through the19th and early 20th centuries and provided newforms in which to fix expressions of informa-tion—photographs, lithographs, motion pic-ture films—the capital and labor required forreproduction remained fairly high, and com-petitive infringing activities were still hard toconceal. Thus, these technologies posed onlyminor problems in copyright enforcement.

Impact of Reprography onEnforcement of Copyright

In the mid-20th century, photocopying, mim-eograph, and xerography were developed,making it much cheaper and easier to repro-duce printed materials. More people began tocopy text and graphic images, making it harderfor copyright holders to monitor such activi-ties. As these technologies became more com-mon, it became too costly and impractical forproprietors to try to authorize copying, collectroyalties, and enforce their rights on a case-by-case basis, even if users were inclined toseek permission and pay for use.

It is difficult to estimate the economic im-pact of this unauthorized copying.2 In general,while we know that xerographic reproductioncauses some lost sales for copyright holders,it does not appear to be a serious threat to theeconomic viability of general-interest book,magazine, or newspaper publishing.3 Publish-

‘BJ- the term “unauthorized,” this chapter means thoseuses of cop.~’righted works that have not been specificall.v per-mitted b-}’ the cop~’right holder. It does not seek to imply thatthese uses are, or should be, illegal.

‘The number of titles published and the profits of publish-ers have remained high despite the introduction and spread of

(continued on next page)


ers of very specialized periodicals with smallcirculations, such as scientific and technicaljournals, contend that disastrous losses of salescould result if corporations and libraries re-place multiple subscriptions with photocopies.If such replacement were occurring on a largescale, one might expect a decline in subscrip-tions and an eventual reduction in the rangeof titles published. However, Copyright Officedata from publishers on trends in the numbersof titles and subscriptions in this category ofcopyrighted works are inconclusive. They donot show that specialized scientific and tech-nical publications are significantly more af-fected by photocopying than are general-inter-est periodicals.4

Impact of Audio and Video Tapingon the Enforcement of Copyright

Just as reprography has led to unauthorizedcopying of text and graphics, the recent wide-spread availability of audio and video tapingtechnologies has brought about more unauthorized reproduction of recorded music and mo-tion pictures. Here, too, copyright holders arefaced with the difficult problem of controllingcopying while millions of people own machinesthat can reproduce their works in private, atfairly low cost and with little effort.

The level of use of audio and videotape tech-nologies is high and rising. (See figures 4-1 and4-2.) By 1982, 52 percent of Americans overthe age of 13 had used audio tape machineswithin the previous 2 years to record phono-graph records and other materials.5 By the endof 1985, 37 percent of American homes had

——- . . —- . -( c o n t i n u e d f rom prev ious p a g e )

xerograpluc bchnology, which was first commercially availablein 1960. See Michael Rogers Rubin and Mary Taylor Huber,The Knowledge Industry in the ?Jrited Stated J960-1980(Princeton, NJ: Princeton University Press, 1986 (in press)). Be-tween 1960 and 1980, industry sales increased from $1 to $4billion. Paul M. Hirsch, “U.S. Cultural Productions: The Im-pact of Ownership, ” Journal of Commuru”cation, vol. 35, no. 3,Summer 1985, p. 117.

‘Dennis D. McDonald and Colleen G. Bush, Libraries, Pub-lishers and Photocopying: Final Report of Surveys Conductedfor the United States Cop~ight offi”ce, May 1982, table 4-6,p. 4-16.

‘Yankelovich, Skeily & White, Inc., Why Americans Tape:A Survey of Home Audio Taping in the Um”ted States, Septem-ber 1982, p. 28.

Figure 4-1.— Audio Recorder Sales, 1958-80

14

12

10

8

6

4

12

0 . 1 I 14 I t I a 1 s 1, I t I I I I1958 1960 1962 19641966 19681970 19721974 197619781980

YearSOURCE 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

videocassette recorders, up from 28 percent atthe end of 1984.6

Consumers use video recording machines for‘‘time shifting" — that is, recording televisionbroadcasts to enjoy at a more convenient time.’They often use audio tape machines to recordmusic to play in more than one location, forinstance, in a car. Some tape machine ownersuse their machines to trade music or video pro-grams with friends, and to build personallibraries.

These machines are also used for less casualpurposes, such as the mass duplication of copy-righted works to sell in direct commercial com-petition with copyright holders. Many propri-etors contend that commercial piracy of audioand video materials is widespread.8

—-— — . . —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 Dollarsin Video Software, ” Forbes, June 17, 1985, pp. 128-131.

‘The recording of commercially broadcast television fortime-shift viewing was specifically found to be fair use by theSupreme Court. See Sony Corp. v. Universal City Studios, 464U.S. 417 (1984).

“The movie industry, through its trade association, the Mo-tion Picture Association of America (MPAA), established a FilmSecurity Office in 1975 to combat commercial piracy of filmsdistributed by the major Hollywood studios. See table 4-1 forsome of their recent enforcement statistics. The musical record-ing industry claims, on the basis of surveys conducted by theInternational Federation of Phonogram and Videogram Pro-ducers, that one out of four musical recordings sold worldwideis a pirate copy. In the United States, their data estimate 1 in10 copies sold is illegitimate. (Reported in Variety, July 31,1985,pp. 1, 92.)

Ch. 4—Impact of Technology on Enforcement of Intellectual Property Rights ● 101

Figure 4-2.— Factory Sales ofVideocassette Recorders, 1977-86

12

2

01977 1978 1979 1980 1981 1982 1983 1984 1985 1986 a

Year

SOURCES 1977.79: U S Department of Commerce Bureau of the CensusStatistical Abstracts 1980. 1980-83. Statistical Abstracts 1985 1984-85:Electronic Industry Association Electronic Market Trends March1986 1986: Electronic Industry AS S O C iation estimate.

Some owners of copyright in musical record-ings and motion pictures have presented fig-ures to support their claims of substantial eco-nomic losses from consumers use of audio andvideo taping technologies. In testimony beforethe Senate Judiciary Committee on October25, 1983, Alan Greenspan presented evidencecollected for the Recording Industry Associa-tion of America suggesting that in 1982 theindustry sustained sales losses of more than

$1.4 billion that were attributable to home tap-ing of borrowed recordings and radio broad-casts.9 Battelle Pacific Northwest Laboratories,in a study performed for the Motion PictureAssociation of America, estimated that, in1982, motion picture copyright owners had lostmore than $57 million in royalties becausevideocassette sales were displaced by hometape copying and off-air taping.10

These figures, however, are not definitive.As detailed in chapter 7, the question of whethera particular instance of copying actually dis-placed a sale of a copy is often impossible toanswer definitively. Moreover, to the extentthat the data are inadequate, or that the anal-yses are inappropriate, these studies may ei-ther grossly overestimate or underestimate theactual harm suffered by musical recording andmotion picture copyright proprietors.11 Someanalysts have suggested that there are bettermethodologies for determining the economiclosses from home taping. In deciding intellec-tual property policy, policy makers will most—————

‘%tatement of Alan Greenspan Re. S.31 Before the Subcom-mittee on Patents, Copyrights and Trademarks, Senate Com-mittee on the Judiciary, Oct. 25, 1983, p. 7.

“’F.J. Cronin, R.J. Ness, A.R. Wusterbarth, and J. I,. Eisen-hauer, An Analysis of the Economic Benefits and Harm FromVideocassette Recorders and Related Products, August 1983,as cited in Economic Issues Relating to New Technoio~”es andIntellectual Property, by Stanley M. Besen (contract preparedfor OTA, December 19841, p. 44,

“See Besen, op. cit., pp. 47-48.

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

Pending casesa Cases where sentence passed.‘ T h r o u g h – Through

1984 June 1985 1984 June 1985— — . —Criminal actions: -

-—

Seizure incidents . . . . . . . . . . . . . . 28 39 24 1Videocassettes seized ., ... . . . . 1,990 24,591 6,286 647Films seized ., ... . . . . . . . . . . . 500 210 100 0Guilty pleas/convictions . . . . . . . . . . . 2 9 38 11indict merits/arrests/information . . 10 12 30 4

Civil actions:Cases recommended . . . . . . . . . . . . 34 24Seizures ... ... ... . . ... 7 9Videocassettes seized ., . . . . . . . . 534 2,601Films seized . . . . . . . . . . . . . . . . . . . . 0 0 —aCases pending at end of the indicated time

SOURCE: Motion Picture Association of America


likely want to take these alternative analyti-cal approaches into account.12

Impact of Computers and DigitalInformation on the Enforcement

of Copyright

The growing use of computers to handle andstore information could make it even harderfor copyright holders to enforce their rights.In the case of the right to control reproduc-tion, the computer poses three major problemsfor copyright proprietors that are distinct inkind as well as in degree from other technol-ogies used to store or copy information.

First, copying digital information can bedone at a fraction of the cost and in a fractionof the time that it takes with photocopying oranalog audio or video taping. Second, the dig-it al nature of computer-mediated informationmeans that an infinite number of perfect cop-ies of material can be made. Possession of anoriginal is not required to obtain subsequentcopies of original quality. Thus, the informa-tion content of a work can be completely sepa-rated (or unbundled) from the medium that car-ries it.13 Third, in the normal course of oper-ations, a computer makes many copies of partsof works. Some copies exist for only a few mil-lionths of a second. Other copies may be helduntil the machine is turned off or the materialis written over. Some copies may be held inpermanent form on magnetic disk or tape. 14

—“See Besen, op. cit., pp. 39-40. See also Stanley M. Besen,

Private Copying, Reproduction Costs, and the Suppl+y of Intel-lectual Propert-v (prepared for the NationaJ Science Foundation,December 1984); and I.E. Novos and M. Waldman, “The Effectsof I ncreaseci Copyright Protection: An Analytical Approach, ’92 Journal of Political Economy 236 ( 1984),

‘ ‘Users’ ability to unbundle information may have a signifi-cant impact on the alternatives that proprietors pursue to pro-tect their economic interests in intellectual property. See ch.6, for further discussion on this point.

“In the case of computer programs, “a user is at leastsomewhat negligent if he does not make copies of his programs.[There are] two reasons [for this]: 1) one cannot see by visualinspection if a program is intact; and 2) operator error or pro-gram “glitches” can quickly destroy a program. Thus good pro-gramming practice and copyright regulations [may be] mutual-ly exclusive. ” Personal communication from Edward Conklin,FORTH, Inc., July 23, 1985.

Because of these characteristics, computerspose novel questions for enforcement. For ex-ample, how, aside from appeals to ethics, canproprietors convince consumers to buy origi-nals when perfect copies are probably muchcheaper? How can consumers tell whether theyare purchasing originals or counterfeits? Atwhat point is the proprietor’s right to controlcopying violated within a user’s computer sys-tem?15 Similarly, how much of the material thatresides in a computer can or should be recog-nized as part of the copyrighted work?

These problems are emerging at a time whenmonitoring and stopping the copying of worksis becoming harder. The proprietors’ right tocontrol copying may thus be severely chal-lenged by the growing scale and private na-ture of infringement made possible by increas-ingly powerful and widely used personalcomputers. Also, as discussed below, comput-ers’ processing capabilities may pose specialproblems with respect to proving infringement.

Currently, users receive a relatively smallamount of copyrighted material in digital, com-puter-readable form–computer programs anda small but rapidly growing amount of mate-rial made available through on-line databases.But this is changing with other technologicaladvances that simplify the conversion of printedtext and graphics into machine-readable, dig-ital format. Optical character readers for textinput are growing in popularity in offices asprices fall and capabilities rise. Some analystsexpect that these machines will be widely usedby the end of the decade. And if price and ca-pability trends continue in their current direc-tion, the automatic conversion of printed orwritten text and graphics into computer-read-able form may become a routine practice bythe turn of the century.16

Once in a computer in digital form, text canbe reproduced with a growing array of com-puter-driven printers. These range in price and

. . —“section 117 of Title 17 addresses this problem, but the lan-

guage has yet to be widely tested by the courts.“Outlook for Office Automation Technologies 1985-2000,

report prepared for OTA by the Georgia Institute of Technol-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-quality dot-matrix and thermal transfer de-vices, to very fast and high-quality laser andink-jet devices. As these technologies mature,as manufacturing techniques improve, and aseconomies of scale are realized, consumers willmost likely be able to get faster, better printersfor lower cost.17

Record companies are beginning to offer mu-sic to consumers in digital form by way of com-pact disk players and laser-scan disks. In theirpresent form, compact disks are read only,which means that users cannot record on them,although one can record analog tapes fromthem with cassette or reel-to-reel tape ma-chines. But manufacturers of laser disks aredeveloping erasable and rerecordable mediasimilar in storage capacity and durability tocompact disks. With these, consumers may beable to reproduce the full, master recordingquality of compact disks on home equipment.

Copying video in digital form is now limitedby the fact that current television transmit-ters, receivers, and video recorders supply thematerial in analog form. International stan-dards-making committees are discussing theestablishment of digital television and videotape standards, so this situation could changevery quickly.

The digital optical disk, a technology thatuses lasers to record and read information offa disk that rotates at a high rate of speed, offersgreat. potential for storing very large volumesof digitized information. A single read-only op-

————-—.Paper will continue to be an important temporary storage

medium because people tend to prefer the higher contrast, port-ability, and other characteristics of print that video screens lack,But electronic and optical media are becoming more attractivefor permanent storage of information in many applications be-cause storage volume is vastly reduced and cost and conven-ience of access can be superior to paper storage. Thus the trend,at least in repeated-use and interactive applications, is towardmass electronic and optical storage and on-demand printing.E.C. McIrvine at the OTA Workshop on Display, Printing, andReprography, Mar, 13, 1985,

tical disk, currently on the market, can easilystore several hundred thousand pages of printedtext, 6 hours of master recording quality mu-sic, or 2 hours of full-motion, television qual-ity video. In some applications, many disksare collected in an automatic playback machinemuch like a jukebox. This is being done for theoptical disk project at the Library of Congressin which old books, photographs, and etchingsare being digitized and stored on optical disks.Thus, a very large volume of information canbe made available on-line (by computer termi-nal) at very low cost for storage and access.

In their present form, optical disks can bewritten on only once, and then only using arelatively expensive high-power laser deviceto impress digital data on the disk. But sev-eral companies, both in the United States andabroad, are working intensively to develop op-tical media and supporting hardware that al-low a disk to be recorded, erased, and rerecordedmany times. 18 Their goal is to manufacture adevice that the average consumer can use withhis personal computer, stereo, and televisionequipment. This technical advance would makeit even cheaper and easier to copy information,while increasing the speed at which a computercould access the large volume of informationstorable on optical disks.

In summary, advances in information stor-age technology have made the process of copy-ing information cheaper, easier, and availableto more people. These trends show every indi-cation of continuing. The technologies are mak-ing the old definitions of “rights, ‘‘infringe-merits, ” and “fair use” ambiguous and largelyobsolete. Because of technical advances andthe blurring of definitions, the traditional copy-right enforcement mechanism, whereby propri-etors sue violators in civil proceedings, mayno longer be effective in protecting the crea-tive and economic interests of copyright owners,

‘“B, Dumaine, “Here Comes the Erasable I.aser Disk, ’ For-tune, Mar. 5, 1985, p. 100,


TRENDS IN COMMUNICATION TECHNOLOGY: IMPACTS ONTHE RIGHT TO CONTROL PUBLICATION AND PERFORMANCE

Communication technology is the term thatencompasses the many devices and systemsused to move information from place to place.These technologies evolved very slowly untilthe 1840s, when, after electronic telegraphywas developed, they rapidly grew in capabil-ity. Since then, innovations in telecommuni-cation technology have quickly advanced thespeed, distance covered, and scope of intercon-nection of people and places, all of which arestill growing exponentially (see figure 4-3).

These technologies are now part of the basicinfrastructure of society. We have come to rely,for example, on the telephone system, broad-cast radio, and television to supply us with vi-tal information about our family, friends, bus-inesses, and government.

Increasingly, we also receive informationproducts and services through telecommuni-cation links that entertain, educate, and helpus make decisions. Since many of these goodsand services are protected by intellectual prop-erty law, advances in communication technol-ogies will have a major impact on enforcementof intellectual property owners’ right to con-trol the publication and performance of theirworks over telecommunication facilities.

Print, Live Performance, andCopyright

Before the 1920s, communication technolo-gies had very little affect on the enforcementof copyright, simply because copyrighted

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

100 billion

10 billion

1 billion

100 million

10 million

1 million

100,000

10,000

1,000

100

10

1

Switched Satellites //

S a t e l l i t e s . 0 ’ T-4 fiber

L5 coaxial cable,....:, :,.,. ...::.., :’,....;.0

,,. , .’.,. , .,. ,: :,.:..,,:../ ... , ..: : Cable television. ./

Carrier telephone■ T-1 digital carrier

/ ‘ =Baudot multiplex telegraph 9 TWX

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, 19761980 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-ing printed copies or by expressing the worksin live stage performances. As the country ex-panded, there were undoubtedly many unau-thorized performances of copyrighted dramaticand musical works, but the important marketsfor such uses were in large cities, so composersand dramatists found it possible to monitorenough of the uses of their work to protect theireconomic rights.

Impact of Radio and Television onthe Enforcement of Copyright

Broadcasting changed this. Commercial ra-dio broadcasting, initiated at KDKA radio inPittsburgh in 1920, complicated copyright en-forcement by dispersing a “performance” overa wide area. When the networks such as NBCwere formed soon after, performances could beheard over virtually the entire nation. Thus,broadcast technology made “collecting at thedoor” from users of a performance of copy-righted music virtually impossible. To continueprofiting from the use of their work, the ownersof copyright in music and the broadcasters de-veloped the system of advertiser support forthe actual broadcast, and established contractswith collecting societies to monitor the use ofcopyrighted work and to pay composers’ royal-ties. (See ch. 9 for details on collecting societies. )

The advent of broadcast television presentedsimilar enforcement problems for copyrightholders. To solve them, networks made simi-lar arrangements to finance the cost of present-ing “free” television to the public. This sys-tem of advertiser support and contracting withcopyright proprietors for use of their work pro-vided a viable and lucrative means of present-ing and paying to broadcast musical enter-tainment.

Cable Television

Cable television originated as a means of pro-viding television to remote areas by the recep-tion of broadcasts with a tall antenna and re-transmission of them by wire to subscribers.

Subsequently, because of the way the courtsand Congress have intervened in the relation-ship between copyright holders and cable broad-casters, it has become a technology with sig-nificant implications for copyright enforcement.

Cable television itself does not present in-tractable problems of detecting or proving in-fringement because most existing cable sys-tems are public. ” But cable television systemshave had to contend with two other enforce-ment problems. One is theft of service, whichis the deliberate unauthorized connection toa cable service. The other is the high transac-tions costs that multiple-channel cable compa-nies face in identifying and negotiating royaltypayments with the many copyright holders intelevision. Congress acknowledged the mag-nitude of the second problem by establishingthe Copyright Royalty Tribunal to set cableretransmission royalty rates and to dispersefunds collected by the Copyright Office.20

Subscription Television21

Some over-the-air television stations scram-ble their signals to prevent access unless theconsumer has rented a décoder box and paida subscription. The direct enforcement prob-lem with subscription television (STV) is theftof service. Some users and commercial com-panies build illegal decoding equipment thatallows users to receive subscription televisionsignals without paying the station. In thisevent, the copyright holder may be undercom-pensated because his royalty payments arebased on the size of the paying audience fora subscription television broadcast.

Television is also relayed to paying sub-scribers by microwave radio. This is called Mul-

‘+ There are a growing number of private cable televisionoperations, generally called Sat-ellite Master .Antenna Tele\’ision(SMATV) that ma~’ present difficult enforcement problems.These systems will be discussed below,

“’U.S. House of Representatives, 94th (’ong., Report 94-1476, p. 88.

- Subscription television was originally ( 19641 a term ap-plied to cable television in California, Erik 13arnouw, Tube off)lent~’ (New York: Oxford University’ I]ress, 19821, p. 350. Nowit is usually applied to transmissions o\’er L’ 11 F and \J 11 F chan-nels that are scrambled.


tipoint Distribution Service (MDS). In someareas, companies have set up several micro-wave channels for television delivery; thesesystems are called Multichannel MultipointDistribution Service (MMDS). To receive thesesignals, consumers need a special device calleda down converter and also a special antenna.Together, the converter and the antenna makethe higher frequency microwave signal com-patible with a standard television set. MDScompanies rent these devices and charge amonthly fee for the program service. But thedevices are widely available from sources otherthan MDS companies. Thus, like STV, theMDS enforcement problem generally involvestheft of service. MDS is treated by the FCCas a common-carrier system; channel time isleased to program suppliers on a tariff basis.Copyright holders contract with MDS compa-nies for transmission services and revenues arebased on the size of the paying audience. Thus,program suppliers and transmitters are under-compensated to the extent that there are ‘freeriders.

Impact of Communication Satelliteson the Enforcement of Copyright

Geosynchronous communication relay sat-ellites affect the enforcement of copyright lawbecause an increasing amount of copyrightedmaterial is being transmitted by these sys-tems. Currently, anyone who has a proper an-tenna ‘dish’ and a down converter can receivethe material. Much of the copyrighted mate-rial transmitted by these satellites is intendedfor cable television “head-ends, or transmis-sion facilities, or for broadcast stations affili-ated with television networks. Many of the un-authorized users are home consumers who livefar from VHF and UHF stations, have poorreception, and no cable service. For these peo-ple, satellite signals offer a wide selection ofprogramming (more than 100 channels) withhigh signal quality for the one-time cost of thedish and the down converter. These systemsare currently priced as low as $1,000, depend-

ing on dish size and its ability to aim the re-ceiver at more than one satellite.22

Some hotels and other commercial establish-ments also use satellite-derived programming,capturing it with roof-top dish antennas andcabling it to their customers. Some apartmentcomplexes install satellite reception gear andsmall, private cable distribution systems thatcompete directly with municipal cable opera-tions. These are the SMATV systems men-tioned earlier. Many of these uses of copy-righted programs are authorized by contract,but others may not be.

Other unauthorized users are in foreign coun-tries that fortuitously fall within the “foot-print” of one or more satellite signals. Theseforeign users often retransmit satellite-derivedmaterial over government or privately ownedcable or over-the-air broadcast facilities with-out seeking the permission of, or making pay-ment to, the copyright holders. As with othertypes of subscription-based television (STV,MDS, MMDS), if copyright royalty contractsare based on the size of the paying audience,these unauthorized uses deprive copyrightholders of rightful compensation.

When revising the Communications Act in1984, Congress, recognizing the already wide-spread use of satellite signals by home consum-ers, put the onus of enforcing property rightsin these transmissions on the program provid-ers and the satellite system operators. The re-visions encouraged them to establish marketmechanisms for payment, and to encrypt theirsignals. Congress struck a compromise be-tween the interests of copyright holders andthose of owners of satellite dishes, making itillegal for unauthorized users to intercept cer-tain satellite signals. However, interception ofsatellite signals is not a violation if:

“’Michael Doan, “A Scramble To Break the Satellite Dish, ’U.S. News and World Report, Sept. 30, 1985, pp. 52-53. In 1985,over 1.4 million homes had satellite dishes, and some believethat this number could double in 1986. Sales are quite brisk,approaching 50,000 units per month. New York Times, July8, 1985, pp. 1,C16.

Ch. 4–Impact of Technology on Enforcement of Intellectual Property Rights ● 107

(1) the programming involved is not en-crypted: and

(2)(A) a marketing system is not established. . . 23

A t l e a s t o n e c o m p a n y , H o m e B o x O f f i c e ,Inc . , has begun to encrypt i ts sate l l i te trans-missions to some cable c o m p a n i e s .24 At pres -ent , such encrypt ion is expensive because a l lr e c e i v e r s m u s t b e p r o v i d e d w i t h d e c o d i n gequipment . I t i s not yet c lear to what extentother program providers will see an advantagei n e m p l o y i n g e n c r y p t i o n t o p r o t e c t s a t e l l i t e

t e l e v i s i o n t r a n s m i s s i o n s .

A new use of satellite transmission to delivercopyrighted works could further complicate en-forcement . A number o f companies are try ingto f ind a way to develop a prof i table marketto satisfy the growing demand for distributiono f t e l e v i s i o n p r o g r a m m i n g b y s a t e l l i t e . O n epossibility, direct broadcast satellite (DBS)technology, could provide consumers with aservice that offers as many channels as cabletelevision. The service would sell or rent sat-ellite dishes and down converters to home vid-eo consumers, and transmit television signalsdirectly to them.

DBS could complicate enforcement of cur-rent theft-of-service and illegal signal intercep-tion laws if some DBS program providers of-fer free services, or if program providers cannotagree to encrypt all satellite television signals.In either case, the mere possession of a back-yard dish and special microwave receptionequipment would not be sufficient evidence toprove unauthorized use. ” Indeed, unauthorizeduse could be very difficult to stop.

To demand payment from a user, programowners must prove that the user actuallysnatched and watched a program. Short ofstaking out the farmhouse with electroniceavesdropping equipment and then storming

“47 U, S,~.. Section 705, 318 ( 1984).L4LJ.S. News and M’orld Report, Sept. 30, 1985, p. 52.“ In the case of MDS receiving equipment, the courts have

found that the manufacture and sale of down converters andantennas without authorization from program providers is aviolation of the Communications Act and FCC regulations. SeeUnited 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 30,1983.

.— .

it with a search warrant, how can programowners prove a farmer ripped them off?26

Impact of Facsimile on theEnforcement of Copyright

Facsimile is a communication technologywith potentially significant implications forcopyright enforcement. Facsimile machineswork by scanning a document and digitizingits image. This is distinct from optical charac-ter recognition (OCR), which scans a documentand digitizes the individual characters so thatthe text can be manipulated in a computer sys-tem. OCR can be thought of as a further proc-essing step beyond that employed in facsimile.

Because the present cost of facsimile is highcompared to mail delivery, for which it sub-stitutes, its current impact on copyright isprobably small. But as seen in figure 4-4, thevolume of information communicated by fac-simile has risen sharply over the past two dec-ades, and it is becoming more and more attrac-tive as a means of moving documents.

Normally, a facsimile document is trans-mitted over telephone lines to a facsimile de-coder and a xerographic copier. The documentis communicated in digital form. Therefore,copyright problems could arise if the cost oftransmitting information this way drops sig-nificantly for, as with data communications,the transmission of information by facsimiletechnology is highly covert.

Data Communications and theEnforcement of Copyright

Data communications is the term used to de-scribe computer-to-computer transfer of digi-tal information. The copyright enforcementproblems associated with data communica-tions result from their growing scope, scale,and speed combined with the covertness withwhich people can take advantage of these ad-vances. In practical terms, this means that,as more and more copyrighted material is avail-

“Alex Ben Block, “An Eye in the Sky, ” Forbes, November1984, p. 196,

708 ● Intellectual Property Rights in an Age of Electronics and /formation

able inbe able

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

10 -

1 .

01 -

.01 -

001 -

0001t

TV

Newspapers

CATVf l ; r ec t ma i l

Education~ B o o k s =

tPhone

Movies

Mail

Datacommunlcation

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 Pressor New York: Elsevier, 1984) Reprinted with permission

computer-mediated form, people willto transfer it widely and quickly with-

out the knowledge or consent of copyrightholders.

Scope, in this context, refers to the numberof terminal points that are connected by com-munication networks. For instance, the scopeof mail delivery and telephone networks areboth very high. Data communication tech-niques use devices called modems, which con-vert digital computer information into analogform compatible with telephone voice trans-mission lines, to take advantage of the scopeof the telephone network for computer-to-com-puter transmissions. The development of anIntegrated Services Digital Network (see be-low) will eliminate the need for these devicesand will further increase the scope of data com-munications.

The use of data communications is expand-ing rapidly for several reasons. First, scientistsand engineers have made great technical ad-vances in moving information electronically.

Satellite communications and fiber optic tech-nology are both fruits of this progress. Sec-ond, costs of manufacturing, installing, oper-ating, and maintaining the transmitters,receivers, switching equipment, and other com-ponents are falling as economies of scale af-fect microelectronics technology. Third, the useof computers is increasing people’s ability toreceive and handle information automatically.For instance, on-line database systems canwatch for information that is of particular in-terest to an individual, and alert that personwhen new information pertaining to the sub-ject enters the database.

The scale of communications, the second fac-tor in enforcement problems, refers to the vol-ume of information that is moved. There is noprecise measure of information volume thatcan be applied across all forms of information.27

“The measure of information volume is complicated by themultiplicity of forms in which information exists (words, num-bers, mathematical formulae, graphics, moving pictures, etc.),as well as by the range of media that communicate information(e.g., printed pages, -television broadcasts, motion picture film).

( c o n t i n u e d o n n e x t p a g e )


Nevertheless, it is clear that electronic mediain general, and data communications in par-ticular, are fostering an enormous increase inthe volume of information transported. Thisincrease is due to the same factors that accountfor increasing scope. But the scale of data com-munications is also growing because informa-tion is a highly efficient means of affecting thecontrol of processes from a distance. Thus, datacommunications can substitute for human ob-servation and action.

The volume of information that passes throughdata communication networks is still smallcompared with the amount of printed materi-al distributed through traditional channels.But, as seen in figure 4-4, data communicationvolume increased approximately 1,000-fold be-tween 1960 and 1980. The personal computerand the modem will undoubtedly increase thisfurther, and technological advances such as op-tical character recognition, voice recognition,and optical disks will make data communica-tions an even more attractive way to transfermany kinds of information, some of it in copy-righted form.

The speed of electronic communications isthe third factor that affects copyright enforce-ment, and it too is increasing at a dizzying pace.(See figure 4-3.) Not only have new inventionsallowed faster communications, but R&D lab-oratories are continually advancing the speedof established communication devices and me-dia. For example, the achievable speed of datacommunications over standard copper wirepairs, such as the wires that run to home tele-phones, have increased 100-fold since 1970. Thechannel capacity of coaxial cable, the stand-

/ ( f )[1 / I II ( , f ,(1 / I f I 1)1 J){ ( \ II 1{1 . )I<t<t

This protean quality has so far defied the development of a uni-\’ersally applicable unit of measurement. As more and more in-formation is transmitted by data communications, the digitalbit–electronic ones and zeros–may become a gross measure.But the relationship between the number of bits in a communi-cation and the quantity of useful information or knowledge con-tained in them is very complex. “One longs, indeed, for a unitof knowledge, which perhaps might be called a ‘‘wit analogousto the ‘‘hit’ as used in information theory; but up to now nopractical unit has emerged. ” Kenneth 130ulding, ‘‘The Economicsof Knowledge and the Knowledge of Economics, Econom”csof Information and Knowledge, D.M. I.amberton (cd. ) (Balti-more: Penguin Woks, 1971 ).

ard cable television medium, has increasedfrom 12 to 54 channels since 1975, and thenewer systems have potential for transmitting72 simultaneous full-motion television chan-nels over one coaxial cable. Geosynchronouscommunication satellites have increased in ca-pacity since the 240 voice channel (or one TVchannel) “Early Bird” Intelsat I was launchedin 1965. The Intelsat V series, first launchedin 1980, averages 12,000 voice circuits and twoTV channels. The capacity of fiber optics tech-nology has improved more than 100-fold sinceits commercial introduction in 1977. Recentlaboratory tests of new fiber optic systemsdemonstrate the ability to transmit 300,000telephone conversations, or the contents of 100average-length novels, a distance of nearly 100miles in 1 second. 28

A characteristic of data communicationswith important implications for intellectualproperty enforcement is that digital transmis-sion can usually be conducted with a high de-gree of secrecy. Thus, unless significant changesare made in the operation of public telecom-munication networks, the increasing volumeof data communications will make it essentiallyimpossible for proprietors to trace the subse-quent movements of their works once they arecaptured by users’ computer and data commu-nication systems. This raises the issue ofwhether proprietors should, and in practicalterms can, control the transfer of their worksafter users first receive them,

Databases

Computer databases are collections of facts,statistics, bibliographic citations, and other in-formation, including complete texts of somecopyrighted works. Many of these collectionsare offered over telephone lines to users whohave data communication terminals or person-al computers. The user pays a fee to searchthrough the database for the particular infor-mation that he needs. The database proprie-tor can obtain a copyright on the database.Thus certain uses of the information that a userobtains will be illegal.

‘“Telephony, Oct. 21, 1985, p. 24.


One unauthorized use about which proprie-tors are particularly concerned is when com-petitors employ large storage capacity com-puters to download large portions of theirdatabases.” This permits unscrupulous infor-mation service entrepreneurs to avoid riskingmuch of the investment that is required to com-pile a database.

Advancing technology could make the prac-tice more common. The large-scale download-ing of database information is becoming cheap-er and easier with improvements in cost andcapacity of computer storage media, faster tele-communication networks, and wider access tocomputer power. Infringers may increasinglyuse computer power to reprocess informationand make it appear original. Thus, proprietorsmay find it increasingly difficult to know whena competitor is using their downloaded material.

Computer Bulletin Boards

A growing number of personal-computer en-thusiasts are keeping in touch with each otherand exchanging information using computerbulletin boards.30 As the name implies, a com-puter bulletin board is a computerized storagespace offered by a computer owner that servesas a place to post messages. There are two im-portant differences between a computer bulle-tin board and the more familiar variety. First,a computer can offer a very large space in whichto post messages. Thus, many computer userscan post copies of their favorite software pro-grams, such as computer games. Some of theseprograms are in the public domain; others arecopyrighted. Second, the telephone networkcan be employed by users of computer bulle-tin boards to build a community that is notconfined to a physical neighborhood. Thus,some computer enthusiasts use bulletin boardsto keep each other informed about the latestsoftware releases and maintain a sense of com-munity of interests among widely dispersedcolleagues and friends. Bulletin boards are also

—

used illegally to trade credit card numbers,long-distance access codes, and the instruc-tions to disable the copy protection of com-puter software packages. In this way, theunscrupulous help others steal goods andservices .31

Bulletin boards are an especially thorny in-tellectual property enforcement problem be-cause they can be used to very quickly spreadcopyrighted works throughout the communityof computer hobbyists. Bulletin boards are aninformal publication mechanism. Becauseaccess is generally not restricted, proprietorsmay monitor the contents of bulletin boardsto detect unauthorized trading of their works.But, as their numbers proliferate, these infor-mal community communications media maydefy systematic surveillance and control. More-over, it is not clear whether a bulletin boardoperator can be held liable for messages postedanonymously on his system.32

Local Area Networks

Local area networks (LANs) are data com-munication facilities that connect computersin a geographically restricted area, such as anoffice suite, a building, or an industrial park.These networks range in size from the verysmall to ones that have thousands of users.The expanding market for office automationtechnology, particularly personal computersand professional work stations for word proc-essing, document management, and data anal-ysis, is encouraging the development and de-ployment of network facilities that allowworkers to communicate with one another.LANs allow users to transfer large files of in-formation very quickly among personal com-puters, work stations, and large mainframecomputers that can store and process corporateor institutional databases. LANs can also givemany users access to computer software pro-grams from a central repository.

“Interview with Eugene Garfield, Institute for ScientificInformation, Mar. 11, 1985.

30There are thousands of computer bulletin boards now inuse, A. Pollack, “Free-Speech Issues Surround Computer Bulle-tin Board Use, ” New York Times, Nov. 12, 1984, p. 1,D4.

J1 Ric M arming, “Policing the Boards, ” Popular Computing,July 1985, pp. 37-39.

“New York Times, Nov. 12, 1984, op. cit.

Ch. 4 —Impact of Technology on Enforcement of Intellectual Property Rights ● 1 1 1

Copyright infringements can occur in thesec i r c u m s t a n c e s w h e n c o m p u t e r p r o g r a m s , i n -format ion downloaded from commerc ia l data-

bases, or other copyrighted materials are madeavai lable and shared in these systems. Manysoftware license agreements and database sub-scription contracts specifically prohibit the useo f l i c e n s e d m a t e r i a l i n m u l t i u s e r s e t t i n g s .Other contracts provide for “s i te l i censes” toal low mult ip le uses o f so f tware . Enforcementof such contract provisions can be difficult be-cause of the private nature of local area net-works . Of ten , ev idence o f contract abrogat ion

o r c o p y r i g h t i n f r i n g e m e n t m u s t b e o b t a i n e dfrom disgrunt led employees o f the infr inging

inst i tut ion or f rom paid inf i l trators .

Integrated Services Digital Network

In its present structure, much of the nationaland international telecommunication networkuses equipment that transmits analog signals.This is particularly true for local “final-mile”connections. Voice communication, still thelargest category of telephone usage, is efficient-ly handled by analog transmission. But the vol-ume of data transmitted by telephone is grow-ing. This growth is encouraging local andlong-distance companies to convert more andmore of the telephone network plant to digitaltransmission. If efforts to set standards aresuccessful, the end stage of this conversionprocess will bean Integrated Services DigitalNetwork or ISDN– "an integrated nationalnet work that can connect any information pro-vider with all its potential customers and anyuser with all the range of information resourcesavailable." 33 Planners envision that users willaccess such a network through a standard con-

‘I{ .M’. Nlc( ;raw, ,Jr,, ‘ ‘The I nforrnation 1ndustrJ: ‘1’he I’rin-ciples That f+; ndure, (’ompufer.s and }’eople, hla}-tJune 1983,p. 10

nection resembling an electric power plug-inreceptical, available in virtually every building.

As more and more of the telecommunicationsinfrastructure is converted to digital transmis-sion facilities, the issue of copyright enforce-ment will be contested on a much larger scale.On the one hand, digital transmission can bea significant threat to enforcement becausescope, scale, speed, and decentralization maymake it very difficult to detect transfers ofcopyrighted works among private users. Butbecause of the recordkeeping and processingpower of digital communications switchingtechnology, there may be opportunity for pro-prietors to monitor contact between data ter-minals. Telephone transaction records couldprovide evidence that a particular terminal ac-cessed a particular store of copyrighted mate-rial at a particular time, and so aid enforce-ment. Alternatively, proprietors might embeddigital “signatures” in their works to aid intheir monitoring efforts.

The development of an Integrated DigitalServices Network raises a basic question forintellectual property: To what extent will theenforcement of intellectual property law be afactor in the design, construction, and opera-tion of future telecommunication facilities?This raises several corollary questions: Who,in our newly deregulated telecommunicationenvironment, will decide to what extent andin what ways intellectual property enforcementwill be implemented in telecommunication sys-tems? What criteria will be used to decidewhich information will be collected about usersof networks and who and under what circum-stances access to that information can beobtained? 34

“The policy implications of new electronic sur~eillance tech-nologies ha~’e been re~’iewed in a recent OTA publication, Elec-tronic Sur~’eil]ance and Ci\ril Liberties, OTA-CIT-293 (Washi-ngton, DC: U.S. Government Printing office, october 1985).

TRENDS IN PROCESSING TECHNOLOGY: IMPACTS ON THERIGHT TO CONTROL THE MAKING OF DERIVATIVE WORKS

Information processing is the physical trans- computing machines. Information processingformation 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 late1940s and early 1950s. It has been used to au-tomate many tasks, improving the efficiencyand speed of much of the information process-ing work that people formerly accomplishedmentally or with the aid of mechanical devicessuch as paper and pencil. In the last 10 years,computing resources have become increasinglyavailable to people in private homes and of-fices. They use this technology to transformand manipulate many kinds of information, in-cluding some types of copyrighted works.

Increasingly, people use information proc-essing technology to prepare derivatives of pro-tected works—to selectively modify them ortake them apart and to reassemble the piecesinto new, or apparently new, works. To a largeextent, the intellectual property enforcementproblems stemming from the use of process-ing technology are nascent, but current usesoffer clues to the potential impact of theseproblems. A discussion of the current and po-tential effects of this technology on severaldifferent types of intellectual property illus-trates the implications of information process-ing technology for enforcement. Integratedwith storage and communication technologiesinto computerized, digital information sys-tems, processing technologies promise sometruly formidable problems for the enforcementof intellectual property rights,

Impact of Processing Technologyon the Derivation of Text

Affecting the way that people prepare text,information processing technology is begin-ning to be used to make derivations of copy-righted textual works. Word-processing hard-ware and software are becoming commonplacetechnologies in offices. Integrated word-proc-essing, database-management, and on-line in-formation retrieval capabilities are also offeredin personal computer software packages. Thesecapabilities make it possible to build personaldatabases derived from the copyrighted worksof CompuServ, The Source, and other on-lineinformation retrieval companies. In fact, thesecompanies design their databases with the

intention of making it easy for users to makederivations. Users construct search statementsthat select a part of the database relevant totheir needs.

Some people use these processing capabili-ties to extract portions of commercial data-bases and resell access to the information. Inmany cases, it is unclear whether infringe-ments have occurred. Although containing theoriginal information in some form, the deriva-tion may look quite different, either becausethe format or other features have been changedto add value, or because of a deliberate attemptto disguise the source of the information. Inother cases it is obvious that the derivativedatabase stems from the original and may bein clear competition with it. The volume ofboth of these kinds of database derivation canbe expected to rise as the amount of textualmaterial available in computer-processibleform increases, and as processing capabilitybecomes better, cheaper, and more widespread.Hence, the enforcement of copyright in data-bases will become a larger problem, one de-scribed by some observers as insurmountable.

There are some text processing capabilitieson the technological horizon that may have im-portant, long-term impacts on the enforcementof copyright. Some of these are still experimen-tal and others are merely speculative. Auto-matic indexing, abstracting, and documentpreparation systems that combine optical diskstorage, high-speed digital communications,and perhaps novel computer architectures andintelligent text processing software may becommon by the end of the decade. Such sys-tems will be able to search a large body of ma-chine-readable text, including many articlesand books, select particular elements that arerelevant to a given research question (muchas current database systems do), prepare cus-tomized indexes and abstracts of relevant doc-uments, and, most speculatively, prepare a re-port in proper English of specified length thatsummarizes the findings of the query. Shouldthese capabilities be realized, they may requirepolicymakers to rethink the question of whatinformation processing activities are accept-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-ing and enjoining infringements of copyrightin textual works.

Impact of Processing Technologyon the Derivation of Music

Information processing technology is affect-ing the way people create music, and it is be-ginning to affect the ways in which they canprepare derivatives of copyrighted musicalworks. In the last 15 years, the decreasing costof digital electronic processing technologies—logic and memory-have brought music syn-thesizing, audio editing, and dubbing technol-ogy out of the academic laboratories and so-phisticated professional studios where systemswere often custom designed and expensive tobuild and maintain. Now available off the shelf,these technologies are in the hands of diskjockeys, sound engineers in small studios, andaspiring professional and even amateur musi-cians. At the same time, the actual capabilitiesof these technologies have improved signifi-cantly. According to one OTA advisor, ‘‘Therehas been a quantum leap in terms of the so-phistication of the kinds of information thatyou can produce on an off-the-shelf synthe-sizer."35 Now, for the price of a grand piano,musicians can buy machines capable of analyz-ing and synthesizing sound wave forms andcustom-designing sounds that have never beenheard before.

Because these technologies are widely avail-able, people are becoming accustomed to thefreedom of using them to create, use, and re-use music. The groundwork is being laid fordigital sound editing capability in the home.As mentioned earlier, compact disks alreadysupply consumers with music in digital form.Within 3 years, digital audio tape may also beavailable. 36 A standard digital communicationconnection for music synthesizers and personal—. — —

“ Michael Kowalski at the OTA Workshop on Technologiesfor Information Creation, Dec. 6, 1984.

“Interview with Stan Cornyn, Apr. 4, 1985. For about$1,000, one can now buy an adapter device that allows a videocas-sette recorder to be used to record music digitally. Barry Fox,“optical Memories for Home Computers, ” New Scientist, Apr.11, 1985, pp. 17-20.

computers, the Musical Instrument Digital In-terface (MIDI), is growing in popularity. Andpersonal computers are now beginning to ap-pear that have digital sound recording capa-bility. 37

Copyright enforcement problems are arisingfrom digital music processing technologies be-cause people can “disassemble” music whenit is in digital form. This disassembly can oc-cur vertically-that is snippets’ of sound caneasily be cut from a copyrighted work and in-corporated in a derivation that may be noth-ing more than a collage of pieces of copyrightedworks. Although it is more expensive, difficultto accomplish, and limited in application, dis-assembly can also occur horizontally. For in-stance, the bass line of a song maybe strippedoff and used in a second work, creating whatis, to some extent, a derivative work.38

Another intellectual property problem mayarise from the use of sound emulators that canmimic complex sounds, including voices, withgreat precision. A question may arise aboutwhether a singer can claim property rights inthe sound of his voice.

These capabilities pose two questions rele-vant to intellectual property rights enforce-ment. First, how is a proprietor to recognizeand prove infringement in this very dynamicmusical environment? Second, what rightsdoes or should an artist/copyright holder haveto maintain the integrity of his work, and howcan he enforce those rights?

Impact of Processing Technologyon the Derivation of Video

Information processing technology is alsoaffecting how people create visual works, andhow they can use copyrighted visual works asraw material for other works. Digital, comput-er-assisted retouching of photographs has

. . . . . -.——.‘-Scott Mace, ‘ ‘Electronic Orchestras in Your Living

Room, ” Infoworld, Mar. 25, 1985, pp. 29-33.‘“Michael Kowalski, Dec. 6, 1985. Mr. Kowalski actually

played for the workshop two pieces of commercially recordedand released music that demonstrated the stripping and reuseof a bass line.


reached a level of sophistication where the im-ages of people can be added or subtracted frompictures leaving little or no trace of tamper-ing.” The pace of progress of video tape edit-ing technology is such that a new generationof equipment appears about every 4 years.40

The television technical community is study-ing the establishment of a worldwide digitalvideo tape standard. Such a standard wouldallow all studio-based production work, includ-ing editing, to be done in digital format.41 Thus,some early steps are being taken in the worldof video toward the kind of disassembling ca-pability now possible with music. Combinedwith communication technologies-UHF andVHF broadcasting, direct broadcast satellite,cable television—and storage technologies—video tape, optical disk—video processing isrevolutionizing the way visual works are made,disseminated, and reused. Thus, equally revo-lutionary questions may be posed regardingthe enforcement of intellectual property rightsin visual works.

Computer hardware and software are reach-ing a truly phenomenal level of sophisticationin the generation of graphics. Some expertssuggest that, within as few as 5 years, it willbe possible to use the filmed image of JohnWayne, for example, and produce a full-lengthmotion picture with a synthesized ‘‘Duke’ inthe starring role.42 Lucasfilm, Ltd., of SanRafael, California, has developed and is nowmarketing a machine, the EditDroid, that usesoptical disk storage and computer processingto automate virtually the entire process of filmediting, making the actual cutting of film un-necessary, except perhaps at the very last

‘“Some people believe that, upon challenge, photographsmay no longer be held as admissible evidence in court, S. Brand,K. Kelly, and J. Kenny, “Digital Retouching: The End of Pho-tography as l:vidence of Anything, ” 14’hole Earth Reviewq JUIV1985, pp. 42-49.

“’Interview with Humberto Rivera, Apr. 18, 1985.“Richard Green at the OTA Workshop on Display, Print-

ing, and Reprography, Mar. 13, 1985,“Several states, including California, have recently passed

laws that would require commercial users to obtain permissionfrom the heirs of a deceased celebrity before they can use a like-ness, thus treating the person’s name and likeness as the prop-erty of the heirs, D. B. Moskowitz, "Celebrities' Ghosts AreHanging Over Advertisers," Business Week, June 3, 1985, p.108.

stage of producing a master print.43 The mar-riage of optical disk storage and video proc-essing equipment suggests the possibility ofestablishing “image banks’ consisting of digi-tized images and standard algorithms to ma-nipulate, transform, and link together videoimage frames, or even parts of frames, into newvisual works derived from older, perhaps copy-righted, works.44 The ownership managementof such image banks could be complex.

Standards for digital television broadcast-ing and reception are being discussed in inter-national standards forums.45 Digital televisionpromises to lower the cost and improve thequality of pictures produced by home televisionreceivers, and could also make it possible forhome users to store and reprocess televisionprograms. Again, the enforcement of the in-tellectual property right to control the produc-tion of derivative works would be complicatedby the private and potentially widespread tech-nical capability to make new uses of copy-righted works.

Impact of Processing Technology onthe Derivation of Computer Programs

Part of the research and development effortin computer technology goes into the creationof hardware and software tools that can beused to help create other computer programs.46

These tools aid people in developing new andever more sophisticated programs. Some toolscan also be used to adapt existing software tonew uses. Thus, if they are employed in theunauthorized production of derivative works,their use may violate intellectual propertyrights.

4’S. Gannes, “Lights, Cameras . Computers, ” Discover,

August 1984, pp. 76-79.“Jim St. Lawrence at the OTA Workshop on Technologies

for Information Creation, Dec. 6, 1984,“Richard Green, Mar. 13, 1985.“’Examples of such tools include workstations, program edi-

tors, code debuggers, program generators, programming envi-ronments (integrated sets of tools), and, in the future, perhapslibraries of standard information processing modules that canbe assembled to perform more complex functions and tasks.For a discussion of these technologies-the potential future andthe current problems of software engineering-the reader is re-ferred to the OTA report, Information 7’echnology R&D: Criti-cal Trends and Issues, OTA-CIT-268 (Washington, DC: U.S.Government Printing Office, February 1985), pp. 75-87.


The adaptation of computer programs toserve new or custom uses is, in many contexts,a well-accepted and widespread activity. Somecomputer languages and soft ware tools aredesigned specifically to aid in modifying pro-grams that they help create. In particular,operating systems software is designed to helpusers tailor their programs and computing sys-tems to serve special needs. ” Some program-mers and computer scientists believe that, be-cause software is such a valuable resource,their creations should be in the public domainand under no circumstances restricted in theiruse as tools.48

The number of American homes with per-sonal computers rose from zero in 1975 to 8million by the end of 1983.49 This technologyhas spread even more rapidly into offices. Aspersonal computers become more widespreadand the demand for more specialized softwarerises, the opportunity and the desire to manipu-late copyrighted programs to serve particularpurposes may also increase.

An especially relevant example of such ma-nipulation is the use of programs designed todisable the copy-prevention schemes of manypersonal-computer programs, thereby allow-ing users to make multiple copies of thesecopyrighted works. Other currently availablesoftware tools— ‘interpreters ‘— are used totranslate a program from one computer lan-guage to another. Other tools aid in the “re-verse engineering’ of programs. Reverse engi-neering refers to the practice of analyzing aprogram to determine how it is arranged to ac-complish its functions. A major goal is under-standing the underlying algorithms used bythe program designers. A very fuzzy line sep-arates legitimate reverse engineering practicesand violation of the copyright owner’s rightto control the production of derivative works.

— ——.—- —‘ Interview with Edward Conklin, FORTH, Inc., Apr. 19,

1985.‘“Richard Stallman, “The GNU Manifesto,” Dr. Dobb's

Journal, March 1985, pp. 30-34.‘qWalter S. Baer, “Information Technologies in the Home, ”

Information Technologies and Social Transformation (Wash-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$10,000–than on mainframe computers or minicomputers,

Congress and the courts have not yet grap-pled with the question of what elements of com-puter programs copyright should protect. Thisissue is examined in detail in chapter 3 of thisreport. Here, it is important to note that muchof the derivative uses of computer programsand their underlying processes and algorithmsoccurs in private, and as such presents propri-etors with major obstacles in detecting andproving infringement of their rights, evengiven clear policy on what those rights include.

There is a widespread and growing researchand development effort aimed at making com-puter software production easier. One goal ofthis effort is to develop extensive libraries ofstandardized functional modules of computercode. Some software module libraries alreadyexist. These standard modules comprise com-puter program segments that represent themost efficient known formulation of how to ac-complish a particular task, such as sorting rec-ords alphabetically. Libraries of modules maysoon be organized so that they can be auto-matically selected and combined into programson the basis of functional specifications. Theuse of standardized modules would help ame-liorate the problem of low productivity in thecurrently labor-intensive software industry.

The establishment of large libraries of reus-able software modules raises questions aboutownership and the management of transac-tions in these resources. Difficulty is likely toarise in determining whether the copyrightownership of a module constitutes a restrainton the use of a function or an idea.

The nature of the computer is at the core ofmany copyright enforcement problems, includ-ing those that surround the unauthorized deri-vation of computer programs themselves. Atruly revolutionary machine, the computer wasrecognized as such when the ideas governingits operation were first conceived. In the 1930s,Alan Turing suggested, by way of a mathe-matical model, that any computer can simu-late the operation of any other computer, past,present, or future.’” The real limit on the use-

“’Alan Kay, “Computer Software, ” Scientific American, Sep-tember 1984, p. 53.


fulness of this simulation capability is thespeed at which a given computer operates; andthe speed of computers is widely projected tocontinue to rise at a breathtaking pace, at leastfor the remainder of the century.” Thus, “Itis clear that in shaping software [tool] kits thelimitations on design are those of the creatorand the user, not those of the medium."52 The

—52See OTA, Information Technology R&D: Critical 7’rends

and Issues, op. cit., pp. 324-331.‘Kay, “Computer Software, ’ p. 57

capabilities to manipulate and transform copy-righted computer programs into derivativeworks, to do so privately and without leavinga trace, are well within the limits of presentcomputer systems. These capabilities confrontlegislators, courts, law enforcement agencies,and intellectual property owners with the ques-tion of what should or can be done to controlthe use of rapidly proliferating computer powerin manipulating and transforming cop-y-rightedworks.

ADJUNCTS AND ALTERNATIVES TO TRADITIONALENFORCEMENT

Faced with mounting difficulty in identify-ing, detecting, and prosecuting infringementsof their traditional rights, intellectual propertyproprietors are pursuing three basic strategiesto protect their economic and artistic interests,They are: implementing technological protec-tions to prevent the unauthorized copy, publi-cation, and use of their works; initiating pub-lic relations campaigns that appeal for citizens’moral support and respect for property rights;and lobbying for legislation that strengthensgovernment enforcement efforts, or establishesalternative mechanisms for obtaining remun-eration.

These strategies are not mutually exclusive,and do not apply uniformly across all situa-tions. Proprietors see different enforcementproblems arising from different technologies,which affect particular types of works in differ-ent contexts of use. Thus, a mix of strategiesmay be most appropriate to meet these differ-

MECHANISMSent challenges. Although a given form of tech-nological protection, for example, may effec-tively reduce copying of personal-computersoftware distributed on floppy disks, it maybe totally ineffective if the software is distrib-uted over telephone lines. Appeals to peoplessense of “fair play’ may be quite useful ineducational or corporate environments, but in-effective, or even offensive and counterproduc-tive, when applied in the context of home use.The collection and distribution of royalties onthe sale of blank media may be a workable so-lution when applied to cassette tapes for mu-sic or movies; but such a solution may be anadministrative nightmare if applied to moreversatile media such as magnetic or opticaldisks, where many more kinds of informationproducts, and thus many more and varied in-terests, would have to be accommodated in dis-tributing royalties.

TECHNOLOGICAL PROTECTIONSeveral varieties of technological protection 1) security measures such as locks, scrambling,

are now used to prevent unauthorized use of and encryption; 2) technological methods tointellectual works in the forms of computer monitor information flow; and 3) proprietarysoftware, 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

Every technological approach to the protec-tion of intellectual property requires a trade-off between the security of the property andits accessibility, marketability, cost, and qual-ity. Furthermore, as was reiterated by everytechnical expert with whom OTA spoke, whileany technological barrier may work in somecases by acting as a‘ ‘stop sign warning againstunauthorized use, no form of technological pro-tection is 100 percent effective against deter-mined opponents.

Software

Many present and proposed methods of using

technology to protect intellectual property cen-ter on software, in part because it is the newestand most technologically sophisticated infor-mation-based product today. Further, softwarecopying has three distinctive qualities that setit apart from the copying of other expressionsof intellectual property, making protection aparticularly critical issue, First, it is easier tocopy software than other products, such as au-dio records or books, because the physical ef-fort is minimal—as simple as pressing a sin-gle key. Second, a computer can copy softwareextremely fast compared to the length of timerequired to copy other materials. Finally, un-like a taped copy of an audio recording, theduplicate is typically an exact, perfect copyof the original software with no distortion ofquality, Thus, the same technological qualitiesthat make software useful also make it vulner-able to copying.

Software protection for mass-market, per-sonal computer programs generally falls in thefirst category of technological approacheslisted above: locks and encryption. Another al-ternative is the use of proprietary channels forthe distribution of software.

Software embodied in disks maybe protectedfrom copying in two basic ways. Either the pro-tection mechanism can be built into the soft-ware, or it may be divided and coordinated be-tween software and hardware. The essentialdistinction between the two methods is thatthe hardware-plus-software protection mech-anisms are able to limit software to one com-

puter

Enforcement of

or one user.

Intellectual Property Rights ● 1 1 7

In contrast, the software-only protection mechanisms cannot control useof the software, only the number of copies thatexist. Software-only protection methods arecurrently in use, and implementation of moreadvanced and secure hardware-plus-softwaremethods is being discussed. Some chip manu-facturers are designing computer chips withmachine-readable serial numbers and decryp-tion circuits to help software makers more ef-fectively control their products.’) But, in gen-eral, hardware companies have little incentiveto help prevent copying because the availabil-ity of “free” software makes their productsmore attractive and less expensive for the in-dividual to use.

There are numerous other mechanisms thatcould prevent unauthorized copying, some re-quiring substantial changes in hardware, andothers based on modified systems of distribu-tion. One of the former involves providing soft-ware in read-only memory (ROM) and redesign-ing computers so they accept ROM modulesor cartridges.54 Taking the concept of softwarecartridges a step further, one can imagine com-puters being sold with many software pro-grams built into the machine, residing in in-ternal ROM chips. ” A developer of especiallyuseful software, fearing lost profits due to ille-gal copying, could market his software onlyin this form—inside a computer. Such a policyhas many drawbacks. It would severely limitusers of computers, who would be forced to buyan entire computer to get a useful piece of soft-ware. Even if computers were inexpensive, thewaste would be great and the computer’s util-

“For example, ‘i Software Protection Llevices, Inc., is at-tempting to incorporate its Copyrighta- software protection s~’s-tem into a microcomputer chip under joint development withThe Western Design Center, ” a Mesa, AR, microprocessor de-sign firm. Edward Warner, “Few Takers for Embedded Pro-tection, ” Computerworhi, Mar. 12, 1984, p. 109.

“Computers that accept software in ROM have thus farmet with mixed success. For example, the Texas Instruments99 and the IBM PCjr accept software in ROM cartridges.

“The trend toward building software into computers is, byand large, currently motivated by the desire for small, light-weight computers, not to prevent copying. For example, theHewlett Packard Portable computer has its operating systemsoftware and two applications programs, Lotus l-2-3Thf, anda text editor, provided by internal ROM to eliminate the sizeand weight of disk drives.


ity as a ‘‘universal machine, or a device thatcan imitate any other device, would be lost.Such computers would be special-purpose ma-chines only.

Another form of technological protectionpermits developers of programs (as distinctfrom suppliers of data) to keep their programsin their own computers, rather than distribut-ing their software on the market. People whowant to use the program are required to con-nect to the developer’s computer, upload thedata they want processed, and pay an on-lineuse fee. The disadvantages of this scheme arelosses in flexibility-users are not able to linktheir programs to remote, protected ones eas-ily—and communication costs for the on-linelink.

One still-theoretical solution would be to linksoftware access to a unique personal identifier.A computer terminal would be equipped witha hardware device that accepted sensory in-put, such as a person’s appearance, finger-prints, hand geometry, voiceprint, or retinalpattern. Software could be designed to permitonly the person whose appearance or printsmatched to log onto the computer or to usea piece of software.56

Broadcast Signals

Because broadcast signals-television andradio transmissions—are not contained in atangible medium or transmitted over wires,they cannot be locked like software or distrib-uted through proprietary channels. They maybe protected in only two ways: directly byscrambling or encryption, or indirectly by mon-itoring techniques.

Scrambling or encryption techniques alterthe signals so that they are unintelligible un-less the proper decoding device is used at thereception end of the transmission. Typically,the signal for a network television show hasa long route to the viewer—e.g., from the net-work to a satellite to the affiliate station andfinally to the home viewer—and so is vulner-

‘<John Koehring, “Automatic Identity Verification, ” Infor-mation Age, April 1984, pp. 103-110.

able to unauthorized pickup at many differentpoints, Broadcasters need to ensure that thesetransmissions are not accessed until the endof the process, after the local affiliate stationhas added local advertisements. Thus, the net-works may scramble the signals so that onlythe affiliate station, using a decoder, has ac-cess to the satellite transmissions.57

Monitoring techniques to verify unautho-rized viewing or listening have been appliedin some cases, particularly by some subscrip-tion television and MDS companies. So far, thecourts have upheld this form of electronic sur-veillance, but privacy concerns remain. In anycase, monitoring individual residences for theftof service is very expensive and therefore oflimited value to proprietors, except perhapsas a deterrent.

Audio and Video Recordings

In ways similar to those used for computersoftware, audio and video recordings may becopy protected by a mechanism built into therecording itself, or by a scheme coordinatedbetween the recording and the playback/copy-ing machine.

Musical recordings have traditionally in-cluded no mechanism to prevent copying. Allknown copy-preventer systems tend to degradethe quality of sound reproduction. Recently,there is renewed interest in protecting musi-cal recordings because digital CD/ROM rec-ords are potentially infinitely copyable in highquality. Manufacturers of compact disk record-ings are, therefore, embedding a unique “sig-nature’ in their products to serve as evidenceof unauthorized copying or manipulation.58

One company now offers protection for video-cassette tapes in a system that “confuses theautomatic gain control of VCRs, causing themto make copies that have dim, weak picturesthat are marred by video ‘noise.’ "59 This sys-

“’interview with David Poltrack, CBS, Inc., June 10, 1985.58Interview with Al McPherson, Warner Records, Inc.,

Apr. 19, 1985.59’’ Homevid ‘Club’ Has Surprise for Pirates, ” Variety, Apr.

24, 1985. Consumer electronics catalogs feature devices thatclaim to defeat these automatic-gain-control-based protectionschemes.

.—


tern could also be used for broadcast signals,so that a work taped from an on-air perform-ance and protected in this fashion would yielda very poor copy .

CBS Inc. recently announced a system toprevent copying of records, tapes, and c o m -pact disks that will be coordinated between ad e v i c e i n c o n s u m e r s ’ h o m e - r e c o r d i n g e q u i p -ment and a coded signal on the purchased re-cordings.” ’ Record distributors would likely of-

fer t w o vers ions o f recordings , o n e c o p yprotected and the other not, and charge differ-ent prices for them. Industry spokesmen a c -knowledge that it will probably take d e c a d e sfor this scheme to significantly affect consumercopying, because people will be able to copyprotected recordings with their existing equip-ment. Also, equipment manufacturers are like-ly to continue to offer equipment that does n o tinc lude the copy-protect ion device , unless thelaw requires such devices .

Effectiveness

The ability of technological protection to pre-vent illegal copying or access depends on themedium and the type of protection, but a fewabsolutes can be stated. Any form of techno-logical protection will prevent some u n a u t h o -

rized use; no form of technological protectionwill stop all unauthorized use. Some systemsare relatively easy to defeat, others more dif-ficult. And it is conceivable that new forms oftechnology will alter the effectiveness of thesed e v i c e s .

Another factor is the level of technologicalliteracy in society. Today, many children haveearly and frequent exposure to the new com-puter technologies, and so will be betterequipped to use—or misuse—technology. Thehigher the level of society’s computing skill,the more difficult the job of technological pro-tection becomes-at least for computer-basedintellectual property.

For technological protection to work on alarge scale, the challenge is to find a level high

“ Martha N1. Ilamilton, “Record Industry Un\eils L)e\’ice toBlock Copying,” The Washington Post, Mar. 26, 1986, p. G3.

enough to reduce unauthorized use to a man-ageable level, but low enough so that consum-ers would not find the protection mechanismso distasteful that they would refuse to pur-chase and use protected materials.61 The mar-ketplace will tend to set an equilibrium ofacceptable protection. But given the uncertain-ties of technological change and shifting con-sumer preferences, industry will have to mon-itor the market carefully to assess the effec-tiveness of protection and to gauge consumerreaction to protection mechanisms.

Advantages and Disadvantages ofTechnological Protection

Some analysts believe that proprietors’ reli-ance on technological protection is a naturaland reasonable process. They argue that usingsuch protection is like building fences to pro-tect real estate. Thus, improvements in tech-nologies for copying and manipulating intel-lectual property will probably result in bettertechnologies to prevent these activities, justas the opening of western lands was followedby the invention of barbed wire.62

However, from the point of view of publicpolicy, technological protection may be a poorway to protect intellectual property rights be-cause it ignores part of the constitutional com-promise between the public welfare and theprofit-making of intellectual creators. Techno-logical bars may block dissemination of andaccess to intellectual property.

One result of this loss of access could be re-dundancy in spending for research and devel-opment. Since technological protection by-passes intellectual property law, softwareproducers, for example, might decide not todisclose the contents of their software, depriv-ing competitors, experimenters, and research-ers of the benefits of their work. Thus, somesoftware research and development would re-peat previous, but undisclosed, work. Thisduplication and waste of resources is precisely

+ Christopher Weaver, OTA Workshop on Storage andDatabase Technologies, Jan. 11, 1985.

‘Personal communication from Fred Smith, (’competitiveEnterprise Institute, January 1986.

120 . Intellectual Property Rights in an Age of Electronics and Intormation-.

what patent law strives to avoid. Moreover,technological protection of software does notexpire after a set period of time, as other intel-lectual property rights do. The creator of soft-ware could, in effect, have a perpetual monop-oly on his work.

Technological protection in and of itself doesnot necessitate changes in intellectual prop-erty law, but it could precipitate changes byweakening the distinctions between differenttypes of intellectual property—patents, tradesecrets, trademarks, and copyrights. If tech-nological protection were effective, intellectualcreators would not have to observe the formal-ities required for legal protection, e.g., submit-ting to the lengthy and expensive patent proc-ess, or disclosing works to the Copyright Office.They might still choose to do so for additionalprotection if technological protection fails, butthere would be less reason. Technological pro-tection, if applied indiscriminately to any orall kinds of intellectual property, could blurthe legal distinctions among these forms of pro-tection. In reflecting what might become awidely accepted public practice, the law itselfcould likewise cloud the differences.63

Widespread technological protection couldmake intellectual property law more effectivein one important way: it would alert consumerswho attempt to copy that they are breakingthe law. This would not necessarily stop them,but by forcing them to take elaborate stepsto make copies, it would at least make the actless convenient and emphasize its illegality.

Widespread use of technological protectioncould generate a need for new, related laws orregulations. In addition to the potential needfor standards legislation, laws that proscribethe manufacture, sale, distribution, or use of

be necessary to ensure effectiveness. This typeof legislation has two drawbacks. The first isthat there are some legal uses of duplicatedmaterials, which would make it necessary tooutlaw devices with legitimate uses. The sec-ond drawback, closely related to the first, isthat it would be necessary to define and char-acterize devices and methods used for defeat-ing technological protection. Those definitionsand characterizations would cover specific ap-plications of technology, and would themselvesexist in a changing technological environment.The law would require making the precise tech-nological definitions necessary to prevent de-feat of protection mechanisms, while at thesame time allowing the use of related tech-nologies.

Another kind of legislation, similar to con-trol of copying methods, could be enacted thatwould outlaw the intentional defeat of, or tam-pering with, technological protection mecha-nisms, regardless of any violation of intellec-tual property rights. Or, perhaps, ordinaryviolations of intellectual property law mightstill be treated as they are now, but violationsthat involved the intentional defeat of tech-nological protection mechanisms could carryadditional penalties.

Public Relations Strategies

Even with safeguards against unauthorizeduse, today’s information technologies provideusers greater potential access to intellectualproperty, and the means to reproduce, store,transfer, and manipulate works. Respondingto this probable increase in uses of technology,many proprietors have tried to inform the pub-lic about intellectual property rights and per-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,

they have tried to alert the public to the idea63John Hersey, in the final report (1978) of the NationalCommission on New Technological Uses of Copyrighted Works that copying is illegal and will be prosecuted.(CONTU), worries about the “subtle dehumanizing danger” of Second, they have tried to convince users thatblurring 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 sation of artists, publishers, and distributors.moment at which the program ceases to communicate with hu-man beinm and is made caDable of communicating with ma- Third, they have sought to educate the publicchines.” 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 understandit. These strategies have met with varying lev-

e ls o f success .

When the law c lear ly def ines infr ingement ,it becomes easier to inform the public and buildawareness about the issue. For instance , theMotion Picture Association of America (MPAA)e m p h a s i z e s t h e p r o t e c t i o n s p r o v i d e d b y l a win its posters, brochures, articles, and manualsfor enforcement o f f i cers . They te l l the publ ic

that video piracy is a Federal crime, and thato f fenders wi l l be prosecuted . Newspapers andmagazines are sent press re leases about suc-cess ful prosecut ions to spread the word thatthe film industry is enforcing its rights. Simi-l a r l y , w h e n t h e r e c o r d i n g i n d u s t r y u n c o v e r slarge-scale piracy, the ensuing publicity alertsthe public to the problem. The industry hopesthat the public, aware of counterfeit tapes andrecords , wi l l be less l ike ly to buy them.

Book publishers, too, launched a major pub-

l ic awareness campaign after Congress passedthe 1976 Copyright Act , seeking support fornew provisions that defined fair use. The tar-g e t a u d i e n c e i n c l u d e d l i b r a r i a n s , e d u c a t o r s ,r e p r e s e n t a t i v e s o f i n d u s t r i e s t h a t u s e c o p y -r ighted works , and the general publ ic . Book

publ ishers distr ibuted printed materials andheld sessions at professional meetings and pub-lic forums. Many publishers believe that theseef forts produced only very l imited resul ts .

Book publishers point to the inherent limi-tations of the copyright notices on books, arti-cles, and copying machines.64

If the industryi s s e r i o u s a b o u t r e d u c i n g u n a u t h o r i z e d p h o -t o c o p y i n g , m a n y b e l i e v e t h a t t h i s i n t e n t i o nmust be made clear through well-publicized liti-gation. As the President of the Association ofAmerican Publ ishers , Townsend Hoopes , saidin announcing a lawsuit against Texaco for un-

a u t h o r i z e d p h o t o c o p y i n g :

Major businesses that either make no ef-fort to obtain clearance for their photocopy-

64The 1982 King Research report on photocopying in librar-ies found that 85 percent of photocopy machines in all libraries,93 percent of the coin-operated photocopy machines in alllibraries, and 100 percent of coin-operated photocopy machinesin academic libraries bear a copyright warning notice. I).McDonald, Libraries, Publishers and Photocopying, pp. 2-16

ing . . . or like Texaco. make only token pay-ments must under-stand that publishers willnot remain silent regarding violations of theircopyr ights . 6 5

S i m i l a r l y , t h e c o m p u t e r s o f t w a r e i n d u s t r yhas undertaken an aggress ive publ ic -re lat ionscampaign. Because so f tware copying is tech-nically so difficult to prevent, many in the soft-ware industry argue that publ ic re lat ions is

essent ia l to an overal l s trategy o f copyr ighte n f o r c e m e n t . T h r o u g h i t s t r a d e a s s o c i a t i o n ,ADAPSO, the so f tware industry has broughtsome major legal cases 66 and has developed andw i d e l y d i s t r i b u t e d a b r o c h u r e t h a t s t a t e s :

People who would never walk into a storeand shoplift a software product think noth-ing of making several copies of the same soft-ware. The results are the same. The act is justas wrong. 67

The industry has taken out advertisements incomputer magazines that make the same point.

Public Attitudes and the Legitimacyof Intellectual Property Law

Neither the threat of legal action, nor the ed-ucation of users about cop}’ right may be enoughto change public attitudes and behavior. Onlyif the public perceives copyright rules as fairand reasonable will they voluntarily respectthe law.

OTA commissioned a public opinion surveyto identify current public attitudes on intel-lectual property. The major findings were asfollows:68

• At the present time, ‘‘ Intellectual Prop-erty Rights’ is not an issue the public feels

—— -—65Press release from the Association of American Publish-

ers, Inc., Washington, DC, May 6, 1985,“(See, for example, “ADAPSO Suit Alleges Piracy, (’om-

puterworid, Jan. 21, 1985; ‘( Micropro and ADA 1’S() Sue Amer-ican Brands, Allege Software Piracy, I)owrnfmxf, Februar-}’1985,

‘-Thou SAdt ,N’ot Dupe (Washington, DC: AI) A1)S(), 198.1)This brochure was mailed to 5,000 colleges and universities,22,000 school districts, and 17,000 corporate counsels in theUnited States.

‘wFub)ic Perceptions of the Intellectual Propert~r Rights is-sue (prepared for OTA by The Policy Planning Cl roup, Yankel-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 notan issue they perceive effects them.The vast majority of the public finds ac-ceptable—such that they would be will-ing to do it—some form[s] of unauthorizedcopying of copyrighted material.Surprisingly, willingness on the part of thepublic to engage in behaviors that infringeon intellectual property rights is not af-fected by awareness of the issue or expe-rience, in general, with home technologies.Conversely, several specific attitude setsappear to be related to the acceptance ofcopying behaviors. Among them are:—a tolerance of ‘‘gray area’ behaviors,–belief in the benefits of sharing infor-

mation, and–pragmatic responses such as the accept-

ance of copying copyrighted materialwhile acknowledging that it is probablywrong,

The public draws the line at behaviors thatinfringe on intellectual property rightswhen they involve the obvious or activecircumvention of payment, when they aredone for sale or profit, or on behalf of busi-ness or in a corporate setting.At the moment, the public perceives theintellectual property-rights-issue to be amarketplace problem whose solution shouldcome from the industries and companiesaffected.

OTA also commissioned a survey of the atti-tudes of small business executives toward in-tellectual property. The major findings wereas follows:69

●

●

Small business executives appear to bemore sensitive to the problem of intellec-tual property rights than the generalpublic.They are more likely to agree with state-ments that emphasize the need to preservethe proprietary nature of information. Asproducers, many of their products are pro-tected by copyright, patent, or trademark

‘The Intellectual l+opert~ Rights Issue: The Small 13usi-nessman Perspecti}’e (prepared for OTA by The Policy Plan-ning Group, Yankelovich, Skelly & White, Inc., August 1985).

laws. Thus, these executives are support-ers of the law.Because of definitions used in the sampleselection, the small business executivesstudied are owners of, or have access to,computers. Their attitudes show that theyare technology oriented—believing thatmore technology is better. They are strongsupporters of actions that will promoteand ensure the availability of future tech-nologies.Small business executives appear lesslikely than the general public to find copy-ing behaviors acceptable.– While they find almost all copying be-

haviors unacceptable, they make an ex-ception for the one behavior they wouldbe most likely to engage in: the makingof copies of computer programs.

–As is the case with the general public,there is consensus that any sort of copy-ing for sale is totally unacceptable,whereas copying for personal use ismore acceptable.

Small business executives emphasize non-governmental solutions to intellectualproperty rights problems. When given achoice, they prefer solutions that involvetechnologies that physically prevent copy-ing. Further, they believe that the clarifi-cation of ambiguities about which copy-ing behaviors are or are not permissiblewould be helpful.–However, as is the case with the gen-

eral public, the intellectual property is-sue is of low salience among small busi-ness executives, and there is littledemand for solutions at present.

Small business executives see themselvesas potentially part of the process of find-ing solutions to intellectual property prob-lems. Within their own companies, theyare willing to set rules and guidelinesagainst conduct that violates intellectualproperty rights. However, they will onlygo as far as setting standards. They feelthat they cannot and will not accept re-sponsibility for actual enforcement ofrules or laws designed to prevent behav-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 bewith students and educators , OTA found that more e f fec t ive i f they emphasize the va lue o fpublic relations strategies are likely to be most an ongoing partnership between creators andeffective if they focus not on the rights of copy- u s e r s .right holders, but on the relationship between

Chapter 5

Impact of Technologyon the Creative Environment

Contents

PageFindings, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127The Creative Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Impact of Technology on Creators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129Self-Image and Motivations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

Tools for Creativity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132Expanding Boundaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132New Ways of Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135Who Can Participate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

Impact of Technology on Resources and Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Impact of Technology on Roles, Relationships, and Rewards . . . . . . . . . . . . . . . . . . . . . 149Roles and Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149The System of Incentives and Rewards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

Implications for the Intellectual Property Rights System . . . . . . . . . . . . . . . . . . . . . . . . 153Changing Players in the Creative Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153The Emergence of New Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

TablesTable No. Page5-1. Electronic Networking: Academic and Research Uses . . . . . . . . . . . . . . . . . . . . . . . . 1415-2. Libraries in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

F i g u r e s

Figure No. Page5-1. Applications of Information Technologies to the Creation and

Processing of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1385-2. National Magnetic Fusion Energy Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1425-3. An Example of At-Home Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1445-4. Public and Private Institutions Providing Information Products and Services . . . 1475-5. institutional Users of Computer Readable Databases . . . . . . . . . . . . . . . . . . . . . . . . 148

Chapter 5

Impact of Technologyon the Creative Environment

FINDINGSThe development and widespread use of the

new information and communication technolo-gies are changing the creative environment ina number of ways, many of which will have sig-nificant implications for the intellectual prop-erty system. These technologies, for example,are redefining who creators are and what moti-vates them, the kinds of tools and materialsthey use, and how they gain access to thesetools, the skills and knowledge they need topursue their work, and their roles and relation-ships to others in their environment.

In this new environment, the incentives andrewards provided by the intellectual propertysystem may no longer achieve their intended pol-icy goals, In many cases, they inadequately re-flect the motivations, needs, and perceptionsof the members of the creative environment,or the kinds of activities that they pursue.Moreover, they may miscalculate the econom-ics of creating, producing, and distributingintellectual properties, Under these circum-stances, new kinds of inducements may be re-quired.

One of the most significant differences in to-day’s creative environment is the growth inthe number of participants and the transfor-mation of traditional roles and relationships.New participants have entered the scene as

new technological opportunities have emerged.Not part ies to previous inte l lectual propertyagreements, many of the new players and evensome of the older ones who now operate in newmodes, have new and divergent attitudes aboutwho should have access to works and mater i -als, and about what kinds of activities and pur-suits should be rewarded. Under these circum-stances, controversies are likely to developamong players about the distribution of rewards.Furthermore, in the future, there may be lessconsensus about the basic aims of the intellectualproperty system.

The new technologies will greatly enhance thecreative environment, providing new and pow-erful tools that can expand the boundaries ofcreativity, changing the ways in which crea-tors and inventors carry out their work, andopening the way for more people to participatein the creative process and to share the prod-ucts of scholarly and scientific research. At thesame time, these technological capabilities alsopose new problems for the intellectual propertysystem. Allowing users to access and manipu-late creative works with unprecedented easeand speed, they make it more difficult for cre-ators and inventors to identify or trace inci-dents of copyright infringement or plagiarism.

INTRODUCTIONThe 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 dis-

“1’hrfju~hout this chapter the t[’rm creators is used in a gen-posal the resources necessary to support their

erlc sense t o include all t hose p(’opl(” who art, i n ~rol~mi in art is- creat ive work . Most o f what they needed was

tic {Jr Int(’llettual actl\rltles. available through printed materials,127


Today, however, we have moved far beyondthe print culture into an era where the new in-formation and communication technologies arerapidly altering the environment for creativ-ity. This raises the question of whether incen-tives of intellectual property rights, establishedin an era when the printing press dominatedcommunication technology, remain adequatein an age of information and electronics.

This chapter analyzes the relationship be-tween incentives and the creative environment

THE CREATIVEArtists, writers, composers, and inventors

do not work in a vacuum. Nor, as the socialhistorian Elizabeth Eisenstein has pointed, “domajor innovations, discoveries, and artisticworks spring to life abruptly and full blown,like Minerva from Jove’s brow."2 Rather, aninvention, discovery, or creative act is morelike a complex social process than an isolatedincidents The environment in which these proc-esses occur is the ‘‘creative environment. ”

The creative environment consists of severalelements:

the creators themselves—the scholars,poets, writers, artists, inventors, andothers who produce intellectual works;the tools and materials that creators needto perform their tasks;the foundation of artistic and intellectualmaterial on which to build, which mightbe as fundamental as an epic poem or assophisticated as an on-line, bibliographicdatabase;a set of skills and procedures for carryingour their work;

‘Elizabeth L. Eisenstein, The Printing Press as an Agent ofChange: Communications and Cultural Transformations in EarlyModern Europe, vol. I (Cambridge, England: Cambridge Univer-sity Press, 1979), p. 31. For two other discussions of the inter-related activities and processes leading to invention andcreativity, see also, Arnold Pacey, The Maze of Igenuity, Ideasand Idealism in the Development of Technology (Cambridge,MA: MIT Press, 1980); and Daniel J. Boorstin, The Discovers:A History of Man Search to Know His World and HimseJf(New York: Vintage Books, 1985).

3Eisenstein, op. cit., p. 31.

by examining: 1) how technology relates to thecreative environment, and 2) how today’s newtechnologies are affecting that environment.Where possible it will distinguish between theenvironments in which artists, scholars andscientists, and information entrepreneurs oper-ate to determine whether technology is affect-ing these areas in different ways in order toidentify where creators might require differ-ent kinds of incentives and rewards.

ENVIRONMENT● a formal or informal system of education

and training;Ž a network of relationships with others,

each constituting a set of roles; and● a community of shared and supportive

values and a system of incentives andrewards.

Together, these elements constitute a sys-tem in which each part affects all others. Thecreative environment can also be influencedby external factors, such as economic devel-opments, politics, or social change. Technol-ogy is one external factor that is likely to havea particular significant impact because just tobe able employ it generally requires the restruc-turing of the environment in which it is to beused.4

As the following discussion shows, the in-fluence of technology on the creative environ-ment is likely to take several forms. It will af-fect who the creators are and what motivatesthem, what kinds of tools and materials crea-tors use and how they get access to them; theskills they need to carry our their work; andtheir roles and relationships to others in theirenvironment.

4Langdon Winner, Autonomous Technology: Technics Outof Control as a Theme in Political Thought (Cambridge, MA:MIT Press, 1977), p. 100. See also Jacques Ellul, The Techno-logictd Societ.v (New York: Vintage Books, Alfred A. Knopf,1964).

Societies are

Ch. 5—Irnpact of Technology on the Creative Environment ● 129

IMPACT OF TECHNOLOGY ON CREATORSshaped and characterized by

the technology that predominates in them. onecan speak, for example, of Stone Age man orof the basket weavers. Today, computer tech-nology is becoming pervasive. While virtuallyeveryone encounters this technology daily inone form or another, its power and scope en-sure that it will have an especially pronouncedeffect on those involved in creative, scientific,and scholarly pursuits. In particular, it will af-fect how artists, inventors, and scholars seethemselves–their self-image, and what moti-vates them.

Self-Image and Motivations

The historical case of the printing press il-lustrates how technology can affect creators’self-images and motivation. In fact, the con-cept of individual authorship, which definitive-ly changed authors’ self images, emerged fromthis new technology.5 Before the printing pressmanuscripts were treated more or less as sa-cred texts whose authorship was as irrelevantas it was difficult to ascertain. Daniel Boor-stin captures how difficult it was to traceauthorship before the establishment of aprinted, title page:6

There were special problems of nomencla-ture when books were commonly composedas well as transcribed by men in holy orders.In each religious house it was customary forgeneration after generation of monks to usethe same names. When a man took his vows,he abandoned the name by which he had beenknown in the secular world, and he took aname of one of the monastic brothers who hadrecently died. As a result, every Franciscanhouse would always have its Bonaventura,but the identity of 'Bonaventura’ at any time

5As Einsenstein has pointed outF’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,the term “man of let ~erq’ I){’ fort> the advent of prlntlng [’art 1>t)ecause copyists had, after all, rre; er paid thosr who~r workst h e y rop]ed, partly becauqe new hooks were a ~mall port Ion oftht~ earl} t)(x)k trade, an{i partl~ because dl~l~rons of Ilterarv lahor remained blurred, the author retained a quasi-ameteur st a-tus until the elght[wnth c e n t u r y

~:isenstein, op cit., pp 15;1- 154‘ Boorstin, op. cit., p 530

could only be defined by considerable re-search.

All this, as we have seen, gave a tantaliz-ing ambiguity to the name by which a medie-val manuscript book might be known. A man-uscript volume of sermons identified asSermones Bonaventurae might be so calledfor any one of a dozen reasons . . . . Was theoriginal author the famous .Saint Bonaven -tura of Fidanza? Or was there another authorcalled Bonaventura ? Or was it copies bysomeone of that name? Or by someone in amonastery of that name? Or preached bysome Bonaventura, even though not com-posed by him. Or had the volume once beenowned by a Friar Bonaventura, or by a mon-astery called Bonaventury? Or was this a col-lection of sermons by different preachers, ofwhich the first was a Bonaventura? or werethese simply in honor of Saint Bonaventura?

The printing press not only gave rise to theconcept of the individual author, it also af-fected how creative people were motitated.With the enhanced economic value of printedbooks fostered by the new technology, crea-tors encountered conflict concerning whetherthey were—or should be— ‘serving the musesor mechanic printers, [or were] engaged in a‘divine art’ or a ‘mercenary metier. ’ "7 Just asthe printing press affected the self-image andmotivations of 17th and 18th century creators,so too are the new information technologiesalready changing contemporary creators’ atti-tudes and perceptions about themselves andtheir work.

In many fields, the convergence of audio,video, and computer technologies now allowsthe creator to express his/her art in multiplemodes and media, changing the way he/she de-fines his role. Basing her art on a variety oftechnologies, the entertainer, Laurie Anderson,for example, defines herself at one and the sametime as a musician, a composer, a video maker,a writer, an inventor, and a pop stars The sametechnologies turn audio engineers into stage

F:isenstein, op. cit., p. 5~1.‘tJ. IIoberman, “The New .Avant-(; arde I’rorn Anderson to

H?rne,” Dial hfagaine, ,Jul~’ 1985, pp. 5-6.

1 3 0 ● Intellectual Property Rights in an Age of Electronics and Informat ion

performers, sound-mixers into composers andperformers on records,’ and computer scien-tists into film artists. Many artists are alsosoftware designers, many composers are tech-nicians, and many biologists are informationscientists. As technology becomes more inte-gral to the arts, artists have to become techni-cians before they can create.

Beyond changing perceptions of their roles,the new technologies may actually affect howcreators think, how they become aware of whothey are and what they do, and how they de-fine their relationship to the rest of the world.After analyzing people’s experiences with thecomputer, Sherry Turkle observes:10

The computer becomes part of everydaylife. It is a constructive as well as a projec-tive medium. When you create in a pro-grammed world, you work in it, you experi-ment in it, you live in it. The computer’schameleon like quality, the fact that when youprogram it, it becomes your creature, makesit an ideal medium for the construction of awide variety of private worlds and, throughthem, for self-exploration. Computers aremore than screens onto which personality isprojected. They have already become a partof how a new generation is growing up.

By firing creators’ imaginations, the newtechnologies are also widening the scope ofcreative activity itself and opening new oppor-tunities. The interactive fiction writer, AnnByrd-Platt, for example, was discouraged frombecoming a novelist, believing she could notdistinguish herself from “the hundreds andhundreds of writers just like her.’’” She foundthat an understanding of computers and tech-nology gave her new areas in which to exerciseher creativity. In writing interactive fiction—an art form impossible without computers—

—‘.See for example Ken Emerson, “David Byrne: Thinking

Man’s Rock Star, ” 7’he New }’ork ~“mes Magazine, May 5, 1985,

pp. ~~-~~. In creating “once in a I,ifet,ime ” teams of technicaland artistic indi~’iduals create together, working out their senseof structure, relying on intuition, improvisation, and technol-OW’. Thus the creator maJ’ be both musician and engineer.

Sherrv Turkel, The Second Se~f: Computers and the ]lu-mtm Spi~it (New York: Simon & Schuster, 1984), p. 15.

‘Ann Byrd- Platt, OTA Workshop on the Impact of Tech-nology on the Creative Environment, Apr. 24, 1985.

she succeeded in finding a niche for herself andher creativity.

Technology, may also change how societyperceives creators and their work. For exam-ple, while most people have always recognizedthat the stage director imparts a unique con-tribution to the performance of a play or mu-sical, the director was unable to claim ‘author-ship’ of his work, because his contributioncould not be written down or expressed unam-biguously. Today, however, video-recordingtechnology, can ‘fix’ the unique way in whichactors, props, motion, and scenery are arrayedin each director’s interpretation of a work. Bythus establishing his authorship, the stage di-rector has greater credence in his claim to copy-right. 12

Technology has also affected the motiva-tions of artists and scientists. Changes in atti-tude seem to be most pronounced in those areaswhere the new technologies have helped to en-hance the market value of creative and scien-tific works. Again, as in the age of the print-ing press, many creators are wrestling withchoices about whether to focus on intrinsic ormonetary rewards.

Traditionally, artists have been inspired tocreate and scientists driven to invent and dis-cover for reasons that can be clearly set apartfrom monetary rewards. The graphic artist Mil-ton Glaser succinctly characterized these kindsof motivations when he said:

I would suspect that a good many peoplewould say that the basic reason they do theirwork is that it pleases them, because they loveit, because they are obsessed by it, and be-cause they don’t feel that they have anychoice. 13

Underlying motivations and the sense of pur-pose for creators remains strong. Explains The-odore Bikel:

The arts are about risk taking. More oftenthan not [they are] about endangerment. Youendanger your soul each time you put some

————‘James Hammerstein, OTA Workshop on the Impact of

Technology on the Creative Environment, Apr. 24, 1985.

‘Milton Glaser, OTA Workshop on the Impact of Technol-ogy on the Creative Environment, Apr. 24, 1985.


pen to paper each time you try to interpretsomebody else’s words. We are about poetry-.We are about the gossamer fabric of hopes,of dreams. We finally in the last analysis hopethat what we do create will furnish the na-tion laughter, the nation’s tears, certainlythe nation’s memory of what today. was likeand what yesterday was like. 14

Scientists, too, have been fueled chiefly bynonmonetary concerns. One major force driv-ing them to pursue their work has been the de-sire to be the first to solve a problem, to bethe discoverer, or the inventor. It was, in fact,the originality of a finding that served as “tes-timony that one had successfully lived up tothe most exacting requirements of one’s roleas a scientist."15 This desire to be first gaverise to numerous battles over originality in thescientific community during the 18th and 19thcenturies. 16

Equally important has been the scientist’sdesire to contribute to the advancement ofknowledge in his field. Traditionally, once ascientist made an original contribution, he didnot try to maintain the right of exclusive ac-cess to it. Rather, scientists’ discoveries andinventions became part of the public domainavailable for all to use and build on.17

Benjamin Franklin exemplified this ethic.Explaining why he had turned down an offerfrom the Governor of Pennsylvania to patentthe Franklin stove. he wrote to a friend:

I declined from a Principle which has weighedwith me on such occasions, vis. That as weenjoy great Advantages from the Inventionof others, we should be glad of an opportu-nity to serve others by an invention of ours,and this we should do freely and generously.

Nor did scientists traditionally seek to mar-ket their discoveries. Louis Pasteur’s attitude

—‘Theodore Bike], OTA W’orkshop on the Impact of Technol-

OW’ on the (’reati\e ~~n~’ironment, Apr. 24, 1985.Robert K, Merton, The .%ciolo~ of Science: Theoretical

and Empirica] ln~’(].~tig[]ticlz?.s [Chicago, 11.: The Uni~.ersit~ of(’hicago I)r-ess, 1973)

‘ Ibid,I bid.

“As quoted i n Ilruce M’illis Ilugbeel (;ene.si.s of ,4 merican

l’atent and (’op~’right l,a w (M’ashington. 1)(’, I)ublic A f f a i r sI)ress, 19761, p. 72.

was typical. Although he himself estimatedthat the use of his method would save 100 mil-lion francs per year, he was not interested inprofiting financially from his discoveries. Ashe explained to Napoleon III:

In France scientists would consider theylowered themselves by doing s0.19

While many of these traditional motives arestill in force, recent technological developmentshave noticeably affected how scientists and cre-ators feel about their work, the reasons theypursue it, and the rewards they expect to gainfrom it. In particular, the enhanced commer-cial value attributed to many information prod-ucts and services has brought about both con-flict and change.

Changing motivations are probably the great-est in fields of science where the commerciali-zation of research results has proved highlyprofitable. Industry representatives are nowactively courting the traditional scholar-scien-tist. As one professor of biological science atHarvard University described it,

At this point, it’s mind boggling. I’m courtedevery day. Yesterday, some guy offered me lit-erally millions of dollars to go direct a researchoutfit on the west coast . . . He said any price.’”

Such offers have placed many scholars inconflict about their roles. While some respondfavorably to these developments–even to thepoint of creating their own firms to exploittheir discoveries for profits—others have op-posed them as unsuitable for academic science.Trying to sort out what is appropriate behaviorfor academics and academia, a number of ma-jor universities have themselves begun work-ing together to develop policy guidelines foruniversity-industry relationships. z}

‘As quoted in J.D. Bernal, Science and lndustry in theNineteenth C~nt~r (Ixmdon: Routeledge and Kegan Paul, 1953),p. 86.

‘ ‘As quoted in l~enry Etzkowitz, ‘‘kjntrepreneurial Scien-tists and Entrepreneurial IJniversities in American Academic.Science, ” kfiner~w vol. XXI, Nos. 23, summerautumn 1985, p. 199.

“ “Academe and Industry Debate Partnership, ” Science.vol. 219, No. 4481, January 1983, pp. 150-151, See also U.S.Congress, Office of Technology Assessment, Information Tech-nolo~’ Research and De~’elopment: Critical Trends and issues,OTA-CIT-268 (Washington, DC: U.S. Govemrnent Printing Of-fice, February 1985),


Creators in the arts and entertainment facesimilar choices. With the development of amass media marketplace, these fields have be-come big businesses where intellectual worksare often treated purely as economic commodi-ties. The development and proliferation of newchannels of distribution has promoted fiercecompetition for entertainent products, whichhas greatly increased its commerical value.22

Under these circumstances, authors, artists,musicians and other creators may be faced withdifficult choices about whether to develop theirart in response to the market or to their owninternal forces. 23 As Milton Glaser describedthis dilemma:

If you begin with the idea that the moviebusiness is a business that has an artistic ele-

22Tom Whiteside, “onward and Upward With the Arts,”Cable I, II, and I I I [three-part article seriesl, The New l’orker,May 1985,

‘ ‘Just such a phenomenon occurred, as has already beennoted, with the growth of the book market after the develop-ment and widespread deployment of the printing press. Suchan occurrence happened again in late 19th century America,when the book market was expanded to meet the needs of anincreasingly literate population. To profit from this literate, al-though generally less educated audience, it was common forpublishers, for example, to press authors to lower their artisticstandard for the sake of increasing sales, See for example, LewisA. Coser, Charles Kadushin, and Walter Powell, Books: 7’he(’u}ture and Commerce of Publishing [New York: Basic Books,Inc, 1982), pp. 226-227.

ment to it, , . . [then you need to recognizethat] the control of the movie business essen-tially is in the hand of the people who thinkof it as a business, invest the money, and arein it to make money and do.24

The choice a creator makes depends on hisfundamental motives and on his relationshipto others within the creative environment. Forsoftware developer David McCune, for exam-ple, there really is no choice. As he says:

I'm going to program computers no mat-ter what. 1‘m concerned that I make enoughmoney to pay the rent and buy myself a com-puter, basically. Other than that I don’t reallycare much.25

Some artists are supported by governmentgrants or endowments from private founda-tions. Few are successful enough to attain boththe desired economic independence and artis-tic freedom. Most, however, choose to workwithin the existing system and, when they can,to finds ways to express their creativity. Ineffect, they work in both worlds, the world ofart and the world of business.

—24Milton Glaser, OTA Workshop on the Impact of Technol-

ogy on the Creative Environment, Apr. 24, 1985.25David McCune, OTA Workshop on the Impact of Technol-

ogy on the Creative Environment, Apr. 24, 1985.

TOOLS FOR CREATIVITYMachine tools enhanced man’s ability to per-

form physical tasks. Similarly, the new infor-mation technology will enhance his ability tocarry out intellectual pursuits. 26

Because these technologies are primarily in-tellectual tools, they are likely to be usedextensively in science, scholarship, and thecreative and performing arts. In these areas,technologies may:

.26For a discussion of how information and communication

technology can extend man’s creative process of knowing, seeMarshall McLuhan, Understanding Media: The Extensions ofMan (New York: Signet, 1964). For a more recent and specula-tive discussion about the impact of the computer on the mind,see Robert Jastrow, The Enchanted Loom: Mind in the Uni-verse (New York: Simon & Schuster, 1981).

1. expand the boundaries of the fields as weknow them,

2. change the ways in which creators and in-ventors carry our their work, and

3. allow more people to participate in thecreative process and to share the productsof scholarly and scientific research.

Expanding Boundaries

History offers many instances in which newtechnological tools have advanced the bound-aries of science and scholarship, also expandedthe domains of art and entertainment. The in-vention of the clock and the lens, for example,greatly facilitated the development of the

Ch. 5—Impact of Technology on the Creative Environment . 133

sciences of mechanics and astronomy.27 Simi-larly, technologies expanded the domains ofart and communication. With the substitutionof oil paint for egg tempera, the course of paint-ing was dramatically changed, giving rise tothe Renaissance style of art. ” The developmentof the camera, too, brought entirely new formsof art and entertainment. As the art critic JohnBerger notes in his analysis of the impact ofthe camera on our perception of the visual arts:

The art oft he past no longer exists as it oncedid. Its authority is lost. In its place there isa language of images. What matters now iswho uses this language and for what pur-poses .’”

Like their earlier counterparts, the new com-munication technologies are exerting a wide-ranging influence on the arts and sciences andon the development of other information prod-ucts and services. They offer new tools. By tak-ing advantage of computers’ high-speed data-processing abilities, computer graphics canrepresent many types of information and art,from mathematical formulae to cartoons. Com-puters facilitate the manipulation and re-arrangement of anything that can be expressedin computer-readable form—images, data files,text. The new techniques for inexpensive re-production–xerography, audio and video dup-lication, computer copying–also allow crea-tors and other users to gain access more easilyto a much broader range of intellectual prop-erties than ever before,

These technologies have varying effects onthe actual substance of creation. For some peo-ple, new technological capabilities enhance thecreative process by making it faster, cheaper,or easier to produce a work. For others, theyactually change the boundaries of their art.

27John P. McKelvey, “Science and Technology: The Drivenand the Driver, ” Technology Review, January 1985, p. 42. AsMcKelvey points out, the casual relationship works both ways,with pure science often given rise to new technologies.

‘“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(London: Penguin Books, 1972), p. 21, as cited in Edward M’.Plowman and L. Clark Hamilton, Cop~’right: Intellectual Prop-ert~’ in the Information Age (Imndon: Routledge & Kegan Paul,1980).

A growing number of authors, for example,write on word processors because the new de-vices make it easier to edit, store, and trans-mit their documents. For these authors, wordprocessing has not produced a new form of lit-erary expression; it has simply facilitated themechanics of creating literary works. Similarly,film makers use sophisticated and intelligenttools to capture or create images and soundswith greater ease and dazzling speed.

Beyond facilitating the creative process,some technological advances have actuallyopened new channels for the expression ofcreativity, thereby expanding the very natureof science and art, Using these new computer-ized channels to generate graphics and synthe-size music, artists, film makers, and composersare creating new kinds of images. These newpictures and sounds are born of equations, al-gorithims, and mathematical models. Usingcomputer programs and mathematical valuesto represent color, shape curvatures, shading,and even randomness, teams of engineers, ar-tists, and film makers “produce extraordinar-ily complex and lifelike graphic simulationsthat rival and sometimes exceed those bornof traditional animation."30 Whether used to“draw” a seaside landscape (see box 5-l), togenerate special effects, or make motion pic-tures, the power for creation lies in the soft-ware and the imagination of the team. For cre-ators at Lucasfilms, today’s tools representonly the beginning of what will later be possi-ble: In the future, “the computer will allowHollywood to tell stories that could not havebeen told any other way.’’”

Like their counterparts in the arts, scientistsuse increasingly powerful computers to carryout more and more complex calculations, andto represent and to simulate experiments, proc-esses, and phenomena. The use of supercom-puters and color imaging techniques for nu-merical computation in fields such as physicsenables scientists to solve increasingly com-

“’Stuart Gannes, “1.ights, Cameras Computers. ” DISCOlrER,August 1984, pp. 76-79,

“I+ld Catmull, Head of the Computer Development Group,Lucasfilms, as quoted by Stuart Gannes, “Lights, Cameras.,, 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 work-ing in the Computer Graphics Project at Lucasfilm. Under the direction of Robert Cook, the land-scape was defined using patches, polygons, fractals, particle systems and a variety of proceduralmodels. Each of the elements of the landscape were rendered separately and later composite. RobCook designed the picture and did the texturing and shading, including the road, hills, fence, rain-bow, 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 drawntexture for the hills and wrote the software by combining the elements. Bill Reeves defined thegrass 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 plantsusing a procedural model. The visible surface software was written by Loren Carpenter. RobertCook wrote the antialiasing software, a program to prevent unauthorized access.

The picture was rendered using an Ikonas graphics processor and frame buffers, and was scannedon FIRE 240, courtesy of MacDonald Dettwiler & Associates Ltd. The resolution is 4K x 4K, 24bits/pixel.

plex problems—problems with so many vari-ables that the true visualization requires a nu-merical solution. For example, modeling gasflowing in black holes, where the actual mani-festations of the gas dynamics around themare too small to be observed, requires numeri-cal experiments of a new order of magnitude.Explains Larry Smarr:

A typical experiment makes use of at least10,000 time steps. Thus, the finite-differencesolution is a set of five variables on a spacetime lattice of 250 million points, that is, thesolution of 1.25 billion numbers of nonlinearpartial differential equations.32

32Larry L. Smarr, “An Approach to Complexity: NumericalComputations, ” Science, vol. 228, No. 4698, Apr. 26, 1985, pp.403-405.

Ch. 5—Impact of Technology on the Creative Environment • 135

Participants at OTA workshops convenedfor this study,” described the multiple waysin which the new technologies are expandingthe boundaries of science, music, art, dance,photography, film, and television:

In musical composition and performance,new sounds and arrangements result fromcomputer synthesizers, digital sound ana-lyzers, and electronic editors. Although mu-sical notation can begin on paper, it may alsobe “drawn” electronically. The technologynot only provides tools to generate sounds,but also the means to store and manipulatethem as well. Thus composition and perform-ance can result from revision, expansion, orrecombination of unending variety of chords,melodies, rhythms, or pitch.

A dance sequence blends the performanceof a live dancer with that of computer-gener-ated images and information. Intricate andcomplex sequences of movement and danceare developed by the choreographer and per-formed by the computer. While early comput-er representations of dance were rudimentaryrepresentations, computer images are nowessential elements of the performance itself.In some instances, the computer-generateddance sets out new steps, followed in turn bythe live dancer. For some choreographers anddancers, the boundaries between technologyand dance cross in the generation of new artforms. (See box 5-2. )

The new technologies not only affect per-formance in dance directly, as adjunct artforms; they also provide new ways to perma-nently record dance. In turn, once stored,these computer records not only becomechoreographical records, when broken downinto their elements, they can also becomesources for new steps and sequences.

Technological changes in cameras, film,lighting equipment, laser separators, printpublishing, and computer processing of elec-tronic images are all affecting photography.

Computing power display technologies en-hance capacity that they expand science intonew horizons. (See box 5-3. ) This expandedcapacity allows for new ways of visualizing

and analyzing physical phenomena such asthe behavior of a molecule or the evolutionof a galaxy.

The power of the new technologies is notlimited to science and the arts, it cuts acrossvirtually all information-related fields. New in-formation technologies have expanded the va-riety, scope, and sophistication of informationproducts and services. Described by some ob-servers as being in the very process of ‘‘self-creation," 34 the information industry—fromdatabase businesses, software and hardwareproviders, publishers, cable television, infor-mation analysis centers and clearinghouses—continues to grow. In the U.S. software indus-try alone, there are an estimated 1,200 com-panies and thousands of individual free-lancerscreating and producing software and provid-ing services worth $40 billion annually.

The new technologies can both enhance ex-isting information products and services andgenerate new ones. Figure 5- I lays out the mul-tidimensional and multifaceted technologicalcapabilities that play a role in developing in-formation products and services to meet a widerange of information-related functions. At thesame time, the technologies enhance the valueof information products and services by mak-ing them more accurate, timely, and accessible.

New Ways of Proceeding

The development and use of new tools alsoinfluences the way people perform creativeactivities. Historically we can see, for exam-ple, that the technology of mass printing andpublishing changed the process of conductingscientific research and scholarship by impos-ing precision and standards for publication.Books were reviewed, examined, and markedup in ways they had never been before. Forthe first time, images could be printed withtext. A system for organizing books was de-veloped; titles were systematically arrangedwith bibliographies compiled, making it eas-

“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.


Box 5-2.-Dance and Computer Technology

“And who can tell the dancer from the dance?”

–William Bulter YeatsComputer 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 com-bined with live action film or video as in Twyla Tharpe’s “Catherine Wheel,” a co-production be-tween Dance in America and the British Broadcasting Corp.

ier to use the growing volume of written works.These changes, in turn, facilitated the devel-opment of the scientific method.35

Printing and the widespread distribution ofbooks also fostered new relationships amongscientists, artists, intellectuals, and their geo-graphically distant counterparts. As Eisen-stein has pointed out:

The fact that identical images, maps, anddiagrams could be viewed simultaneously by

35Eisenstein, op. cit., pp. 80-111.

scattered readers constituted a kind of com-munications revolution itself.36

Just as technology affects the tools used bycreators and enhances and expands the crea-tive process, so too it will lead to new waysof operating. With computers’ increased capac-ity to store, retrieve, and manipulate informa-tion and images, the process of creativity andresearch is becoming more interactive. Twophenomena illustrate this: electronic snippingand pasting and computer networking.

“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

Photo credit: D. Hoffman and J.T. Hoffman. © 1985

Minimal surfaces are mathematical idealizations of membranes which are stretched in such away as to attempt to make their surface area as small as possible. They occur as soap films, asinterfaces 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 andWilliam H. Meeks III, then at Rice University, were able to prove the existence of a new minimalsurface, 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 por-tions of it, they were able to discern that the surface was highly symmetric. According to DavidHoffman, “This provided qualitative information and insight which led to a new general theoryand the construction of infinitely many examples.” Moreover, he notes, “The ability to process andcondense 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.


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

Description & synthesis Logical access

Microcomputers

CAD/CAM

Synthesizers

Cataloging utilities

/

Circulation systems

CatalogsAutomatic indexing Online retrieval systems

Automatic synopsis/

Database management lnstru-

Computer. generation systems mentation

‘aidedtranslation

Graphics systems

Managementinformation

systems

Computers

Decisionand terminals / Telephone lines support systems

SatellitesCable networks \ Knowledge bases

Word processors

Photocomposition Microwave”Local area Microcomputers

ComputersTelevision sets

Printers

Photocopiers

Printingpresses

Microform readers/printers Compact disk\

/ Facsimile terminals Holographs\

Physical transformation Storage & preservation

SOURCE King Research, Inc., July 1985

Electronic Snipping and Pasting

Even when done with scissors and paste,snipping and pasting consists of a process ofstoring, retrieving, and manipulating informa-tion. The computer, with its unique capacityto perform these tasks, is the ultimate editingtool. With this technology readily available,the creator is now as prone to re-create as tocreate in the first place.

Computer and video technologies are hav-ing such an effect on film editing. With toolssuch as EditDroid, developed by Lucasfilms,the arduous task of editing thousands of feetof film is simplified by electronic snipping andpasting.

37 By computerizing the editing Proc-

— . — .“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-self. A typical finished feature film consits of 10,000 feet of film,on six reels, the result of as many as 2,000 splices from the origi-nal footage. See Gannes, op. cit.

03

Decision support-0 systemszw CAD/CAM—.C-Iw Graphics—

ess, a film artist can rearrange footage in thesame way a writer rearranges words on hisword processor: inserting and deleting imagesframe by frame; taking whole sequences fromone place and shifting them to another; andscrolling through sequences again and again.All this is done in a matter of seconds.38 Asin creating texts or developing on-line data-bases and information services, films can alsobe edited, merged, and reformed. In the samefashion, old films, stored tape footage, andother archival material can all serve as the ba-sis for new derivative products and creativeworks.

Electronic snipping and pasting has also al-tered the world of the still image photographer.Using laser and computer technologies to scanoriginal photographs and convert them into

38Ibid,

Ch. 5 Impact of Technology on the Creative Environment ● 139

digital data, one can manipulate the ‘no-longerphotographic’ image in very sophisticatedways.39 Color, texture, figures, and so on canbe varied slightly or totally. (See box 5-4, “NOWyou see them, now you don’t. The same tech-nologies can also transmit photographs elec-tronically to printers in remote locations.

These capabilities can alter both the way aphotographer works and his control over hiswork. Before digitized photography, for exam-ple, the photographer could control his imagesby controlling the film negatives. Today, how-ever, the commerical photographer must ne-gotiate in advance, in exact detail, how the im-age will be used, for what length of time, andunder what circumstances. Explains BillWeems: “The human relationships of the wholeindustry have changed dramatically now. . . .You have a whole new world to deal with here.Images are not only stored and retrieved, butare digitized and re-created.”40 To work outthese relationships, additional time must bespent dealing with administrative and trans-action issues. And the photographer wondersif it is only a matter of time before it will beliterally impossible to track all of the uses ofone’s images.

The production of music and sound is equallyamenable to electronic snipping and pasting.Using the ability to store recorded sound dig-itally and gain increased digital control of thatsound, the musician can mix and match notonly sounds, but also rhythms and pitch. Ac-cording to composer Michael Kowalski, thesenew tools allow for:

. . . unprecedented access to reproducing,copying and editing sound— an ability to taketiny snippets of sound, anywhere from a twenty-thousandth of a second of a sound to the wholepiece of music, and manipulate it to yourheart’s content.”

These technological advances have the po-tential to damage creators’ interests as well.— — —

‘Steward Brand, Kevin Kelly, and Jay Kinney. “DigitalRetouching,” Whole Earth Review, No. 47, July 1985, pp. 42-47.

‘ Hill W’eems, OTA Workshop on the Impact of Technologyon the Creative E:n\’ironment, Apr. 24, 1985,

4’ Michael Kowalski, OTA W’orkshop on Technologies for In-formation Creation, Dec. 6, 1984.

The same images and sounds that the artist,photographer, or musician has stored to use,manipulate, revise, and reproduce can also bemanipulated, revised, copied, and used in amultitude of ways by others, with or withoutpermission. Some creators worry that a “cav-alier attitude will develop toward taking what-ever you want and doing whatever you wantwith it. "42 This attitude has already surfacedwithin the artistic community itself, as wellas in the worlds of advertising and publish-ing.” Although many of these innovative toolsfor cutting and pasting are still relatively ex-pensive and unavailable, they may be more ac-cessible in the future. With wider deploymentof such techniques, artists, photographers, andmusicians may find it increasingly difficult totrack or trace the uses of their work. NotesJoyce Hakansson:

Now, talent, creativity, works of art are alsoin an intangible fashion being transmittedand we are not aware of the fact that we arestealing; that we are, in fact, impinging. Weare encroaching on somebody’s rights. Thathas to be transmitted. The new technologyis now putting things in a new format and wehave to be taught to look at it in a new way.44

Thus one question for the creative commu-nity is: How do you proceed?

Computer Networking

Computer networking makes it possible touse distant computing power to analyze dataor generate new images; to consult with one’scolleagues and jointly write papers; and to ex-change ideas or reports. However, such shiftsin the way information and knowledge are cre-. — —

“Ibid.“Interview with Lauretta Jones and Bonnie Sullivan,

graphic artists in New York City, March 1985, For example,Jones worried about continued reuse of her images, done easilywithout her permission, once her client has a copy of her disk,on which the image was fixed. Sullivan found that using a verysophisticated computer graphics system that required that shestore her images on hard disk, placed her image files in a com-puter system in which she had no control. Finding that otherusers had access to her files without her knowledge or acquies-cence, Sullivan chose not to work on the system until users couldagree to control and respect controlled access to one another’swork.

44Jovce Hakansson, OTA Workshop on Technology and theCreative Environment, Apr. 24, 1985.


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 ap-pears to be two separate photographs is actually only one. By digitizing the photograph of the fourhikers, it becomes possible to capture and then manipulate information about color, patterns, andtexture.With a Chromacom machine, a computer-driven device, it becomes a simple matter to copythe 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 ofthe changes closer and closer together. While requiring skill, the digitizing process appears to bealmost a routine operation.

Ch. 5

ated and distributed can have a tremendousimpact on the worlds of scholarship and crea-tivity. For just as the centralization of book-making and publishing led to the developmentof authorship and standardized texts, so mightelectronic networking speed the decentraliza-tion of information distribution, which, in turn,may to lead changes in the processes by whichresearch is conducted and art is created.

These changes are already becoming visiblein the academic world, where scientists areusing computers and telecommunication linksto conduct research and communicate with oneanother on networks supported by the Depart-ment of Defense (ARPANET), the NationalScience Foundation (NSFNet), and the Depart-ment of Energy (MFENET).45 The number ofnetworks and users are growing rapidly, notonly for scientific communities, but also inother academic disciplines.

BITNET, for example, used by scientistsand other scholars, provides linkages to morethan 175 institutions of research and highereducation in the United States and has directlinks to networks in Canada and Europe. Usersof BITNET and other networks send eachother messages, text files, and computer pro-grams. ” Those who use computer networkingdescribe it as an essential tool in their work.(See table 5-l.)

Some networks serve not only as mecha-nisms for exchange of data and information,they also provide the means to access distantcomputing power for conducting research. Onesuch example is the National Magnetic FusionEnergy Network (see figure 5-2), which con-nects a total of 4,000 users in 100 separate loca-

—‘“For a description of the operation and scope of those net-

works see, Dennis M. Jennings, I.awrence H. I.andweber, I raH. Fuchs, David ,J. Farber, and W. Richards Adrion, 1’Comput-er Networking for Scientists, Science, vol. 231, No. 4741, pp.943-950.

~, Files, for example, can include any type of machine-reada-ble document, such as memoranda, research proposals, manu-scripts, and letters. Just as networks transmit messages fromone computer to another, networks also transmit informationfrom one computer to another, in the form of data or computerprograms. See Ira H. Fuchs and Daniel J. Obserst, Report orI.Vetworking, OTA contractor report, June 1985.

—Impact of Technology on the Creative Environment “ 141

Table 5-1 .—Electronic Networking: Academicand Research Uses

“1 have found the network to be extremely useful thus farIn furthering my collaborative efforts with researchers in othercities The ability to transmit both raw and transformeddata and computer printouts of analyses rapidly between lo-cations greatly facilitated the collaborative efforts. It was pos-sible, indeed in cases easier than if we’d been in the samecity, to receive data, run an analysis, ship results, discussthe results, and plot next strategies for analysis with col-leagues in Boston and New York . Further, I am activelycollaborating in a research grant at --– with – -- –and we both have found the ability to send copies of meas-ures, initial data, and other forms rapidly to each other hasgreatly facilitated our work

., “We use BITNET for electronic mail dialogues withauthors in all stages of publishing business, Including theshipment of complete book manuscripts to our editorsTwo encyclopedia projects are underway at remote locations.We currently carry on conversations with the authors and edi-tors of the projects, but when they move into the copy-editingstage we plan to have a constant flow of articles, back andforth project editors to our in-house manuscript editors, andvice versa"

“Last summer,... I moved shop from – toI was able to ship the majority of files from both

the CS/SOM DEC-20 and the IBM 4341 quickly and effortless-l y t o ––– via BITNET “

... “I have used BITNET on several occasions to send datato and receive data from users at [several different universi-ties]. [It] has made the scientific interactions with research-ers at these institutions much easier than it would be withoutthe network. Unfortunately several institutions with which Iregularly communicate are not on the network.”

Other faculty members used the network while they wereon academic leave to advise graduate students who wereworking on their dissertations. “Using BITNET, question andanswer exchange or draft approval could take place withinthe same day. ”SOURCE BITNET Network lnformation Center. EDUCOM Princeton, NJ

tions, all of whom are involved in multi-insti-tutional research efforts.47

Electronic networks can also provide accessto vast electronic libraries. Although few re-searchers today report using their time on elec-tronic networks to search on-line bibliographicand content databases, more are likely to doso in the future. Eventually, researchers con-ceivably might acquire all they need—people,research tools, current data and information,

‘-Figures provided by the Office of Fusion Energy, U.S. De-partment of Energy, and the National Magnetic Fusion EnergyComputer Center, Lawrence Livermore National Laboratory,University of California.


Figure 5-2.— National Magnetic Fusion Energy Network

Hanford Engineering University ofDevelopment Laboratory Wisconsin

1 \ Argonne Grumman AerospaceUniversity of I \ Nat, LabWashington University of Illinois \ New York I

Lawrence BerkeleyLaboratory

University ofCaliforniaBerkeley

NMFECC

LAWRENCELIVERMORE ANATIONAL

LABORATORY/

University ofCalifornia

Los Angeles

TRW Inc /

UniversityColumbia University

\Cornell

University Massachusetts

\

Institute of/ / T e c h n o l o g y

PLASMAORATORY

Y

GENERALATOMIC

/ \NATIONAL

LABORATORYFusion Engineering

Science LOS ALAMOS-‘ University of Texas Auburn University

Applications SCIENTIFIC-Inc. LABORATORY

SOURCE National Magnetic Fusion Energy Computing Center, Lawrence Livermore

and published literature-via these electronicnetworks.

In such a fluid, interactive system, the pos-sibility of discovery or invention on-line, oncea vision of the future, is now a reality. As scien-tists and researchers work in this environment,intellectual property concerns are likely to ariseon such issues as determining originality andassigning patents. International transmissionof data, software, and other information mayfurther complicate this situation.

It should be noted, however, the informationdistributed on networks differs in one key wayfrom information published in technical andscientific journals. Works transmitted elec-tronically are likely to be still in progress, withmultiple authors, each at a different stage ofrevising the work. Eventually, scientific re-search may actually be published on such net-works instead of on paper. This practice wouldhave far-reaching consequences for scholar-

— Dual 56 ki lobi t satel l i te I inks

— Medium speed land IineNational Laboratory

ship. As Ithiel de Sola Pool has noted, “Theproliferation of texts in multiple forms, withno clear line between early drafts and finalprinted versions, will overwhelm any identifi-cation of what is the world’s literature. “48 Asin the days prior to the printing press, origi-nality will be hard to verify and authorshiphard to establish.

Who Can Participate

The new information and communicationtechnologies and networks may determine, inpart, who can participate in the creative proc-ess. These tools, like their earlier counterparts,can increase the need for some skills and re-duce the need for others. In the past, for ex-ample, the invention of letters and the devel-opment of written language increased the need

48Ithiel de Sola Pool Technologies of Freedom (Cambridge,MA, and London, England: The Belknap Press of HarvardUniversity, 1986), p. 212.

Ch.

for analytic skills and diminished the need forsome of the poetic skills that facilitated mem-orization. Similarly, the new information tech-nologies are bringing about changes in theskills required to participate in the creativeprocess, helping to determine in this way whocan take part in this process. The effect, how-ever, differs depending on the product. Al-though these tools decentralize and democra-tize some kinds of activities, they might beerecting barriers to entry for others.

Until recently, computer technology was theexclusive province of a technological elite.Use of computers required a special set of skillsand knowledge held by highly trained comput-er scientists and a select group of self-educatedcomputer hobbyists or hackers. Today, ad-vances in hardware design and operation, aswell as improvements in software design andapplications, have brought computer technol-ogy to the public as well as to artists and scho-lars. Now everyone can use new technologiesto expand and enhance their creative powersand vision.

Before the advent of computer synthesizersor software tools such as MacPaint, innate abil-ity and years of training were needed to playa musical instrument, compose a tune, or cre-ate an illustration for printing, While todaytools substitute for neither artistic talent nortraining, they do open new avenues for crea-tive expression and communication of the un-initiated. Using a personal computer, one cangenerate melodies, explore harmonies, and playan instrument, bypassing the study and prac-tice that separated the musician from the non-musician.49 Digital synthesizers, sound sys-tems, and recording systems can further ex-tend the reach of both amateurs and profes-sionals, and at increasingly lower costs.50 Nowa musician can create highly sophisticatedsound in his basement or in a studio, usingtools that were once available only in a univer-sity music research Laboratory.51

‘” hlusic in the (’omputer Age, Compute, January 1985,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-

formation (’reation, I)ec 6. 1984.

5—Impact of Technology on the Creative Environment c 143

The technologies that make such things pos-sible are now more widely available, as the caseof computer graphics illustrates. A few yearsago, these technologies were only available tocomputer scientists and engineers involvedwith computer-aided design, data analysis, andmathematical modeling. Now a wide range ofsoftware applications are readily available foruse in diverse fields. This software does notpose problems for novices since they providewhat has come to be called “a user-friendlyoperator-machine interface."52 In this way, ob-jects, ideas, and projects of study can be ex-pressed and represented graphically for busi-ness, education, and personal use. For example,using stylized, highly professional fonts andfigures that can be “called up” on a personalcomputer, one father, as figure 5-3 illustrates,composed a rather artistic letter to his son, offat camp.

Advances in hardware and software are alsoenhancing access to information itself, and toresources that can provide information. Elec-tronic networks such as the Source or Compu-Serve can put people in touch with vast infor-mation resources such as on-line informationservices, electronic databases, and new formsof information sources, such as communitybulletin boards.

Searching the literature with on-line comput-erized databases has, until recently, been doneprincipally by trained information specialists,such as librarians or technical specialists em-ployed by large companies. Such searches notonly required the use of highly specialized andarcane computer commands but also highlyspecialized knowledge of the databases them-selves. More accessible software designed toreach on-line databases makes it easier forusers of personal computers to retrieve infor-mation. Similarly, improvements in the designinterface of on-line systems themselves facili-tate search and location of information. Thesedevelopments enable medical professionals,market managers, or off-campus students toturn on their personal computers, connect with

“Andries \’an Dam, “Computer Software for Graphics,Scientific American, 101.251, September 1984, pp. 146-159,


SOURCE John Willis, Frederick, MD, 1985

Ch 5—Impact of Technology on the Creative Environment ● 145

on-line information providers, and obtain thematerials they need.53

Information can be acquired electronicallyin other ways as well. Public bulletin boardsallow individuals of all ages, interests, andlevels of expertise to access information. Manyhundreds of such bulletin boards are now oper-ating nationwide. These facilities provide a va-riety of information, from answers to a userquestions by other users, to digital informa-tion tidbits, opinions, articles, or even entiremagazines. Many also provide access to pub-lic domain soft ware. Use of the board requiresa phone line, a personal computer and diskdrive, a modem, and software that makes theconnection to the board. Most boards can bereached without charge by dialing a local phonenumber. 54 For many people, fellow bulletinboard users become more than a source of in-formation; they comprise a community.’;

These new opportunities for both technicaland nontechnical users have not diminished

‘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.

A t the OTA W“orkshop on Students Perceptions of the In-tellectual Property Rights Issue, May 20, 1985, one high schoolstudent explained that he had two sets of friends: 1 ) friendsfrom school that he might call on the phone and talk about home-work or other things; and 2) friends from the computer whosereal names might not be known but who are a constant sourceof conversation and recreation on-line. Notes this student: ‘‘ Mjrcomputer probably doesn ‘t stay off more than half an hour af-ter I get home. and before 1 go to bed. So it’s on for essen-tially 6 hours ‘‘

the need for training and education in variousfields. Despite potentially broad and instantlyavailable access to information, users still mustlearn to use these tools to their fullest capac-ity. Given this need, education and trainingmight best be used to help progress from de-veloping routine skills to adopting more inno-vative processes, focusing less on the trans-fer of facts, and more on understanding howto find and use information.56

As Ithiel de Sola Pool notes in Technologiesof Freedom:

The technologies used for self-expression,human intercourse, and recording of knowl-edge are in unprecedented flux. A panoply ofelectronic devices puts at everyone’s hand ca-pacities far beyond anything that the print-ing press could offer. Machines that think,that bring great libraries into anybody’sstudy, that allow discourse among person’sa half-world apart, are expanders of humanculture. They allow people to do anything thatcould be done with communication tools ofthe past, and many more things too.’”

“ For example, some companies provride corporate trainingin on-line searching to give the end user. such as the researchchemist, the skills that would enable him to use highly techni-cal on-line databases, such as Chemical Abstracts. I n learningto use such search systems, researchers find they understandmore fully both the possibilities and limitations of the data-base, and are able to use information professionals even moreeffecti~’ely for more complicated searches. See ‘‘on-I.ine I,iter-ature Searching Catches on Among Researchers, (’heroical &rEn@”neering News, May 7, 1984, pp. 29-31,

‘-Pool, op. cit., p. 226.

IMPACT OF TECHNOLOGY ON RESOURCES AND MATERIALSIn the process of creating, artists, scholars,

and others build on the works of the past anddraw on those of their contemporaries. Inpreliterate societies, the poets, storytellers, andartists drew their content from national lore.The epic poem served, in effect, as a culturaldatabase. In more recent times, the universityand other institutions of learning have houseda nation’s accumulated wisdom. Individualsgained access to this knowledge either throughtheir own education and training or through

informal or self-initiated activities. Modern in-formation technologies are greatly expandingour capacity to store, input, search, and dis-tribute any type of information that can be rep-resented in digital form.

Traditionally, the library has been a key re-pository for information resources. Today, theNation’s approximately 110,802 libraries sup-ported by universities, education, research, andbusiness institutions, and by local communi-


ties (see table 5-2), remain committed to orga-nizing knowledge, supporting continuing schol-arship and learning, and offering open-endedaccess to the universe of knowledge.58

This universe of information has grown ex-ponentially, doubling steadily every 15 yearsor so.” Scientific journals now number 50,000worldwide and 6,500 in the United States. Sim-ilarly, scientific books published in the UnitedStates now number 20,000 annually. ’()

Works in other fields have grown as dramat-ically as those in science. For example, between1900 and 1970, the libraries of major universi-ties in the United States doubled their bookholdings every 17 years.61 The Library of Con-gress, the “Nation’s Library,” has more than80 million items in its collection, including over20 million books and pamphlets, Its collectionscontinue to grow at the rate of 7,000 items aday.62

““see, for example, Scholarship. Research and .4cces.s to In-formation, A Statement from the Council on I.ibrary Resources,Washington DC, January 1985,

“.See King Research Inc., Impact of Information Technt~l-ogy’ on information Sertrice Pro\’iders and 7’heir (’lien te]e, OTAcontract report, July 1985,

“’Derek de Solla Price, Little Science, Big Science (NewYork: Columbia University Press, 1963).

“ Isabel Cil]iers, 4’ Impact of the Information SOciet} on theInformation Profession, ” Information Age, vol. 7, No. 2, April1985,“% Peter T. Rohrback, FIND: Automation at the l.ibrar.}’

of Congress, The First Twent?,-five )’ears and lle-~’ond (\$’ash-ington, 1)(’: The I.ibrary of Congress, 1985).

Table 5-2.— Libraries in the United States

Libraries N umber

P u b l i c ( C e n t r a l ) 8,768’Total public outlets = 70,956 which “Includes 6,056

branch Iibraries

A c a d e m i c 4,924

S c h o o l , p u b l i c 70,400School, private 14,300

Special . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,410Includes. Federal

LawMedicalReligiousCorporate

Total . . . . . . . . . . . . . . .. . . . 110,802SOURCE National Commission on Libraries and Information Science

As the amount and use of information in-creases in all sectors of society, other publicand private institutions have joined librariesto provide information and services.63 Thesenew institutions describe and synthesize in-formation, provide logical access to it, evalu-ate and analyze information, and store and pre-serve materials. (See figure 5-4. )

Dramatically affecting the ways informationis stored, organized, accessed, reprocessed, andused, the new technologies may have a radicalimpact on libraries and analogous institutions,They permit libraries and information provid-ers not only to enhance and expand the serv-ices they offer, but also to provide new serv-ices that were previously unavailable. 64 Usingelectronic networks and databases, location orsize are no longer the sole determinants of theservices that such institutions can provide. 65

Computer databases, themselves, now con-stitute a new kind of library. Members of thelegal profession, for example, now rely exten-sively on on-line databases such as WESTLAWand LEXIS (see figure 5-5). Users can accessmany different kinds of information rangingfrom bibliographic, full text, or abstracted ma-terials to compendiums of processes on physi-cal and chemical properties. These data maybe compiled separately or jointly by govern-ment agencies, academic institutions, libraries,information analysis centers, clearinghouses,publishers of books, journals, newspapers,newsletters, and business and industry.

Databases have also been created by indi-viduals, small groups, and communities ofusers with shared interests. Developed to meetparticular needs, they have often come to lifespontaneously and informally. Some are acces-

b’$ee 1;.~, Brinberg, “Information in the U.S.–An Indus-try Service Industry, ” Information and the Transformation of.%ciet~’, G.P, Sweeny (cd. ) (New York: Else\rier North- IlollandPublishing Co,, 1982),

“See for example, Patricia Battin, “The I;lectronic I.ibrary:A Vision for the Future, ” EDUCOM Bulletin, summer 1984.Ilattin describes the application of computer and communica-tion technologies to library processing activities over the past15 years. In addition see, Peter T, Rohrbach, FIND: A utoma-tion at the Library of Congress, The First Twent~’-fi\’e Yearsand Beyond (Washington, DC: I.ibrary of Congress, 1985).

“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

Editingunits

Translatingunits

Information

Speech Writing analysis centers

UnitsInformation brokers

Technical writingunits Financial

institutions

Engravers

PhotoprocessingLibraries

units

Publishersbook stores

Word processing units Museums

Printers DocumentRecording

companies

Film companies OCM unitsD a t a b a s e / Records

producers management units

/

Word processing unitsComputer centers

Book storesOCR units

Bibliographic

Clearinghouses utilities

Physical transformation Storage & preservation

SOURCE Kinq Research Inc June 1985

sible only to authorized individuals; others areopen to the public. Spurred by the desire toshare ideas or obtain needed information, userscreate these new information resources on elec-tronic bulletin boards or computer networks.66

Computer engineer and software designer LeeFelsenstein envisions thousands of such usercommunities providing information within andacross communities and serving as the com-———.——

“’Take the example of database teaching ideas brought to-gether by members of the math/science forum on CompuServe.The database came about when one participant in the forumasked others if they had examples of effective approaches toteaching physics. Almost immediately, several members of theforum responded. In turn, other suggestions and revisions orexpansions of the original set of ideas were shared. Thus theentries in this database increase just as they do on databaseswhich compile information about published literature or lawsand legal decisions. In this instance information is upgradedand revised, not by professional editors, librarians, or research-ers, but by users themselves.

cSu

53

munity memory" owned and shared by all par-ticipants. 67

Other kinds of technology-driven resourcesare also emerging. Laser-read optical storagesystems are being used to store and retrievevisual images, such as photographs, maps,drawings and paintings. At the SmithsonianNational Air and Space Museum, for example,videodisks derived from 1 million photographscurrently stored at the museum will be usedto capture the entire history of aviation.68 Tenarchival videodisks are planned, each contain-ing color and black-and-white photographs ofU.S. and foreign aircraft, as well as the ar-

“Interview, Apr. 15, 1985.‘“SW M. Woodbridge Williams, “ 100,000 Photos on a Plat-

ter,” Photo District News, July/August 1984.


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

Legal

IndustryPublic libraries

Not for profit

GovernmentAcademia

Information brokers

SOURCE Martha Williams (ed), lnformation Market lndicators, September 1985

tifacts and people associated with the devel-opment of aviation and space flight.69

The use of videodisk for this and similar proj-ects offers significant advantages over printtechnology. Once they have been stored onvideodisk and indexed by location on the disk,subject matter, and cross references, the pho-tographs become database entries—inter-active, and easily accessible. Searching be-comes a dialog between the searcher and thedatabase or electronic library. In this dialogthe searcher is not limited by old structuresof knowledge that have been built into tradi-tional library indexes; he can put togetherwhole new combinations of ideas.70

Electronic databases and libraries are power-ful tools and important resources because they

. - .- ..- .“It is interesting to note that most of the photographs are

in the public domain. Some, however, are still under copyrightand will require permission for use by the photographer. As aresearch project, the developers hope that such permission willbe given. But there are some members of the photography com-munity who view the “precedents” of this project with alarm.(Interview with Philip Leonian, New York City, November 1984.)

“’James Ducker, “Electronic Information–Impact of theDatabase, ” Futures, April 1985, vol. 17, No. 2, pp. 164-169.

provide greater access to more indices andsource material than single libraries contain.Like computer databases, videodisks make re-sources such as photographs more accessibleto more people. Similarly, digital libraries ofsoftware routines and tools, and optical disklibraries of motion pictures, offer these mate-rials to larger audiences. Eventually, librariesof audio data may be compiled for musical com-position.

In creating new ways to capture and handleinformation, the use of information technol-ogies may conflict with traditional methodsof scholarship, which require a clear record ofeach contribution and a published work thatis fixed. A computer-readable database, for ex-ample, can archive information in permanentform. But at the same time, this informationwill be in constant flux if it is continuously up-dated, revised, and deleted. These capabilitiesraise concerns for many in the research com-munity. As the Council on Library Resourcesrecently described the problem:

Scholarship is personal, but its results arenot private. To judge the validity of scholar-

Ch.

ly work, the records of past and present re-search must be open to scrutiny. This is theonly way the intellectual audit trail that isat the heart of discovery can be maintained.Limitecl or conditional access to bibliographicrecords (or information about information inany form) is of particular concern .71

A second problem arises out of the increasedcapacity to manipulate information in comput-er databases. Accuracy, reliability, and qual-ity are concerns for both author and publisherwhen they enter their works or products in adatabase. Although in some instances, theauthor may cooperate with the publisher in de-veloping abstracts of technical works or books,in others, the author does not play a role. In-stead, teams of editors and research librarians,or others who are developing or assembling thedatabase, may abstract the works. In all cases,authors and publishers want to assure that theabstracted or summarized work maintains itsintegrity.

The issue of information presentation, integ-rity, and documentation of sources is also be-coming a problem for artistic creators, suchas photographers and artists whose imagesmay become part of large electronic libraries.

—.——‘Scholarship, Research, and Access to Information, A

Statement from the Council on Library Resources, Washing-t`on, D.C. January 1985.

5— Impact of Technology on fhe Creative Environment ● 149

Although most creators want others to learnand benefit from their works, they also wantassurance that their personal contribution isrecognized and kept intact.

A final concern for all creators, be they scien-tists, scholars, artists, or individual learners,is one relating to cost and access. As more data-bases and electronic libraries develop, infor-mation that was once available in journals orother paper forms may now appear only in com-puter-processable forms. Now providing com-puter database services, academic and publiclibraries face new and increasing costs. Somehave been able to pass on costs of on-linesearching to users rather than subsidizingthose costs within the library budget. But,while grants and subsidies may fund the workof many scholars and scientists and, therefore,cover these additional costs, they will not fundothers, who will be disadvantaged. And thosewho can pay, cannot only tap into electronicresources, they can also take advantage of in-formation brokers and information on demandservices now available at additional cost.72

‘See for example, Da\rid Streitfeld, “Ask and The3’ shallRetrie\’e, ” The W’ashignton Post, Aug. 16, 1985, p. 1~5. A t}rpi-cal information on demand research project may cost a clientabout $300. Clients include businesses, foundations, hobb~’ists,and ini’enters, even writers who are ‘‘reasonably success-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

The use of technology in society involves in-on the distribution of works.73

dividuals working in relation to one another. New information technologies, too, can makeThe 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 andtionships. Again, the case of printing illus- publisher, film maker and producer, databasetrates how this might take place. Before pub- compiler and distributor, and inventor andlishers became established, authors depended manufacturer. Whether this change in the rela-on patrons to support their work. With the ad-vent of publishers, this dependency ended, tobe replaced by another. The author became de-

‘Benjamin Kaplan, An Unhurried View of Copyright {NewYork and London: Columbia University Press, 1967).


tionship occurs depends on how technologicaladvances affect the costs of new tools, the loca-tion of tools and resources, the restructuringof roles, and the control over the mechanismsfor distribution. The nature and scope of crea-tive endeavors also help to shape the relation-ships among creators and others. Where crea-tors must work in expensive, large-scale,centralized operations, they will be more in-terdependent.

As tools based on new technology becomecheaper, more powerful, more available, andeasier to use, a greater number of creators canuse them to explore and manipulate images,sounds, and information, The increasingly so-phisticated tools also enable the artist to pro-duce a more polished professional work. Mu-sicians, for example, who once depended totallyon recording studios, now may have equipmentin their basements for performing, recording,mixing, and producing musical works.74 Thistechnology can be used to produce tapes that,on the basis of quality, are indistinguishablefrom commercial studio tapes.

Such tools and technologies will also opennew avenues for distribution. As musician,Richard Green, explains:

. . . musicians can for very small amounts ofmoney do their recording project, print un-limited cassettes and distribute them, totallybypassing the larger aspects of the music bus-iness as we call it, Totally bypassing, amongother things. . . . copyright laws [and] govern-ment regulations. There are a lot of bad thingsabout this. The good point about this is thatit allows the individual to disseminate hiswork. 75

In film making, too, highly sophisticatedcameras and audio equipment are no longer theexclusive domain of major studios. Droppingin price, this equipment is more widely avail-able to a growing number of independent filmmakers. These creators find they are able towork cheaply and have the creative freedomthey say would not be possible in Hollywood,

‘Richard Green, OTA Workshop on the Impact of Technol-ogy on the Creative Environment, Apr. 24, 1985.

“’Ibid.

where the average film budget is $11 million.76

Just as audio technologies enable musiciansto create finished products, so too have thetools to create and edit images allowed the filmmaker to produce professional and appealingproducts, on modest budgets, with fundsscavenged from foundations, government, in-dividual investors, and even relatives. More-over, with their greater sophistication and ap-peal, and their more extensive distributionmechanisms, these films are being extendedbeyond traditional audiences on college cam-puses and in art houses. Public and cable tele-vision, as well as local multiplex theaters, arenow showing independent films alongside first-run Hollywood features.77

The world of publishing has similarly beenaffected by the new technologies. Using a state-of-the-art printing system, a publisher such asWestview Press can quickly produce books inlimited editions of between 100 to 2,000 copies.This kind of production run allows the pub-lisher to rapidly accommodate the needs of themarket and to produce highly specialized booksfor limited markets.78 The number of small, in-dependent publishing houses has increasedwhile the older, larger, commercial publishingindustry is becoming more centralized throughmergers and acquisitions. It is estimated thatas many as 200 new publishers start operationsevery month. In the last decade, the numberof publishing houses has quadrupled and nowstands at about 20,000.79

Whether creating and publishing computer-readable databases, monographs, or full man-uscripts, both authors and publishers can usecomputer-driven tools and resources. At thesame time, technology itself is changing the

“Kathleen Hulser, “Ten Cheap Movies and How They GotThat Way, ” American Film, May 1984, pp. 22-25, 53.

77See for example, Julie Salamon, “It’s Boomlet Time forMoviedom’s Little Guys, ” Wall Street Journal, Mar. 28, 1985.Notes Salamon, the number of such film makers is growing:the Association of Independent Video and Filmmakers hasgrown to more than 3,000 members from 700 in 1980.

‘“See for example, Lisa See, “Frederick Praeger: Portrait ofa Publisher, ” Publishers Weekly, June 14, 1985.

“see Marc Leepson, “The Book Business, Editorial Re-search Reports,” The Congressional Quarterly, Washington,DC, June 28, 1985.


relationship between the author, publisher, anduser of copyrighted works. Some observers seethis as a dramatic change, where products andservices can be tailored with increasing speci-ficity to meet the needs and requirements ofusers:

The user, in turn, becomes more than justa buyer of titles. Through his selective use ofthe databases, he signals to the publisher hisspecific interests, and through user-drivenpublishing he can become a publisher in hisown right. . . . In fact, one can say that thereis no true end product until the user tailorsthe data into his unique set of ideas, for exam-ple, his own published product.80

With an estimated 20 million printers nowavailable, xerography has “made everybodya printer, according to Paul A. Strassman,former Xerox Vice President.81 Each improve-ment in reprographic technology, such as im-age clarity, color reproduction, speed, and com-pilation, makes it more feasible for creatorsto publish and distribute their own work. Inparticular, where traditional modes of publish-ing and distribution are either not accessibleor financially impractical, this mechanism canmake it much easier to disseminate informa-tion and images. Thus, for example, one caneasily publish a newsletter for a special-interestgroup, a community association, or a groupof scholars. Moreover, the technology permitsmore people to share their work—be it a col-lection of poems, a book of recipes, or a seriesof drawings.

The development of electronic networks thattransmit text, numerical, or graphic images toprinters at remote locations can further expandauthors’ publishing and distribution capabili-ties. The result is that roles once held by sev-eral people are now all held by one person.Starting with a single copy of a letter or arti-cle composed at a computer and transmittedto readers at the other ends of the network,one person can become author, printer, pub-lisher, and distributor of a work.

*’Ilerbert R. 13rinberg, “The Brave New J$’orld of F;lectronicPublishing, ” Publishers it’eekl}’, No\. 23, 19/+4, pp. 3z-05

“’See Michael Kernan, “The Deans of Duplication, ” 7’heJt’zx+ington Post, .Aug, 21, 1985.

While an increasing number of computer-driven tools are dropping in cost, some will al-ways be prohibitively expensive for the indi-vidual artist, scientist, or inventor. Moreover,hand-held calculators or portable computer-aided design systems now exist that are morepowerful than the early mainframe computersystems that occupied whole rooms, certainclasses of artistic work, or scientific problemsdemand even more power and sophisticationthan even these systems provide. Thus, somecreators find that to do their work, they mustbe part of a well-equipped facility, such as acomputer graphics production studio. In otherinstances, the writers, programmers, and ar-tists who choose to work in a highly innova-tive and capital-intensive venture, such asvideotex, may need to join a corporate entityto work in that field. And the scientist whoseresearch requires access to a multimillion dol-lar supercomputing facility has to be affiliatedwith industry, government, or academic insti-tutions.82

Other factors may also limit use of new toolsand mechanisms of distribution. Taking fulladvantage of these technologies may requiretechnical expertise not normally held by authors,artists, or dancers. Thus, technology can re-quire the creator to interact with people withwhom he has never dealt with before.

The System of Incentives and Rewards

The granting of rewards requires that crea-tors and inventors be given a special statusin society. Historically, this did not happen un-til the time of the Renaissance. Before then,creativity was considered the prerogative ofGod. Because the Renaissance notion of crea-tivity deemed the work of any major poet, art-ist, or inventor as a product of a special crea-tive genius, which most mortals lacked, itbecame something to be rewarded. ”

“The capital costs of buying and maintaining a supercom-puter facility requires sponsorship by large institutions. Onceestablished an individual user could simply buy time in smallamounts still supporting only a fraction of the true costs of main-taining the facility.

“’Pacey, op. cit, p. 87.


The technology of printing fostered this no-tion of the individual, as creator. With the in-vention of the printing press it was possiblefor a single author to produce a work, no longerdependent on communal efforts. Moreover,conventions such as standardized texts anda title page were developed, making individ-ual attribution practical. Today, the new in-formation technologies are affecting society’sattitudes about creativity, regarding both howit treats the creative genius and how it assignsrewards.

The intellectual property system can be con-ceived of as a societal device to foster creativ-ity. To be most effective, however, it requiresthat an author’s particular contribution andwork can be clearly identified. The new tech-nologies are undermining this assumption.They foster multiple authorship and intangi-ble works. Thus, instead of a situation in whicha single author, artist or scientist creates onesingle product, such as a book or mechanicaldevice, now many authors work jointly andtheir individual contributions are often diffi-cult to distinguish from one another. Moreover,to the extent that they are working in and onelectronic media, their materials may be con-stantly changing.

Examples of multiple authorship are foundin the world of arts and entertainment, as wellas in research and development. Whereas tradi-tionally, a song was the work of a composerand a lyricist, whose particular contributionwas easily discerned and rewarded by the in-tellectual property system, today the creationof a song, the production of a film, the devel-opment of computer software or an electronicdatabase, and the design of a new hardwaresystem, may involve many different creativeinputs, connected in a myriad of ways. Creat-ing a seaside landscape with computer-gener-ated imagery, for example, may entail one art-ist creating the atmosphere, another texture,and others rocks and beaches. In the final exe-cution, a software program will “glue” it alltogether.

When designers, artists, musicians, and pro-grammers are parts of teams that receive jointremuneration as teams, individual authorship

may not be an issue. To avoid problems ofdividing rewards, some creative teams haveformed their own companies or economic units,jointly sharing their creative expertise, the de-velopment costs, and eventually, the profits.Many computer software efforts have beenbuilt by such creative entrepreneurial teams.

In other cases, teams of creators and scien-tists are salaried and supported by an institu-tion such as a software development company,an advertising agency, a hardware manufac-turer, or a university or a government labora-tory. In these circumstances, the creative con-tribution of the employed inventor or artist isoften treated as a work-for-hire. The work ofthe individuals in the team might be recognizedin the process of applying for an institutionalpatent or copyright. In scientific fields, tech-nical papers are commonly authored jointly .84

Although there are many independent writ-ers, artists, composers, and poets involved increative activities, most information productsand services are developed by employee work-ing teams who rarely receive financial rewardsin direct proportion to their particular contri-butions. 85 Attribution is normally to the sourceof publication, not to the writer. Profits flowfor the most part to the investors, not to thosewho found the data, organized the presenta-tion, or created an efficient expression.

Nevertheless, there are many creative effortsthat go unrewarded or unrecognized, and it isthese examples that free-lance creators oftencite when calling for changes in the present sys-tem. Some free-lance graphic artists and pho-tographers believe, for example, that as crea-tors, they should maintain control over theirimages even when their materials have been

“’Like creators employed by businesses, scientists are paidsalaries, but the relationship between this compensation andthe incentives to create intellectual property is weak. Gastonstudied the reward system in British and American science andaffirmed what has generally been believed: that scientists arerarely motivated by salary or other compensation. Rather, theyoperate more under nonpecuniary incentives such as distin-guished titles at universities, distinguished levels of member-ship professional associations, honors, prizes, and fellowships,editorships of journals, and citation in journals. See JerryGaston, The Reward System in British and American Science(New York: John Wiley & Sons, Inc., 1978).

“’see Christopher Bums and Patricia A. Martin, The Eco-nomics of Information, OTA contractor report, 1985.

Ch. 5—impact of Technology on the Creative Environment . 153

commissioned as works-for-hire. This attitudeis becoming more pronounced as creative ma-terials become easier to manipulate and reuse.”While creators want their works to be widelyseen and distributed, they also want adequatecompensation for derivative uses, which bringadditional profits to publishers. They are con-cerned, moreover, that the images attributedto them are, in fact, of their own creation.

The new information technologies can alsoaffect how society views the work of the crea-tor and the values it attributes to his work.The growing economic value of information inthe arts and entertainment industries fuel pub-lic perceptions of superstars, superbooks, com-puter millionaires and the like. In focus groupsessions conducted by Yankelovich, Skelly &

“See the Graphics Artists Guild and the American Societyof 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~’presented by Robin E3rickman, Graphic Artists Guild Member.

White for OTA, participants pointed out thatrock stars, movie actors, and information in-dustries were making a lot of money. They wereskeptical of the claim that such individuals orcompanies would be seriously affected by per-sonal copying. 87 And yet many book, film, andcomputer companies are small, high-risk, low-profit operations. Similarly, many free-lanceartists and performers barely make ends meet.

It should be noted that the intellectual prop-erty system is only one means by which soci-ety supports the creative environment. In ad-dition, there still exists public and privateprograms providing grants and patronage. Tothe extent that alternative mechanisms willaffect public policy choices about intellectualproperty rights, they are discussed in otherchapters of this report.

87Yankelovich, Skelly & White, Inc., Focus Group Sessionsin Philadelphia, PA, and Greenwich, CT, October 1984.

IMPLICATIONS FOR THE INTELLECTUALPROPERTY RIGHTS SYSTEM

As we have seen in this chapter as well asin previous ones, the intellectual property sys-tern governs the relationships among individ-uals involved in the creative environment. Itdetermines who are creators, what tools andresources are available to them, and how andunder that circumstances their work will bedistributed to the public.

Technology is affecting the creative environ-ment in a number of ways that are likely tohave implications for the intellectual propertysystem. These can be summarized under twomajor headings: 1) changing players in thecreative environment, and 2) the emergence ofnew opportunities.

Changing Players in the CreativeEnvironment

Traditionally, the intellectual property sys-tem was a simple one, involving only a fewplayers–the creator, publisher/distributor,

and user. New participants have come on thescene as new technologies have emerged. Thusin addition to the writer and artist, we nowhave the composer, photographer, and the filmmaker. In addition to the publisher, we nowhave the record company, the television pro-ducer, and the cable operator. And added tothe reader, we have the radio and record lis-tener, the television viewer, and the computeruser.

With the new information technologies, thenumber and variety of players have increasedmany fold. Moreover, now more than ever be-fore, technology is affecting the roles that eachplayer plays and his relationship to others inthe system. Today the user, whether he is deal-ing with audio, visual, or computer-generatedmaterials is not just a passive receiver. He canat the same time be a creator or a distributorof his own or others’ materials. In this sense,for example, the personal computer user whomake 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,acting as a distributor. And the university thathouses educators and researchers is increas-ingly claiming rights as the creator of theirworks.

Above all, these changing roles and relation-ships may affect the consensus on which sup-port for the system has traditionally rested.Many of the new players, not a party to theagreements of the past, may hold different val-ues about who should have access to what ma-terials and who should be provided rewards.One such newcomer on the scene is the com-puter hobbyist who finds the thrill of creatingsomething useful and successful more impor-tant than either owning the copyright or be-ing recognized as the author.88

Given the trend identified in this chaptertowards joint authorship and the increasinglyfluid creative process, controversies may alsoemerge among players about the distributionof rewards. Describing the culmination of thedevelopment of the Data General Eclipse MV/8000, Tracy Kidder depicts the dilemmasaround the distribution of rewards:

Long before it disbanded formally, theEclipse Group, in order to assist the companyin applying for patents on the new machine,had gathered and had tried to figure outwhich engineers had contributed to Eagle’spatentable features. Some who attendedfound those meetings painful. There was bick-ering. Harsh words were occasionally ex-changed. Alsing, who during the project hadset aside the shield of technical command,came in for some abuse—Why should hisname go on any patents, what had he done?Someone even asked that question regardingWest. Ironically, perhaps, those meetings il-lustrated that the building of Eagle really didconstitute a collective effort, for now thatthey had finished, they themselves were hav-ing a hard time agreeing on what each indi-vidual had contributed. But, clearly, the teamwas losing its glue. ‘It has no function any-more. It’s like an afterbirth, ’ said one old handafter the last of the patent meetings.89

88Stephen Levy, Hackers: Heroes of the Computer Revolu-tion (Garden City, NY: Anchor Press/Doubleday, 1984), pp.43-44.

“’Tracy Kidder, The Soul of a New Machine (Boston, MA:Little, Brown & Co.), p. 288.

As the economic value of information-basedproducts and services increases, disagreementssuch as these may become more intense.

The technology will also affect the expec-tations of the user, making him more or lesswilling to comply with the rules of the system.As the Yankelovich study suggests, the moretechnology to which people have access, themore they expect of technology. Youth haveparticularly high expectations. Often they takethe new technologies for granted. As one younguser recounted at a recent OTA workshop, hewas willing to pay for work only if “it was reallyawesome. ’90

The Emergence of New Opportunities

As this chapter points out, the new technol-ogies greatly enhance the creative environ-ment, providing new and powerful tools andnew opportunities for artistic expression, so-cietal advancement, and financial gain. As inthe past, the intellectual property system willestablish the rules by which these opportuni-ties will be taken advantage of and who willget to benefit from them. Because of the en-hanced social and economic value of creativeand scientific works, intellectual property lawbecomes an important public policy tool in aninformation age. It will determine, for exam-ple, whether new technologies are used to in-crease access to the Nation’s information re-sources and if so, by whom, and at what cost.

By virtue of their ability to increase access,these technologies may pose problems for theintellectual property system and for the in-tegrity of the creator’s work. As noted in thechapter, they allow users to access and manipu-late creative works with ease and speed previ-ously unheard of. While this may enhance theirability to work jointly and create new prod-ucts and services, it will also make it more dif-ficult to identify or trace cases of copyrightinfringement or plagiarism that may occur.This is significant for the creator’s motivation.For, as we have seen, the creator is as oftenconcerned about the integrity of his works ashe is about his own financial gain.—— —

“OTA Workshop on High School Students Perceptions ofIntellectual Property Issues, May 20, 1985.

Chapter 6

Technology, Intellectual Property,and the Operation ofInformation Markets

Contents

PageMajor Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

Technology and the Emerging Economic Characteristics of Information. . . . . . . . . . . . 158Information Distribution and Economies of Scale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159Information Production and Economies of Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162Private Investment and Information Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

Government Policy and the Diversity of Information-Based Goods . . . . . . . . . . . . . . . . 170Problems in Framing Policy To Promote Information Diversity . . . . . . . . . . . . . . . . . 171Proprietor Concerns, Government Policy Tools, and the Diversity of Information . . 171

Problems in Selected Markets for Intellectual Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174Print Technology and the Functioning of Copyright in Book Markets . . . . . . . . . . . . 174Motion Pictures, Videocassettes, and the First Sale Doctrine . . . . . . . . . . . . . . . . . . . 176Information Services, Electronic Databases, and Derivative Works . . . . . . . . . . . . . . 180Computer Software, Market Size, and the Cost of Contract Administration . . . . . . . 182

TablesTable No. Page6-1. Production Costs for PBS Television Programs . .............................1596-2. Selected Information Markets: Costs, Profits, Revenues, and

Economies of Scale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....................1606-3. Representative Charges for On-Line Database Access . . . . . . . . . . . . . . . . . . . . . . ...1686-4. Primary Activities of Information Industry Association Members . .............180

FiguresFigure No. Page6-1. Decision Tree for Communications Regulation Under Computer Inquiry III. ... .. 1666-2. Representative Release Sequence for a Major Theatrical Feature . ..............1776-3. Feature Motion Picture Releases. . . . . . . . . . . . . . . . . . . . . . .....................1796-4. A Shrink-Wrap License Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...184

Chapter 6

Technology, Intellectual Property, andthe Operation of Information Markets

MAJOR FINDINGSNew technologies are causing information to

assume economic characteristics that make it sig-nificantly different from other commodities inthe way markets develop and operate. These eco-nomic characteristics-economies of scale andscope in production and distribution, and re-usability and expandability as a resource—are further complicated by information’s so-cial and political significance. Therefore, gov-ernment intervention, through intellectualproperty laws or other government policymechanisms, is a particularly critical factor inthe operation of information markets.

Policymakers currently have little objective,quantitative data with which to make policyjudgments about information markets. The dataproblem stems, in part, from the rapid changesin information markets attributable to tech-nological change. As well, data collection inthis area of the economy is not yet institu-tionalized in government. Often, the availabledata are fragmentary and are supplied bystakeholders in the policy debates. As a result,policymakers face a high level of uncertaintyabout the impact of decisions on the cost andavailability y of specific varieties of information.

The effects of policies designed to governtransactions between sellers and buyers of in-formation are becoming more complicated. It islikely that a decision made to affect one vari-ety of information may be ineffective or inap-propriate if applied more generally. Moreover,more people are making a living by creating,distributing, and using information, so thesepolicies are becoming more important in reg-ulating the economy as a whole. The market-place rules that intellectual property policyestablishes will need to evolve, and perhapsbecome more subtle and complex, as informa-tion markets change.

Intellectual property law is increasingly out-dated in providing appropriate incentives for theproduction and distribution of many informa-tion-based goods. Because of this, markets mayincreasingly fail to provide economically andsocially efficient varieties of information. Intrying to remedy information-market failures,policymakers face trade-offs among interestswith high stakes in intellectual property de-bates. When they enact changes in intellectualproperty law they may be required to makesome explicit decisions about the actual na-ture, content, and distribution of goods basedon information.

It is clear that changes in intellectual prop-erty policy alone will not remedy all the marketfailures to which information-based goods aresubject. Communication, antitrust, publicinformation, education, tax, and governmentR&D policies, and perhaps others, can be ex-pected to interact more and more with intel-lectual property policy in their impact on theoperation of information markets.

Although the information industry is relative-ly unconcentrated today, this may change in thefuture: economies of scale and scope, the require-ments for large capital investments, and mar-ket power and high profits that may comethrough control of communications and contentresources are potentially strong incentives toownership concentration. Considering the so-cial and political importance of information ina democracy, Congress may consider it impor-tant that the information industry remain lessconcentrated than other industries. Intellec-tual property rules affect the distribution ofwealth and opportunities in society; therefore,they must be carefully crafted to maintain abalance between private and public interestsin information.

157


INTRODUCTIONIntellectual property law is based on the

premise that intellectual works differ fromother commodities traded in free markets. TheU.S. Constitution authorizes Congress to enactintellectual property law, recognizing that“writings and inventions” require specialtreatment.

Intellectual works are taking on greater sig-nificance for society. Information’s value asa commodity and as a source of productivityand wealth is rising; the range of availableinformation-based products and services is ex-panding; the technologies through which theseproducts and services are created and distrib-uted are changing; and the number of peoplewhose livelihood depends on information pro-duction, trade, and use is increasing. Becauseof these changes, the markets that determinethe supply, variety, price, and availability ofdifferent kinds of information are in flux.

The operation of markets for intellectualworks is of particular interest because allcitizens require many kinds of information tomake political choices and to become produc-tive members of society. Because an informedand free citizenry is essential to democracy,the first amendment requires that the Feder-al Government value and defend freedom ofexpression: the exchange of information un-encumbered by government. The governmenthas intervened in information activities wherepolicy makers concluded that private enter-prise, acting on its own, would not providecitizens with the full range of information thatthey deemed necessary for society.

The Federal Government has along historyof involvement in the production and dissemi-nation of information. The government has

TECHNOLOGY AND THECHARACTERISTICS

An information-based good is a package thatconsists of an intangible content portion—theinformation itself—and a medium in which the

produced information when private enterprisesaw no advantage in doing so or when the in-formation was vital to government operations.The government has also used a variety ofstrategies, including intellectual property law,to encourage private investment and marketsin intellectual works.

The mechanisms of intellectual property lawwere originally designed to counteract a basiceconomic characteristic of information: It ismuch more costly to originate valuable infor-mation than to reproduce it. Thus, the law gaveproducers limited control over reproductionand dissemination in the form of copyrights,patents, and trademarks. The grant of suchmarketplace control was intended to induceproducers to continue producing and dissemi-nating works by allowing them to gain enoughincome to cover their costs and earn a profit.In this way, the public interest in learning wasmade to coincide with the economic interestsof creators and publishers. In the marketplacefor printed works, governed by copyright, theincentive to produce was linked to the incen-tive to disseminate printed copies as widelyas possible; for selling copies was how produc-ers generated income.

As technologies for creating and marketinginformation change, as new uses for informa-tion are developed, and as information takesa more central place in the economic and so-cial life of the Nation, information is beginningto display a number of characteristics thatalter the incentive structure for production anddissemination. This chapter examines some ofthese characteristics and explores how they af-fect the interests and the marketplace activi-ties of producers, distributors, and users ofdifferent kinds of intellectual works.

EMERGING ECONOMICOF INFORMATIONcontent is embodied and through which it iscommunicated. Information content is chang-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, andproduce other goods and services. The mediathat make information available are also in themidst of rapid and profound change. In par-ticular, technology is increasing the economiesof scale and scope under which informationpackages are produced and disseminated; andinformation-based goods are emerging as basicand essential resources for the economy, thepolity, and culture. These changes in the me-dia, the content, and the uses of informationare altering the operation of markets for in-formation-based goods, and thereby stressingthe intellectual property system.

Information Distribution andEconomies of Scale

At the outset, intellectual property protec-tion was a response to an economic character-istic of information-based goods in the printmedium: origination costs are high in compar-ison to reproduction and distribution costs.Economists describe goods with this charac-teristic as having economies of scale. Modernmedia allow even greater economies of scalein information distribution, so that in somecases an information-provider marginal costsapproach zero.1 For example, radio and televi-sion broadcast stations incur no additionalcosts when additional people tune in; a com-puter database company can serve additional

‘Economies of scale exist when the initial investmentneeded to begin production of a good (fixed cost) is high rela-tive to the cost of producing additional units of the good (mar-ginal cost), and when marginal costs decline with increased pro-duction. In the case of electronic information-based goods, incontrast to other products, a distributor’s marginal cost mayinvolve only the cost of serving an additional customer, ratherthan the cost of producing an additional, tangible unit. In thisway, information-based goods resemble services. With electronicdistribution, one “performance” may serve all customers, asis the case in radio and television broadcasting. Thus, in con-trast to other services, the marginal cost of providing informa-tion can be essentially zero. Electronic information is often medi-ated by a system. Part of the cost of establishing the systemis paid by the provider (e. g., broadcast transmitters or data-base computers) and part by the customer (e.g., radio or TVreceivers or personal computers). Thus, a significant portionof the cost of distributing electronic information must be “sunk”before any information is sent or received. See A. AlIan Schmid,A Conceptual Framework for organizing Observations AboutParties Interested in Intellectual Property, contract report pre-pared for OTA, February 1985,

users, within the limits set by their equipment,at very low incremental cost. This is so becausemany information-based goods that are em-bodied in and distributed through electronicmedia assume a basic characteristic of intan-gible information content: They are not nec-essarily depleted with use.2

However, with time, much information doesbecome obsolete, or at least less interesting.Although information technology promises toimprove the productivity of many aspects ofinformation production, it is still expensive tooriginate movies, television programs, elec-tronic databases, computer programs, andother valuable information because these activ-ities are labor intensive, requiring humanknowledge, creativity, and skill. Hence, thecost of originating information relative to thecost of distributing it is high and is likely toremain so. (See tables 6-1 and 6-2. )

The increase in distributional economies ofscale achieved with modern information tech-nologies affects the incentives for producingand disseminating information-based goods,and so influences the operation of informationmarkets in three direct ways.— .-—--—

‘How marvelous it is that, once recorded, an intellectualwork can potentially be reproduced and communicated an in-finite number of times. The value of a given piece of informa-tion, as for example a weather report, may change or diminishover time. But the information itself can be used simultane-ously or successively by many people without being consumedin the process. The value of information is a result of the con-text in which it is received and used. (Gregory Bateson definesinformation as “the difference that makes a difference. SeeMind and Nature (New York: Bantam Books, 1979).) Contextis essentially the knowledge possessed by the receiver of infor-mation that shapes its meaning. Thus, information actually ex-pands and takes on new meaning as it is received and used bymore people. See Harlan Cleveland, “Information as a Resource,The Futurist, December 1982, p. 36.

Table 6-1 .—Production Costs forPBS Television Programs

Cost of producingProgram 1 hour episodeThe Brain . . . . . . . . . . . . . . . . ... ., $556,000The Constitution:

That Delicate Balance . . . . 169,000Mystery . ... ... ... ... ... . . . 76,000Frontline ... . . . . . . . 145,000Nova ... . . . ... ... 230,000SOURCE Paul I Bortz

-—


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

Televisiona . . . . . .Recordings b

Movies c . . . . . . . . .Online service . . .Radio a . . . . . . . . . .Print servicea . . .Newspapers . . . . .Magazines . . . . . .Documents a . . . . .Books ... . . . . . .

Creation(percent)

17222617243016171215

Conversion(percent)

2 4341833261016121511

Fixed costs(percent)

41 -

564450504032292726

EconomiesVariable costs of scale

(percent) (percent)

23343139454652627069

64626256564738322827

Profit and taxes(percent)

35102511

61516

945

Revenues(billion$)

13.86.14.13.15.1

11,029.413.5

0.712.0

aError in total percent due to roundingbThese numbers are based on revenue from the sale of both audio records and tapes.cThese numbers are based on revenue from theatrical showings onlyNOTE 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: Creationcosts plus conversion costs as a percentage of revenue Variable costs: Percentage of revenue that goes to reproducing individual units and getting those unitsto end users, including reproduction, shipping, advertising and promotion and discount for retail houses Does not include users’ costs Incurred in purchaseand operation of equipment necessary to use a good, such as television sets, radios, VCRs, and computer equipment Economies of scale: Fixed costs dividedby 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 Assessmentby 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 customerfor access, and assuming that the cost of col-lecting payment from a customer, the trans-action cost, is not higher than the price he cancharge,3 a seller has an incentive to increasethe number of customers for an informationpackage. Of course, some kinds of information,such as stock-market tips, secret formulas, andentertain ment with current “snob appeal” maybe more valuable if only a small number of peo-ple have access. But for a wide range of infor-mation, proprietors find that even a small mar-ginal profit can yield large returns when manycustomers are served. Conversely, originatorsmay have less incentive to create or to pub-lish valuable information if they do not share

‘Transaction costs are those expenditures that a proprietormust make to negotiate and execute a transaction agreement.They include the cost of price setting and billing. In selling in-formation-based goods proprietors may also incur marginal costsin monitoring and enforcing special transaction conditions, suchas the exclusion of nonpayers and the prohibition of subsequentcopy and transfer of the information. Thus, transaction costsserve as a check on providers’ ability to exploit distributionaleconomies of scale. Broadcast radio and television are two me-dia with high economies of scale where it has been difficult tocharge the consumers of information because the transactioncosts would be so high. In these circumstances, advertisers havefound it profitable to pay broadcasters for the opportunity toinfluence the purchasing behavior of the vast numbers of con-sumers of broadcast information.

in the profits being made through large-scaledistribution.’

Second, rising economies of scale give infor-mation sellers a greater incentive to deny ac-cess unless they strictly control the conditionsunder which they offer it. In the world in whichthe printing press was the only mass mediumfor reproducing and distributing information,proprietors of intellectual works saw uncom-pensated use, such as in libraries or throughusers trading books, as possibly troubling butgenerally unthreatening. But since electronicinformation can be reproduced and dissemi-nated so cheaply, the modern proprietor ismuch more interested in maintaining physi-cal control over works, and in selling accessonly if users agree not to reproduce and dis-tribute identical or similar works. Because elec-tronic media make it costly and possiblyineffective to exclude nonpayers and compet-

—‘This suggests that, in general, the increase in economies of

scale reinforces the rationale for intellectual property protec-tion: The profits made from the wide distribution of informa-tion should contribute to the cost of originating it. On the otherhand, because the cost of disseminating information declineswith increased economies of scale, the benefits given up by so-ciety through the grant of exclusive copyrights increases. SeeCompetitive Enterprise Institute, “Intellectual Property andCopyright Laws, ” issue brief, 1985.

. .

Ch. 6—Technology, Intellectual Property, and the Operation ot Intormation Markets ● 161

itors, proprietors may, more than ever, favorgovernment intervention to help them enforceexclusion or collect payment. Alternatively,they may invest in more efficient ‘‘ fences,” orprivate means to exclude unwanted users. Thisalternative is explored in detail in chapter 4.5

A third effect of increasing economies ofscale on information markets is that owner-ship of distribution facilities tends to concen-trate in fewer hands.6 Since the per-user costof distribution declines as the number of usersrises, a large network can price informationlower than a small network and may eventu-ally buy out or drive out the smaller business.7

This tendency is enhanced where the fixedcosts of developing a network infrastructureare very high, as they are for launching com-munication satellites, laying cables, or secur-ing broadcast licenses or other government reg-ulatory approval.”

The potential of economies of scale to causemedia concentration in electronic distributionis currently checked by the number and varie-ty of distribution technologies.’ Newspaperscompete with television in providing news andadvertising; videocassettes compete wit h thea-ters and cable television to supply feature mo-vies; newsletters and magazines compete withon-line computer database services to providespecialized information on a wide range ofsubjects.—.—

Anothe;alternative, adopted by tele~’ision and radio broad-casters and also newspaper and magazine publishers, is to bun-dle the entertainment or news information with advertising.The advertiser ma~’ associate his message to bu~ with desira-ble aspects of the information-based good—e. g,, the integrityof the news, or the pleasures of the entertainment.

‘ J?’, Curtiss Priest, The Character of Information: Charac-teristics and Properties of Information Related to issues Con-cerning intellectual Propert~’, contract report prepared for OTA,~’ebruar~ 1985, p. 27.

See Geral(i Brock, The Telecommunications Industr~’: TheDynamics of .Ifarket Structure (Cambridge, MA: I{arxrardUniversit~ Press, 1981).

‘NICI spent $10 miilion in regulator~ and iegal costs o~.eran %lear period to obtain approval for its first microwave long-distance teiephone service. Brock, The Telecommunications In-dustr~r, p. 213. The facilities of Lele;’ision station KTI.A in I,osAngeles, and its F(’C broadcast iicense. sold for $510 millionin 1985.

“See Benjamin hl. Compaine, Christopher H. Steriing,Thomas Guback, and ,J. Kendrick Noble, tJr., Ii”ho Owns the%fedia? (M’hite Plains, NY: Knowledge Industr3. Publications,1982),

There will probably be uncertainty for sometime over the most profitable ways to providedifferent types of information. Companies andresearch institutions are experimenting widelywith new media forms, exploring whether onemedium may have a competitive advantageover others.10 People consider a complex setof factors in choosing one medium over anotherfor receiving a particular type of information. 11

Cost is a major consideration; it may drop slow-ly for a new medium as people adopt it andeconomies of scale come into play. While un-certainties rule, the ownership of media canbe expected to fluctuate.

Fiber optic systems are being rapidly addedto the mix of information-distribution technol-ogies. ]2 The single-mode fibers now being in-stalled in the country’s telephone plants havecommunication capacities significantly great-er than copper wire or coaxial cable. One fibercan carry the entire Encyclopedia Britanicafrom Washington to Baltimore in a second or300 simultaneous television channels withina city, Laboratory results suggest that this ca-pacity may rise 1,000-fold or more with im-provements in signal transmission and detec-tion equipment that can be used with existingfiber lines.

The economies of scale offered by fiber op-tics are certain to affect communication com-panies’ strategies as they learn to employ thistechnology profitably. Many other distributiontechnologies may prove much less economical.For a time, large businesses with great datacommunication needs will benefit the mostfrom these economies. ” Small businesses will

“’Although technological innovations may cause costchanges that move slowly at first, their longer term effects ‘canchange cost ratios by orders of magnitude rather than by thefew percentage points that constitute common static barriersto entry, ” Brock, The Telecommunications industr~, p, 301.

“J. Dimmick and E. Rothenbuhier. “The ‘i’heor?’ of theNiche: Quantifying Competition Among Media Industries, ”Journal of Communication, vol. 34, No. 1, 1984, pp. 103-120.

“See the OTA report Information Technolomr R&D: Criti-cal Trends and Issues, OTA-CIT-268 (Washington. DC: U.S.Government Printing Office, February 1985). for a case studyon fiber-optic technology.

‘ ‘Many large companies that rely heaviiy on data communi-cations, in particular, banks such as Citicorp, are installing theirown fiber lines in buildings that house their offices and com-puters and between their facilities and long-distance telephone

(Continued on next page)


also benefit as they begin to use data commu-nications for such things as credit-card verifi-cation and remote bookkeeping services.14

An unresolved question is whether peoples’needs to communicate to and from the homecan support the high cost of running fiber-opticcable the expensive ‘‘final mile’ to Americanresidences. If this occurs, people at home willbe able to receive and transmit everything fromtelevision shows to computer software to elec-tronic mail over switched telephone lines, andbe billed, and conceivably bill others, directlyfor use.15

One of the major advantages society gainsfrom public communication media, such as thepost office, is the ability to connect every citi-zen and organization with every other. Mod-ern communication media and their inherenteconomies of scale can be made available toevery citizen, as the post office and public roadshave been, if efficient and equitable rules canbe established for the development and use ofthese societal resources. To establish rules forinformation commerce in a public electroniccommunication system of the capacity of dig-ital fiber-optic technology, policy makers willneed to balance many interests: public and pri-vate, individual and corporate, economic andsocial. In the electronic information environ-ment supported by technologies such as fiberoptics, intellectual property rules will workhand-in-glove with rules that govern, for ex-ample, the operation of the local public tele-phone central-office switch.16

access points. (See Michael A. Laviola, ‘‘The Citibank Fiber-Optic Network, ” Telecommunications, February 1984, pp. 86-94.)

“See, for example, “Bell Companies Race To Offer LocalData Services,” Data Communications, April 1985, pp. 46-50.

‘r’Some believe that even rural users and others on thinroutes that cannot support the cost of fiber-optic lines may stillbe served by broadband telecommunication links with cellularradio and low-cost satellite earth-station gear. See Ithiel de SolaPool, “User Interfaces, ” The Information Societ.v, vol. 2, Nos.:1 4, p. 439.

“’(liven a broadband, public-switched telecommunicationnetwork available to all, Pool suggested that opportunities wouldabound for small, diverse information businesses to flourish inan electronic environment. Ibid., pp. 433 and 441.

Information Production andEconomies of Scope

Economies of scope are present when a pro-ducer, because he makes one product, has acost advantage in making other products. 17 Theproduction of information-based goods clearlyinvolves economies of scope.18 In writing abook, for example, the an author builds skills,experience, and a reputation that afford himan advantage in producing and selling subse-quent writings.

Electronic media establish an entirely newdimension for economies of scope in informa-tion production. Information content may bepackaged in many forms to serve the particu-lar preferences or requirements of differentusers. For example, a book may be producedwith paper and ink, on audiocassette, or onoptical disk; its content may be adapted intoa television ‘‘mini-series’ or an interactivegame that can be distributed in a variety offorms. Users of information can gather con-tent from many sources, analyze it, and re-arrange it to produce new information. For ex-ample, daily stock market statistics may beprocessed very quickly to help investors ad-just to changing conditions. Information maybe extracted from a larger bundle and used ina new context. An artist, for example, can elec-tronically pluck the image of an eye from a mo-tion picture film frame and use it to create amagazine advertisement or a T-shirt logo.

Intellectual property concepts are funda-mental in determining who may take advan-tage of the economies of scope inherent in in-formation production. Serving as marketplacerules that govern the conditions under whichinformation-based goods are traded, intellec-tual property laws specify what rights attachto a work, what rights are retained by the origi-nal proprietor, and what rights accrue to thepurchaser when he buys the work. The rulesthat govern how purchasers may use a workin producing their own works are particularly--—-.——-—--——

‘“For example, a steelmaker may have an advantage in pro-ducing coke, pig iron, specialty steels, or perhaps knives, cook-ware, or other finished products.

“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-tween the benefits of exclusive control as anincentive to innovate, and the cost of limitingothers’ ability to compete with a rights holder.

Until recently policy makers could allocatethe right to exploit economies of scope fairlyeasily using relatively simple rules. Some ruleshave been passed down from antiquity in thecustoms of scholarship, which demand thatusers cite and credit originators for their con-tributions. The legal concept of derivative usewas first formalized as a rule by the courts ingiving authors exclusive rights to make andsell foreign translations. In response to tech-nological change, this concept was later ex-tended by the judiciary to give fiction writersa say in the making of movies based on theirbooks. In 1976, rules based on derivative userights were defined by Congress to govern abroad range of situations. Copyright now con-fers to a proprietor exclusive rights over allgoods substantially based on an original work.

In parallel to the evolution of rules for deriva-tive use, the concept of fair use has grown andevolved. Originally developed by the courts asan exception to exclusive copyright, it was de-signed to promote the scholarly use of intel-lectual works by suspending, under certainconditions, the rule that users obtain permis-sion to use portions of protected works inbuilding new works. Fair use was codified byCongress, also in the 1976 act, to apply to ed-ucational use of photocopying technologies.

Today, however, technology is complicatingthe allocation of rights in information. Mod-ern information technologies force a fundamen-tal confrontation between the two concepts ofderivative use and fair use. With new electronictechnologies, people have a host of new oppor-tunities to create new information packagesbased on existing works; to serve new custom-ers by manipulating and transforming works;to add value by placing existing informationin new contexts; and, generally, to participatein intellectual work. These technologies havegiven scholarship—the building of humanknowledge—a new set of tools and a broaderfield of operations. And as a result, the eco-

nomic, legal, and social questions involved indetermining proper and efficient rules for con-trolling derivative use have become much morecomplex.

From the legal perspective, modern informa-tion technologies make it harder to definewhich commercial uses are merely derivative(that is, copies) and thus unfairly competitive.These technologies make it more difficult andcostly to detect infringements and enforce de-rivative use rights. Furthermore, detection ofinfringement and enforcement are potentiallymore intrusive of personal privacy. These sub-jects are covered in chapters 3 and 4.

From the economic perspective, it is unclearwhether, as a general rule, the right to controlderivative uses encourages or inhibits thegrowth of knowledge. Because derivativeworks may substitute for and undercut mar-kets for originals, they might diminish incen-tives to create or disseminate works. On theother hand, the threat of competition from deri-vations might spur the originator to make hisown derivations or to create new works. Whenproprietors seek to inhibit derivative uses, asthey might, for example, by building techni-cal or contractual ‘‘fences’ and suing infring-ers, they increase the transaction costs asso-ciated with distributing information. Suchefforts reduce the benefits that society gainsfrom the high economies of scale offered byelectronic media, Moreover, if a user is not al-lowed to make his own derivations, society maybe deprived of the unique contribution he alonecould make. Thus, society could lose some ofthe benefit, in the form of economies of scope,that electronic information offers.19 Market-place rules based on the right of derivative useclearly affect the competition that proprietorsof information-based goods face and the profit-making strategies that information providerspursue.

“’There are two ways in which a person ma} be pre~rentedfrom making dw-i~ations: 1 ) enforceable rules prohibiting deri-vation: 2) secrecy or technical protection schemes that physi-cally prevent deri~ations. Both of these prei’entions ma~’ re-sult in the costly and inefficient duplication of effort, which theintellec~ual property system seeks to minimize.


Operating under conditions of economies ofscope, information providers often constructa variety of packages to tap markets for differ-ent combinations of media and informationcontent. For instance, the movie industryoffers the same content in a variety of mediaforms, including movie houses, free broadcasttelevision, monthly subscription television,“pay-per-view” and “premium-channel” cabletelevision, and videocassettes and disks. Thisrepackaging of movies is designed to imple-ment price discrimination, the setting of pricesaccording to assumptions about how muchusers value the information package and theirability to pay, rather than on the basis of themarginal cost of providing the information.

Another set of information-providers oper-ate in markets that cater to users’ needs forvery specific information content. For exam-ple, financial analysts, engineering consul-tants, market research specialists, and a grow-ing array of information brokers use theirexpertise to select relevant content from massesof available information and construct highlycustomized packages .20 These providers pricediscriminate on the basis of users’ differentcontent requirements, rather than on the ba-sis of users’ preferences for different mediaforms, as is the case, for instance, with moviedistributors.

The effectiveness of price discriminationhinges on proprietors’ ability to exclude com-petitors from offering similar packages. Pro-viders must also know what information usersneed and what they are willing to pay for it.The feedback that information providers re-ceive from their customers’ purchasing behav-ior allows them to tailor both the goods theyoffer and the prices they charge.21

—.—————‘(’One may consider many traditional “professions,” such as

law, medicine, and engineering, as being in the business of pro-viding highly customized information.

“A crude form of price discrimination, which requires rela-tively little control of derivative use or detailed knowledge aboutcustomers’ preferences and requirements, is employed by otherinformation providers. Publishers of newspapers and magazines,for example, “bundle” information and take advantage of thefact that some people value one feature or article enough to paya price that exceeds the cost of the article and thus contributesto the provision of other items in the bundle.

Computer database technology promisesinformation providers new opportunities toamass comprehensive collections of informa-tion, offer data processing services, constantlyupdated information content on a broad rangeof subjects, and precisely tailored packages ina wide variety of forms. They can do all thesethings through a self-service system for “one-stop” information shopping.2223 These comput-erized delivery systems also offer proprietorsgreater potential to collect and analyze feed-back, in the form of transaction information,on customers’ information-use habits so theycan implement price discrimination more ef-fectively. 24

Computerized information-retrieval systemsalso make proprietors more vulnerable to un-controlled derivative use of their resources..— - -— ..—

“Theoretically, any kind of information can be embodied ina computerized database. Currently, most information that isoffered through publicly available databases is factual in na-ture--economic and financial statistics, bibliographic citations,etc. (See Martha E. Williams, “Electronic Databases, ” Science,Apr. 26, 1985, pp. 445-455. ) More and more access to functionalinformation is being offered, such as remote data processingfor bookkeeping or statistical analysis. A number of venturesoffering computer software transmitted to the user from a cen-tralized collection have been tried, with mixed success. (SeeDownload, January 1986, pp. 1-4.) Potentially, art can also beoffered on a user-selectable basis, for example, full text of novelsand other books, music in a form some have termed the “celes-tial jukebox, and "imagebanks" that contain content and soft-ware for making and manipulating pictoral works.

“Electronic technologies also make the cruder form of pricediscrimination that relies on bundling less effective. Photocopymachines, videocassette recorders, and especially computers al-low users to quickly and conveniently “unbundle’ information,taking only those pieces that are valuable to them. ChristopherBurns and Patricia Martin, The Economics of Information, con-tract report prepared for OTA, April 1985, p. I-7. This sameunbundling capability threatens advertising revenues.

2’This transaction information has growing economic valueas a marketing tool and a commodity in its own right. Thereis a potential conflict between the development of highly effi-cient computerized information markets and the right of citizensto privacy in their personal affairs. The Cable CommunicationsPolicy Act of 1984 places specific limits on the collection anduse of personally identifiable data on subscribers of cable sys-tems (section 631). The Videotex Industry Association has de-veloped voluntary privacy guidelines for the use of transactiondata collected in their operations. A spokesman for the on-linecomputer database industry says that, at present, it is too ex-pensi}’e to collect and use detailed transaction data from theiroperations. It may be possible to have computerized, electronictransaction systems that technically limit the collection anduse of personally identifiable transaction information. See, forexample, David Chaum, “Security Without Identification:Transiiction Systems To Make Big Brother Obsolete, ” Com-munications of the ACM, October 1985.

Ch. 6— Technology, Intellectual Property, and the Operation of Information Markets ● 165

Their competitors can employ these technol-ogies to offer the same or similar informationpackages and compete for customers. Conse-quently, information providers may supportstrong intellectual property laws to protecttheir investments in originating, purchasing,and customizing information, and to achieveand retain market share. Although they nowhave legal rights over derivative uses, propri-etors still have an incentive to strictly controlaccess because legal enforcement is so difficultand expensive.

Economies of scope, like economies of scaleprovide incentives for ownership concentra-tion.25 Users of information want to go to themost comprehensive source. Suppliers of con-tent have an incentive either to deal throughlarge distributors with popular recognition andprestige (who may require contract provisionsthat exclude dealing through competitors) orto become employees of a large company and‘‘work for hire. And proprietors of informa-tion resources have greater freedom to pricediscriminate if ownership is concentrated andcompetition is checked.

Proprietors of electronic information alsohave an incentive to integrate vertically-tocombine ownership of content resources anddistribution facilities. In the current deregula-tory climate they are freer than in the past todo so. Policy makers are particularly concernedabout vertical integration among communica-tion and information providers in situationswhere competition in distribution facilities isweak.26 In these instances, a vertically inte-grated information provider has an incentiveto favor its content over that of competitorsby cross-subsidy, “predatory” rate discrimi-nation, or outright refusal to deal. Common-carriage regulation, and the more recent effortsat structural separation, leased or equal access,and “Computer III” regulations are govern-.——

“ Priest, The Character of Information, p. 27.““A firm with monopoly power over part of the system has

an incentive to restrict access to its part in order to extend con-trol over other parts. . . W’ith public systems, such actions canlead to a total monopoly. To have competition in a public sys-tem with some parts monopolized, it is necessary that nondis-criminator~’ access be maintained. Brock, The Telecommuni-cations Industry, p. 301.

.

ment attempts to check the market power po-tential of vertically integrated communicationentities.27 (See figure 6-l.)

Private Investment andInformation Resources

For individuals and for society, informationis the raw material of knowledge and learning.28

New information technologies are providingtools and techniques for capturing, creating,using, and sharing information in unprece-dented forms and quantities. These technol-ogies make possible a vast expansion of knowl-edge about the world, and they allow theestablishment of information resources thatpeople can draw on for many purposes As de-tailed in chapter 5, by automating many of thetasks that artisans, scholars, and managershave traditionally had to master, they prom-ise to raise productivity in creative and intel-lectual work. We also expect these technologiesto enhance learning and amplify the social andeconomic benefits that come from knowledge-able people and an educated society.29 Chiefamong these benefits, as seen in chapter 2, areopportunities for citizens to more fully partici-pate in society-to develop and contribute theirunique talents and insights to the economy andto the community.

Information-based products and the technol-ogies that support them are also important asfactors in the production of an expanding range

——-—— —-—‘“For overviews of the issues being addressed by the Com-

puter 11 I inquiry see Andrew D. I,ipman, “Taking the Compet-itive Plunge: The FCC Dives Into Computer I I 1, Telephon?~,Oct. 7, 1985, pp. 48-49; and Edwin E. Mier, “Computer InquiryIII: The Emerging Monolith, ” Data Communications, March1986, pp. 51-58.

‘“Information has been characterized as a nondepletable re-source. For example, see Karen Levitan. ‘ ‘Needed Research inthe Economics of Information Resources, proceedings of theAmerican Society for Information Science, vol. 17, p. 334; and“Information Resources as ‘(Goods” in the Life Cycle of Infor-mation Products, ” Journal of the American Societ}’ for Infor-mation Science, January 1982, pp. 44-54; see also, Cleveland,“Information as a Resource. ”

‘<’In 1776, economist Adam Smith identified the skill, dex-terity, and judgment of the labor force as primary determinantsof economic and social well-being. See Adam Smith, The Vt’eal.thof 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 RegulationUnder Computer Inquiry Ill

NoIs it a commoncarrier? v

Is it a dominant No

carrier? v.

I Yes

What is thenature of service?

Basic communications Noncommunications

Ancillary tocommunications

Is there a competitiveenvironment?

No Yes

Bottleneckfacilities?

Yes No

I Accounting

Minimal FCCregulation(forbearance)

7v controls. 1Regulated Regulated Accounting Accounting UnreguIatedas before together and tariff - oversight -

with “basic” controls onlycommunications

Maximum Degree of FCC regulation MinimumSOURCE” From presentation by Pacific Bell to FCC Commtssloner Dennis Patrick, September 1985

of goods and services.30 Information technol-ogy increases productivity and contributes tothe material wealth and well-being of society;31

and information itself imparts competitive ad-vantages to those that possess it and can makegood use of it.32

— — — —‘OSee ch. 2 for a discussion of the importance of information

to the economy.‘iCharles Jonscher, “Information Resources and Economic

Productivity, “ Information Econorm”cs and Policy 1, 1983, pp.13-35.

“Michael E. Porter and Victor E. Millar, “How InformationGives You Competitive Advantage, ” Eh-vard Business Rew”ew,July/August 1985, pp. 149-160.

Although information is essential to mate-rial production and social welfare, economistsgenerally believe that private enterprise in-vests less in its production and distributionthan is socially desirable or efficient.33 The rootcause of this inadequate private investmentis uncertainty. Motivated by profit, individ-—— ———.—

%ee Yale Braunstein, “Information as a Factor of Produc-tion, ” The Information Society, vol. 3, No. 3, pp. 261-273. Anincreased amount of valuable goods and services could be pro-duced with a given amount of land, labor, and capital resourcesif more were invested in information that is applicable to produc-tive activities.

Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets Ž 167—

uals and corporations are uncertain whetherthey may benefit by investing in the develop-ment of information resources.

The producers, distributors, managers, andusers of information, and the people that in-vest in these activities, all operate in an envi-ronment characterized by uncertainy.34 Manyoriginators of information, whether they areartists, scientists, or computer programmers,are working at the frontier of knowledge, sothe outcome of their work is inherently uncer-tain. They may succeed or fail in accomplish-ing their goals, or the goals themselves maybe poorly defined, deliberately ambiguous, orself-justifying. They often do not know in ad-vance how much time will be required to meettheir objectives, what the ultimate value oftheir work will be, or how much money theywill make from a work.

Distributors of information face uncertaintybecause they have only imperfect control overthe public dissemination and use of their prod-ucts. Information is inherently “leaky,” so itis both expensive and difficult for them to ex-clude nonpayers and competitors from usingit. Also, because users’ requirements and pref-erences are hard to define precisely and theychange unpredictably, price discrimination isa trial-and-error process.

“The distinction between information distributors and man-agers is informed by an analysis by Charles Jonscher. (“Infor-mation Resources and Economic Productivity, pp. 18-1 9.) AsJonscher states, it is difficult to precisely ascertain the relativemagnitude of effort accounted for by market allocation versuscentralized management of information, but:

The distinction is quite fundamental, in that the extent towhich economic [and information resource] management is cen-tralized or left to the interaction of independent trading partieslies at the heart of the distinction between market and non-market allocation processes, and indeed between socialist andcapitalist economies.

Jonscher estimates that in 1978 information management anddistribution activities, which together account for more than80 percent of total information economic activities, were car-ried out approximately half by distributors (39 percent of totalactivity) and half by managers working for firms or governmentbodies (42 percent of total). Intellectual property rules are fun-damental to the operations of independent distributors, and thuscrucial to market-driven allocation of information resources, Inthe absence of adequate incentives for independent distribu-tion of information, it is reasonable to assume that private sec-tor firms will be compelled to rely more on internal productionand distribution and centralized management of informationresources, and the need for government to provide publicly avail-able information will rise.

The professional managers of information—employees of companies and government whoobtain, organize, and provide access to infor-mation—also face large uncertainties. Theymust contend with increasingly complex me-dia and information content, while continuingto meet organizations ever-changing informa-tion needs. Moreover, within corporate andState bureaucracies, the real cost of generat-ing and managing information resources is gen-erally accounted for very poorly or not at all,so there is often little ability or incentive toengage in rigorous “make or buy” decisionswhen information is needed.35

Users, perhaps, face the greatest uncertain-ties of all. Economist Kenneth Arrow recog-nized a paradox in trying to determine the de-mand for information. “[The] value [ofinformation] for the purchaser is not knownuntil he has the information, but then he hasin effect acquired it without cost. "36 Of course,through experience and exposure to advertis-ing, users build expectations about the valueof information packages that they consider forpurchase. They may browse through printedinformation in book stores and, if facilities andresources are available, at public libraries. Butthe user of electronic information is generallydenied access unless he agrees in advance topay. Therefore, he may be unable to compareone package with another. Moreover, becauseaccess to electronic databases is charged forby the hour or minute, the user is under thepressure of the clock.37 (See table 6-3.) Also,

‘r’Marc Porat, “Information Workers Jt’ithin 13ureaucra-cies, Bulletin of the American SOciet-}r for Information Science,February 1984, p. 17. See also, Burns, The 13conomics of Znfor-rnation, pp. V-l-9.

“Kenneth J. Arrow, “Economic Welfare and the Allocationof Resources to Invention, ” Economics of Information andKnowledge, D.M. I.amberton (cd.) (Baltimore, MD: PenguinBooks, 1971), p. 148.

‘“Both of these factors sharply limit peoples’ opportunity tobrowse randomly and make the occasional serendipitous dis-covery. This is a complex subject that involl’es the design ofcomputerized information-delivery systems and the methodsused to index, access, retrieve, and charge for computerized in-formation, Automated systems may yet be designed and offeredthat can promote the ability to make new connections amongdisparate pieces of information. But this capability is limitedin present systems, and the pressure of a ‘‘running meter’ fur-ther limits their use as general tools in knowledge building. Thequestion of how information resources are to be structured to



Table 6-3.—Representative Charges forOn-Line Database Access

Database Per minute(publisher) access chargea

Academic American Encyclopedia(Grolier Electronic Publishing) . . . . . . . . . . .

AP News(Press Association) . . . . . . . . . . . . . . . . . . . .

BLS Consumer Price Index(U.S. Bureau of Labor Statistics). . . . . . . . . .

Books in Print(RR. Bowker) . . . . . . . . . . . . . . . . . . . . . . . . . .

Career Placement Registry(Career Placement Registry, Inc.) . . . . . . . . .

Chemsearch TM

(Dialog Information Services, Inc. andChemical Abstracts Service) . . . . . . . . . .

CIS(Congressional Information Service, Inc.) . .

ClaimsTM/U.S. Patent Abstracts(lFI/Plenum Data Company) . . . . . . . . . . . . .

Compendex(Engineering Information, Inc.) . . . . . . . . . . .

Laborlaw(Bureau of National Affairs) . . . . . . . . . . . . . .

Medline(U.S. National Library of Medicine). . . . . . . .

Peterson’s College Database(Peterson’s Guides, Inc.) . . . . . . . . . . . . . . . .

Pollution Abstracts(Cambridge Scientific Abstracts) . . . . . . . . .

PTS U.S. Time Series(Predicasts, Inc.) . . . . . . . . . . . . . . . . . . . . . . .

Zoological Record(Biosciences Information Services) . . . . . . .

$0.75

1.40

0.75

1.08

1.58

2.42

1.50

1.58

1.65

2.00

0.60

0,90

1.40

1.90

1.30 —a Does not include telecommunications charges. which run $6 to $18 Per hour

SOURCE DIALOG Price List, October 1985

unless public or shared facilities are available,he must buy equipment before he can receiveelectronic information, equipment that maysubsequently fall drastically in price or soonbecome obsolete.

Investment in information production, dis-tribution, management, and use is risky. Only

meet different information needs is a problem that libraries con-stantly face. Public libraries are increasingly compelled to makeeither/or choices, in a time of shrinking budgets, among invest-ments in different kinds of information resources for their pa-trons. The issue of charges for information services in publiclibraries is sparking great controversy, and the introductionof computerized retrieval systems is at the center of that de-bate. See, for example, Brett Butler, “Online Public Access: TheSleeping Beast Awakens, ” Bulletin of the American Societyfor Information Science, December 1983, pp. 6-10; and Jose-Marie Griffiths and Donald W. King, Impact of InformationTechnology on Information Service Providers and Their Clien-tele, contract report prepared for OTA by King Research, Inc.,July 1985, pp. 54-84.

a small portion of the total value that individ-uals and society gain from the use of informa-tion resources can be expected to be returnedto producers and distributors through pay-ments for use. This is because information isintangible and leaky, and its value expands un-predictably through new uses and the build-ing of knowledge.38 As a result of this discrep-ancy, the private economy allocates less land,labor, and capital to information resource pro-duction than is socially efficient or desirable.

Economists characterize those markets inwhich resources are unlikely to be allocated effi-ciently as exhibiting market failure. There arenumerous types and degrees of market fail-ure;39 study of market failures associated withinformation began in the mid-1920s.40 In theiranalyses, economists generally have includedinformation in a class of goods called publicgoods. Others in this class are parks, light-houses, and national defense.” Because the pri-

‘FPriest, ‘The Character of Information, pp. 33-35.“See, for example, Francis M. Bator, “The Anatomy of

Market Failure, ” QmrterlyJoumal of Economics, August 1958,pp. 351-379; and Robert H. Haveman and Julius Margolis (eds.),Public Expenditures and Policy Analysis (Chicago, IL: Mark-ham, 1970).

4“Pigou recognized that knowledge provides benefits to so-ciety as well as to the purchaser. Arthur C. Pigou, The Eco-normcs of Welfare, 4th ed. (London: Macmillan, 1932). In 1962,Arrow wrote a seminal piece on the subject in which he recog-nized three forms of market failure associated with informa-tion: indivisibilities, inappropriability, and uncertainty. (Ken-neth Arrow, “Economic Welfare and the Allocation of Resourcesto Invention.”) More recent looks at information and marketfailure include: Yale M. Braunstein, “The Functioning of In-formation Markets, ” in Issues in Information Policy, directedby Jane H. Yurow, edited by Helen A. Shaw (U.S. Departmentof Commerce, National Telecommunications and InformationAdministration, February 1981), pp. 57-74; Michael D. Cooper,“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: MITCenter for Policy Alternatives, Oct. 25, 1984); and W. CurtissPriest, “Development of Economic Guidelines and AlternativeOptions for Public Investment Decisions in Scientific and Tech-nical [formation,” working paper (Cambridge, MA: MIT Cen-ter for Policy Alternatives, Mar. 15, 1984).

“According to Samuelson, a public good has the attribute“that each individual’s consumption of such a good leads tono subtraction from any other individual’s consumption of thatgood . .“ Paul Samuelson, “The Pure Theory of Public Expend-iture, ” Review of Econorm”cs and Statistics, vol. 36, 1954, p.387. Actually, Samuelson uses the term “collective consump-tion good, ” but public good is now the commonly accepted ter-minology. Stanley M. Besen, Economic Issues Relating to NewTechnologies and Intellectual Property, contract report preparedfor OTA, December 1984, p. 1.

Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets ● 169.—

vate economy underinvests in them, publicgoods are often provided or subsidized by thegovernment.”

Given the importance of information re-sources and the fact that the private sector un-derinvests in them, the public policy questionis: How might the government best encouragetheir growth and use? Can the government re-duce the uncertainties faced by people engag-ing in information activities, and if so, how?May reducing the uncertainty of one group re-sult in problems or expense for others? And,given that it costs more to originate informa-tion than to reproduce and distribute it, a corol-lary question is: How might the governmentbest encourage the growth of the human re-sources that form the pool of knowledge, crea-tivity, and skill from which valuable informa-tion originates?

Motivated only by financial profit, the pri-vate sector will produce and distribute thosetypes and forms of information from whichthey can inexpensively exclude nonpayers andcompetitors, and for which they can collectenough revenue to cover their costs and real-ize a profit that is competitive with other in-vestments. 43 To compensate for insufficient pri-vate investment, government could:

1. institute policies that help proprietors to

. . —‘-Since exclusion is difficult and may be socially inefficient,

the use of tax-payer money to supply the good can often be justi-fied. F;conomists and public admimstrators point out that gov-ernment is not obligated to provide all public goods. There aresituations in which the waste and distortion that governmentma~’ incur in trying to counteract market failures associatedwith public goods may produce more inefficiency than it cures.See, for example I’ritz hlachlup, Know’fecige: Its Creation, Dis-tribution and F;ccmomic Significance, Volume 111: The Eco-nomics of Information and Human Capital 1 Princeton, NJ:Princeton University Press, 1 984), p. 157.

‘ Fortunately, there are many moti~ations for producingand disseminating information aside from financial gain. Seech. 5, “The Creati\e Fln\rironment. ’ See also, Robert M. Hurtand Robert !YI. Schuchman, “The Economic Rationale of Copy-right, ” .+!merican Plccmomic }iet’iew’, Maj’ 1966, pp. 425-426.

exclude nonpayers and competitors, col-lect payment, or price discriminate;

Z. subsidize investment in the production ordistribution of information that the pri-vate sector finds unprofitable; and/or

3. undertake the task of producing and/ordisseminating information.

The latter two approaches require that gov-ernment identify unprofitable kinds of infor-mation for which there is a compelling socialneed and public interest. Some of these judg-ments are straightforward. Public investmenthas long supported most basic scientific re-search, a large part of the applied research infields such as medicine, agriculture, and ener-gy, the bulk of economic and social statisticson which government policy is based, a largeshare of the cost of formal education, and manyother information activities.

The first approach—helping private enter-prise exclude, collect payment, and price dis-criminate—has been the traditional role ofintellectual property policy and law. It has af-forded three distinct advantages over govern-ment subsidy or direct investment in produc-tion. First, it minimizes the government needto make judgments about the specific valueand uses of information. Second, it permits pri-vate markets to respond quickly to changesin consumer demand where profits signal in-vestors to shift resources and where there areno substantial barriers to competition. Third,intellectual property protection has tradition-ally promoted both learning and private invest-ments in the production of ideas.

Changes in technology that alter the incen-tives for producing and disseminating infor-mation may in some cases weaken the advan-tages of intellectual property protection. Ifunchecked, the incentive to control access andto concentrate ownership of media and contentmay undermine the promotion of learning andwidespread participation in the developmentand use of knowledge and information resources.


GOVERNMENT POLICY AND THE DIVERSITYOF INFORMATION-BASED GOODS

A basic goal of intellectual property law isto promote a healthy diversity in the ideas, in-formation, and knowledge available to society.In the age of print, diversity was fostered bygranting individual creators the right to con-trol the conditions under which their workswere published, printed, and distributed in tan-gible copies. The questions of what rights at-tach to works embodied in tangible copies,which particular rights a proprietor retains,and which rights are transferred to a buyer ofa copy of a work have been relatively easy todetermine. The incentives to originate worksand disseminate copies were clearly fosteredby the limited controls afforded by copyright.Users’ ability to employ existing works inlearning and scholarship were supported by thelegal limits of copyright control developed inthe fair use and first sale doctrines.44 Thus, arich diversity of information, and the growthand use of knowledge, was promoted by a bal-anced set of rights over information.

As information is increasingly distributedin less tangible electronic forms, these ques-tions of rights in information become morecomplicated. If one assumes that, in the infor-mation age, more people will make a living pro-ducing, distributing, and using information,these questions of rights become all the moreimportant. As detailed in chapter 3, new tech-nologies are blurring the boundaries definedby the traditional legal rights over informa-tion. Concomitantly, as seen in chapter 4, theenforcement of those traditional rights is in-creasingly difficult and troublesome. Worksin electronic form take on a fluid character.Form and content are transformable and dy-namic; separating idea from expression is amore arbitrary judgment; and information isan integral part of automated processes, as wellas a conveyor of meaning to people.

“The first sale doctrine states that ownership of a copy ofa work passes to the purchaser of the copy. The purchaser maythen sell or otherwise dispose of his copy (section 109). The firstsale doctrine allows the development of trade and rental mar-kets out of the control of the copyright owner and thus limitshis potential market power.

Alongside changes in the character of infor-mation as a technical package, as an economicand social good, and as a cluster of legal con-cepts, the structure of incentives for originat-ing, disseminating, and adding value to infor-mation is undergoing change. To maintain abalance in the rights over information, newdefinitions that correspond to the emergingtechnical, economic, and social characteristicsof electronic information must be developed.In particular, the definition of rights shouldclarify the ways purchasers may use works:What are the rules for using protected worksin producing and distributing information?How may one compete with his source of in-formation or with sellers of similar works?

For some types of information, especiallyworks of fact, proper inducements to add valuemay be as important in the information ageas incentives to originate works were in theage of print.45 For other types of works, espe-cially art, rules that help creators preserve theintegrity of their contributions may be mostappropriate. New types of art that arise fromcollaborative or interactive processes may re-quire new kinds of corporate arrangements.Functional works may require new adminis-trative mechanisms to assure that proper, pol-icy-consistent controls are placed both on in-fringements and on the market power inherentin patent-like protection.4G In these ways,intellectual property law may continue to fos-ter the creation and dissemination of emerg-ing information-based goods, a healthy diver-sity of works, and the profitable trade ofinformation in open markets.

Historically, many other government policymechanisms-communications regulation, an-titrust enforcement, R&D management andsupport, the development and promulgation

“Burns, The Econom”cs of Information, pp. 111-17-18.“See Carroll Pursell, Historical Case Studies of the lrlflu-

ence of Intellectual Property Laws on Technolo~”cal Change,contract report prepared for OTA, August 1985, for a discus-sion clf the history of market power derived from patents in aselection of information technology industries.

Ch. 6—Technology, Intellectual Property, and the Operation of Information Markets • 171

of technical standards, special tax provisions,the funding of education, and public informa-tion production and dissemination-have alsohad significant effects on the development ofinformation markets. As markets change inresponse to new media and the expanding roleof information in economic life, policy makersmay need to think about how all of these mech-anisms interact in their affect on the diversityof available information.

Problems in Framing Policy ToPromote Information Diversity

Designing policy to promote diversity in in-formation is fraught with difficulty. Few ef-forts have been made to collect adequate datato make policy judgments about informationmarkets based on strict, quantitative criteria.47

The data that exist reveal little about how dif-ferent kinds of information are produced andused, about the factors that guide producersand users in their investment and purchase de-cisions, or about how to measure the influenceof different kinds of information as factors inthe production of subsequent information orother goods. 48 Moreover, much of the available

47Two comprehensive efforts at collecting data on the infor-mation economy have been undertaken and published. The first,Fritz Machlup’s The Production and Ilistribution of Knowledgein the .!lnited States, published by the Princeton UniversityPress in 1962 and since extended in three additional volumes,Knowledge and Knowledge Production, 1980, The Branches ofLearning, 1982, and The Economics of Information and Hu-man Capital, 1984, presents data on aspects of the productionof some varieties of information. The second, I,Iarc Porat TheInformation Economy, published in 1977 by the Departmentof Commerce, Office of Telecommunications, is a snapshot ofinformation-related economic activities for the year 1967. A thirdstudy, which updates some of Machlup’s work, is scheduled forpublication in 1986: Michael Rubin and Mary Taylor Huber,The Knowledge Industry in the United States: 1960-1980(Princeton, NJ: Princeton University Press, in press). The Copy-right Office has begun to produce a series of studies on the sizeof the copyright industries, the first of which was presentedto the Senate Judiciary Committee in December 1984. Manyeconomists and other writers use a wider array of industry-levelstatistics in analyzing the operation of information markets.It is often the case that these data are incomplete or may evenbe inappropriate to the analytic questions under consideration.

‘“”A strong argument can be made that this new kind ofcapital [knowledge capital] is more critical to the growth of theAmerican economy than is money capital. But knowledge capi-tal does not show up in the numbers economists look at (or quote)when evaluating capital formation. From “Gnomons, Wordsand 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,September 1985, p. 22.

data is supplied by stakeholders in the policydebates, and thus may be biased. At present,the available data are inadequate to directlyand objectively test hypotheses about invest-ment in and supply of different kinds of infor-mation.

Another problem is that the optimal diver-sity of information-based goods is difficult, ifnot impossible, to specify. Each person’s needsfor information are unique; and individualsplace different value on information depend-ing on the uses to which they plan to put it.In some cases, the information package maybe most valuable if it is standardized, as, forexample, is information on the toxicity ofchemicals. Other kinds of information are mostvaluable when they are simultaneously avail-able to a wide audience, as, for example, is newscoverage of a historic event. Other informa-tion is uniquely prepared for, and only valu-able to, a single individual, as is the financialanalysis of one’s estate. Therefore, the intel-lectual property goal of fostering a balanceddiversity of information is difficult to achieve,given the vastly different kinds of content andthe wide range of media that are needed to effi-ciently serve audiences ranging from one tomillions of users.

Proprietor Concerns, GovernmentPolicy Tools, and the Diversity

of Information

The actual diversity of information-basedgoods available to individuals and society de-pends on a complex set of factors. Because ofeconomies of scale and scope, proprietors’choices of profit-making strategies will beguided by whether, and to what degree, theycan select the audience for a given informationpackage. They select customers focusing onthree major criteria: exclusion (of nonpayersand competitors), collection, and price discrimi-nation. Government policy interacts with pro-prietor concerns and their strategies for select-ing audiences on a technical level and atransactional level to affect the diversity ofavailable information.


Technical Concerns

Information providers must select a distri-bution medium with technical characteristicssuitable for their particular variety of infor-mation content. For example, a broadcast tele-vision signal requires a dedicated portion ofradio spectrum; a publicly available computer-ized database information service requirescomputer hardware, software programs, anda public switched telephone network.

Government support for and promulgationof technical standards will fundamentally af-fect the development and operation of commu-nications media. The regulation and licensingof radio spectrum affects the operations of in-formation providers who use broadcast or pri-vate radio channels (including terrestrial micro-wave and geosynchronous satellite links) todistribute goods. The development of Inte-grated Services Digital Network (ISDN), whichwill rely heavily on fiber-optic lines, is currentlythe subject of a worldwide, but loosely coordi-nated, standards-making procedure. The re-sulting system will have major and long-lastingeffects on markets for information-basedgoods.”

Technical standards are also of fundamen-tal importance in regulating the content of cer-tain kinds of information, particularly factualand functional information. The National Bu-reau of Standards (NBS) has been interestedfor some time in establishing “Data QualityIndicators” for scientific and technical infor-mation that could help universities, businesses,and government agencies by increasing the

‘“See, for example, Michael D. Bander, “Pacific Bell ForseesThree-Phase ISDN Revolution, ” Telephony, Mar. 24, 1986, pp.44-53. In general, technical standards perform four basic func-tions in markets:

1. they provide information on terminology and test and meas-urement methods;

2. they promote minimum levels of acceptable quality, suchas safety standards do;

3. they promote compatildity of components in systems toallow users to purchase components from multiple vendors;and

4. they promote reduction in variety to allow economies ofscale to be realized.

John H. Young, Effects of Standards on Information Technol-ogy R&D: Local Area Net works and Integrated Service Di~”-tal Network, contract report prepared for OTA, November 1983.

reliability of factual information distributedby computer databases. “These indicatorswould provide the user with enough informa-tion to determine the utility and suitability forspecific purposes. ’50 Such information, manybelieve, could yield substantial productivityimprovements in research, development, andmanufacturing in a wide range of fields, andincreased safety for workers and for the pub-lic. NBS is also at work on technical standardsfor computer software to improve governmentoperations. These efforts may affect the na-ture of computer programs used by the privatesector as well.

Because of technical differences among me-dia, the difficulty of excluding, collecting, andprice discriminating will vary according to themedium. For example, many goods publishedin tangible copies, such as books, are availableto everyone at more or less identical prices.They are paid for in individual transactions,and require a visible capital investment to becompetitively reproduced for sale. Informationbroadcast over radio and television is, by andlarge, available to all and paid for by adver-tisers, and competing broadcasts are easy torecognize and exclude from competition.51

Information-based goods may also be leasedor exhibited to consumers on a per-use basis.Movies shown in theaters, pay-per-view tele-vision, and electronic databases are paid forin this manner. Many goods are provided bysubscription on a more or less continuing ba-sis. Information packages offered by lease orsubscription vary widely in terms of howproprietors can exclude, collect, and price dis-criminate. Some of these packages and trans-action mechanisms are looked at in detail

. — —‘(’National Bureau of Standards, Workshop on Data Quality

Indicators: Summary Report and Recommendations. Gathers-burg, MD, Feb. 10-12, 1982, p. iii.

“Printed and broadcast information are increasingly vulner-able to advanced copying technologies, Proprietors’ ability toexclude private copying is a subject of heated debate, and isdiscussed in other sections of this report. At this point, it isimportant to consider the potential for private copying as oneof the factors that all information proprietors must considerin their marketing strategies.


below. 52 As technologies for storing, commu-nicating, and processing information convergein computer-based systems, proprietors are in-creasingly concerned about the extent to whichusers may subsequently reuse or trade theirworks, and thus diminish proprietors’ oppor-tunities to collect for use and price dis-criminate.

Some forms of distribution and payment willencourage mass markets for goods and tendto restrict the diversity of the goods offered.53

Other forms of distribution and payment willencourage highly diverse varieties of informa-tion that are tailored to individual needs andpreferences. s’ Economic theory suggests thatproducers will use the feedback they receive,from observing how consumers purchase anduse goods, to fine-tune products and servicesto serve consumer preferences. Informationproviders may also use this transactional in-formation to improve price discrimination andthus increase their profits.

Transactional Concerns

A second factor a proprietor must considerin selecting distribution media and offering in-formation content is the cost of administeringbusiness transactions with his customers.Transaction costs will depend on the techni-cal characteristics of the media, the numberof customers the proprietor must deal withdirectly, and government-derived rules thatspecify the legal conditions to which trans-actions must adhere. The information he re-ceives from transactions will, in turn, providethe proprietor with feedback, allowing adjust-ments in products, services, and prices.

‘“’’What we must do is to analyze the natural structure ofthe new systems of communication as they seem to be emerg-ing to try to identify what systems of payment are enforceableand socially acceptable. ” Ithiel de Sola Pool, 7’ecfmolo@”es ofFreedom (Cambridge, MA: Belknap Press, 1983), p. 5.

“If the profitable provision of highly differentiated prod-ucts can occur only where different prices can be charged todifferent customers of the same product, while undifferentiatedproducts can be sold profitably at a single price, the differen-tiated products will not be offered even if efficiency would beincreased by doing so.” Besen, Economic Issues Relating toNew Technologies and Intellectual Property, p. 4.

‘Ithiel de Sola Pool, ‘*The Culture of Electronic Print, ”Daedalus, vol. 3, No. 4, fall 1982, pp. 17-31.

Intellectual property law and other gov-ernment mechanisms may affect diversity byencouraging one form of distribution overanother. For example, the enforcement of theftof service laws might make terrestrial micro-wave (MDS) more attractive than free broad-cast television as away of distributing moviesby making transactions with individual con-sumers profitable. Government-sanctionedmechanisms that aggregate transactions, suchas the Copyright Royalty Tribunal or privatecollecting societies such as ASCAP, can reducethe cost of managing the transactions betweenproprietors and users. This may give mediathat are covered by such arrangements costadvantages in obtaining content for distribu-tion. The aggregation of transaction arrange-ments may also affect ownership concentra-tion and market power in the informationindustry. For example, eliminating the com-pulsory licensing provision for cable televisionretransmissions may give cable program sup-pliers increased incentive to merge with or buyout competitors.55 Other regulations, such asthose that govern common carriers and thosecalled for in the Cable Communications Actof 1984, can require companies to offer leasedaccess to channels on a competitive basis.

Government policy may also encourage in-vestment in certain types of information con-tent by affecting the risks producers face intransacting business. For example, tax creditsand subsidies may discriminate among differ-ent types of information-based goods. Compul-

c5Priest, The Character of Information, p. 37. The currentoperation of the Copyright Royalty Tribunal (CRT) encouragesprograms suppliers to work together to settle royalty disputesso as to avoid the Tribunal’s adjudication procedure. This re-quires suppliers to seek representation from powerful trade ass~ciations, such as the National Association of Broadcasters andthe Motion Picture Association of America, who can afford thecost of presenting a case for remuneration to the Tribunal. TheCopyright Act grants antitrust immunity for private agreementson the distribution of royalties by the CRT. There is no publicrecord of how the trade associations decide to disburse fundsto the copyright holders they represent. See Cable Retransmis-sion of Broadcast Television Programs Following Eliminationof the “Must Carrj’ Ru)es (Washington, DC: Office of PolicyAnalysis and Development, National Telecommunications andInformation Administration, U.S. Department of Commerce,1985), p. 7. Some private collecting societies operate under anti-trust consent decrees that serve to inhibit price fixing and anti-competitive behavior. (See footnote 70, p. 281.)


sory licenses and royalty collection and dis-tribution may affect the relative costs ofrebroadcasting versus originating informationcontent.56 Government R&D and public infor-mation activities may make information-basedgoods available that can compete with goodsproduced or offered by the private sector. Ruleslimiting the transferability of intellectual prop-erty rights between creators and publishersmay affect the transfer of risk. Common-car-riage, cross-ownership, equal-access, and anti-trust rules can set limits on industry concen-tration and check anticompetitive transactionarrangements.

Private sector transactions may not provideall the information society requires because theprofit motive may not allow for the produc-tion or distribution of some kinds of informa-tion. Some information may be of such criti-cal importance to citizens and to the processof governing that policy makers may decidethat no one should be denied access for anyreason. Therefore, free or subsidized public in-formation sources, such as libraries and pub-lic schools, and tax-supported public informa-tion content, such as the census, weatherforecasts, and information on the operationsof government agencies, may be reasonableand proper alternatives to reliance on private-

‘hSee Cable Retransmission of Broadcast Television Pro-grams Following Elimination of the “Must Carry” Rules.

sector, profit-motivated information trans-actions .57

At the most basic level, intellectual propertylaw may specify which works are public infor-mation or are of such a fundamental naturethat they are neither copyrightable or patent-able. In this way, the law can prevent compa-nies from discriminating in the selection ofusers or from employing de facto proprietarystandards to exclude competition and exercisemarket power.58 And, as discussed above, le-gal distinctions, such as those implied by thecategories of art, fact, and function, may beuseful in adjusting the incentive structure tothe realities of electronic information produc-tion and distribution.

“OTA has studied the question of the impact of changingtechnology on the provision of public information. See FederalGovernment Information Technology: Management, Security,and Congressional Oversight, ch. 7, pp. 139-158, February 1986,for an overview of policy concerns relating to government in-formation.

“HThe fact that electronic information is often available onlythrough a system, that is, “a set of complementary productswhich must be used together to provide value” (Brock, TheTelecommunications Industry, p. 16), the potential for attain-ing market power is enhanced. For example, a computer manu-facturer may be able to restrict competition in markets forperipheral components by developing proprietary processor-in-terconnection standards (Brock, p. 17). Similarly, a companymay employ copyright on operating system software to restrictcompetition for its hardware or applications software; and acommunication company may restrict competition by refusingto provide competitors with connecting lines to customers.

PROBLEMS IN SELECTED MARKETS FORINTELLECTUAL WORKS

Print Technology and the Functioningof Copyright in Book Markets

Traditionally, copyright law has been mostconcerned with the relatively simple marketsfor distributing information-based goods inprinted form. Printing production technologyis efficient on a relatively small scale; for ex-ample, printers may produce a fairly smallnumber of copies of books at a per-copy costthat is not much higher than large-scale print-ing. Thus, there are more than 15,000 Amer-ican book publishers, and most of these com-

panies are small.59 But large advertisingexpenditures, buyouts of publishing houses byconglomerates that may be more adverse totaking risks,60 and the concentration of bookretailing

61 have, some observers contend,

“’’The Book Business, ” Ech”torid Research Reports, June28, 1’385, p. 479.

‘Twelve publishing firms, all of them divisions of conglom-erate corporations, garnered 45 percent of book sales in 1983.“The Book Business, ’ p. 486. See also, Lewis A. Coser, CharlesKadushin, and Walter W. Powell, Books: The Culture andCommerce of Publkdu”ng (New York: Basic Books, 1982), p. 29.

‘i’ Although approximately 80 percent of the 9,500 full-linebookstores are independently owned, the volume of orders thatpublishers 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 forauthors trying to publish their first book.62

Others contend that, “the cost of printing, off-setting, or photocopying a manuscript remainslow enough that virtually anyone can publishanything. "63 Thus, the problem for new authorsmay not be getting their books published, butgetting them reviewed and widely read.

Not all publishing firms perceive of theirbusiness in the same ways. Some considerthemselves to have an almost exclusive respon-sibility to maximize profits for owners andstockholders. Others feel they are primarily re-sponsible to the educated public, to the gen-eral public, or to the cultural traditions of theNation.64

Publishers are increasingly influenced by themedia industries and corporate world in whichthey must do business. The growth and result-ing complexity of many publishing houses has,in some cases, caused a loss of contact betweenpublishers and the writers, thinkers, and liter-ary critics who previously were central to thepublishing business. The integration of bookpublishing into conglomerate corporations alsotends to divorce publishing decisions frompurely literary criteria. Publishing contractsare more often negotiated with literary agentsor lawyers rather than with authors. 65

Independent authors use copyright in nego-tiating the conditions under which publisherswill offer their books to the public. In mostcases, the author transfers his copyright own-

(continues from previous page)

ton, Barnes & Noble, and Crown, give them a major influenceover what gets published.

[T]he chains tend to reserve shelf space for guaranteed best-sellers b}’ name authors, books that are hot at the moment (suchas celeb;ity exercise books or diet books) and low-cost sale bookscalled remainders [unsold hardcover books returned to publishersand wholesaled to chains at very low prices]. Many books thathave been published in the recent past and sell in steady butlow quantities, are difficult, if not impossible, to find at the dis-count chains.

“The Book Business, ” p. 495.““J%’ill Books Survive?”’ a discussion held at the American

Booksellers Association convention in San Francisco, Lewis H.Lapham, moderator, Harper’s, August 1985.

‘ ‘Paul Hirsch, “U.S. Cultural Productions: The Impact ofOwnership, ” Journal of Communication, vol. 35, No. 3, sum-mer 1985, p. 114.

“Coser, Kadushin, and Powell, Books, p. 15.“’Ibid., pp. 31-32,

ership to the publisher in exchange for edit-ing, typesetting, printing, distribution, adver-tising, and promotional services. The authormay receive compensation in advance of thesale of copies. He also will receive a royalty,usually about 10 percent of the sale price, foreach copy sold. Often, the advance paymentis deducted from the author’s forthcomingroyalties.

Currently, the players in the intellectualproperty community are debating the transfer-ability of intellectual property rights, and thepotential alterations in the bargaining posi-tions of creators and publishers that mightoccur should the transferability of rights bechanged. The transfer of rights is closely re-lated to the transfer of risk between author andpublisher. Some economists contend that achange in intellectual property law that limitsthe extent to which authors may transferrights over their works will limit their abilityto transfer risk.66 Such a view assumes that“work for hire’ is the extreme case in whicha creator is so averse to risk that he exchangesall rights in his work for a salary.

Existing copyright law returns control of awork to an independent author after 35 yearsunless he renews the transfer contract.67 Pol-icymakers could shorten this term, taking intoaccount the reasonable shelf life of differentkinds of works, and so give independent au-thors more long-term control over their workwithout producing a large effect on their abil-ity to transfer risk.

The work-for-hire situation is more compli-cated. Employers often supply hired creatorswith sophisticated and expensive equipment,and therefore claim ownership in the worksproduced in their shops. Another problem isthat many works are produced by teams of cre-ators, and it can be very difficult to dividerights in a work. In such cases, corporateownership may be a more efficient way of orga-

“’Besen, Economic Issues Relating to New Technologiesand Intellectual Property, pp. 30-33.

‘-Generally, publishing contracts allow publishers, but notauthors, to terminate the contract. Coser, Kadushin, and Powell,Books, p. 229.


nizing production, distribution, and rewardsto creators. Thus, although modifying the rulesabout transfer of rights may foster the diver-sity of some kinds of information by encourag-ing independent authorship, other kinds ofinformation production may be too complexfor anything but corporate sponsorship andcontrol.

Subsidiary rights to derivative works isanother issue of interest in the negotiationsbetween a creator of an intellectual work anda publisher. The law allows a copyright propri-etor to exploit markets for a work other thanthose for the initial form in which the work ispublished. This raises the question of whetherthe creator or the publisher is to control theexploitation of markets for these works. Whenthe subsidiary markets are known (e.g., a novelalways has a potential to be produced as a playor movie), the contract between author andpublisher can specifically address the controlof subsidiary rights. However, given the rapidchanges in information uses and distributiontechnologies, it is conceivable that new formsfor distributing works will emerge that are notcontemplated in current publication contracts.In this context, intellectual property law couldspecify which party owns rights in unantici-pated markets if contracts are not explicitabout subsidiary rights.

The questions raised by the issue of thetransferability of rights between creator andpublisher may be relevant to a wide range ofsituations. For example:

the development of computer software,where the question involves the way inwhich the authors of software and firmsthat market and distribute their productsdivide the revenues from sale or lease;the production of motion pictures, wherethe questions involve the rights retainedby producers and those transferred to afilm’s distributors;the production of television programs,where the questions involve the rights re-tained by producers and those transferredto the networks; andthe invention of technical processes or new

products, where the questions involve therights retained by the inventor and thosetransferred to the exploiters of the in-vention.

Motion Pictures, Videocassettes, andthe First Sale Doctrine

Motion picture production and distributionis a part of the information industry in whichthe definition of rights and the conditions un-der which those rights may be transferred areof growing importance. In this part of the in-formation industry, intellectual property ruleshave a major influence on the diversity of prod-ucts produced and made available to the pub-lic. The markets for motion picture productshave expanded since the 1950s as television,followed by videocassettes, became alternativemethods of distribution, augmenting tradi-tional theater exhibitions.68

The major motion picture distributors stag-ger the release of feature films in these mar-kets to maximize the per-viewer net revenuethey can obtain in each, and thus maximizetheir profits for each film.69 (See figure 6-2.) Thestaggered or ‘tiered’ release strategy is awayof implementing price discrimination. Thoseconsumers who value early access to a movieare willing to pay a higher price than those whoare content to wait for it to appear on pay tele-vision or those who can wait 2 years or moreuntil they may expect to see the movie on freetelevision.

““The characterization of “scope” in movie products may bea subject of disagreement. To be characterized, on a priorigrounds, as distinct markets for different products, the differ-ent forms of movie distribution would have to substitute verylittle for each other. In practice, there apparently is substan-tial substitution between at least some of the forms, in particu-lar rented cassettes and pay television. Other forms, such astheater attendance and cassette sales, substitute less and mayin fact be complementary products. See David Waterman, “Pre-recorded Home Video and the Distribution of Theatrical Fea-ture Films, ” ch. 7, pp. 221-243, in Video Media Competition:Regulation, Econom”cs and ‘Technology, Eli M. Noam (cd.) (NewYork Columbia University Press, 1985). The Justice Depart-ment has specific guidelines for defining market scope in mergerand antitrust actions that are based on the ability of producersto control prices. See U.S. Department of Justice, AntitrustDivision, Merger Guidelines, 1984.

“’Waterman, “Prerecorded Home Video and the Distribu-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 fora Major Theatrical Feature

SOURCE Waterman & Associates Video Media Competition. Regulation Eco-nomics and Technology. EIi M.Noam (ed) (New York Columbia Univer-sity Press 1985)

The profitability of the tiered release strat-egy depends on the distributor’s ability to con-trol the timing, number of exhibitions, andprice of the movie in each market. Such con-trol allows him to coordinate advertising andpromotion, and segment markets according tothe cost of the various distribution media andthe value of the product to different con-sumers. 70

Price discrimination in the sale of informa-tion-based products may promote efficientallocation of investment since the revenuereturned to a producer more closely approxi-mates the value of the good to consumers. Theprofitability of markets for different forms canalert producers and distributors to trends inconsumer preference. However, extensive pricecontrol combined with barriers to market en-try for potential competitors may reduce mar-ket efficiency by allowing producers to restrictsupply and obtain monopolistic profits. Tradi-tionally, movie distributors have almost com-pletely controlled access to their products andthe prices charged for access.” This has been

I hid,Marketplace controls by motion picture producers, distri-

butors, and exhibitors ha~re been the subject of antitrust litiga-tion for many years. See, for example, Paramount Famous Lask.lrCorp. ~. United States, 282 U.S. 30,42 (1930), Schine Chain Thea-ters, Inc. t’. United States, 334 U.S. 110 I 1948), United States\r. l)aramount Pictures, Inc., 334 U.S. 131 ( 1948), and UnitedS’tates }’. l,oew Inc., 371 U.S. 38 ( 1962). These and other cases

possible, in part, because until recently movieswere not distributed to end-users in individ-ual, tangible copies. And lease agreements fortheaters and television have strictly controlledthe conditions under which movies may be ex-hibited.

The release of movies in videocassette formand the growth of the video rental market haveloosened distributors’ control over the timing,frequency, and prices charged for access totheir products. The first sale doctrine is a ma-jor impediment to distributors’ control overthe cassette rental market.72 Because of this,the major distributors of feature movies sup-port amendment of the first sale doctrine toallow distributors more income from videocas-sette rentals and to compel rental outlets toseek specific permission to rent cassettes.73

Other cassette distributors who do not also dis-tribute movies to theaters for exhibition op-pose this change.74

Amendment of the first sale doctrine couldhave mixed effects on the overall efficiency ofthe videocassette market. On one hand, dis-tributors would probably try to raise prices forcassette rental. This would tend to push theirper-viewer revenues on cassette rentals closerto those from the highly price-efficient pay-per-view cable and theater distribution modes andthus increase the major distributors’ net rev-enues. The major distributors argue that thisrevenue would be used to finance the produc-tion of more movies to meet the increased de-mand for films fostered by the new distribu-

.are analysed in Michael Conant, Antitrust in the Motion Pic-ture Industry (Philadelphia, PA: Ayer Co., 1978).

“’’The fact that distributors choose to release movies onprerecorded software [video cassettes and disks] in spite of the[first-sale] doctrine is evidence that they increase their net rev-enue by doing so. Waterman, p. 236.

“The Motion Picture Industry Association and its membercompanies, Paramount, Columbia, MGM/United Artists, 20thCentury Fox, Universal, Warner Brothers, Embassy, Orion, andBuena Vista (Walt Disney), who together controlled more than89 percent of theatrical distribution and 90 percent of videocas-sette distribution in 1983 (data from Waterman, tables 1 I andIV) have been the major proponents of first sale doctrine amend-ment for videocassettes. Two bills to amend the first sale doc-trine for audio-visual works were introduced in Congress andhad hearings held on them in 1983 and 1984: H.R. 1029 and S.33.

“’Statement of Austin O. Furst, Jr., before the House Judi-ciary Subcommittee on Courts, Civil Liberties, and the Admin-istration of Justice, Apr. 12, 1984.


tion technologies. 75 They argue, moreover, thatthe prices for cassette purchases by userswould decline because distributors could pricediscriminate between sales to rental outletsand to final consumers.

On the other hand, higher cassette rentalreturns to distributors may force many rentaloutlets out of business. The market for cas-sette rentals is in the process of consolidationand shake-out even with the first sale doctrineintact.76 Any increase in rental prices thatcaused a substantial reduction in rental vol-ume would be likely to cause further concen-tration and would work to the disadvantageof smaller outlets.77 A reduction in rental out-lets would tend to reduce price competitionamong the remaining outlets; a reduction inrental volume could force the outlets left todevote more shelf space to mass-market fea-ture titles and less to titles appealing tosmaller, more specialized consumer markets.78

Some opponents of past attempts to amendthe first sale doctrine for videocassettes arealso concerned that modifications could leadto the imposition of “tie-in’ or “full-line” salesrequirements by distributors. In such arrange-ments, a distributor would require a rental out-let to purchase additional titles as a conditionfor obtaining one or more very popular works.If this were legal,79 a distributor would have—— ——- - — . ——

“’iThe Consumer Video Sales/Rental Amendment of 1983Briefing 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.

“’Statement of Nina W. Cornell, President, Cornell, Pel-covits & Brenner Economists Inc., before the Subcommitteeon Courts, Civil I.iberties, and the Administration of Justiceof the House Judiciary Comrnittee, Econom”c Impacts of Repeal-ing the First Sale Doctn”ne for Audiovisual Works, Oct. 27, 1983,pp. 29-31.

‘“Statement of Stuart Karl before the House Judiciary Sub-committee on Courts, Civil Liberties and the Administrationof Justice, Apr. 12, 1984, pp. 13-15.

“9The Supreme Court has ruled that tying arrangements areillegal because they, “deny competitors free access to the mar-ket for the tied product, not because the party imposing thetying requirements has a better product or lower price but be-cause of this power or leverage in another market. At the sametime buyers are forced to forego their free choice between com-peting products. ” Northern Pacific Railway v. United States,356 U.S. 1,6 (1958). The amendment of the first sale doctrineproposed in H.R. 1029 may not specifically permit such tyingarrangements, but it may lead to many situations in which liti-

more control over a rental outlet shelf space,and could compete with other distributors onbases other than the price and quality of hisgoods.

The conflict over the first sale doctrineamong players in the videocassette market isespecially interesting in light of the motion pic-ture industry’s overall current situation. Fig-ure 6-3 shows the number of feature moviestarts by major studios and independent pro-ducers. The steep rise in feature film produc-tion beginning in 1982 was predicated on theindustry’s perception of increased demand,fostered by the growth of the cable televisionand videocassette markets and by an infusionof more than $1 billion in capital in 1984.80

Some stock analysts consider markets for fea-ture motion pictures to be facing an impend-ing glut. They have cautioned investors notto expect impressive earnings from the majordistributors. 81 In fact, the major movie studioshave recently cut production sharply .82

The important policy question is whether theproposed amendment of the first sale doctrinewill, as the major distributors claim, lead toincreases in the number of films produced andmake the films more valuable and available toconsumers. Faced with impending market glut,the producers of feature films often react bycutting production. Alternatively, they mayattempt various mechanisms to exact morerevenue from the films they produce. Adver-

gation would be required to nullify cases of tying, whereas theirlikelihood is much less under the current video cassette marketstructure. See Statement of Jonathan Rose, Professor of Law,Arizona State University College of Law, before the Subcom-mittee on Courts, Civil Liberties, and the Administration of Jus-tice of the House Judiciary Committee, Feb. 23, 1984. General-ly, unlike the legal precedent in patent infringement cases,antitrust violations have not been treated as a valid defenseof copyright infringement. See Robert A. Feitel, “CopyrightMisuse and Cable Television: Orth-O-Vision, Inc. v. Home Boxoffice,’” Federal Commum”cations ~Jtfw Journal, vol. 35, fall 1983,pp. ,347-373.

“OHarold A. Vogel, “(llitterless Glut,’” ~ntert~”nment ~n.dustry, Merrill Lynch, Capital Markets Securities Research Di-vision, Jan. 28, 1985.

“J’ogel, “Glitterless Glut. ”““A cut in production apparently improves the quality of

films–and improves their chances to become hits by giving themmore exposure. ” Ellen Farley, “The Movie Studios Hope LessWill 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

1973 1974 1975 1976 1977

SOURCE Weekly Variety, Jan 2, 1985

tising and promotion for individual films mayincrease. Concomitantly, distributors may tryto increase the efficiency of price discrimina-tion.

The amendment of the first sale doctrine, aswe have seen, could be expected to aid the ma-jor feature film producers, at least, in doingthis. Some have suggested other ways to in-crease price efficiency. One proposal is to giverebates to purchasers of cassettes to, in effect,discriminate between the sale-only and rentalmarkets.83

The industry is responding to market con-ditions in the absence of changes to the firstsale doctrine. Distributors are beginning to usethe broad retail market base that has sprungup from demand for cassette rentals to seg-ment rental markets into more specialized anddiverse video offerings. This trend is alreadyevident in the growing popularity of educa-tional titles and such specialty items as “JaneFonda’s Workout. ”

The videocassette market may represent anopportunity for independent film producers tomarket their movies without signing over con-

“ ftose, pp. ~12-fItI. The important factor- in the success of thisstrattigyr would he the elasticity of demand for cassette pur-ch as(~s. S{)m(’ e~riden{e suggests that sales of some very popu-lar title+ can t)e increased dramaticall~. l)~r lowering the pric’cto n(’zirer t ht. marginal cost. See M’aterman, p. 2;35, and (’ornell.pp 19-21

---

1978 1979 1980 1981 1982 1983 1984

Year

trol of all distribution rights to the major dis-tributors, as they have generally been obligedto do with feature motion pictures. The inde-pendent distributors are also beginning to usetheir revenues to finance the production offilms.84 The issue of first sale doctrine repealmay thus involve the question of whether thevideocassette market is to be an ancillary mar-ket for feature films or a new means of offer-ing consumers a diverse range of video prod-ucts based on a new technology.

Implicit in the above analysis of the video-cassette market is a policy question that maybe particularly difficult to answer definitively:What level of investment on a given intellec-tual work does and should intellectual prop-erty law encourage? For example, should pol-icy encourage movies that cost $15 million toproduce? This is not the kind of question thatintellectual property law has heretofore beenconsciously concerned with. But decisionsabout intellectual property rules may have amajor influence on the level of investment ina given work that is profitable. Because filmmakers compete for consumers’ time as wellas money, a decision to uphold the first saledoctrine in the case of videocassettes may en-courage investment in cheaper film projectsat the expense of investment in costlier

‘“’ F’urst pp. I5-16

, .

180 . Intellectual Property Rights in an Age of Electronics and Information-. —

projects. 85 Thus, intellectual property policy-making may require hard, explicit decisionsabout the nature and content of some infor-mation markets, which may compel policymakers to make judgments about the socialvalue of private investments in different kindsof works.

Information Services, ElectronicDatabases, and Derivative Works

The scope of the information services indus-try is illustrated by table 6-4 which lists thevariety of activities carried out by membercompanies of the Information Industry Asso-ciation. These companies find or create infor-

‘“At least one film-industry analyst disagrees strongly withthis conclusion. He believes that the number of projects under-taken, and not the per-project spending or quality of films, willbe reduced by upholding the first sale doctrine. David Water-man, personal communication, January 1986. However, anotheranalyst cites the movie industry reaction to the introductionof television to argue that per-movie investment levels may de-cline in the face of competition from new technologies. Hirsch,“U.S. Cultural Productions, ” p. 116; see also Paul Ilirsch, “Proc-essing Fads and Fashions: An organization-Set Analysis of Cul-tural Industry Systems, American Journal of Sociology, Jan-uary 1972, pp. 639-659.

— ——

mation and package it in forms most usefulto their clients. They may obtain the informa-tion from government sources, nonprofit in-stitutions, other private information compa-nies, or they may originate it themselves. Theyadd value to this information by packaging themost relevant, timely, and reliable informationin its most useful form.

Within the information services industry,the impact of intellectual property law is a sub-ject of great interest and some controversy.In particular, these markets are directly af-fected by the rules governing derivative usesof intellectual properties.

Many information service providers obtaininformation from several sources and thenprofit from distributing the package of infor-mation they create. Often, the informationservice company claims a property right on thepackage. In other cases, the service companyadministers the property rights of those whoprovided them with information content.

A producer’s profits and leverage in attract-ing information from originators depend on hisability to exclude nonpaying customers from

Table 6-4. —Primary Activities of Information Industry Association Members

2626252222

22

2019

19

1918181717

171716

Document acquisitions and delivery (S)Periodicals-publishers (P)Publishing (P)Consulting services (S)Databases—design and/ormanagement (S)Databases—information (P)(publishers of information aboutdatabases)Indexing publishing (P)Databases—searching (S) (firmsthat carry out database searches)Information systems—design andevaluation (S)Market research services (S)Business information (P)MicropublishingCurrent awareness services (S)Databases–vendors/lessors (S)(companies that produce or sell theuse of databases)Government information (P)Literature searches (S)Corporate information (P).- -—.—. .—

KEY (S) Service(P) Product

151313131211111010

988888877777666—

SOURCE Carlos A Cuadra, ‘The Role of the Private Sector1, January 1980 p 98

—Directories (P) 6Abstracting publishing (P) 6Indexing services (S) 6International business information (S) 6Energy information (P) 6Abstracting services (S) 5Financial information (P) 5Marketing services (S) 5Software (S) 5Scientific literature (P) 5Audiovisual materials (P) 5Cataloging services (S) 5Engineering information (P) 5Environmental information (P) 5Legal information (P) 5Television information (P) 5Clearinghouse (D) 5Library Automation Services (S) 5Medical literature (P) 5Newsletters-publishers (P) 5Typesetting services (S) 5Asia (P) 5Economics (P) 5Electronics information (P)— .—

Forecasting services (S)Microform system design services (S)Micrographic services (S)Records management services (S)Reprint publishers (P)Accounting information (P)Agriculture (P)Book information (P)Bookselling services (S)Chemical information (P)Computers-hardware (S)Conferences-information (P)Drug information (P)Education (P)Europe (P)Financial Information (International) (P)Information industry (P)Looseleaf services (P)Management information (P)Patent information (P)Product development (S)Social science literature (P)Statistics (P)

I n the Development and Improvement of LIbrary and Information Services ‘‘Library Quarterly, vol. 50, No


using his goods. Success also depends onwhether he can prevent others from commer-cially exploiting his various packages, andwhether he can prevent competitors from re-packaging his products. Such exclusion willaffect his competitors’ available sources of sup-ply and the ways they may use the informa-tion available. Thus, the stronger derivativeuse rights are, the greater the potential for con-trol a producer will have over the prices hecharges and the exclusion of competition. Butif derivative use controls are too weak, the pro-ducer may be unable to receive compensationadequate to cover the cost of constructing aparticular package.

The information service providers’ dilemmaover derivative use rights is mitigated some-what by the nature of their business. Theirproducts are valued because they meet the spe-cific needs of their clients. Thus, given somelatitude in the derivative use of others’ prod-ucts, small companies can succeed by target-ing a particular market niche and serving thosecustomers well.

Since the products are highly customized,the market for a particular product may bequite small because the demand for additionalcopies is quickly exhausted. Thus, a serviceprovider may be able to succeed by focusinghis efforts to exclude competitors on a smallgroup of people; and control over his productsneed only limit the ability of competitors tosteal his customers. With no marketplace rules,competitors could do this by unfairly under-cutting prices and competing without invest-ing in finding and purchasing or developingtheir own information. The regulation of un-fair trade practices may serve as well or bet-ter than copyright in this situation.86

Electronic delivery of information servicescomplicates the situation. Over the past 10years, this segment of the information econ-omy has grown to the point where there arenow over 2,800 data files publicly available to

“’The formalities of copyright, registration and deposit ofcopies with the I,ibrary of Congress, ma}’ be especially burden-some to the producers of highly di~’ersified and frequently up-dated information products.

users with the proper computer and commu-nication equipment.87 These services operateby making a very large file of information, suchas scientific journal bibliographic citations orindustry statistics, available with softwarethat allows users to search the file and createa customized information product themselves.Competitors may copy the entire file or sig-nificant portions of it, construct their ownsearch software, and exploit the original pro-ducer’s market by undercutting prices. Thus,derivative uses of large electronic databasescan be more attractive to competitors; and deri-vations may damage the original producer ofa large database more than they would a com-pany serving a small market niche. Conversely,producers of large electronic databases haveeconomies of scale and scope not available tothose who employ people directly in produc-ing customized products. Thus, the on-line in-formation service industry may have a greatertendency to concentrate than does its printcounterpart, and large electronic database pro-ducers may have greater power to control thesupply and price of information.88

Another potential problem related to con-centration in the electronic publishing indus-try concerns the question of private controlover information in a particular field. Althoughit may be most efficient for consumers to beable to go to one source to obtain all the avail-able information on a particular subject, themonolithic control thus afforded the proprie-tor of such a source may allow him to elimi-nate all effective competition—to corner themarket for information on a subject—and thusset conditions on access and prices so as to earnmonopoly profits.89

“’Martha E. Williams, “Policy Issues for Electronic Data-bases and Database Systems,’” The Information Societ~r, vol.2, Nos. 3/4, 1984, p. 445.

““The top four (out of 14 total) vendors of electronic data-bases in the U.S. information center library market accountedfor 92.6 percent of the $54.08 million in 1984 re~enues in thatindustry. Two firms accounted for approximatel~’ 84 percentof 1984 revenues. Martha E. Williams, Information ,Tfarlret IZI-

dicators, summer 1985, pp. 1-2.““Martha E. Williams, “Policy Issues for Electronic I)ata-

bases and Database Systems, ” The Information Societ~r, vol.2, Nos. 34, 1984, p. 4 11; and Pool, “User Interfaces, p. 441.Pool suggests that information resource monopolies are likel~rto be narrow and perhaps short-lived.


Computer Software, Market Size, andthe Cost of Contract Administration

The dynamics of markets for computer soft-ware programs depend, to a large extent, onmarket size—that is, the number of users whomay find a particular type of program usefulto them. Many programs are so specializedthat markets for them are quite small. In thesecases, it is possible for distribution to proceedon the basis of contracts worked out with in-dividual purchasers. Individualized contractshave the advantage of spelling out in detailthe rights that a user purchases and the rightsthat a proprietor retains. For example, soft-ware for mainframe computers has largely beendistributed under contract lease or license ar-rangements where the purchaser does not ac-tually buy a copy, but instead buys rights touse and perhaps modify a program. The ven-dor often agrees to provide certain services,such as expert help in customizing a programfor specific user requirements, provision of up-dated versions at favorable prices, or on-callresponse to problems that crop up in using thesoftware. Often, the software distributed un-der contract is treated as a trade secret. Thus,when software is distributed under terms ofindividualized contracts, the government rolemay be confined to adjudication of contractdisputes at the State level. Software proprie-tors may also seek Federal copyright for addi-tional protection against programs that maycompete as substitutes.90

Computer software proprietors often faceparticular problems in controlling or exclud-ing the marketing of programs that are poten-tial substitutes for their programs. There isoften a range of programs available that mayprovide similar value to users. These programsmay have been developed in the course ofgovernment-sponsored R&D, and many are inthe public domain. For example, the computerlanguage called “Forth” was developed at theNational Radio Astronomy Observatory. Onecompany that deals in developing and market-ing products based on Forth has to compete

‘See SAS Institute, Inc. v. S&H Computer Systems, Inc.(M.D. Term. 1985, nos. 82-3669 and 82-3670).

with some programs in the public domain, andsome that have been developed by hobbyistswho are not especially interested in profitingfrom the use of their work.91 In such situations,users may see a wide disparity in the pricesbeing charged for programs that may appearto have similar capabilities. A proprietor incommercial business, in these circumstances,will have to compete with such substitutes byadvertising and offering superior service. Suchcompetition can result in a healthy diversityof software products. But users can also be con-fused by this diversity, and they may be be-wildered by the prices that commercial soft-ware providers charge.92 Thus, the softwarebusiness can be particularly risky, and is oftendependent on elaborate and expensive market-ing techniques.

Software developers have tried a number ofinnovative marketing techniques for softwareprograms. For example, one successful effortgoes under the title “Freeware.” The conceptof Freeware evolved of necessity, according toAndrew Flugelman, the program’s creator anddeveloper. 93 Flugelman was searching for a wayto share a program he developed for commu-nicating among computers by telephone, andmake money from his efforts at the same time.To protect his investment, he considered a soft-ware protection scheme, but he discarded theidea because he figured that it would be un-popular, ineffective, and would limit the useof his software. Having been a book publisher,Flugelman was well aware of both the highvalue and high cost of advertising a productand of setting up mechanisms to distribute it.Putting these two concerns together, he cameup with the idea of offering his software free—first on electronic bulletin boards and later bymail. He anticipated that, once his method took

y Interview with Edward Conklin, FORTH, Inc., Apr. 19,1985.

9“Software companies, like most information providers, havesignificant discretion in setting prices because, once a packageis developed, reproduction and distribution costs are relativelylow. They often set prices high under the assumption that apackage with a high price is perceived as superior to one thatserves a similar function but is much cheaper. Elizabeth Ran-ney, “The Puzzle of Software Pricing,” Info WorM, Nov. 4,1985,pp. 35-39.

‘“ 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-tribute his product. However, while Flugelmanoffered his software for free, he encouragedthose who used it to pay a nominal fee to showtheir satisfaction with the product.

Several other software developers have usedsimilar approaches to launch their products.Some, like Flugelman, have been successful ingenerating healthy revenues and in maintain-ing full-time businesses. 94 These approaches,however, have had their problems. Since soft-ware products often require extensive docu-mentation and user support to be fully utilized,the costs of such support can grow uncontrol-lably. Furthermore, as Flugelman has noted,the Freeware concept appears to have workedmost successfully with the individual user—the computer hobbyist, the home user, and thevery small business man. With these users, thecreator can appeal on a one-to-one basis to “themorality and basic honesty of the public.”95

In the environment of large corporations, per-sonal appeals are apt to get lost.

Software designers may indeed increasinglyhave to resort to approaches that rely on usersto advertise and distribute software, becauseboth advertising and distribution are begin-ning to constitute larger and larger proportionsof software companies’ total costs. Ashton-Tate, for example, spent $4 million on adver-tising during the Democratic Convention andthe Los Angeles Olympics, Similarly, othercompanies are aggressively pursuing a vari-ety of advertising and marketing schemes inan effort to stay at the top of what is now ahighly turbulent and competitive industry. Toincrease the sales and name recognition of theirproducts, some companies are even offeringtheir buyers coupons, trial samples, and trade-ins on previous models. In such a climate, awhole variety of new advertising and distri-bution schemes can be expected.

As personal computers have come into wide-spread use, the cost to software proprietors

—“See Larry Thompson, *’Freewa-~ and Freeware. ” Iliscotrer,

November 1984, pp. 87-89.4 “Software: The .New Driving Force: J$rith Computers Be-

coming More Alike, the Action Shifts to Programs, BusinessUreek, Feb. 27, 1984, p. 74.

of managing individualized contracts and pro-viding customized user services has risen dra-matically. Proprietors have tried a number ofstrategies to lower these transaction costs. Forinstance, many software companies offer” sitelicenses” that authorize a purchaser, such asa company or government agency, to make aspecific number of copies for multiple usewithin the institution. But site licensing maynot be practical unless the proprietor deals witha relatively small number of institutions. Thisis because the proprietor must have frequentcontact with the user institution, sending rep-resentatives to the site regularly enough to as-sure that the terms of the agreement are notbeing violated.” Moreover, when proprietorsare dealing with very large institutions, sitelicenses may make the problem of enforcingcompliance with the license extremely costlyto monitor.

Another strategy adopted by the distribu-tors of personal computer software is the“shrink-wrap” license. With these, vendors ofmass-market programs, such as word process-ing packages, display a licensing contract onthe cover of the container in which the soft-ware and its documentation are sold that speci-fies the exclusive rights that they retain. (Seefigure 6-4.) By opening the package, the pur-chaser tacitly agrees to the provisions of thecontract. The legality of such ‘take it or leaveit contracts has been tested in only one State,Louisiana, which passed a specific statutevalidating shrink-wrap licenses.

Many computer program users are con-cerned about shrink-wrap licensing because itincreases their uncertainty in making com-puter software purchase and use decisions. Auser may decide after trying a program thatit is not appropriate for his particular needs.There is also a question of what rights a pur-chaser might have should the software ven-dor go out of business. A purchaser may en-trust valuable information that is critical tohis business to the operation of a particularsoftware system, and come to rely on vendorsupport. Industry is addressing this problem

‘+’lldward !{’arner, “Site I,icensin~ Stirs IJebat~ at Com-dex, ” C’omputerworki, May 13, 1985, pp. 1,11.


to some extent by establishing “software es- licensees should the vendor go out of businesscrow” 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 AgreementYOU SHOULD CAREFULLY READ THE TERMS AND CONDITIONS OF THIS AGREEMENT BEFOREBREAKING THE SEAL OF THIS PACKAGE OPENING THE PACKAGE INDICATES YOUR ACCEPTANCEOF THESE TERMS AND (’CONDITIONS XYQUEST PROVIDES THIS PROGRAM AND LIENSES ITS USEIN 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 PROGRAMLICENSEYou maya) 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 ofyour 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 programmerged 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 thisAgreement If you transfer the program, you must at the same time either transfer all copies whether in printed ormachine readable form to the same party or destroy any coples not transfered, this includes all modifications andportions of the program contained or merged into other programsYou must reproduce and include the copyright notice on any copy, modification or portion merged into anotherprogramYOU MAY NOT USE, COPY, MODIFY OR TRANSFER THE PROGRAM, OR ANY COPY, MODIFICATIONOR MERGED PORTION, IN WHOLE OR IN PART, EXCEPT AS EXPRESSLY PROVIDED FOR IN THISLICENSEIF YOU TRANSFER POSSESSION OF ANY COPY, MODIFICATION OR MERGED PORTION OF THEPROGRAM TO ANOTHER PARTY YOUR LICENSE IS AUTOMATICALLY TERMINATEDTERM OF LICENSEThe license is effective until terminated. You may terminate the license at any other time by destroying the programtogether with all copies, modifications and merged portions in any form It will also terminate upon conditions setforth elsewhere in this Agreement or if you fail to comply with any term or condition of this Agreement. You agreeupon such termination to destroy the program together with all copies, modifications and merged portions in anyformLimited WarrantyTHE PROGRAM IS PROVIDED ‘AS IS’ WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED ORIMPLIED, INCLUDING, BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITYAND 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 STATESDO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOTAPPLY TO YOU THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS AND YOU MAY ALSO HAVEOTHER RIGHTS THAT VARY FROM STATE TO STATEXYQUEST does not warrant that the functions contained in the program W ill meet your requirements or that theoperation of the program will be uninterrupted or error free.Limitations of RemediesXYQUEST’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 XYQUESTor an authorized XYQUEST distributor along with a copy of your receipt, orb) if XYQUEST is unable to deliver a replacement diskette which is free of defects in materials or workmanship, youmay 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 LOSTPROFITS, LOST SAVINGS OR OTHER INCIDENTAL OF CONSEQUENTIAL DAMAGES ARISING OUTOF THE USE OR INABILITY TO USE SUCH PROGRAM EVEN IF XYQUEST HAS BEEN ADVISED OF THEPOSSIBILITY OF SUCH DAMAGES OR FOR ANY CLAIM BY ANY PARTY.SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTALOR CONSEQUENTIAL DAMAGES SO THE ABOVE LIMITATION MAY NOT APPLY TO YOU.GeneralYou 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 TOITS TERMS AND COND1TIONS. YOU FURTHER AGREE THAT IT IS THE COMPLETE AND EXCLUSIVESTATEMENT 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 theIntellectual Property Bargain

Contents

. . . . . . . . . . . . . . . . . . . .Findings . . . . . .

The Intellectual Property Bargain . . . .Transformation of the Constitutional

. . . . . . . . . . . . . . . . . . . . . . . .

Bargain : : : : : : : : : : : : : : : :The Intellectual Property Bargain in a New Technological Context

Private Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Use as Fair Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .

P a g e

187

188190

193193195

Chapter 7

New Technologies and theIntellectual Property Bargain

●

●

●

FINDINGS

Technology is spawning a wide range of newopportunities to use information-based prod-ucts and services. A central question for in-tellectual property law is who shall benefitfrom these opportunities. In the SupremeCourt’s “Betamax” decision, for example,the question was whether proprietors orusers would benefit, either directly or indi-rectly, from home videorecording capabil-ities. As even newer technologies affect indi-viduals’ abilities to copy, store, and modifyinformation, such questions are likely tomultiply.

Because it evolved in a period when dupli-cation and storage technologies were cen-tralized and deployed in a commercial con-text, copyright law offers little guidance tocourts in resolving conflicts over who shallbenefit from new uses afforded by technology.Neither the existing framework of rights norlimitations on those rights, such as fair use,clearly apply to the private use of informa-tion-based goods.

Some survey research has been conductedon the financial benefits that would accrueto proprietors if they were remunerated fornew technological uses, and unremunerateduses are often considered harmful to copy-right proprietors. Estimates of harm, how-ever, are in and of themselves insufficient toassist Congress in resolving the issue of whois to benefit from new uses. They presuppose

●

●

and cannot be the foundation for a legal rightto profit from new uses of copyrighted worksmade available by technology. Whether Con-gress wishes to consider new uses as harm-ful will depend on the goals that it seeks topromote through copyright law, and whereit believes the benefits of new technologiesshould be allocated.

The need for congressional action on this is-sue is immediate. Public opinion, while tend-ing to favor free private use, is not yet firmlyestablished. However, as technologies forduplicating, storing, and manipulating in-formation become more prevalent and so-phisticated, public opinion and public be-haviors may become more entrenched.

A separate, but related issue is that of ac-cess to information goods distributed elec-tronically. Traditionally, copyright law hasprovided a quid pro quo between proprie-tors and the public in information goods soldin copies. The sale of copies ensured publicaccess to copyrighted works. However, be-cause electronically disseminated works arenot sold in copies, but accessed through com-munications media, Congress may need to re-think the intellectual property bargain to en-sure adequate access to information goods.The policies pursued with respect to accessand communications law will affect the reso-lution of the private use issue.

INTRODUCTION: A NEW INTELLECTUALPROPERTY 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


rights should be retained by the public? Al-though copyright law has traditionally an-swered these questions, information and com-munication technologies have created a newcontext in which the application of copyrightlaw is uncertain. In some cases, the technol-ogy is shifting the capabilities of printing, pub-lishing, and distributing information from thecentralized commercial entrepreneur to privateindividuals. In others, the technology is cre-ating new and unprecedented uses for infor-mation products and services. The videocas-sette recorder, for instance, not only allows auser to watch motion pictures where and whenhe will, but also to store video transmissionstaken off the airwaves.

The current debate before the courts andCongress centers on whether copyright propri-etors or the public shall benefit from these newtechnological capabilities, and whether andhow both can benefit. On the one hand, tech-nology gives the public an unprecedented abil-ity to access, store, transmit, and manipulateinformation, with little or no need for pub-lishers, printers, or distributors. On the other,the same technologies simultaneously permitthe copyright proprietor to exploit marketsthat have never before existed. In many cases,the interests of the proprietor and the publicare in conflict; as, for example, with home videorecording.

In resolving the question of who should ben-efit from new technology, one must begin byunderstanding that rights granted to a propri-etor in a work act as prohibitions on the sub-sequent uses that others may make of it. Togrant a right is to make certain activities ille-gal for all but the author of a work. Thus, the

———

benefit conferred on an author by the grantof a right exacts a corresponding cost from theremainder of society.

The rights granted the author are not, how-ever, meant to be gratuitous burdens on thefreedoms of the public. Congress has in the paststressed that rights are granted to authors forthe purpose of benefiting the public, and so,

. , . [i]n enacting a copyright law Congressmust consider . . . two questions: First howmuch will the legislation stimulate the pro-ducer and so benefit the public, and, second,how much will the monopoly granted be det-rimental to the public? The granting of suchexclusive rights, under the proper terms andconditions, confers a benefit upon the publicthat outweighs the evils of the temporarymonopoly. 1

The effect of technology on this ‘cost/bene-fit” equation underlies the discussion in thischapter. To understand how the current debatearose, the chapter looks first at the U.S. Con-stitution and the bargain that it establishedbetween authors and the public. It then exam-ines how technology has changed the contextin which that bargain is carried out, causingambiguity and uncertainty over which rightsshould belong to the proprietor and whichshould be retained by the public. Finally, thischapter suggests that resolving this issue willdepend on which criteria are chosen for analy-sis, and which goals Congress seeks to imple-ment through intellectual property policy.Four such criteria are considered: harm, effi-ciency, access, and public opinion.

‘H. R, Rep, No. 2222, 60th Cong., 2d sess. (1909).

THE INTELLECTUAL PROPERTY BARGAINWe 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 bylie. 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 benefitfrom the disclosure of inventions, the publica-

tion was written, the word “science” meant knowledge in thebroadest sense of the word.

Ch. 7—New Technologies and the Intellectual Property Bargain ● 189— ——

tion of works. Although the Supreme Courthas consistently interpreted the intellectualproperty bargain to be “primarily” for the ben-efit of the public,3 James Madision—the prin-cipal author of the intellectual property clause—believed that “[t]he public good fully coin-cides . . . with the claims of individuals’ in in-tellectual property.’ In Madison’s view therewas no question of subordinating the interestsof either the author or the public. The purposeof the intellectual property clause—the publicbenefit–and the mechanism for achieving thatpurpose—the creator’s exclusive right—weremerged in one simple bargain.5

Although few disagree that the ends that in-tellectual property seeks to promote are in thepublic interest, many feel that the means cho-sen are in fact inimical to it. Because the con-stitution grants exclusive rights, copyrightsand patents are sometimes considered “monop-olies,” and—at best—necessary evils. ThomasMacaulay, a British legal historian, voiced thisopinion in a speech on the subject of copyrightbefore Parliament:

Copyright is a monopoly, and produces allthe effects which the general voice of man-kind attributes to monopoly. The effect ofmonopoly generally is to make articles scarce,to make them dear, and to make them bad.It is good that authors should be remuner-ated; and the least exceptionable way ofremunerating them is by a monopoly. Yetmonopoly is an evil. For the sake of the goodwe must submit to the evil; but the evil oughtnot last a day longer than is necessary for thepurpose of securing the good.’

James Madison, too, was aware of the mo-nopolistic connotations of a governmentallygranted exclusive right.7 However, he distin-guished American intellectual property andthus copyright from the pernicious monopo-lies that had preceded it:

Monopolies are sacrifices of the many to thefew. Where the power is in the few it is natu-ral for them to sacrifice the many to their ownpartialities and corruptions. When the poweras with us is in the many not in the few thedanger cannot be very great that the few willbe thus favored.8

To avoid the evils of monopoly, Madison in-tended that the exclusive rights afforded bycopyright be very limited; he envisioned lim-ited rights, owned by “many,” for limitedperiods of time.

Madison’s concerns over monopoly and hisconfidence in the “coincidence” of the publicand private interest were reflected in the par-simonious bundle of rights granted by the firstcopyright act.9 To accomplish its stated goalof encouraging learning, the act granted authorsrights that were far more limited than thoseof the most recent copyright statute. Copy-right law gave authors only the rights to“print, reprint, publish and vend” their writ-ings. The author retained the right to repro-duce the copyrighted work for sale, but he heldno property rights in books as such. A copy-right was infringed, not by the uses to whicha work was put, but by the unauthorized exer-cise of the author’s commercial rights to sellthe work and to print copies of it. ’” Thus, af-

“’The Copyright law, like the patent statute, makes rewardto the owner a secondary consideration.’” Fox Film v. Doyal,286 U.S. 123, 127, as quoted in SorJy Corp. v. Universid Cit~TStudios, 464 U.S. 417, 429 [1984).

‘From The Federalist, No. XLIII, 281 (italics added).Leon Seltzer, author of a noted book on copyright, wrote

that “to sav that the benefit to the author is a ‘secondary con-sideration’-is like saying that when reliance is put on a flaskto transport wine across a carpeted room, whether or not theflask leaks is, with respect to getting the wine there, a ‘second-ary consideration. ‘‘ Leon Seltzer, Exemptions and Fair Usein Cop}’right (Cambridge, MA: Harvard University Press, 1978),p.14.

‘Thomas Macaulay, “Speeches on Copyright” (1841), quotedfrom Barbara Ringer, The Demonology of Cop~ight (New York:R.R. Bowker, 1974), p. 13. More recently, Stephen Breyer andBenjamin Kaplan have expressed similar views on copyright,

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(New York: Columbia University Press, 1967).

As ch. 2 discussed, many of the earliest intellectual prop-erty schemes, such as the Stationers Copyright, were true mo-nopolies, concentrating a good deal of economic and social powerin the hands of a small number of people.

‘Letter from James Madison to Thomas Jefferson, Oct. 17,1788, as quoted in Bruce Bugbee, (ienesis of American Patentand Cop-vright Law (11’ashington, DC: Public Affairs Press,1967), p. 130.

C’Act of May 31, 1790, ch, 15, 1 Stat. 124.“At the time that the constitution was written, printing

and publishing required large, costly equipment that made themessentially commercial enterprises. The constitutional bargaintherefore presupposed a commercial environment for the ex-ploitation of Writings; it could hardly have done otherwise, sincethe technology of the day necessitated a publisher. Thus, be-cause of the economics and technology of publishing, the rights



ter a work had been commercially printed andsold, others could display it, read from it pub-licly, or even write other books based on it,without infringing the author’s copyright.11

Even though the author might have profitedfrom these subsequent uses, the drafters of thefirst copyright act did not believe it necessaryto grant such extensive rights in order to en-courage learning.

Numerous other features of the first copy-right law ensured that the bargain struck be-tween the author and the public would not con-stitute a monopoly.12 For example, the termof copyright protection was limited to 14years, 13 after which time the work would re-turn to the public domain and anyone wouldbe free to print it. The copyright term endedwithin the lifetime of both the author and hisreading public, so that, even if copyright werea monopoly, it was one that could not last long.Moreover, copyright was initially vested in theauthor, although he could thereafter assign hiscopyright to others. By creating as many copy-rights as there were authors, the law avoidedthe concentration of market power, as Madi-son said, in “hands of the few. ”

(continued from previous page)

conferred by the intellectual property clause on authors hadoperational significance as a regulation of the business of pub-lishing. Indeed, this notion of copyright as a form of trade reg-ulation is, as we shall see, substantiated in other developments.The precursor to the concept of copyright—the Stationer’sCharter-granted publishing rights to printers, rather thanauthors; furthermore, the first Federal copyright statute washeld to extinguish any common law rights of the author uponpublication (an activity which at the time required the commer-cial publisher as intermediary).

“Each of these activities would be illegal today,12It is doubtful that a copyright would qualify as a monop-

oly as defined by antitrust law. Monopoly, as the term is usedin antitrust, is the power to set prices or exclude competitionin a relevant geographic and product market. See, e.g., UnitedStates v. Grinnell Corp., 384 U.S. 563 (1966). A single copy-right is at most a monopoly of a product, which seldom givesthe copyright proprietor market power. Others are free to com-pete with the author, so long as they do not copy or produceworks that are substantially similar.

13This term was renewable by living authors for another 14years. The drafters of the act may have arrived at 14 years basedon previous experience. Several of the States had, per a 1783recommendation of the Continental Congress, passed copyrightlegislation with a term of 14 years. The recommendation wasmodeled on the Statute of Anne, which also implemented a 14-year term. L. Ray Patterson, Copyright in Historical Perspec-tive (Nashville, TN: Vanderbilt University Press, 1968), p. 183.

Transformation of theConstitutional Bargain

During the 19th and 20th centuries, this con-stitutional bargain was gradually transformed,perhaps the most significantly through thegradual expansion of rights. Like the expan-sion of copyrightable subject matter (see ch.3), the expansion of rights granted under copy-right largely tracked technological develop-ment. Those granted under the first copyrightact of 1790 corresponded to the capabilitiesof the printing press; these were the rights toprint, reprint, publish, and vend a writing.14

New rights were gradually added to the copy-right scheme as social and technological changeprompted Congress to include an expandingvariety of subject matter. The “right to per-form, ” for example, was first granted in 1856for dramatic compositions, 15 and in 1897 wasapplied to musical compositions.16 In 1909,Congress granted musical compositions a “me-chanical recording right, "17 at which time theduration of copyright was also lengthened fromits initial 14 to 28 years,18 and on renewal, to56 years.19 Finally, in 1976, the term of copy-right was extended to the life of the author plus50 years.20

During this period of statutory expansion,the judiciary also sought to mark the bound-aries of the exclusive right. In the beginning,the courts confined infringement to literalword-for-word plagiarism, and seldom assessedthe ostensible similarities between one workand another. They did not extend copyrightprotection to protect what are now known as“derivative works.”21 A playwright, for exam-ple, did not require permission from the authorof a novel to base his play on the novel. Courtsstrictly limited infringement to printing theauthor’s book without his consent.. —

‘“A(t of May 31, 1790, ch. 15, 1 Stat. 124.“Act of Aug. 18, 1856, ch. 169, 11 Stat. 138.“Act of Jan. 6, 1897, ch. 4, 29 Stat. 481.‘7 Act of Mar. 4, 1909, ch. 320, 35 Stat. 1075.‘n Ib~d.“Former Title 17 U.S.C. $24.‘“Current 17 U.S.C. j302.“For example, a German translation of the entirety of Un-

cle Tom Cabin was held not to infringe. Stowe v. Thomas, 23Fed. 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 toadopt a broader and more qualitative approachto the question of similarity.22 They began tointerpret “copying” to mean more than sim-ple duplication and to include mimicking or ex-tensive borrowing within its definition. Theydecided whether a defendant had infringed aplaintiff’s right to print, reprint, publish, orvend on the basis of an often subjective esti-mation of what was essential and unique toa given author’s writing.23 As chapter 3 details,the courts began to use the concept of “idea”versus “expression” as the accepted tool ofanalysis for determinations of similarity. Theyruled that infringement occurred not only whenan individual printed the writings of another,but also when one author adopted an expres-sion that was similar to another’s. Courtsfound no infringement only when the similari-ties between works were confined to ideas—the abstract concepts or themes employed inthe work.

It was Congress however, that, unwittinglyand perhaps accidentally, granted writtenworks the most far reaching of rights in theact of 1909. To the exclusive rights of print-ing, reprinting, publishing, and vending, itadded the right to copy.24 Before then, “copy-ing’ was a right applied only to photographs,paintings, engravings, and other graphic works:works that were not ordinarily reproducedthrough “printing” or “reprinting.” Althoughsection 1 of the 1909 act claimed to “retainwithout change” the rights granted under prior

22See, for example, the case of Daly v. Palmer, 6 Fed. Cas.1132, No 3552 (C.C.S.D.N.Y. 1868), in which an escape frombondage to a train track constituted the sole common themebetween two plays, and the basis of infringement.

“Kaplan, Unhurried View, p. 28.“The word “copy” was first used in conjunction with the in-

fringement of etchings in an amendment of 1802, ch. 36, ~3,2, Stat. 171. Again, in an amendment of 1831, copying was aterm applied to the infringement of other than literary works.See the Revision of 1831, Ch. 16, jj6-7, 4 Stat. 436, In 1870,when paintings, drawings, chromos, statuettes, and other three-dimensional works were added to the growing list of subjectmatter, the rights afforded all copyrighted works were ag-~egated under one section ($86), but the activities constitut-ing infringing conduct were separated so that “copy” appliedto works other than maps, books, and charts. Revision of 1870,ch. 230, \ \99-100, 16 Stat. 198. In the general revision of 1909,infringing conduct was not defined, and “copy” was retainedas a right applying to all works.

law,25 it nevertheless extended the right to copyto a new subject matter.26

This seemingly trivial change in the word-ing of the law would have far-reaching conse-quences. The change meant that “copyrightproprietors, without seeking it and apparentlyquite by accident, acquired at least the sem-blance of a right of an activity that was to haveincreasing importance in the new century. “27

For the ambiguity of the word “copy” subse-quently endowed proprietors with rights, notonly against commercial piracy, but alsoagainst noncommercial personal or privateuse.28 To some, this expansion of copyright lawis at odds with the traditional intention of copy-right. Commenting on the issue of photocopy-ing, Francis Nevins, a copyright scholar, notesthat:

. . . [copyright is intended to govern relationsbetween the creator of a work and all thosebusiness people who intervene between thecreator and the work’s ultimate consumers.It is not intended to control non-commercial

—————25H.R. Rep. No. 2222, 60th Cong., 2d sess. 4 (1909).‘bThus, the redundancy of the terms “print, reprint, and

copy” was noted years later in a Report of the Registrar ofCopyrights on the General Revision of the U.S. Copyright Law,87th Cong., 1st sess., 1961. Although the verbs “copy” and‘‘print are nowhere defined in the law, Webster offers a defini-tion of print most clearly fitting the context of authorship andpublication: “to publish in print. ” This defintion would makesense of phrases such as “out of print. ” “Copy” is describedas a synonym for “imitate, mimic, ape, mock. ”

“L. Ray Patterson, “Copyright, Congress and Technology:The Public Record ’” —Book Review, 34 Vanderbilt Law Review,833 (1981), n.30; see also Vernon Clapp, Cop.vright —A Librar-ian View (1968),

“The dubious pedigree of the right to copy was later recog-nized in the watershed case of Williams & Wilkins Companyv. United States, 487 F.2d 1345, 1351 (Ct. Cl. 1973), aff’d, 420U.S. 376 (1975), which stated that “ ‘copy’ is not to be takenin its full literal sweep, thus raising ‘‘a solid doubt whetherand how far ‘copy’ applies to books and journals. In this case,publishers of medical journals sued the United States for thecopying activities of the National Libraries of Medicine and Na-tional Institutes of Health, which, in a split decision, the Courtof Claims determined to be fair use. Professor Nimmer notesthe ambiguity regarding “copy,” and says that the confusionis no longer present ‘‘since under the 1976 act the term ‘copy’clearly includes a photocopy (citing Section 101 of the Act whichdefines “copies’’ ).” Nimmer on Cop~”ght j13.05[Ej (]984). HOW-ever, the definition to which Professor Nimmer alludes is of thenoun form—i.e., “the tangible object’ ’–while the ambiguitynoted in Williams & Wilkins revolves around the meaning andapplication of the verb form—i.e., whether the activity of copy-ing is one in which the copyright owner holds a right.


use of copyrighted works nor to permit law-suits against non-commercial users. 29

At a critical juncture in the emergence of newtechnologies such as the photocopier and thetape recorder, the vagaries of copyright lawmay have yielded a fundamental change in thebargain between the proprietor and the pub-lic. A literal interpretation of the right to copytransformed copyright from the right to con-trol the use of copyright for commercial profit(vis-à-vis competing publishers) to the rightto control the copyrighted work itself (vis-à-vis the user of the copyrighted work) .30 Ironi-cally, proprietors’ control over the copyrightedwork emerged at same time as technology wasperfecting methods of denying them that con-trol—the photocopier and the tape recorder.

This distinction between control over a copy-right and control over a copyrighted work iscritical. If copyright is essentially the right tocommercially exploit an intellectual creation,then it is a form of regulation designed to en-sure that only an author will be allowed to sellhis work to the public. It also means that endusers of the work are free to copy, store, ma-nipulate, and share copies that they have pur-chased. If, on the other hand, copyright is aright to control how a work is used, then it isa form of property; a bundle of rights that fol-lows each and every copy of a book, record,or computer program. Under this theory, pro-prietors have rights to profit from the uses towhich the work is put.31

“Francis M. Nevins, Jr., “University Photocopying andFair Use: An American Perspective, ” 8 European lntellectualProperty Review 222 (1985) (italicx added). Support for this no-tion of copyright as an essentially commercial right can alsobe found in Supreme Court opinions:

An author who possesses an unlimited copyright may precludeothers from copying his creation for commercial purposes with-out permission. . Congress may guarantee to authors and in-ventors a reward in the form of control over the sale or commer-cial use of copies of their works.

GoMs.tein v. California, 412 U.S. 546,555 (1973) (italics added).“’Note that this is different than the distinction made in

Section 202 of the Copyright Law between the work and the copy.“Today, rights to these uses is confined to reproducing, de-

riving, publically performing or displaying, and distributing thecopyrighted work. 17 U.S.C. j 106. Other rights to uses of a workhave been proposed, such as rights to royalties on library lending.

The theory of copyright as property is thesource of much confusion and conflict overcopyright law. It provides the basis for say-ing that copyright proprietors have a problemof enforcing unauthorized uses, such as homevideotaping (see ch. 4). If copyright is a publicpolicy tool, directed toward regulating com-petitors in the marketplace, rights to these usesdo not exist. Nor do problems of enforcingthem. Also, as new uses for copyrighted worksare bred by technology (see later in this chap-ter), conflicts arise over who benefits fromthese new uses. Again, if copyright is con-strued as a right to commercialize one’s crea-tion, rather than a property right in each copyof that creation, the benefits of new technol-ogies will go to the public.

The central question that Congress needs toaddress is whether copyright shall be consid-ered property or regulation. If Congress wereto resolve the question, clear guidelines on thelegality of the “private use”32 of copyrightedworks might be possible. So far, however, Con-gress has not given a clear statement of thenature and purpose of copyright. When it en-acted the latest revision of the copyright lawin 1976, Congress folded the exclusive rightsto print, reprint, and copy into the right “toreproduce the copyrighted work in copies. ’33

Ambiguities remain, however, about whetherthis and other exclusive rights are proprietaryor regulatory in nature, and therefore, whetherthey apply to private use activities. The HouseCommittee Report that accompanies the actsheds little light on the question, but suggeststhat at least the right to reproduce copies isdirected at commercial printing and publish-ing activities, and is therefore regulatory .34 Sig-nificantly, no court has yet held private useto be an infringement, which also suggests that

32Private use is defined and discussed in greater detail inthe next section.

“17 U.S.C. § 106(1).“11.R. Report No. 94-1476 says that:

A single act of infringement may violate all of these rights(under $106) at once, as where a publisher reproduces, adapts,and sells copies of a person’s copyrighted work as part of a pub-hshing venture. Infringement takes place when any of the rightsis violated: where, for example, a printer reproduces copies with-out selling them or a retailer sells copies of a person’s copyrightedwork as part of a publishing venture.

Ch. 7—New Technologies and the Intellectual Property Bargain ● 193— —

copyright is regulatory and not meant to pro-hibit copying by end users of a work.35 The “Be-tamax” decision, in which the Supreme Courtruled that videotaping for purposes of "time-shifting’ is legal, left the question of privateuse open. The status of rights in sound record-ings are also ambiguous. Although the HouseReport accompanying the 1971 recording rightsamendment says that “private copying’ is ex-cluded from the act,36 advocates of the record-

— . —The U’illiams & WilJc~rIs case seems to be the closest that

courts have come to deciding the issue of pri~’ate use. Thatcase— which decided that the substantial and systematic copy-ing and distribution of journal articles by two governmentalinstitutions was fair use— has little resemblance to the pritrateuse concerns of the record, software, and motion picture indus-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 Courthas said that:

., [e]ven copying for noncommercial purposes may impair thecopvright hol(iers ah iljt} [ o oht ain the rewards that Congressintended him to havcj

But, the status of such pri~ate use was further obscured in thenext sentences:

Hut a use that has no d(.mon~trahle effect upon the potentialmarket for, or the \alue of, the copyrighted work need not beprohibited in order to protect the author’s incentive to createThe prwhihition of ~uch noncommercial uses would mere]; in-hihlt access to Ideas without an} countervailing benefit.

The issue of private use, as a class of uses to which cop~rightedworks majr be put, remains unresolved.

“ H.1{. Rep. No. 92-487, 92d Cong., 1st sess. 2 ( 1971) reads:

ing and electronics industries disagree overwhether these comments apply to the 1976 re-vision. Proposed legislation, which would pro-vide for “royalties’ on blank tape,37 and ex-emptions for home-taping activities” are allpredicated on the resolution of this policy is-sue, which existed since the time the photo-copier was introduced over 20 years ago.

The issue of whether copyright is regulatoryand governs only commercial entrepreneurs,or whether it is proprietary and controls theultimate users of copyrighted works is still un-settled. A definitive answer will require con-gressional action. Whether, in deciding the is-sue, Congress wants to strike a new bargainwill depend on a number of criteria, four ofwhich are considered in the next part of thischapter.

Specifically, it is not the intent ion of theC’ommittee to restrainthe home recording, from broadcasts or from tapes or records,of recorded performances, where the home recording is for pri-vate use and with not purpose of reproducing or otherwisecapitalizing on it This practice is common and unres[ralnedtoday, and the record produc~rs and performers would be in nodifferent position from that of the owners of copyright inrecorded musical composition o~’er the past 20 y ears.

‘“S.31 and H.R. 1030 (Sen. N!athias and Rep. Don Edwards),9t3th Cong., 1st sess.

%. 175 and H.R. 175 (Sen. DeConcini and Rep. Fole~r), 98LhCong., 1st sess.

THE INTELLECTUAL PROPERTY BARGAININ 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 causesto the end user. As a result, policy questions harm to copyright proprietors, whether itare emerging about whether and how the copy- would be economically efficient to extendright 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 copy-right proprietor should extend when new tech- Private Usenologies change the context in which theserights operate. Because copyright law does not Private use of copyrighted works differsclearly 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,


if not impossible, to detect, monitor, and con-trol the use.39 Unlike commercial piracy, pri-vate use is not a commercial activity. The per-son who makes a copy of a television programor a magazine article does not ordinarily at-tempt to sell that copy. He is typically an enduser of the information, and as such, does notcompete commercially with the proprietor.However, as is discussed below, the aggregateeconomic effect of individuals’ private use maybe equivalent to what might occur with com-mercial piracy.

For puposes of this discussion we shall de-fine private use as the unauthorized, uncom-pensated, noncommercial, and noncompetitiveuse of a copyrighted work by an individual whois a purchaser or user of that work.40 The "timeshifting” videotaping involved in Sony Corp.v. Universal City Studios,41 the home record-ing of a piece of music, the copying of a maga-zine, a newspaper article, or a computer pro-gram might all be considered instances ofprivate use. Private use may be occasional orinsubstantial-as when a cartoon is photocop-ied (possibly infringing reproduction rights)and posted on an office door (possibly infring-ing display rights) -or it can be systematic andsubstantial-as when music “libraries” arebuilt on blank tape (possibly infringing repro-duction rights) and shared amongst friends(possibly infringing distribution rights) .42

Technology has fostered private use, and itwill continue to expand individuals’ capabil-ities to make private use of copyrighted mate-rials. With each new application of technology,

“The difficulties of enforcing private use activities is dis-cussed in ch. 6 on enforcement.

‘“See Anne Branscomb, The Accommodation of IntellectualProperty Law to the Introduction of New Technologies, OTAcontract re ort, December 1984, discussed under the term” r-P rsonal use. ’ It should be noted that “unauthorized” here oesnot mean “illegal’’ -it means without consent. “Noncompeti-tive” means that the fruits of private use are not sold commer-cially. Private use is also referred to as “

prsona.1 use, ” “pri-

vate co in , “ “noncommercial use, ” an “home use. ”4’SO{~ (%orp. v. Universal City Studios, 464 U.S. 417

(1984).“The literal application of Section 106 of Title 17 would,

subject to the application of fair use or exemptions, make anyreproduction, derivation, dissemination, performance or display,regardless of its context, an infringement. It may well be thatthe new wave of technological uses, urdike the technolo “es of

?reprography and reproduction, would implicate each o theserights.

new forms of private use will occur. At present,these uses principally involve the copyrightproprietor’s right to reproduce the copyrightedwork.43 The photocopier and the audio andvideocassette player, for example, each enableusers to reproduce information, and perhapsinfringe the proprietor’s reproduction right. Asmore information becomes distributed elec-tronically and downloaded over networks, theissue of private use involving reproductionmay become more complex. In the age of print,for example, a person could purchase a book,and read and re-read it as often as he pleased.When accessing information over a network,however, a person may need to reproduce awork tore-use it. Thus, conflicts may arise be-tween proprietors and users requiring a pol-icy decision about the rights people have ininformation they have purchased.

Private use involving reproduction rightsmay be only the beginning of private use is-sues. As inexpensive home computers becomemore prevalent, and as more information isstored in computer processible media,44 theproprietor’s exclusive right to make derivativeworks may become an equally important is-sue.45 The extreme manipulability of digitallymediated information will allow individuals toreconstruct, enhance, and modify informationto suit their taste or needs. This is already pos-sible with computer programs, and may soonbe feasible for music, video, and text. In thefuture, a user might enter the digital versionof a song—perhaps stored in a medium simi-lar to today’s compact disk-into the memoryof his computer. Once in the computer, he couldsubject the song to any number of modifica-tions: he may take the vocals out and substi-tute them with his own; he may vary the pitch,rhythm, and melody; or he may add instru-ments. The issue will then be whether the copy-right proprietor has the exclusive right to pro-vide users with modified versions of his work.Just as today’s audiotaping potentially harmsproprietors by displacing a sale (see below), sotoo might proprietors say that user derivationof their works deprives them of potential sales.

4“17 U.S.C. §106(1).44 See ch. 4 on enforcement.“17 U.S.C. §§ lOl, 106(2).

—.

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

As computer networks proliferate, privateuse may assume other forms, and create issuesinvolving the proprietor’s exclusive rights todistribute, perform, or display the copyrightedwork.46 If, for example, a user in a computernetwork sends copyrighted information to an-other network user, has he infringed the propri-etor’s right to distribute the work? If policy-makers or the courts liken this sharing overnetworks to sending a book to a friend throughthe mail, they will find no infringement of copy-right, and hence no issue of private use. If, in-stead, they compare it to a person photocopy-ing and sending a book to a friend, they mayfind that the proprietor’s copyright has beeninfringed. Whether private use is consideredan illegal activity will often depend on the anal-ogies that policy makers use.

New methods of distributing information,such as Cable Television, Satellite Master-Antenna Television (SMATV), MultichannelMultipoint Distribution Service (MMDS), andDirect Broadcast Satellites (DBS), augment thetechnologies for private use and exacerbate ex-isting tensions with respect to it.47 In manycases, the communication issues created by thenew distribution technologies are very simi-lar to copyright issues involving private use.

The case of DBS and “satellite viewingrights’ is one example. A recently enacted lawallows people to sell and own receiving equip-ment, such as dish antennae, but requires themto pay a “reasonable” fee to program ownersif a marketing system for collecting such feeshas been set up.48 Although ostensibly a com-munications law, this prohibition of unautho-rized reception is bound up with intellectualproperty issues, including private use.49 As

“17 U.S.C. § 106(3),(4), (5).‘-Although these communication technologies are presently

used primarily for television, their application need not be solimited. Telephone signals, videotext, teletext, and data trans-missions may eventually be routed through cable and satellitesystems. Trudy Bell, “The New Television: Looking Behind theTube,” IEEE Spectrum, September 1984.

‘“Section 705 of the Communications Act (Section 5 of theCommunications Policy Act).

“’Unauthorized reception of signals by an individual in-fringes none of the rights of the copyright holder. SMATV, whichties many receivers to a master antenna, may infringe the rightto perform.

with activities such as home taping, the propri-etors of DBS programming assert that the un-authorized and unremunerated reception of sig-nals deprives them of revenue. Cable Televisionoperators, who are the intended recipients ofmany of these satellite signals, also assert thatunauthorized reception undermines their sub-scription system. Like private use, the satel-lite viewing rights issue also involves thebalancing of compensation to proprietors withpublic access to the signals.50 Like private use,unauthorized reception is difficult to monitorand prove, and detection may raise privacyproblems. 51 Because of these similarities, muchof the following analysis of private use applieswith equal force to unauthorized reception.

Private Use as Fair Use

Fair use is a judicially developed doctrine,which originated in 1841 in the case of Folsomv. Marsh.52 Its purpose, like that of the copy-right itself, is to benefit the public by facilitat-ing the access to and dissemination of works.It is a “safety valve” for cases in which copy-right law does not serve the public interest.53

In other words, fair use concerns those usesof a work that would be technically infringing,but for the fact that they themselves furtherthe promotion of science and useful arts.

Fair use is not subject to precise definition.Which uses are fair will often depend on theparticular circumstances of a case. For this rea-son, fair use is often called an “equitable ruleof reason. ’54 Although Congress codified the-.—.—-——-

‘(’S.1618 (Sen. Gore), “Satellite Viewing Rights Act of1985, ” for example, seeks to ensure access by limiting broad-caster discretion over distribution, pricing, price discrimination,and decoder availability.

“’’Short of Staking Out the Farmhouse, How Can ProgramOwners Prove That a Farmer Ripped Them Off? Answer: TheyProbably Can’t. ” Forbes, Nov. 5, 1984. See also ch. 4 on en-forcement.

529 Fed. Cas. 342,246, No. 4,901 (C.C.D. Mass. 1841).“In some cases, “courts in passing upon particular claims

of infringement must occasionally subordinate the copyrightholder’s interest in a maximum financial return to the greaterpublic interest in the development of art, science and industry. ”13erlik v. E.C. Puln%mtions, Inc., 329 F.2d 541,544 (2d Cir. 1964).

“41 7 U.S.C. j 107; “Indeed, since the doctrine is an equitablerule of reason, no generally applicable defintion is possible, andeach case raising the question must be decided on its own facts. ”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 preferrednot to define the term, and instead delegatedits interpretation to the courts. Even the typeof ‘use” that falls under the term ‘fair’ in thestatute was left unspecified by Congress, buta House Report says that such uses would “in-clude” reproduction.55

Fair use is not, however, a tabula rasa. Itis a defense to a claim of infringement that,if successful, negates a finding of infringe-ment.56 Section 107 of the 1976 Copyright Actlists four factors that courts may consider indeciding whether a particular use is fair:

1. the purpose and character of the use, includ-ing whether such use is of a commercialnature or is for nonprofit educationalpurposes;

2. the nature of the copyrighted work;3. the amount and substantiality of the por-

tion used in relation to the copyrightedwork as a whole; and

4. the effect of the use upon the potential mar-ket for or the value of the copyrightedwork.57

Although the fair use factors are neither ex-haustive nor determinative of the “fairness”of a particular use, they are nevertheless usedby courts to balance the competing claims oflearning and economic incentive. Judicial his-tory is replete with interpretations of the fairuse factors, and the types of activities that canbe labeled fair use are well charted. The fairuse doctrine has proven most difficult and con-troversial in cases of first impression, wherethe court must proceed with little or no guid-ance from prior rulings.

Despite its usefulness as a safety valve forcopyright protection, the fair use doctrine maybe an inappropriate mechanism for resolvingthe private use issue for a variety of reasons.First, and perhaps most important, the appli-cation of the fair use doctrine presupposes in-fringing conduct. Although legal scholars dis-agree about whether fair use excuses or negates

55Id. Arguably, fair use comes into play anytime there is anallegation of infringement of any of the exclusive rights in § 106of Title 17.

‘hSee n. 58.‘“17 U.s.c. §107.

a claim of infringement, it is clear that the de-fense of fair use is only relevant where infringe-ment is alleged.58 For instance, one need notclaim that sharing a book with a friend is fairuse, because sharing books is not infringingconduct under copyright law. Since neither thecourts nor Congress has unequivocally deter-mined that private use constitutes an infringe-ment, the application of the fair use doctrineto private use may be premature.

Secondly, fair use is a tool used by the judi-ciary to resolve competing claims over the useof copyrighted works. However, the judiciarymay be an inappropriate forum for address-ing the private use issue. Private use is essen-tially a policy issue. It involves a determina-tion of whether whole classes of activities, suchas audio or video taping, should be consideredinfringements. It requires, moreover, an evalua-tion of who shall benefit, and how, from newtechnological uses, and whether copyright pro-tection should extend beyond protecting com-mercial activities to protecting profits in mar-kets that did not exist before the introductionof new technologies. However, the function ofcourts is not to make policy, but to interpretlaw. In recognition of this point, the SupremeCourt stated in Sony v. Universal Studios, “itis not our job to apply laws that have not beenwritten. ’59

— — —““Professor Nimmer seems to favor the latter interpretation

(despite a substantial similarity of works, “the defendant is ren-dered immune from liability because the particular use whichhe has made of the plaintiff’s material is a ‘fair use. ’ “ Nimmeron Copyright, § 13.05 (1985)); as does Professor Goldstein (“[t]heeffect of the fair use defense is to excuse otherwise infringingconduct in circumstances where the public interest compels freeaccess “ Goldstein, “Copyright and the First Amendment, 70Columbia Law Review 1011 (1970)). Messers Kaplan (“policyruns throughout our subject . . . it would, I think, be possibleto dispense with it (fair use) in relation to (infringement). ”Kaplan, An Unhurried View of Copyright (New York and Lon-don: Columbia University Press, 1967), pp. 69-70 and Seltzer(“[f]air use. . . has to do with whether a particular cost-free useis one both foreseen by the author and contemplated by theConstitution.” 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,the matter may be academic, since the fair use defense arisesonly in cases where a claim of infringement is made.

“Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984).For a discussion of the institutional reasons why the courts maynot 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-mercial context, the fair use doctrine may sim-ply be inapplicable to private use activities.Traditionally, fair use has been limited to casesin which a copyrighted work was used in theproduction of yet another work.60 The use ofa work for its own sake-for intrinsic pur-poses–has traditionally fallen outside of thefair use doctrine. The reason for this interpre-tation had to do with the very purpose of copy-right: the promotion of learning. 61 Withoutsome “give” in the exclusive rights of anauthor to his or her work, other authors mightbe thwarted in their ability to make contribu-tions to the public good by way of “criticism,comment, news reporting, teaching, scholar-ship or research."62 Fair use, then, does notshield every ostensibly infringing use of awork, only those justified by the very purposeof copyright itself.

Fair use evolved in the context of print eratechnologies, and was designed to resolve thetensions between an author and others mak-ing use of his work. Typically, the doctrine wasinvoked by an author who wanted to use por-tions of another’s work. Thus, it was aimedprimarily at the resolution of tensions betweencopyright interests, broadly construed to in-clude those activities for the promotion oflearning. The emergence of reprographic tech-nology, however, created a new and uncertaincontext for fair use. For the first time, it wasend users and not competing authors who in-voked the doctrine, seeking to use material forits intrinsic purposes.63 Thus, fair use was— —— - ——— ——

“ Fair use “has always had to do with the use by a secondauthor of a first author’s work. Leon Seltzer, Exemptions andFair Use in Copvright, p. 24. This principle, termed “produc-ti~’e use” by the Circuit Court in Universal Cittiv Studios, Inc.~’. Son.}’ Corp., 659 F.2d 963 (9th Cir. 1981 ), rev ‘d, 464 U.S. 417( 1984)104 S. Ct. 774 ( 1984), was rejected as a sole criterion bythe Supreme Court majority in the Son-v case, but the rejectionhas no support in prior case law. Indeed, in a study preparedby Alan I,atman for the Senate Committee on the Judiciary,Copyright I.aw Revision, Subcommittee on Patents, Trade-marks, and Copyrights. 86th Cong., 2d sess., 1 (1960), not acase was found upholding the fair use defense in the instanceof intrinsic, private use.

‘‘ See: Patterson, Cop.vright and .Vew Technolog~’: The Im-pact on the Law of PrivacLv, .4ntitrust, and Free Speech, OTAcontract report, 1985.

‘-17 U.s. c. $107.‘‘\{’illiams & W’ilkins Co, F’. United States, 487 F.2d 1345

(Ct. Cl. 1973), aff’d, 420 IJ.S. 376 (1975).

called on to resolve extra-copyright claims be-tween proprietors and end users.

To decide the issue of reprography, the courtsdrew an analogy between photocopying andmaking a handwritten copy of the work for pri-vate consumption. Photocopying was regardedas merely a more efficient way of doing thesame thing as hand copying, and as such, wasnot considered to be an infringement.64 Al-though similar in principle, the analogy be-tween hand and photocopying soon breaksdown, however. For, precisely because pho-tocopying is more efficient than hand copying,its potential to cause economic harm is muchgreater. 65 This is the problem of harm in theaggregate, a problem that becomes moretroublesome as technology continues to im-prove the efficiency of private copying.

In addressing the private use issue to whichthe new technologies give rise, the fair use doc-trine, as we have seen, is of limited value. In-stead, policy makers will need to decide the is-sues on the basis of value judgments about whoshould benefit from the new uses that technol-ogy creates—proprietors or private users. Thefour criteria discussed below may serve as thebasis for such a discussion.

1. The Criterion of Economic Harm

Within the copyright community, many peo-ple argue that private use damages the copy-right proprietor economically by displacing po-tential sales and thus profits. This argument,founded on an interpretation of existing lawand on economic analyses of harm, presup-

.—“The legal status of hand-copying for personal use is not

known. Nimmer reports that “[t]here is no reported case on thequestion of whether a single handwritten copy of all or substan-tially all of a book or other protected work made fort he copier’sown private use is an infringement or fair use, ” ,Vimmer on Cop> T-right j 13.05[E], but the ~~illiams and llllkins case states that,, . . . it is almost unanimously accepted that a scholar can makea handwritten copy of an entire copyrighted article for his ownuse. . . “ 487 F.2d at p. 1350. “[A]nyway,” says ProfessorKaplan, ” it was a question no one would be interested to liti-gate,’” op. cit. p. 68.

“’’Few people hand copy, but millions find machine copyingeconomical and convenient. . . .(the argument) fails to take intoaccount the true economic effect when thousands of individualdecisions are aggregated. ‘“ “New Technology and the Law ofCopyright, ” 15 U. C.1..A. Law Review 931, 951 (1968). Whethersuch deleterious economic effects exist is uncertain (see ch. 4).


poses the existence of a right to profit on pri-vate use.66 Such a right, however, does notclearly exist. Instead, policymaker have yetdecide to what uses the proprietors’ exclusiverights should extend. In doing so, they maywant to take the economic consequences of pri-vate use into account. They should also notethat assertions that private use causes eco-nomic damages presupposes the transgressionof a legal right, and cannot, therefore, be thefoundation of that right.

One of the difficulties of using economicharm as a criterion for determining the issueof private use is that the economic conse-quences of new technological uses vary signif-icantly according to the type of use, the typeof work, and the marketing adaptations thatcopyright proprietors make to accommodatethat use. Moreover, technologies that permitcopying can either harm or benefit both propri-etors and users, depending on several empiri-cally determined factors: the costs of produc-tion and distribution, the behavior of producersand consumers in the absence of unauthorizedcopying, and the effects of copying on subse-quent purchasing behavior. Using harm as acriterion for determining rights in new tech-nological uses would require, therefore, thecompilation and analysis of a significant amountof information.

It is not surprising, therefore, that not allof those involved in the intellectual propertydebate agree that harm should be used as abasis to determine rights. David Ladd, a form-er Register of Copyrights, for example, arguesthat to require a showing of harm in order tosecure protection would inevitably prejudicethe interests of proprietors, since such a show-ing is difficult in any event, and it assumesthat a neutral observer could determine what“fair” compensation is for new technologicaluses.67 Others, however, suggest that a heavy

‘Notwithstanding those uses which are fair uses, or whichare exempt or not covered by the act.

“Mr. David Ladd, from a speech, “Seven Years of the NewCopyright Act, ” sponsored by the American Bar AssociationForum Committee on the Entertainent and Sports Industries,Section on Patent, Trademark and Copyright Law, Washing-ton, DC, Oct. 26-27, 1984. Some have also argued that sinceSection 504(c) of the Copyright Act permits a court to, in its

burden of proof for extending rights to newareas and showing harm should lie on thoseseeking proprietary rights. David Lange wouldhave the proponent of a new right prove notonly that it would make him more secure eco-nomically, but that the public domain wouldultimately be enhanced by the extension of ex-isting or new rights to the new uses.68 The Su-preme Court, in Sony Corp. v. Universal CityStudios, proposes yet a different standard:

. . . [a] challenge to a non-commercial use of acopyrighted work requires proof either thatthe particular use is harmful, or that if itshould become widespread, it would adverselyaffect the potential market for the copyrightedwork.69

The use of harm as a criterion is made evenmore difficult by the fact that the concept hasno clear qualitative definition. Rights defineharm. Where there is no right, there may beeconomic consequences, but not harm. If, forexample, a person wished to charge moneyevery time his name was uttered in public, hewould need a right to do so. If his claim toremuneration went uncompensated, he mightbe said to suffer economic consequences (hewould not receive money), but in lieu of a rightto receive money, one would hesitate to sayhe had been harmed. Harm to intellectual prop-erty owners therefore hinges on how policy-makers define the proprietors’ rights, but newtechnologies have made the application ofrights to new contexts ambiguous.

Notwithstanding these difficulties, OTAfound that a calculation of harm is unavoida-ble in instances where new technology re-arranges the relationships between proprietorsand the public. Because intellectual property

— —discretion, award statutory damages in lieu of actual damagesfor willful infringement, the issue of harm is irrelevant to in-fringement. This argument, however, is not entirely germaneto the policy issue of whether a right should be granted or ex-tended in the first place, and assumes that a fair use defenseis unsuccessful.

‘Statement of Professor David Lange, Duke UniversitySchool of Law, Hearings Before the Subcommittee on Courts,Civil Liberties, and the Administration of Justice of the Com-mittee on the Judiciary, House of Representatives, 98th Cong.,1st sess., July 20 and 21, 1983.

“Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984).


law itself serves to compensate for market fail-ure in the production or dissemination of a pub-lic good,70 and because the allocation andstrength of rights determines who and whatwill be compensated, the question of harm can-not be dispensed with.71 Moreover, in the ab-sence of clearly defined rights to new uses,72

it is still possible to distinguish between atleast two different types of claims to harm inintellectual property: actual harm and poten-tial harm.

Actual harm occurs when there is a reduc-tion in the profits of the producer below theirlevel prior to a new unauthorized use.73 Actualharm does not occur, however, if the unautho-rized use leaves profits from all previous usesunaffected. 74 The criterion of actual harm looksto whether new uses made available by tech-nology compete with proprietors’ preexistingeconomic interests. For example:

Ž if a commercial broadcaster’s programsare taped off-air by a viewer, and thebroadcaster’s advertising revenues fromthat program do not decline, the broad-caster has suffered no actual harm;75

• if a radio broadcaster or cable companytransmits a long-playing album to an au-dience, and the audience avoids purchas-

“’For a discussion of market failure, see ch. 6.“Moreover, copyright law–through the vehicle of the Copy-

right Royalty Tribunal—is already determining what consti-tutes a “fair return’ to creators and ‘‘fair income’ to users un-der two of the compulsory licensing provisions of the act. 17U.S.C. \801(b)(l)(A), governing the objectives of rates underSections 115 and 116. In addition, bills submitted in the 98thCongress (S.31 and H. R.103O), which deal indirectly with theissue of private use by imposing a‘ ‘compulsory license’ on pur-chasers of video and audio equipment and tape, would have anarbitration board determine “the projected impact of home videorecording on copyright owners. The ‘compulsory license’ cre-ated by these bills differs from any previous compulsory license.Formerly, compulsory licenses were imposed on the copyrightowner for the benefit of competitors; the bills would impose acompulsory license on the user for the benefit of the copyrightowner. Patterson, Copyright and New Technologies.

‘iThe analysis of harm that follows is, in other words, basedon the assumption that the proprietor’s exclusive rights under$106 of Title 17 do not clearly apply to private use.

‘iBesen, op. cit., p. 46.‘“Ibid.“$Even though the copyright holder’s right to reproduce the

work may have been infringed.

•

●

●

ing the album by taping it off-air, theproprietor has suffered actual harm;76

if a purchaser of a computer program runsthat program simultaneously on severalmachines, no actual harm has occurred;77

if the purchaser of a computer programmodifies the program to run more effi-ciently, the copyright proprietor of the un-modified program has suffered no actualharm;78 andif a SMATV system is set up in a hotelto receive commercial broadcasts and dis-tribute them to the hotel rooms, no actualharm has occurred.79

Actual harm cannot be presumed on the ba-sis of infringement—it is a thoroughly empiri-cal measurement. The same standard of meas-uring actual harm can be used regardless ofthe technology involved: if a new technologi-cally based use causes a reduction in profitsby substituting for previous uses, then actualharm is present. Causation, however, is not al-ways easy to establish, even with empiricaldata available, since mere correlation (e.g.,declining sales in the presence of a new use)is not tantamount to causation (e.g., the sub-stitution of a new use for a previous one).

The second type of harm is potential harm,where harm occurs if the new use reduces prof-its below the level they would have reachedhad the producer been able to exploit the mar-ket served without authorization.80 In otherwords, potential harm arises where a proprie-tor could have and would have been able tosupply the product and receive compensation.Unlike actual harm, potential harm occurs evenif existing markets are unaffected.

—.———.“’Note that the copyright owner of the sound recording has

no performance right, and a broadcast of sound recordings isnot an infringement, even though the broadcast may be taped.The end-user’s taping may be an infringement, but this is un-certain.

“Technically, loading programs into several machines maybe an infringement of the reproduction right, but this is uncer-tain under Section 117 of the Copyright Act.

78The modification of the program is probably an infringe-ment of the proprietor’s right to prepare derivative works, un-less allowed by Section 117.

“’This conduct may be in violation of Section 705 of theCommunications Act.

“’Besen, op. cit., p. 46.


Claims of potential harm are based on a rightto the new opportunities provided by technol-ogy. In a potential harm situation, proprietorsand users have competing claims to the valueof the new use. To the copyright proprietor,these new opportunities represent new andprofitable markets. To the copyright user, theopportunities provide enhanced flexibility, wide-spread availability and inexpensive access.

Arguments based on an analysis of harm pre-sume—and so cannot be the basis of—a pro-prietary right in the new opportunities foruse.81 Potential harm, therefore, cannot in andof itself justify the extension of a right. In-stead, some other criterion, such as an increasein efficiency or access (see below), is neededin order to determine whether to extend a rightto new uses.

Like actual harm situations, potential harmcan take many different forms and appeal tomany different rights:

●

●

●

An unauthorized off-air videotape of a sub-scription television motion picture is madeby a consumer. The proprietor of the mo-tion picture has suffered potential harmif the consumer could have and would havepurchased the motion picture from theproprietor-or if the consumer could haveand would have paid for the right to makean authorized videotape of the motion pic-ture.82

A computer program designed to run inBASIC computer language is translated,without authorization, by a user to run inFORTRAN. The author of the programhas suffered potential harm if the usercould have and would have purchased atranslated version of the program from theauthor.A user of an on-line database downloads,without authorization, the entire text of

“’To predicate a proprietary right on a potential harm anal-ysis is circular: X is harmed because X has a right to the newuse and X has a right to the new use because X is harmed.

“’Note that in this scenario, potential harm exists eventhough the conduct may be entirely legal.

an article. The user thereafter consults thearticle at his leisure. Database articles arenormally paid for on a “pay per use” ba-sis. The proprietor has suffered potentialharm if the user could have and wouldhave paid for each use.A television station broadcasts its newsstories and shortly thereafter erases thevideotapes on which they are fixed. A busi-ness videotapes the news programs off-air, and later sells copies of the tapes tointerested parties. The news program hassuffered no potential harm, since inter-ested parties could not have purchased thetapes from the television station.83

The criterion of potential harm makes intel-lectual property rights considerably more pow-erful than that of actual harm. This addedstrength of rights under a theory of potentialharm stems from the fact that the potentialuses to which a work can be put are unlimitedin number and variety. Once the criterion ofpotential harm is accepted, its amount islimited in principle only by the activities cov-ered by intellectual property rights. So longas a case can be made that a user could haveand would have84 remunerated the proprietorfor the use, all conceivable uses that infringea right could be said to cause potential harm.

Potential harm, however, is not an easy caseto make. Empirical studies of the potentialharm done to proprietors all suffer from a basicmethodological shortcoming: they do not clearlydescribe the behavior of either consumers orproducers in the absence of private use.85 Theassertion that consumers “would have” pur-chased an original in the absence of private use

. —“’See: Duncan v. Pacific and Southern, 744 F.2d 1490 (llth

Cir. 1984), cert. denied, 105 S. Ct. 1867.“Note that even “would have and could have” suffers from

definitional ambiguity. “Would have” can refer to a subjectivedisposition of the user to buy in the absence of an ability tocopy (a most difficult item of proof), or to the collective eco-nomic behavior of the market in the absence of copying (it isthe latter of these that Besen uses in his resolution of the prob-lem of indeterminacy (see below)). “Could have” can refer toeither the financial ability of the user to buy in the absence ofcopying (calculated either individually or in the aggregate) orto the availability of an original (problematic in the case of tele-vision broadcasts).

“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 wouldhave been in the absence of private use. Butby the same token, the price of the original can-not be determined until the behavior of con-sumers in the absence of copying is known, Theharm done to producers by private use is there-fore indeterminate.”

The situation is even more complicated whenno copy (i. e., no original tangible object) isavailable-as is the case with television andradio broadcasts, teletext and videotext, andon-line databases. In these instances, the al-legedly infringing copy is often not a substi-tute for the sale of an original, since the origi-nal is seldom sold in copies (i. e., published ordistributed). The copyright holder must thenuse other empirical criteria to demonstrateharm-i. e., the user would have and could havemade further use of, or further access to, theephemeral copyrighted work. It should benoted, moreover, that works disseminated overelectronic media, instead of in copies, also raisequestions of access. This issue is discussedbelow.

Most estimates of harm to producers of in-tellectual property are based on surveys of userpractices, in combination with data on salesand the costs of production. However, a con-sideration of the beneficial effects of new tech-nological uses to either new or existing mar-

.——“’To know what consumer behavior “would have been, ” one

must determine price in the absence of private use; but priceis itself partially depend ant on consumer behavior. A model forestimating harm that may account for this indeterminacy hasbeen suggested, but has not yet been used in any empirical studyof harm.

In order to estimate the effect of copying. it is necessary to de-termine what would have been the situzition if copying had notoccurred. the determination of a counterfactual. The tech-nique is to ‘calibrate’ the model. using data on the number ofcopies made per original, the cost of copying, the cost of produc-ing originals, the number of originaIs sold, and the price beingcharged for originals m the absence of copying, The interceptof the demand curve can be determined using data on the priceof originals, the costs of producing originals and copies, and thenumber of copies per original. The intercept, together with thecost of originals, can then be employed to dererrnine (sic; in origi-nal) the price of originals that would have prmailed if there wereno cop:ing. With data on the number of originals sold, the esti-mated intercept of the demand curve, and the number of copiesper original, the slope of the demand curve for originals can becalculated. Together wit h information on the cost of producingoriginals, the market equilibrium that would have existed in theabsence of cop}ing can he estimated.

13esen, op. cit., pp. 54-55.

kets for intellectual property is often absentfrom such estimates. Although the videocas-sette recorder may give rise to copying, it alsopermits the exploitation of markets that wouldotherwise not exist. Both factors must be takeninto account in considering harm. The policy-maker is therefore still left with a decision overwho will benefit from new technological uses,and for what reasons.

To make such decisions, Congress may it-self need to gather timely and accurate dataon harm. Existing surveys vary considerably,and rapid changes in technologies and usemake previous surveys of harm increasinglyless relevant. Conducted by parties involvedin the intellectual property debate, most of thesurveys that are available are, moreover, sub-ject to bias.

The discrepancies in previous analyses areclearly illustrated in a sampling of principlefindings of surveys conducted over the last10 years, listed below. Because these surveysoften focused on a unique product or geographi-cal market, and because each employed differ-ent methods of research and presentation, noattempt has been made to list them in a com-parable form.

Survey Sponsor: Recording Industry Associationof America (RIAA)

Year: 1983 {for sales year 1982)Domain: audiocassette tapingConducted by: GreenspanPrincipal Findings;

● Overall, more than two-fifths of home tapingwas in lieu of the purchase of prerecordedrecords and tapes, representing lost sales ofapproximately 32 percent, or about $1 billionout of a total of $3.2 billion in actual sales. Thissales displacement is said to have depressedall record sales by 5 percent, bringing totallosses from home taping to $1.4 billion. In par-ticular, the study found that:–Approximately 50 percent of taped, bor-

rowed records or tapes ‘‘would have gener-ated” purchases of originals, if no taping hadoccurred.

—Forty-two percent of taping from ownedrecords “would have resulted’ in purchasesof additional records and tapes, if no tapinghad occurred.


—Forty percent of all off-air taping “would havegenerated” record and tape purchases.

Survey Sponsor: Motion Picture Association ofAmerica (MPAA)

Year: 1983 (for sales year 1982)Domain: videocassette tapingConducted by: Battelle Pacific NorthwestPrincipal Findings:

● Tape-to-tape copying: If no blank videocas-settes were sold, the market for prerecordedvideocassettes would approximately double(by inference, lost sales due to tape-to-tapecopying). Using this figure, lost sales for 1982would be about 1.1 million units, or about $11million in royalties (based on a $10 per unitroyalty rate). Projections for 1990, using thesame assumptions, amount to approximately11.2 million units lost sales, or $112.4 millionin lost royalties

● Off-m-r taping: The survey predicts thatprerecorded videocassette sales would againapproximately double, were there no off-airtaping from television. Using this result, theyestimate royalties lost in 1982 of approxi-mately $26.9 million for commercial television,and approximately $19,3 million for pay tele-vision. Comparable estimates for 1990 are$273.7 million and $196.7 million, respectively,for commercial and pay television.

Survey Sponsor: International Federation of Phono-gram and Videogram Producers (IFPI)

Year: 1979Domain: video and audio cassette taping (United

Kingdom)Conducted by: G. DaviesPrincipal Findings:

● Audiotaping In 1979, approximately 280 mil-lion LPs had been copied. Approximately 25percent of these copies replace retail sales, re-sulting in lost sales of approximately $622million-or the equivalent of 70 percent of thevalue of retail sales in 1979.

• Videotaping A‘ ‘tentative estimate’ of lossesto the video industry of $24 million at the re-tail level, and $9 million to the copyrightholders. (No details of methodology provided.)

Survey Sponsor: British Phonograph IndustryYear: 1973, 1975, 1977Domain: audiocassette taping (United Kingdom)Conducted by: Anna, Impey, Morrish & Partners

(AIM)

Principle Findings:● Loss estimates based on the length of time of

music taped in-home correlated with the LPequivalent-hours were used. . .

● . . . in combination with a survey of whetherconsumers would have purchased if not fortaping. This yielded a loss sales estimate ofbetween £ 63 and £ 98 million.

● . . . in combination with estimates of theproportion of blank tape used for home tap-ing and with the above survey. This produceda loss sales estimate of between £ 90 and£ 139.5 million.

● . . . a third estimate based on a comparison be-tween actual sales and projected sales (usingdata from 1972 to 1974) produced an estimateof lost sales of £ 85 million.

Survey Sponsor: National Music Publishers Asso-ciation (NMPA) and Recording Industry Asso-ciation of America (RIAA)

Year: 1982Domain: audiocassette tapingConducted by: Roper OrganizationPrinciple Findings:

● Based on a survey of people who taped athome from any source, in which the respond-ents were asked how many records and tapesthey saved buying as a result of taping. Thesurvey revealed that 90 percent of everythingtaped from other than respondents’ own col-lections would have been purchased if nottaped at home. This translates into 268 mil-lion albums and 213 singles. Roper ultimatelyaccepted a potential sales loss of 14 percent.

Survey Sponsor: Audio Recording Rights CoalitionYear: 1982Domain: audiocassette tapingConducted by: Yankelovich, Skelly & White, Inc.Principal Findings:

● This survey—unlike others—concerned pri-marily audiocassette taping practices and thereasons cited for those practices, rather thanestimates of harm done by audio taping.Among the major findings were:–Seventy percent of the respondents recorded

primarily to construct their own programselections, rather than to avoid paying forprerecorded selections. From 1 to 3 percentcite cost as the only reason for home taping.

–Seventy-five percent tape for reasons ofportability; 51 percent cite quality; and 57percent cite convenience.

Ch. 7—New Technologies and the Intellectual Property Bargain • 203

–Fifty-two percent of all audiotaping was ofsomething other than prerecorded music.Fifty-one percent of tapes were made fromrespondents’s own selections.

–“Heavy tapers” owned approximately threetimes as many prerecorded selections (which,according to the survey, indicates that tap-ing stimulates purchases).

Survey Sponsor: Recording Industry Associationof America (RIAA)

Year: 1983Domain: audiocassette tapingConducted by: Audits and SurveysPrincipal Findings:

● Americans tape the equivalent of 564 millionalbums of music annually, resulting in lostsales of 325 million albums. Non-copyrightedmaterials accounted for 302 million albumequivalents.

• Only 7 percent of retail purchases of prere-corded tapes are stimulated by taping.

● Eighty-four percent of blank tapes are usedto record prerecorded music,

Survey Sponsor: Warner Communications, Inc.Year: 1981 (1980 Survey Year)Domain: audiocassette tapingConducted by: M. Kapp, S. Middlestadt, and M.

FishbeinPrincipal Findings:

● A ‘‘conservative estimate’ the total value ofhome-taped music is $2858.5 million.

● Seventy-five percent of all blank tapes pur-chased were ultimately used to record music.Consumers spent $609 million for blank au-dio tape for the purpose of recording music orother professional entertainment

● Twenty-five percent of all home tapers tapedin order to avoid buying prerecorded music.

Survey Sponsor: CBS RecordsYear: 1980 (1979-80 Survey Year)Domain: audiocassette tapingConducted by: CBS Records Market ResearchPrincipal Findings:

Audiocassette taping costs the prerecordedmusic industry 100 million units annually—or lost sales of $700 to $800 million.Seventy-five percent of home tapers tape inorder to “customize” tape selections,Fifty-five percent of home tapers tape in or-der to save money. Twenty-five percent cite“better quality” as the reason for taping.

● Forty percent of consumers tape from theirown records or tapes, and 30 percent tape fromborrowed records or tapes. An additional 20percent tape from radio broadcasts.

Survey Sponsor: The Association of Data Process-ing Service Organizations (ADAPSO)

Year: 1985 (Survey Year 1984)Domain: Computer SoftwareConducted by: Future Computing, Inc.Principal Findings:

● Fifty percent of all programs (database pro-grams, spreadsheet/accounting programs, andword processing programs) are unauthorizedcopies. (No distinction made between legal“backup” copies authorized by 17 U.S.C.§ 117 and other copies).

● Estimated loss revenues in 1985 were $800million.

2. The Criterion of EfficiencyAnother criterion for determining rights in

private use is that of efficiency: does privateuse either hinder or promote an economicallyefficient market for particular types of infor-mation-based products or services.87 The term“efficiency” assumes that the welfare of pro-ducers and users will both be simultaneouslymaximized. It is a relevant criterion, therefore,because the intellectual property bargain alsoassumes that the interests of the public andthe author coincide. Like harm, however, effi-ciency is hard to determine. Depending on theparticular market for the type of informationthat is being produced and on the costs oftransactions in these markets, uncompensateduse may either increase, decrease, or have noeffect on efficiency. The problem of determin-ing efficiency is made more difficult by the factthat, as the previous chapter points out, in-formation markets are subject to market fail-ures, and our understanding of, and knowledgeabout, these markets is still quite limited.

— — . .‘“A market is economically efficient when the cost of pro-

ducing an additional unit of a good equals the value of that unitto consumers. An economically efficient market maximizes thewelfare of both the producers and consumers of information,and allocates resources to their most valued use. These concepts,as the~’ appl~’ to information markets, are discussed in greaterdetail in ch. 6.


Using efficiency as a criterion for allocatingrights, policymakers might extend proprietorsrights to private use so as to allow them torecover income equal to the value of privateuse to consumers. Under ideal market condi-tions, the producer would then be able to in-vest this additional income in more informa-tion products, and the market would receivethe signal it needs to identify and supply con-sumer demand. Consumers would also bene-fit from the resulting increase in productivityand from a market that was attuned to theirpreferences.

In the case of information markets that arenot ideal, however, the criterion of efficiencyis more difficult to apply. Because informationis a public good, it does not operate efficientlyin the marketplace. Hence, it is impossible todetermine precisely at what point rights to pri-vate use would maximize the joint welfare ofusers and producers.88

The costs of transactions in information im-pedes efficiency, and thus greatly complicatesthis problem. The user’s need to obtain clear-ance and pay for use, and the producer’s needto monitor use and obtain payment may off-set the actual value of the use to the user, orthe income to the provider. Transactions costsmay be reduced through the formation ofcollecting societies (for example, CopyrightClearance Center), or by compulsory licensesadministered through a governmental or non-governmental agency (such as The CopyrightRoyalty Tribunal). In these arenas, outcomesoften have less to do with efficiency than withthe extent of the resources that stakeholderscan bring to bear.

88For example, if all consumers pay the same rate to down-load from a database, those who value the use at less than thatprice will be unwilling to purchase it. This is inefficient sincethere are no additional costs to serving these consumers, Atthe same time, consumers who value the use at more than themarket price contribute less to its production and distributionthan its value to them. This, too, is inefficient, because the valueplaced on the use by the consumer is not reflected in the pricethat he is charged. In the absence of an ability to price dis-criminate between users based on value, a market based on le-gal rights to private use is unlikely to be efficient. In other words,it is impossible to determine whether rights to private use wouldsimultaneously maximize the welfare of both producers and usersof information.

Determining efficiency in the granting of in-tellectual property rights will become evenmore troublesome as new technologies allowindividuals not just to copy, but to reprocessinformation in their homes. In effect, privateuse will take the form of derivative use. And,as in all cases of derivative use, policy makerswill find it difficult to use efficiency as a cri-terion for determining rights. For they will notbe able to anticipate all future uses to whicha work might be put, or the values that mightbe attached to them.

Unable to establish an efficient level ofrights, policy makers may want to leave someleeway for unremunerated private use. In theabsence of clear evidence to the contrary, flex-ibility may be the best way to encourage thegreatest variety of works and those that arebest suited to individual needs. In this way,if they err, it will be on the side of creativity.

3. Access as a Criterion

One criterion that will have to be used in re-solving issues surrounding private use is ac-cess. This criterion differs from efficiency orharm in one important respect: the right to ac-cess is part of the constitutional bargain. More-over, unlike the other criteria, access is nothard to define or measure. Rather, the prob-lem for policymakers in an electronic era is inestablishing rules that will continue to provideaccess to information.

Problems of access can arise, for example,when copyright protection is extended toinformation that is communicated through ameans other than publication- e.g., television,teletext and videotext, and computer networks.The access problem occurs because electronicdissemination—unlike printing—does not in-volve the publication of copies. As a conse-quence, copyright ownership is transformedfrom the right to reproduce a copyrighted workin copies for sale to the right to control accessto the copyrighted work for any reason.89 Thus,when copyright is applied to works that are

“’This potential was articulated by L. Ray Patterson, Copy-right and New Technology: The Impact of the Law of Privacvv,Antitrust and Free Speech, OTA contract report, 1984.

Ch. 7—New Technologies and the Intellectual Property Bargain . 205

electronically disseminated, the balance be-tween the rights held by the proprietor andthose retained by the public is changed. Thisproblem of access can best be seen by contrast-ing what happens when works are dissemi-nated by print and electronic technology.

Dissemination by Print. Copyright law, fromthe Statute of Anne in 1710 to the CopyrightAct of 1976, has adopted the technological par-adigm of printing—the distribution of a workin copies for sale-as its underlying concep-tual paradigm. 90 Indeed, until the invention ofradio around 1900 and television in about 1928,no other form of dissemination was possible;copyrighted works were always found in printedcopies. 91

Until the Copyright Act of 1976, copyrightprotection was conditional on publication. Thatis, unless the work was available to the publicin copies, it did not receive statutory copyrightprotection. 92 Common law protection was avail-able for unpublished works, but Federal lawrequired that, if statutory protection wassought, the author’s discretion over whetherto publish was relinquished.93 The 1976 actabolished this requirement, replacing it withthe principle of “automatic copyright ‘–thatis, copyright now subsists from the moment

——“’The Statute of Anne was concerned exclusively with

books, since the printing press was the only “information tech-nology” then in existence. The Statute is prefaced by this phrase:“An Act for the ~ncouragement of I.earnin~, by Vesting theCopies of Printed Books in the Authors or Purchasers of suchCopies, during the Times therein mentioned. ” 8 Ame C. 19 (1710)(underline added). The Statute contemplated that the onlymethod for distributing information was in books.

The 1909 Act predicated copyright protection on publicationof a work in copies. Former Title 17 U.S. C. 510).

Similarly, the Copyright Act of 1976 contemplates the dis-tribution and publication of a work in copies, 17 U.S.C. \ f 106,101, and the formal requirements of ❑ otice ($ \ 401-406) and de-posit (~407) are also based on publication.

“A copy is the material object in which a work is fixed; itis, for example, the printed and bound version of the literarywork Grat’ity ‘S Rainbow, or the exposed strip of celluloid inwhich the work known as Citizen Kane is fixed. For sound record-ings, the material object is referred to as a “phonorecord, ” 17U.s.c. $101,

“’section 10 of the 1909 act required publication of the workwith notice as a condition of copyright. An exception to thisrule was found in Section 12, concerning works, such as motionpictures or statuary, which are not normally reproduced for sale(published), but performed or exhibited in public.

’117 U. SC. ~\2, 10 (repealed).

the work is created and fixed in a tangiblemedium.94

Where a work is sold in copies, a proprietor’scontrol over these copies (but not the copy-right) ceases after they are sold.95 This is knownas the first sale doctrine and it permits a pur-chaser of a copy of work to lend, sell, or freelyreuse that copy without authorization from theproprietor. Once a copy enters the public arena,its presence there is permanent and uncon-trolled; determining who sees the copy, for howlong, and under what conditions are not theprerogatives of the proprietor. Copyright con-trol extends to the first sale of the copy,96 af-ter which efforts to control distribution or priceare prohibited by law. In print publishing, theproprietor does not control the conduits throughwhich the public has access to a work—or, ifhe does, the control was not based on copy-right. Thus, a publisher’s effort to maintainthe retail prices of its books was rejected ascounter to the first sale doctrine.97 Even whenthe copyright owner does not exercise his rightto vend the work, and instead licenses its use,attempts to maintain prices or control perform-ance of work sometimes may run afoul of anti-trust laws.98

Under a print system, the legal rights arealso limited to control over the first sale of acopy. Property rights in the intangible “work,”such as a literary work, do not extend to thetangible “thing,” such as a book, in which theinformation is embodied. The public access toa copyrighted work—the number and varietyof conduits through which copies of a work canbe obtained and the ability to use and disposeof the copy freely—is thus guaranteed undera print system requiring publication as a con-

‘“Sections 102 and 302 of Title 17. The act also preemptedcommonlaw copyright.

“This principle is known as the doctrine of first sale. See:17 U.S.C. $109 (formerly $27). Under the first sale doctrine, copy-right permits no restraints on the alienation of a copy.

‘Former Title 17 U.S.C. $27, the first codification of the“first sale doctrine. ”

“-Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908); See also:Scribner v. Straws, 210 U.S. 352 (1908) and !3rzms v. AmericanPublisher’s Association, 231 U.S. 192 (1913),

“’E.g., Interstate Circuit, Inc. v. United States, 306 U.S.208 (1939) and United States ~’. Paramount Pictures, Inc., 334Us. 131 (1947).


dition of protection. The bargain betweenauthor and public is built into the law, and as-sumes the dissemination of a work in copies.

Electronic Dissemination: A New CopyrightMilieu. While the system of print publicationmay to an extent still reflect reality, it has inrecent years been largely superseded by a newsystem of dissemination.99 For purposes of thisdiscussion, we will refer to the new system aselectronic dissemination, 100 and define it as thetransmission of information in the form of elec-tronic signals. Under this system, a work iscommunicated, rather than distributed. Inother words, the work is disseminated in anintangible, rather than tangible, medium.101

Hence, novels and newspapers, which havetraditionally been distributed in print on pa-per, may now be stored and delivered electron-ically. 102 The last vestiges of information as a

— . —‘As Ithiel de Sola Pool observes:

The nonprint media are not just passing the print media (interms of the amount of information as measured by the numberof words), but are for the first time showing signs of displacingthem in part.

Ithiel De Sola Pool, 7’echnolo@”es of Freedom, (Cambridge, MA:Belknap Press, 1983), p.20.

‘(”)The word “dissemination” is used in place of either “dis-tribution” or “publication.” The latter are terms of art havinga unique legal denotation. Under the Copyright Act, ‘ ‘publica-tion” is the distribution of copies or phonorecords of a work,17 U.S.C. jlOl, and “distribution” occurs by offering copiesor phonorecords of the work for sale or other transfer of owner-ship, 17 U.S. C. \ 106(3). Both terms are predicated on the no-tion of a copy–the material object in which the work is fixed.17 U.s.c. $101.

‘(’’Electronic dissemination can be said to be an intangiblemedium for a number of reasons:

1. electrons, electromagnetic waves or photons are transient(for our purposes these can be considered the samephenomena); they disappear when their energy stimulusis turned off. On a high speed telecommunications circuitthey appear and disappear as rapidly as 10 billion timeseach second;

2. without a receiving devise of some kind, the transmissionis for all practical purposes, non-existent; and

3. unlike physical media (disks, tapes, film), wire or other trans-mission does not lend itself to physical controls (such asa locked box).

From Solomon, “Intellectual Property and the New Computer-Based Media, ” OTA contractor paper, p.8.

‘(]’The demise of the book has been prophesied for sometime now (See; e.g., C. Overhage, and R. Harmon, Project ln-trex (Cambridge, MA: MIT Press, 1965), speculating on thepromising future of microfilm), but despite a growing infrastru-cture (i.e., the growing popularity of the home computer, the grow-ing availability of online information, and the prospect of theIntegrated Services Digital Network), it is likely that–for cer-

tangible “thing” to be bought and sold havebeen removed, and it has taken on the attrib-utes of a service.103

Not all technologies for electronic dissemi-nation have the same potential to raise issuesof access. The technologies differ widely intheir format, limitations, and suitability foruse with particular types of information.104

Moreover, technological limitations, consumerdemand, and the economics of production willvariously affect the likelihood that these tech-nologies will replace or augment a traditionalmode of distributing copyrighted works. Otherfactors, such as whether the dissemination sys-tem is “open’ or “closed, "]05 and prohibitionson copying or downloading, may also affect thesalience of the access issue. Also, many of thetechnologies now being developed are of un-known technological or commercial viability,106

or lack definite application. These uncertain-ties further obscure the possibility of conclu-sive statements regarding affect of access con-cerns on private use.

In general, the technologies of electronicdissemination can be, or are now used forcommunicating copyrighted or copyrightableworks to the public. Each technology makesit unnecessary to distribute copies. Each alsorepresents a way of moving information fromplace to place that has no clear analog in thesystem of print. Electronic dissemination re-quires a consideration of how copyright prin-ciples that apply to it—automatic copyright,107

tain uses, such as temporary storage media—printed informa-tion will always be with us. OTA Workshop on Storage Tech-nologies, 1985.

“’’Electronic dissemination is not new, only the copyrightprotection of electronically disseminated works. Television andradio broadcasts have been around since early in the century,but were not copyrightable until the 1976 act.

‘(’’For present purposes, electronic dissemination technol-ogies comprise television (including broadcast, cable, SMATV,DES, STV, and others); radio; video and teletext (included, per-haps, under the designation of television); and online services.

‘(’’Broadcast television is an example of an open system; paytelevision or on-line database services are examples of a closedsystem.

“’hPay-per-View television is a case in point. See: “Here WeGo Again, ” Forbes, Aug. 26, 1985, pp. 108-114.

‘(’’Automatic copyright, endows the proprietor with copy-right protection from the moment a work is created, with noobligation to make the work available to the public—in copiesor 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-trine109—affect private use issues.

Because no copies are distributed, electronicdissemination means that the proprietor musteither monitor or control access in order to beremunerated. 110 111 In broadcasting, where ac-cess to works can be measured but not con-trolled, advertising has proven a successfulmethod of paying for the copyrighted work. 112

In other cases, advertising may not be viableor desirable. In these instances, the communi-cations medium must lend itself to the meas-urement and control of access, whether by sub-scription, pay-per-use, or user-identification.The proprietor is remunerated through controlover access to either the medium (e.g., cabletelevision) 113 or the work (e.g., on-line data-bases, and videotext and teletext).114

“All original works of authorship are copyrightable, re-gardless of how they are disseminated, as long as they are per-ceptible either directly or with the aid of a machine or device.17 U.S. C. j102(a). Thus, books disseminated in tangible copiesand books that are distributed in the form of intangible elec-tromagnetic signals receive the same protection. While the copy-right holder of the printed book loses control over price, use,and distribution of the copy once the work is published, the copy-right holder of the “electronic” book does not. Performancesand pictures of events transmittedlive are also protected as longas a tangible copy —e. g., a videotape—is fixed simultaneouslywhen the signal is transmitted. However, a performance, e.g.,a news broadcast, does not constitute publication. (It shouldbe noted that different rights for different kinds of subject matterare provided in Section 106, and that Section 108 through 118set subject matter specific limitations on rights).

““’The doctrine of first sale, Title 17 U.S.C. f109, which hasalways abbreviated the rights of the copyright holder in thecopy, is largely irrelevant to works disseminated electronically,since no tangible version of such works is ever sold. Instead,what is sold is access to the copy in limited slices of time orquantity.

“’’The copyright proprietor of many television shows, for in-stance, is also the broadcaster, but need not be—the copyrightproprietor may be the producer, or even the filmmaker. Ulti-mately, a copyright proprietor must be compensated for pro-ceeds of a broadcast (whether by assignment of performanceor display rights, or license, or royalty).

“The measurement or control of access may take manyforms. In television, for example, it maybe based upon by viewerpenetration rate, as measured by “Nielson Ratings,”’ which isin turn translated into advertising revenues (as with network-broadcasts); or it may be based on a set royalty (as is the casewith cable television rebroadcasts); or on a pay-per-use basis(as with many database services).

“- For a discussion of private alternatives, see ch. 6.“ ‘Where access to the medium is controlled, the copyright

proprietor is often remunerated indirectly. In cable television,for example, the copyright proprietor is remunerated (often viaa compulsory license) indirectly on the basis of the cable com-panies’ ability to control access to the coaxial cable.

114The situation occurs most often in cases in which the

Copyright protection is, however, still use-ful to proprietors whose works are electroni-cally disseminated. Indeed, the value of copy-right to the proprietor may be enhanced, sincehe may avoid the consequences of the first saledoctrine. Consequently, the proprietor can cap-ture payment for more of the value of addi-tional uses of the copyrighted work, and canprice discriminate among buyers, thereby re-covering the marginal utility of a work to avariety of users.115 The proprietor may alsoavoid the need for channels of distribution, in-cluding shippers, wholesalers, and retailers.The result may be an overall increase in theeconomic efficiency of production and distri-bution, but may pose problems insofar as thedissemination of copyrighted works is encum-bered with the public interest.

Electronic dissemination creates some verycomplex issues with respect to the public in-terest, and involves the intellectual propertysystem in other issues, such as communica-tions, antitrust, and freedom of speech. Thevery means by which the proprietor securesremuneration is by controlling disseminationto the public. The public does not gain accessto copyrighted works by buying or borrowingpublished copies, but through the reception ofephemeral performances or displays, such astelevision programs. Because works are neverpublished, the proprietor need not give up le-gal control over access. As a consequence, thepublic is dependent on the information pro-vider for each and every access made to a work,and the provider may be the sole source forthe work. Competitive pricing between re-tailers, and the competition for the copyrightedwork from alternative sources, such as librariesand “second hand” booksellers is removed.

Situations in which access is controlled bya proprietor heighten the potential for anti-

proprietor, assignee, or licenser and the disseminator are oneand the same entity. In such cases, copyright control is direct:access to the work itself is controlled.

‘]’’See: Besen, op. cit., p. 4; and David Waterman, Videocas-settes, Videodiscs, and the Role of Theatrical Distribution,Waterman and Associates, and Annenberg School of Commu-nications, University of Southern California, Mar. 13, 1984, froma conference on “R-ivalry Among Video Transmission Media:Assessment and Implications. ” (Harriman, NY: Arden House,Apr. 13-15, 1984).


competitive behavior, especially where cross-ownership exists between the medium of com-munication and the material that is communi-cated. This potential becomes even more acutewhen the copyrighted content is accessed, butnot purchased by the consumer. Since the copy-right owner need not lose control over distri-bution, it can at once be the owner and the solesource of access to the copyrighted work.116

This combination of content and distributionis a form of vertical integration, and forms thejunction between copyright policy-which hastraditionally dealt with ownership of content—and communication policy-which has tradi-tionally dealt with the ownership of carriage.

When communications becomes the neces-sary condition for access to a work, it is neces-sary to consider what interrelations exist be-tween carriage and content. In particular, whencontrol over content and control over carriageare located in one and the same entity, thepower of copyright becomes closely related tothe number of channels of access to a givenwork. Some cross-ownership restrictions117 ad-dress themselves primarily to cross-ownershipbetween the media (telephone and broadcasttelevision), but do not deal with the medium-content issue. The FCC’s Computer I and II,and most recently, Computer III regulationsare efforts to address the issue of vertical in-tegration through restrictions on the commu-nications industry.118

There may also be first amendment consider-ations involved in the issue of access. When

—-—“’There are some indications that the vertical integration of

production and dissemination through cross-ownership is be-ginning to occur, especially in the cable industry. The motionpicture industry is presently an oligopoly of seven companieswhich comprising S5 percent of the market (based on box officegross]. ~~sjmss ~ee~, Feb. 21, 1983, p. 78. Each major pro-duction studio, or its parent, either owns or is involved in jointventures in pay-television st~tions. See Ithiel de Sola Pool, 7’ec~-~oh~”es of Freedom (Cambridge MA: Belknap Press, 1983); andWho Owns Whom (London: Dun & Bradstreet, 1984). In gen-eral, acquisitions and mergers in the information industry hita new record in 1984. Information Hotline, vol. 17, No. 5, May1985, pp. 1, 12.

‘“For example, Section 613 of the recently enacted CableCommunications Policy Act of 1984 (Title VI of the Communi-cations Act of 1934).

“KSee ch. 6 on information markets for a more thorough dis-cussion of the vertical integration.

no copy of a copyrighted work is available tothe public, the “right to receive informationand ideas"119 may conflict with the right to re-strict access based on proprietary discretion. 120

Robust debate requires that information beavailable for public inspection and analysis. 121

Fair use may be a way of reconciling conflictsbetween private rights and political rights, butthere are important theoretical as well as prac-tical differences between fair use and the firstamendment. 122

5. The Criterion of Public Opinion

Finally, the importance of public opinion indecisions about intellectual property rightscannot be overlooked. For the public’s percep-tion of what is fair and equitable is bound upwith questions of legitimacy and enforce-ability y:

On few points in the longstanding debateover the “rule of law” is there greater con-sensus than on the close and necessary rela-tion between societal support for a system of

“’Board~f Education v. Pico, 457 U.S. 853, 867 (1982); Cf.Stanley v. Geor~”a, 394 U.S. 557, 564 (1969).

“’)In Duncan v. Pacific& Southern Co., Inc., 744 F.2d 1490(1 lth Cir. 1984), cert. denied, 105 S. Ct. 1867 (1985), for exam-ple, a defendant to a copyright infringement suit was enjoinedfrom taping local television newscasts and selling them to in-terested parties. Despite the fact that the television stationerased tapes of its news programs after they were retained aweek, and the fact that the news clips were sold only to thesubjects of the station’s broadcasts, the court found for the plain-tiff. Unlike the recent case of Harper & Row, Inc. v. NationEnterprises, S. Ct. No. 83-1632 (citing the Duncan case), theplaintiff in the Duncan case, per its own admission, was neitherin competition with nor harmed by the defendant news serv-ice. I n the Duncan case, ironically, the infringed videotape wasobtained through a customer of the defendant’s.

“’Such was the basis of the defense in the CBS v. Vander-bilt University litigation (Civ. No. 7336 (M.D. Tenn., filed Dec.21, 1973), a case in which Vanderbilt University was engagedin copying CBS’s news coverage for archival and educationalpurposes. The suit was later dropped when Section 108(b) ofthe new copyright law essentially mooted the issue.

“’’’The scope and extent of fair use falls within the discre-tion of the Congress itself. Fair use, when properly applied, islimited to copying by others which does not materially impairthe marketability of the work which is copied. The First Amend-ment principle, when appropriate, may be invoked despite thefact that the marketability of the copied work is thereby im-paired. Nimmer, Cases and Maten”a)s on Cop~ight ( 1978), Sec-tion 1.10 A, pp. 1-64 as quoted in Rosenfeld, “The Americanconstitution, Free Inquiry, and The Law, ” in Fti”r Use and FreeZnqujry, Lawrence and Timberg (eds.) (Ablex Publishing Corp.:New Jersey) 1980, p. 287, 302.


law and the effectiveness of such a legal sys-tem in regulating conduct. The viability of thelegal order of a free society cannot rest solelyon applications or threats of force by author-ities. It must rest on a people’s sense of thelegitimacy of the rule-making institutions andof the rules these institutions make. 123

A survey of the public commissioned byOTA on the issue of intellectual property rightsreveals a number of findings of relevance tothe public’s perceptions of what rights shouldand should not exist in information products.124

With respect to the issue of private use, in par-ticular, the public’s attitudes seem to reflecta rough congruence to the distinction betweencommercial and noncommercial uses.

The survey reveals that two-thirds of thepublic is neither familiar with nor feels affectedby intellectual property rights issues. How-ever, neither familiarity nor self-interest appearto be related to their responses; the knowledge-able and the uninformed responded in verymuch the same way. Among the more signifi-cant of those responses were:

The vast majority of the public (over 7 in10) believes that copying personal posses-sions, like a record or a program from one’sown TV, is acceptable behavior.A majority of the public believes that trad-ing and copying information and enter-tainment such as computer programs andrecords is acceptable behavior.When there is an issue of access–eitherthe information is readily available suchas a library book or there is a questionwhether the information (broadcast sig-nals or airwaves) should be free—the pub-lic is divided.

While each of these behaviors involved per-sonal or private behavior which might give rise

Sha[ tu{k. l’ublr’c \ ttitude.q .nnd th(> b.’nf[]rceahilitjr of Law,OTA contract report. 1985. p 2. “Sometimes . the official sec-tor maj be dt’tached from the prik’ate sector, in the sense thatthere l’+ no longer genw-al obedience tot he rules which are validaccording LO the (t it ~ria of ~’aliditj’ in use in the courts. Th~’~’aricty of w:t}~ in whi~h t his may happen !Jelongs to the pathol-ogy of 1(’#<ul s}’ St e In % . ‘ ‘ 11.1 ,..+4. IIart, The ~oncepl of l.a}~( I,ondon: oxff~r{l ( ‘ni\ersit J l)ress. 1961), p 114.

“Puhli( l’ercepcion,s of tht’ “lntellt’ctu:tl [+-c~pert> liights” qissue, prepared b?’ The Policy Planning (;roup }’a]’kelo~ichSkelly & W’hite, Inc., February 1985.

to civil liability under copyright law,125 thereappears to be little public support for such con-sequences.

However, when asked about conduct whichgenerally involved commercial, for-profit activ-ity or willful, active attempts to avoid payingfor something the public responded as follows:

More than 8 in 10 among the public findbehaviors that obviously circumvent a feeor service (such as purchasing a descram-bler to watch pay TV, or secretly record-ing a concert) to be unacceptable.There is almost complete unanimity amongthe public that behaviors which jeopard-ize privacy, such as entering a databasewithout permission are unacceptable.If copying of copyrighted materials isdone for reasons other than private use,for public display, for sale or personal gain,or on behalf of a large corporation, themajority oft he public found the behaviorless acceptable.

While the public was not informed of the ille-gality or criminal nature of any of the behaviorson which they were questioned, it is interest-ing to note that many of their responses re-flect the criteria for criminal infringement setforth in in the copyright law: the infringementof copyright “willfully and for purposes of com-mercial advantage or private financial gain."126

In general, the public seems to be in supportof laws regarding criminal infringement or ac-cess, and competitive or institutionalized copy-ing activities, but it withholds support for pro-hibitions on civil infringement or private usecopying behavior.——.

“ Under 1 T U.S. C \ \ 106, 501, if these protrusions arc inter-preted to co~’er pri~ate use,

‘“’ 17 U .S. C, \50G. This is not to suggest that criminal in-fringement is not a problem for the motion picture :Ind record-ing industries. “W’hile reports of raids and confiscation of pi-rated materials are quite common, it should be emphasized thatthe statistics suggest that there [ire man~’ nlore pirates opw-at -ing than are ever apprehended, . “ Statement of Nlr, Df)naldC. (krran, Acting [tegistrar, I.ibrary of ~ongrt>ss, ]]cari) ig onCi\il and Crirnin:il k;nforcement of th~ Copyright I.aws Reforethe Senate Subcoml.~ittee on Patents, Copyrights and ‘l’rade-marks, Commit ttx’ on the tJudiciar~, ~lpr. 17, 19S5. Accordingto industrj’ sour~es, criminal infringement has stabilized. W’il-Iiam Nix, MPAA and .Joe lloscaret. \ ice Prescient of Film andVideo stwurit~ at Paran]ount l’ict ures, as cited in {’urran, op. cit.

Chapter 8

Impact of New Technologieson the International Intellectual

Property System

Contents

PageFindings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........................213

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .,..214

Early History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............................214

Present International Intellectual Property System ..,,, . . . . . . . . . . . . . . . . . 215Harmonization of Disparate National Intellectual Property” Systems . .............215Principle of National Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............219Minimum Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........................219

Stresses on the International Intellectual Property System. . ......................220Increasing Flows of Information and Information-Based Products and Services

Between Nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........................221Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................,223Growing Importance of Information and Information-Based Products and

Services to National Economies and International Trade and Competitiveness ....224Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................,......225Increasing Cultural and Political Significance of Information and

Information-Based Products and services . . . . . . . . . . . . . . . . . . . . . . . . . . ........228Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........................230Emergence of New Information-Based Products and Services That Do Not

Correspond to Traditional Intellectual Property Protections . . . . . . . .............232Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......235Increasing Difficulty of Enforcing Intellectual Property Rights Caused by

Emerging Information and Communication Technologies . .....................237Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........................246Growing Convergence of International Intellectual Property Issues With Other

International Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...247Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............,.........249

Implications for Future U.S. International Intellectual Property Policy . ............250

TablesTable No. Page

8-l. International Intellectual Property Agreements . .............................2168-2. Membership in the Berne Convention, the Universal Copyright Convention,

and the Paris Convention for the protection of Industrial Property ..., . ........2188-3. Estimated Losses From Piracy in Ten Selected Countries . ....................2418-4. Countries and Regions That Infringe Copyrights of U.S. Motion Picture and

Television, Prerecorded Entertainment, Publishing, and Advertising Industries . . .2428-5. Policy Options for Addressing International Intellectual Property Issues . .......251

FiguresFigures No. Page

8-1. Shrinking of Our Planet by Humans’ Increased Travel and Communications .. ...2228-2. Computer Utilization: Selected Countries, 13 Sectors . ........................2268-3. The Speed of Change: Intervals Between Discovery and Application in

Physical Science. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........................2338-4. The Level and Location of International Counterfeit Activity of U.S. Products ...239

Chapter 8

Impact of New Technologieson the International Intellectual

Property System

FINDINGS

OTA found that recent developments in in-formation and communication technologies arecreating new stresses on the international in-tellectual property system. Such developmentsinclude:

●

●

●

●

●

●

the increasing flow of information andinformation-based products and servicesamong nations;the growing economic importance of in-formation and related products and serv-ices, both within and between nations;the increasing cultural and political sig-nificance of information and related prod-ucts and services;the emergence of new information-basedproducts and services that do not corre-spond to traditional categories of pro-tection;the increasing difficulty of enforcing in-tellectual property rights at the interna-tional level; andthe growing convergence of internationalintellectual property issues with other in-ternational issues.

Given their magnitude, these technologicaldevelopments pose novel difficulties that chal-lenge the relative stability of the internationalsystem. They affect not only the internationallegal system, but also international economicand political relations. Consequently, theyhave major implications for the United Statesboth as a participant in the international in-tellectual property system and also with re-spect to its choices for domestic intellectualproperty policy. These policy implications are:

● As information and communication tech-nologies facilitate the international ex-

change of intellectual property, domesticintellectual property issues will need tobe resolved within an international con-text and according to internationally agreedupon norms.As technological change prompts greaterneed for rapid international consensus onhow and what to protect, the UnitedStates will need to take greater interna-tional action to keep abreast of as well asinfluence the development of internationalpolicies for the protection of new tech-nologies.As information and information-basedproducts and services become major tradeitems and the basis for economic growth,international trade and economic consider-ations will increasingly be brought to bearon the resolution of international intellec-tual property issues.Given the growing cultural and politicalsignificance of information-based prod-ucts and services, international politicalrelations will need to be taken into accountin resolving international intellectual prop-erty issues.As information and communication tech-nologies undermine the traditional mech-anisms for enforcing intellectual propertyrights, the international community willneed to cooperate and coordinate their ef-forts to provide adequate and uniform en-forcement mechanisms and remedies.Given the convergence of international in-tellectual property issues with other in-ternational issues, the United Statesmight need to establish domestic institu-tional arrangements to develop and coor-dinate consistent international policies.

213


The United States can choose among a vari-ety of policy strategies to deal with technologi-cal change and its effects on the internationalintellectual property system. There is no clear-cut, single strategy, however, that will com-prehensively address all international intellec-tual property issues. Moreover, many policystrategies may conflict with one another andexacerbate other stresses on the internationalintellectual property system. Thus, the UnitedStates will need to make fundamental decisionsabout how it would like to frame international

intellectual property issues (for example, interms of trade, legal, or political relations) anddesign its international intellectual propertypolicies accordingly. As information and com-munication technologies become major factorsin international trade and nations’ economicand social development, such policy decisionswill become more significant to many aspectsof U.S. foreign policy—from international is-sues of trade, defense, and foreign aid to is-sues of international information and commu-nication policy.

INTRODUCTIONHistorically, U.S. intellectual property pol-

icy developed in isolation from the rest of theworld. Such isolation was possible becauseprint materials were confined, for the mostpart, within national borders. Over time andas the necessity arose, the United States slowlybegan to extend its participation in the inter-national intellectual property system.

Recently, however, new technological devel-opments have led to a great expansion in thenumber of ways to create, store, reproduce, dis-tribute, and transmit literary, scientific, andcreative works. The progressive developmentof, for example, radio, television, and comput-ers coupled with advanced telecommunicationand satellite systems have greatly increasedinternational distribution and access to works.These technological developments are creat-ing new stresses on the international intellec-tual property system, which raise questionsabout whether the United States should play

EARLYBefore the 19th century, intellectual prop-

erty protection was largely a domestic concern.Because of the limited intercourse and com-munication among nations, works were distrib-uted almost exclusively within their authors’country. Thus, the lack of international pro-tection caused little concern.

a more active role in the international intellec-tual property system.

To examine the effects of new communica-tion and information technologies on the in-ternational intellectual property system andthe adequacy of U.S. participation in it, thischapter will:

1.

2.

3.

4.

review the early history of U.S. partici-pation in the international intellectualproperty system;describe the present international intellec-tual property system;describe how technological developmentsmay affect the international intellectualproperty system; andsuggest the implications that these devel-opments have for both the level and typeof U.S. participation in the internationalintellectual property system and for U.S.domestic intellectual property policy.

HISTORY

By the early 1800s, a variety of social andtechnological developments began to generateinterest in international intellectual propertyprotection. Increased trade, communications,and travel were important factors, as was thegrowing practice of learning foreign languages.In response, the European nations began to

—

Ch. 8—Irnpact of New Technologies on the International Intellectual Property System ● 215

consider mechanisms to ensure protectionabroad for their domestic works, as well as toprotect foreign works. These nations first setup a number of bilateral protection agree-ments; then, in 1866, many of the Europeannations joined together and signed the firstmultilateral agreement, the Berne Convention.1

While many European states relied on mul-tilateral agreements to regulate their copyrightrelations, the United States did not participatein any international copyright arrangementsfor the first 100 years of its existence, nor didit recognize any copyright protection for for-eign works or authors.z In fact, in the first U.S.copyright law of 1790, Congress explicitly re-stricted the protection of foreign works:

‘Edward W. Ploman and L. Clark Hamilton, Copyright: IrI-teffec.tual Property in the Information Age (London: Routledge& Kegan Paul, 1980), p. 18.

The position of the United States was almost unique at thetime. The major Western nations early on made provisions forthe international protection of authors’ rights. Acting in 1828,Denmark was the first, Prussia followed in 1836 and Englandin 1837. France in 1852 and Belgium in 1854 also granted pro-tection for alI for foreign works. By the mid-19th century, onlythe Soviet Union, the Ottoman Empire, and the United Statesdid not grant protection for foreign works. Aubert J. Clark, TheMovement for International Copyright in Nineteenth CenturyAmerica, (Washington DC: The Catholic University Press, 1960),p. 26.

. . . [N]othing in this act shall be construed toextend to prohibit the importation or vend-ing, reprinting or publishing within theUnited States, of any map, chart, book orbooks, written or printed, or published by anyperson not a citizen of the United States, inforeign parts or places without the jurisdic-tion of the United States.3

It was not until 1891, when Congress passedthe Chace International Copyright Act, thatthe United States begin to recognize interna-tional copyright relations. The act, however,provided neither for multilateral agreementsnor for the protection for foreign works man-ufactured outside the United States.4 But itdid extend copyright relations to nations foundand proclaimed by the President to afford ade-quate protection to American works. This actprovided the basis for all of the U.S. bilateralcopyright relations for more than the next 60years.

‘Committee on the Judiciary, Subcommittee on Patents,Copyrights, and Trademarks, hearing on “Oversight on Inter-national Copyrights, ’ Sept. 24, 1984, p. 28.

‘The manufacturing requirement, still in existence today al-beit in a much diluted form, stipulates that nondramatic liter-ary material must be manufactured in the United States (orCanada) to enjoy full copyright protection in the United States.This requirement is scheduled to be repealed as of July 1986.Title 17 U.S.C. Sec. 601(a).

PRESENT INTERNATIONAL INTELLECTUALPROPERTY SYSTEM

Over the last century, the international sys-tem for protecting intellectual property hasbeen quite stable, displaying a higher level ofcooperation than other international agree-ments. Unlike other international agreementsthat are periodically readapted or completelyrevised, the interlocking conventions that con-stitute the international intellectual propertysystem have provided a permanent legal framework, although it is subject to amendmentsand revisions if required. Table 8-1 summarizesthe major international intellectual propertyconventions. Table 8-2 shows the nationalmembership of each of the three major intel-lectual property agreements.

The system is complex and structured aroundmany different international conventions and

agreements to which different groups of coun-tries adhere. These conventions share severaloutstanding characteristics that govern the in-ternational intellectual property system. Theyare:

1. the harmonization of disparate nationalintellectual property systems;

2. the principle of national treatment; and3. the establishment of minimum rights.

Harmonization of Disparate Nationalintellectual Property Systems

Although rooted in various philosophical tra-ditions, the intellectual property systems ofdifferent nations have been harmonized overthe years under international intellectual prop-

— — . — —A g r e e m e n t - Revis ions

— — . — —Copyright agreements:The Berne Convention for the Protectionof Literary and Artistic Works (1886)

1896: Paris Additional Act andIn terpre ta t ive Dec lara t ion

1908 Berlin Act1914 Berne Addi t ional Protoco l1928: Rome Act1948: Brussels Act1967 Stockholm Act1971 Paris Act

The Rome Convention for the Protection ofPerformers, Producers of Phonograms, andBroadcast ing Organizat ions (1961)

N o n e

The Universal Copyright Convention (1957)1971: Paris

The Convention for the Protection ofProducers of Phonograms Against theUnauthorized Duplicatlon of TheirPhonograms (1971)

None

Table 8-1 .—International Intellectual Property Agreements— .

Protected subject matter— . — —

“This Convention obliges Contracting States to protect theexpression of literary and artistic works [which include] everyproduction in the literary, scientific, and artistic domain, whatever maybe the mode or form of its expression, such as books, pamphlets,and other writings: lectures, addresses, sermons and other worksof the same nature, dramatic or dramatlco-musical works:choreographic works and entertainments in dumb show; musicalcompositions with or without words, cinematographic works to whichare assimilated works expressed by a process analogous tocinematography: works of drawing, painting, architecture, sculpture,engrawng, and Iithography, photographic works to which areassimilated 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

This Convention obliges Contracting States to extend protection:“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 transmitterssituated on its territory “ Article II

“Each Contracting State undertakes to provide for the adequate andeffective protection of the rights of authors and other copyrightproprietors in literary, scientific, and artistic works, including writing,musical, dramatic, and cinematographic works, and paintings, engrav-ings, and sculpture. ” Article 1.

“Each Contracting State shall protect producers of phonograrns whoare nationals of other Contracting States against the making ofduplicates without the consent of the producer and against theImportation of such duplicates, provided that any such making orImportation IS for the purpose of distribution to the public, and againstthe distribution of such duplicates to the public. ” Article Il.

U S membership Comments— — . — — . —

N o Basic principles established underthe Berne Convent Ion1 Principle of national treatment2. Principle of automatic protection

(with no formalities)3 Principle of Independence of

protection4 M i n i m u m r i g h t s

N o

Yes The primary purpose of the UCC wasto join the United States and theLatin American countties with thecountries of Europe, Asia, and Africain a Single multinational agreement.

Like the Berne Convent Ion, the UCCIS based on national treatment andminimum rights. Unllie the BerneConvention, the UCC has severalformalities, such as a not icerequlirement

Yes

A g r e e m e n t R e v i s i o n s

Inter American Copyright Convent IonsThe Montevideo Convention (1889)

N o n eThe Mexico City Convent Ion (1 902)

N o n eThe RIO de Janeiro Convent Ion (1 906)

N o n eThe Buenos Aires Convention (1910)

N o n eThe Havana Convention (1928)

N o n eThe Washington Convention (1946)

N o n e

The Convent Ion Relating to Distributionof Program-Carry ing S ignalsTransmitted by Satellite (1974)

N o n e

Patent and Trademark Agreements:The Paris Convent Ion for the Protect Ionof Industrial Property (1 883)

1900: Brussels1911 Washington1925 The Hague1934 London1938 Lisbon1967 Stockholm

Table 8-1 .—International Intellectual Property Agreements—Continued

Protec ted sub jec t mat ter U.S. membership C o m m e n t s

This Convent Ion obliges Contracting States to protect the expres- N o The Buenos Ai res Convent Ion

S ion of Iiterary and artistic works which include books, writings,p a m p h l e t s of al I Kinds, whatever may be the subject of which theytreat and whatever the number of their pages, dramatic or dramatico-musical works choreographic and musical compositions with orW ithout words, drawings paintings scuIpture engravingsphotographic works ast ronomica l and geographica l g lobes. p lanssketches or plastic works relating to geography geology or

topography archiItecture or any other science and finalIy alIproductions that can be published by any means of Impress Ion orreproduct ion Ar t ic le I I

of I1910 remains the basic Pan

N o Amer ican copyr ight Ins t rument

The Convent Ion obliges Contracting States to take adequate and Yes

effective measures to prevent the distribution on or from its territoryof any program-carrying signal by any distributor for whom the signalemitted to or passing through the satell ite IS not In tended."

During the past 20 years there hasN o

been a clear trend away from these

Yesreg iona l copyr igh t convent ions I n

f a v o r o f w o r l d w i d e a g r e e m e n t s

N oC o n s e q u e n t l y i n m a n y I n s t a n c e st h e U C C h a s r e p l a c e d t h e P a n -

N oA m e r i c a n c o n v e n t i o n s a s t h e

operat ive agreement

The protection of industrial property has as Its object patents, utility Yesmodels industrial designs, trademarks, service marks, trade namesindications of source or appelIations of origin. and the repression ofunfa i r compet i t ion.

Industrial property shall be understood in the broadest sense andshall apply not only to industrial and commerce proper but Iikewiseto agricultural and extractive Industries and to all manufactured ornatural products for example. wines, grain, tobacco leaf fruit cattle.minerals, mineral waters, beer, fIowers, and flour

P a t e n t s s h a l l I n c l u d e t h e v a r i o u s k i n d s o f I n d u s t r i a l p a t e n t srecognized by the laws of the countries of the Union such as patentsof importation patents of [improvement, patents and certif icates ofaddition etc." Article I

The Patent Cooperation Treaty (1 978)N o n e The Treaty facilitates the filing of the applications for patents on the Yes

same Invent Ion in member count r ies by prov id ing among otherthings for centralized fiIing procedures and a standardizedapplication format

SOURCE Off Ice of Technology Assessment

●


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

Algeria . . . . . . . . . . . . . . . . . . . .Andorra. . . . . . . . . . . . . . . . . . . .Argentina . . . . . . . . . . . . . . . . . .Australia. . . . . . . . . . . . . . . . . . .Austria . . . . . . . . . . . . . . . . . . .Bahamas . . . . . . . . . . . . . . . . . .Bangladesh . . . . . . . . . . . . . . . .Barbados . . . . . . . . . . . . . . . . . .Belgium . . . . . . . . . . . . . . . . . . .Belize . . . . . . . . . . . . . . . . . . .Benin . . . . . . . . . . . . . . . . . . . . .Brazil . . . . . . . . . . . ... . . . . . . .Bulgaria . . . . . . . . . . . . . . . . . . .Burkina Faso . . . . . . . . . . . . . . .Burundi . . . . . . . . . . . . . . . . . . . .Cameroon. . . . . . . . . . . . . . . . . .Canada . . . . . . . . . . . . . . . . . . . .Central African Republic . . . . .Chad . . . . . . . . . . . . . . . . . . . . . .Chile . . . . . . . . . . . . . . . . . . . . . .Colombia . . . . . . . . . . . . . . . . . .Congo . . . . . . . . . . . . . . . . . . . . .Costa Rica. . . . . . . . . . . . . . . . .Cuba . . . . . . . . . . . . . . . . . . . . . .Cyprus . . . . . . . . . . . . . . . . . . . .Czechoslovakia . . . . . . . . . . . . .Democratic Kampuchea . . . . .Denmark . . . . . . . . . . . . . . . . . . .Dominican Republic . . . . . . . . .Ecuador . . . . . . . . . . . . . . . . . . .Egypt . . . . . . . . . . . . . . . . . . . . .El Salvador. . . . . . . . . . . . . . . . .Fiji . . . . . . . . . . . . . . . . . . . . . . . .Finland . . . . . . . . . . . . . . . . . . . .France . . . . . . . . . . . . . . . . . . . .Gabon . . . . . . . . . . . . . . . . . . . . .Germany, Democratic

Republic of. . . . . . . . . . . . . . .Germany, Federal

Republic of . . . . . . . . . . . . . .Ghana . . . . . . . . . . . . . . . . . . . . .Greece . . . . . . . . . . . . . . . . . . . .Guatemala . . . . . . . . . . . . . . . .Guinea . . . . . . . . . . . . . . . . . . . .Haiti . . . . . . . . . . . . . . . . . . . .Holy See... . . . . . . . . . . . . . . .Hungary . . . . . . . . . . . . . . . . . . .Iceland . . . . . . . . . . . . . . . . . . . .India . . . . . . . . . . . . . . . . . . . . . .Indonesia . . . . . . . . . . . . . . . . . .Iran . . . . . . . . . . . . . . . . . . . . . . .Iraq . . . . . . . . . . . . . . . . . . . . . . .Ireland. . . . . . . . . . . . . . . . . . . .Israel . . . . . . . . . . . . . . . . . . . . . .Italy . . . . . . . . . . . . . . . . . . . . . . .Ivory Coast . . . . . . . . . . . . . . .Japan . . . . . . . . . . . . . . . . . .Jordan. . . . . . . . . . . . . . . . . . . . .Kenya . . . . . . . . . . . . . . . . . . . . .

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Paris

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Korea, Republic of . . . . . . . . .Laos . . . . . . . . . . . . . . . . . . . . . .Lebanon . . . . . . . . . . . . . . . . . . .Liberia. . . . . . . . . . . . . . . . . . . . .Libya . . . . . . . . . . . . . . . . . . . . . .Liechtenstein. . . . . . . . . . . . . . .Luxembourg. . . . . . . . . . . . . . . .Madagascar . . . . . . . . . . . . . . . .Malawi . . . . . . . . . . . . . . . . . . . .Mali . . . . . . . . . . . . . . . . . . . . . .Malta. . . . . . . . . . . . . . . . . . . . . .Mauritania . . . . . . . . . . . . . . . .Mauritius . . . . . . . . . . . . . . . . . .Mexico . . . . . . . . . . . ..., ...,Monaco . . . . . . . . . . . . . . . . . . . .Morocco . . . . . . . . . . . . . . . . . . .Netherlands . . . . . . . . . . . . . . . .New Zealand . . . . . . . . . . . . . . .Nicaragua. . . . . . . . . . . . . . . . . .Niger. . . . . . . . . . . . . . . . . . . . .Nigeria . . . . . . . . . . . . . . . . . . . .Norway . . . . . . . . . . . . . . . . . . . .Panama. . . . . . . . . . . . . . . . . . . .Pakistan . . . . . . . . . . . . . . . . . . .Paraguay . . . . . . . . . . . . . . . . . .Peru . . . . . . . . . . . . . . . . . . . . . . .Philippines . . . . . . . . . . . . . . . . .Poland . . . . . . . . . . . . . . . . . . . .Portugal . . . . . . . . . . . . . . . . . . .Romania. . . . . . . . . . . . . . . . . .Rwanda. . . . . . . . . . . . . . . . . . . .San Marine. . . . . . . . . . . . . . . .Senegal . . . . . . . . . . . . . . . . . . .Singapore . . . . . . . . . . . . . . . . . .South Africa . . . . . . . . . . . . . . .Soviet Union ..., . . . . . . . . . . .Spain.. . . . . . . . . . . . . . . . . . . . .Sri Lanka . . . . . . . . . . . . . . . . . .Suriname . . . . . . . . . . . . . . . . . .Sweden . . . . . . . . . . . . . . . . . . . .Switzerland . . . . . . . . . . . . . . . .Syria ..., . . . . . . . . . . . . . . . . . .Tanzania. . . . . . . . . . . . . . . . . .Thailand . . . . . . . . . . . . . . . . . . .Togo . . . . . . . . . . . . . . . . . . . . .Trinidad and Tobago . . . . . . .Tunisia . . . . . . . . . . . . . . . . . . . .Turkey . . . . . . . . . . . . . . . . . . . . .Uganda . . . . . . . . . . . . . . . . . . . .United Kingdom . . . . . . . . . . . .United States . . . . . . . . . . . . . . .Upper Volta . . . . . . . . . . . . . . . .Uruguay ..., . . . . . . . . . . . . . .Venezuela, . . . . . . . . . . . . . . . . .Viet Nam . . . . . . . . . . . . . . . . . .Yugoslavia . . . . . . . . . . . . . . . . .Zaire . . . . . . . . . . . . . . . . . . . . . .Zambia . . . . . . . . . . . . . . . . . . . .Zimbabwe . . . . . . . . . . . . . . . . . .

Berne UCC Paris

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Ch. 8—Impact of New Technologies on the International Intellectual Property System . 219— —

erty agreements. This harmonization was pos-sible because each of the national systemsshared a common set of goals. In general, na-tions have advanced four major rationales tojustify intellectual property protection. Thesehave generally been accepted in most coun-tries, but nations weigh them differently.5

Based on these justifications, three tradi-tions of intellectual property law have evolved.These include: the droit d’auteur system, whichplaces the emphasis on the principles of natu-ral justice; the Anglo-Saxon or copyright sys-tem, which is based on economic arguments;and the socialist system, which places the em-phasis on socialist doctrine and the importanceof the author in terms of his social role. Thereare, however, considerable variations amongdifferent countries that follow the same sys-tem.6 Although both the justifications for andthe actual systems of protection may differfrom nation to nation, overall internationalagreement is possible because the end resultor goal is the same–to protect intellectualproperty.

Principle of National Treatment

The second shared characteristic of these in-ternational agreements is the principle of na-tional treatment. In practice, this principle wasadopted to achieve two goals: 1) to facilitateinternational judicial interpretation; and 2) to

“First, the principle of natural justice says that the authoris the creator of the work, which is the expression of his person-ality, and therefore he should decide whether and how his workis commercialized and prevent any injury and mutilation of hisintellectual offspring. The royalties he receives are the wagesfor his intellectual work, Second, the economic justification forprotection is based on the argument that the investment in creat-ing works, as well as in disseminating them to the public, wouldnot be undertaken unless creators have a reasonable expecta-tion of recouping investments and earning a reasonable profit.The third justification for protection is based on the argumentthat creative works are a considerable national asset, and there-fore it is in the public interest to encourage and reward creativityas a contribution to the national culture. The fourth is basedon a social argument that the dissemination of works to manydiverse sectors of the public improves social cohesion and ad-vances the society. Stephen Stewart, The Law of InternationalCopyright and Neighboring Rights (London: Butterworth & Co.(Publishers) Ltd., 1983), pp. 3-6.

‘Stephen Stewart, The Law of International Copyright andNeighboring Rights (London: Butterworth & Co. (Publishers)Ltd., 1983), pp. 6-11.

unify laws among countries that offer differ-ing levels of protection.7

National treatment facilitates internationaljudicial interpretation because it requires thatjudicial decisions be made within the countrywhere the rights holder seeks protection, re-gardless of his nationality. As a result, judg-ments are more consistent and more certain;the courts can more effectively interpret theirown laws as opposed to those of other nations.

Second, many nations adhere to nationaltreatment because they believe it leads to bet-ter political relations and unifies levels of pro-tection among countries. Nations believe thatthis will occur because rights owners in coun-tries of low-level protection, who receive higherlevels of protection in other countries, willpress their governments to raise their domes-tic levels of protection. Thus, it is believed thatnational treatment will give rise to a more uni-fied and higher common level of protectionamong nations.

Minimum Rights

All international intellectual property agree-ments also establish a common set of minimumrights that may be claimed in all adhering coun-tries, regardless of national legislation. Al-though convention countries are not requiredto grant minimum rights to their own nation-als, all foreign member country nationals areentitled to these minimum rights. These mini-mum rights attempt to ensure that nationaltreatment does not lead to any imbalances inlevels of protection among nations. Withoutthem, national treatment, which exclusivelycalls for equal treatment of foreigners and na-tionals within a convention country, could notprevent large discrepancies in levels of protec-tion among countries.8 Consequently, mini-

‘Ibid., p. 39.“The principle of national treatment without minimum

rights might produce a serious imbalance which States wouldfind unacceptable. For exampIe:

If countries A and B were members of a [international] conven-tion which provides only for national treatment and has no mini-mum rights and country A grants performance and broadcastingrights as well as a reproduction right, the effect would be thatthe nationals of country B would enjoy performance and broad-casting rights in country A, but nationals of country A would

[continued on next page)


mum rights work in conjunction with nationaltreatment to achieve the greatest possible uni-formity of intellectual property protectionamong countries.9

Minimum rights also provide a flexible mech-anism for unifying and increasing levels of in-ternational protection as needed. Starting witha small number of minimum rights, a conven-tion can add others as new rights are requiredand as the level of international agreementrises. For example, beginning with the trans-lation right, the Berne Convention later addedthe rights of public performance and broad-casting, the droit moral (moral rights), and the

— —.—.— —-(continued from pre~’ious page)

not enjoy these rights in country B because the nationals of coun-try B do not enjoy them either. This could produce a serious dis-equilibrium which would be unacceptable to country A.

Ibid., pp. 40-41.“A history of copyright and neighboring rights bears this out . . .When the Universal Copyright was negotiated 60 years after [the13erne Convention], the difference in the level of protection withrights covered by the convention became less marked, and thusless stringent measures to insure against unacceptable differencesin the level of protection were required.

Ibid., p. 40.

cinematographic right. The Universal Copy-right Convention (1952 text) originally pro-vided only for the translation right; its revisedversion (1971 text) added the reproductionright, the broadcasting right, and the publicperformance right. ’”

The harmonization of different national in-tellectual property systems, the principle ofnational treatment, and minimum rights haveenabled the periodic revision of internationalconventions, which has given the internationalsystem the flexibility needed to adapt overtime to technological change and changing atti-tudes about intellectual property protection.However, with the development of many newways of creating, reproducing, and exploitingintellectual works, the international intellec-tual property system is currently experienc-ing a number of new and perhaps more seri-ous stresses. Questions arise, therefore, as towhether U.S. domestic policy and participa-tion in the existing international system candeal with such changes.— — .

“’[bid., p. 40.

STRESSES ON THE INTERNATIONAL INTELLECTUALPROPERTY SYSTEM

Recent technological developments are cre-ating pressures on the international intellec-tual property system. Such developments andtheir effects include:

1.

2,

3.

4.

the increasing flow of information andinformation-based products and servicesamong nations;the growing economic importance of in-formation and related products and serv-ices, both within and between nations;the increasing cultural and political sig-nificance of information and related prod-ucts and services;the emergence of new information-basedproducts and services that do not cor-respond to traditional categories of pro-tection;

5. the increasing difficulty of enforcing in-tellectual property rights at the interna-tional level; and

6. the growing convergence of internationalintellectual property issues with other in-ternational issues.

Greater in magnitude than those of the past,today’s technological developments pose noveldifficulties that challenge the relative stabil-ity of the international system. Such develop-ments affect not only the international legalsystem, but also international economic andpolitical relations. Consequently, these devel-opments may affect the U.S. role in the inter-national intellectual property system as wellas domestic intellectual property policy. Abrief 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-tional and domestic policies are providedbelow.

Increasing Flows of Informationand Information-Based Products

and Services Between Nations

Technological advances in and the growingconvergence of information and communica-tion technologies have greatly increased theflow of information and information-basedproducts and services across national borders.Increases in international trade, as well as thedevelopment of satellite, broadcast, fiber op-tics, and other telecommunication technol-ogies, have combined with more powerful in-formation storage, processing, and distributiontechnologies to bring about international ex-changes of intellectual property. As illustratedin figure 8-1, these developments have led togreater international exchanges of informationand technology and international inter-dependence.

Although exact measurements of computer-ized data flows are difficult to attain, manyinquiries reveal that their rate of growthexceeds the growth rate of nonvoice communi-cations. 11 The growing number of installed ter-minals, telecommunication facilities, databasesearches, and computer services all reflect theincreasing flow of information.

For example, the number of network termi-nating points (points of connection betweenuser equipment and telecommunication trans-mission facilities) in Western Europe increasedfrom 393,000 in 1979 to 832,000 in 1983 andis projected to reach 1,620,000 in 1987. Thetotal number of bits sent per average workingday grew from 1,310 billion in 1979 to 3,970billion 1983 and is expected to reach 9,820 bil-lion in 1987. In North America and WesternEurope, the number of data searches increased

Cees *J. 1iamelink, Translational Data F’lows in the Infor-mation ,4ge (Sweden: Studentlitteratur AH, Chartwell-Bratti,td., 1984), p. 44.

“M. Renedetti, “Ejurodata ’79: The Growth of Data Com-munications in W’estern Europe, paper for the I B I Conferenceon ‘1’ranshorder Flow Policies, Rome, June 1980.

from 3.3 million in 1973 to 12.5 million in 197613

and the number of users of database servicesincreased from 10,000 in 1965 to 2 million in1978.14 Exports by U.S. information servicescompanies increased by 9 percent between1982 and 1983, and are expected to continueto increase by 9 percent annually through1987.15 The U.S. software industry also reportedan increase in exports that represented 30 per-cent of total sales by 1982.16 In addition, theuse of satellite technology is greatly increas-ing the electronic exchange of entertainmentprograms internationally. Sky Channel, for ex-ample, provides by satellite many Europeancable systems with programs intended for theentire European market. 17 Estimates place the1985 transatlantic flow of television programsat approximately 20,000 to 30,000 hours annu-ally. 18

Other indications of international informa-tion exchanges are reflected in increases ininternational trade of computers and telecom-munication equipment, as well as by the grow-ing international exchange of patents, scien-tific information, technology, and culturalproducts. ” For example, between 1978 and1982, U.S. exports and imports of computersand equipment increased by 21.2 and 29.8 per-cent, respectively .20 U.S. exports and imports———-————

‘ ‘Paul B. Silverman, “international Telecommunications asa Tool for Technology Transfer, paper for the Technolog~ E x-change ’78, Atlanta, February 1978.

“P.]. van Velse, “Aspects of a European Information In-dustry, paper for the Commission of the European Communi-ties, Luxembourg, September 1979.

“US. Department of Commerce, International Trade Ad-ministration, “A Competitive Assessment of the U.S. informa-tion Services Industry’ (J$’ashington, DC: (J. S. GovernmentPrinting Office, 1984), p. 35.

“’U.S. Department of Commerce, International Trade Ad-ministration, “A Competitive Assessment of the U.S. SoftwareIndustry’ (Washington DC: U.S. Government Printing office,1984), p. 35.

“Michael Schrage, “Murdoch Reaches for Sky in EuropeanTV Battle, ” The tlrashington Post, Nlar. 3, 1985, p. F, 1, 6, 7.

IKKalba Bowen Associates, The Economist: Connections: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 TechnologyR&D: C1-iticd Trends and Issues, OTA-CIT-268 (WashingtonDC: U.S. Government Printing Office, February 1985).

“’U.S. Department of Commerce, International Trade Ad-ministration, “High Technology Industries: Profiles and Out-looks: The Computer Industry” (Washington DC: U.S. Gov-

ernment Printing office, 1983), p. 24.


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 growthStages in human communication

r 1

I Word of mouth, drums, smoke, relay runner,drawings and hand printed material prior to 1441 I

Mechanized printing

,

I Use of electro-magnetic communications-telephones, radio, and television

“intelligent” telecommunications networksthrough 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 InformationEnvironment: An Information Chartbook (Rome Intergovernmental Bureau for Informatics, 1985), p 2.

of telecommunication equipment increasedfrom 1977 to 1983 by 22.1 and 35.3 percent,respectively .21 Between 1966 and 1981, thenumber of U.S. patents granted to foreign na-tionals increased from 13,722 to 26,546.22 TheU.S. use of foreign scientific and technical liter-—.——-——

21U.S. Department of Commerce, International Trade Ad-ministration, “High Technology Industries: Profiles and Out-looks: The Telecommunications industry” (Washington DC:U.S. Government Printing Office, 1983), p. 21.

‘zNational Science Board, National Science Foundation, SU”-ence Indicators-1982 (Washington DC: U.S. Government Print-ing Office, 1983), p. 206; and Office of Technology Assessmentand Forecast, U.S. Patent and Trademark Office, “Indicatorsof the Patent Output of U.S. Industry IV (1963 -81),” 1982.

ature increased 6 percent between 1973 and1980;23 the U.S. technology transfer exports(patents and management or consulting fees)equaled approximately $3,034 million in 1973.24

U.S. exports of cultural products (motion pic-tures, television programming, prerecorded en-tertainment, published materials) have alsogrown dramatically over the last few years: forexample, the foreign revenues for U.S. motion

———. —‘Sh-ational Science Board, National Science Foundation,

Science Indicators-1982 (Washington DC: U.S. GovernmentPrinting Office, 1983), p. 12.

“Marc Uri Porat, “Global Implications of the InformationSociety, ” 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 $1,420million from 1978 to 1983.25

Policy Implications

The increasing flow of information and in-formation-based products and services arebreaking down national boundaries, thus chal-lenging the traditional theories of internationalrelations, which are based on the nation-state.26

With the erosion of national sovereignty, eventstaking place in one country will increasinglybe felt in others. Consequently, intellectualproperty decisions, that were once consideredexclusively domestic concerns, will now haveto be made with international considerationsin mind.

Currently, U.S. participation in internationalintellectual property fora is relatively limited.No longer a party to the United Nations Educa-tional and Cultural Organization (UNESCO),the United States might not have as muchpolitical leverage in the Universal CopyrightConvention (UCC), which is administered byUNESC0.27 Although the U.S. withdrawaldoes not preclude the United States from ob-serving UCC activities, it does prevent theUnited States from participating in theUNESCO General Conference, which reviewsand approves the various budgets and admin-istrative bodies of UNESCO, including theCopyright Division. As a result, the U.S. abil-it y to influence other nations in its favor mightbe weakened. Because the United States is nolonger funding UNESCO activities, a reduc-

-.——“CBS, inc., “Trade Barriers to U.S. Motion Picture and

Television, Prerecorded Entertainment, Publishing and Adver-tising Industries, ” September 1984, p. 10.

“The theory of the nation-state or the state-as-the-only -ac-tor approach was first advanced by Arnold Wolfers. Accordingto his theory, the most important characteristic of States istheir sovereignty, which is considered indivisible and absolute.The model further implies that because States do not recognizeany higher authority, they are consistently in an internationalstate of conflict and competition. Consequently, there is almosta complete separation between politics within nations and poli-tics between nations. Arnold Wolfers, ll~scm~ m(i Collfi~or8-.tion: Essays in International Politics (Baltimore: Johns Hop-kins University Press, 1962).

‘-The increasing politicization that polarized UNESCO wasa major impetus of the U.S. decision to withdraw from UNESCOin late 1984. Seymour Finger, “Reform or Withdrawal, ” For-eign Service Journal, vol. 61, June 1984, pp. 18-23.

tion in funding for studies on emerging copy-right issues which are traditionally sponsoredby the UCC might also occur. Moreover, theUnited States might lose some of its abilityto influence decisions about which substantiveissues such studies will address. For example,recent U.S. efforts to convince the UCC Inter-governmental Committee to undertake studieson the copyrightability of computer softwarehave not yet been successful.

Magnifying the problems arising out of theU.S. withdrawal from UNESCO is the fact thatthe United States is not a member of the onlyother major international copyright conven-tion, the Berne Convention. Although, overtime, the United States has amended its do-mestic copyright laws to be more compatiblewith those of the Berne Convention, severalmajor attributes of U.S. copyright law impedeU.S. ratification of the Berne Convention.These attributes include, for example, the for-malities required to obtain protection underU.S. copyright law, such as registration andthose enumerated in the manufacturing clause.28

As a nonmember of the Berne Convention, theUnited States can only observe Berne policydecisions; it cannot directly influence the de-velopment of policy concerning internationalprotection of new technologies.

Given the increasing internationalization ofintellectual property issues, the United Statesmay want to take greater steps to influencetheir resolution. There are several options theUnited States might pursue to strengthen itspresence in international intellectual propertyorganizations. First, the United States mightconsider rejoining UNESCO. Because UNESCOhouses not only the governing body of theUniversal Copyright Convention, but alsoother agencies that oversee related matters ofinternational information and communicationspolicy, joining UNESCO might place the UnitedStates in a more advantageous position from

“Statement of Ralph Oman, Register of Copyrights, Assis-tant Librarian for Copyright Services, Library of Congress, Hear-ing on S. 1822 and S. 1938 Bills to Make Permanent the Manu-facturing Clause of the Copyright Act, before the Subcommitteeon Patents, Copyrights and Trademarks, Senate Committee onthe Judiciary, Jan. 21, 1986, p. 35.


which to influence the decisionmaking proc-ess of such agencies, Rejoining UNESCO,moreover, might relieve much of the resent-ment harbored by many developing countriesfor the United States and its historical lackof international participation in the interna-tional intellectual property system.

Rejoining UNESCO, however, is not with-out political and economic tradeoffs. Addition-al funding, for example, would be required ifthe United States were to become a memberof UNESCO. In addition, the United Stateswould most likely need to make further politi-cal and perhaps economic concessions to ad-dress the concerns of the developing nations.

A second option to strengthen U.S. partici-pation in the international intellectual prop-erty system would be to ratify the Berne Con-vention. This would benefit U.S. internationalcopyright relations in several ways. First, theadministrator of the Berne Convention, theWorld Intellectual Property Organization(WIPO), would provide a more favorable fo-rum for dealing with international intellectualproperty issues because it specializes only inintellectual property rights and it is consid-ered to be less politicized than UNESCO. Sec-ond, the Berne Convention provides the high-est levels of international copyright protection.Third, ratification of the Berne Conventionwould also provide the United States with theopportunity to influence major policy devel-opment with regard to new technologies. Fi-nally, joining the Berne Convention wouldshow other nations, particularly developing na-tions, that the United States is indeed verycommitted to the protection of internationalintellectual property rights and that it is cog-nizant of the growing need for its system ofintellectual property rights to operate withinan international context.29 For these reasonsand others, there is wide agreement amongthose dealing with intellectual property issues,particularly at the international level, that a

‘sDonald Quigg, Acting Assistant Secretary and Commis-sioner of Patents and Trademarks, testimony on “U.S. Adher-ence to The Berne Convention, ” before the Subcommittee onPatents, Copyrights, and Trademarks, Senate Committee onthe Judiciary, May 16, 1985.

number of benefits would accrue to the UnitedStates if were to adhere to the Berne Conven-tion.30

At the same time, there are several trade-offs associated with U.S. ratification of theBerne Convention. The major disadvantage ofsigning would be the legislative adjustmentsneeded to bring the present U.S. copyright lawinto compliance with the Berne Convention.Although Congress has over the years soughtto make U.S. law more compatible, several le-gal adjustments are still required. These in-clude the need to remove copyright formali-ties embodied in the U.S. law—such as noticeand deposit, compulsory licenses, and the man-ufacturing clause— and the need to add moralrights.31 The Department of State’s Ad HocWorking Group on U.S. Adherence to theBerne Convention, which is made up of repre-sentatives of the copyright community, is cur-rently exploring how these adjustments canbe made while preserving traditional U.S. lawsand practices as much as possible.

Growing Importance of Informationand Information-Based Products andServices to National Economies and

International Trade andCompetitiveness

Historically, all nations have viewed the cre-ation of intellectual works as having great cul-—. -. .——.

“’For example, at the Sept. 12, 1984, meeting of the Depart-ment of State’s International Copyright Advisory Panel, theprivate sector representatives from all different parts of the in-tellectual property community were unanimous in their sup-port for U.S. adherence to the Berne Convention. Moreover, allof the witnesses who testified before the Subcommittee on Pat-ents, Copyrights, and Trademarks, Senate Committee on theJudiciary, expressed their support for U.S. adherence to theBerne Convention. Hearing on “U.S. Adherence to The BerneConvention, ” before the Subcommittee on Patents, Copyrights,and Trademarks, Senate Committee on the Judiciary, May 16,1985.

“’’The importance of maintaining the attributes of U.S.copyright law, such as deposit, registration, and recordationprovisions can scarcely be questioned. For these provisions haveserved a most important public function; they have enabled theLibrary of Congress to become the most important repositoryfor U.S. cultural expression as well as for the rest of the world. ”Donald Curran, Associate Librarian of Congress and ActingRegister of Copyrights, Copyright Office, testimony before theSubcommittee on Patents, Copyrights, and Trademark, Sen-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-ever, intellectual products are becoming anincreasingly important component of nationaland international economies .32 A recent studyon the size of the copyright industries reflectsthe same trend. These industries, which relyon the exploitation of the legal protections em-bodied in the copyright law, showed growthin sales from $6.2 million, or 2 percent of thegross national product (GNP), in 1954 to $140.9billion, or approximately 5 percent of the GNP,in 1982.33 An additional $11.3 billion would beadded if semiconductor chips were included.Estimates of the U.S. labor force involved inthe copyright industries suggest that morethat 2.2 million workers are affected by tradein intellectual property .34 The U.S. Departmentof Commerce also estimates that in 1983, theUnited States enjoyed a $4.7 billion favorablebalance of payments in the licensing and as-signment of patent rights, trademarks, andcopyrights. 35

Information and information-based productsand services are not only valuable economiccommodities in and of themselves; their usealso increasingly affects the performance ofother economic sectors. The application of in-formation technology is responsible for vastincreases in productivity y in manufacturing in-dustries, offices, financial services, and scien-

Several major studies completed over the last severalyears document this trend. Daniel Bell was one of the first todescribe the changing role of information in society: “And ifcapital and labor are the major structural features of industrialsociety, information and knowledge are those of the post-industrial society. Daniel Bell, The Corning of Post IndustridSociet~r (New York: Basic Books, 1976), p. xiii. A quantitati~restud~’ b~’ Marc Porat found that by 1967, the primar~r and sec-ondary production, processing, and distribution of information-based products and services constituted approximately 46 per-cent of the G N P and that nearly half of the labor force is en-gaged with informational activities. Marc Uri Porat, Office ofTelecommunications, U.S. Department of Commerce, “The In-formation I+:conomy: Definition and Measurement” (Washing-ton DC: U.S. Go}’ernrnent Printing Office, 1 977).

“Michael H. Rubin, *’The Copyright Industries in theUnited States: An Economic Report Prepared for the Amer-ican Copyright Council, ” 1985, p. 1.

“U.S. Copyright Office “The Size of the Copyright Indus-tries in the IJnited States, ” Subcommittee on Patents, Copy-rights, and Trademarks, Senate Committee on the .Judiciary,December 1984.

‘ Flileen Ilill, *’Commerce Department Seeks Greater Pro-tection for U.S. Intellectual Property Rights, ” Business Amer-ica, Mar. 18, 1985, p. 3.

tific research.36 Because they have become notonly an important component in the U.S. econ-omy, but also a significant productivity fac-tor in many industrial sectors, information andinformation-based products and services havebecome an extremely crucial element in theU.S. economy and its overall international com-petitiveness. 37

Just as information and information-basedproducts and services are of increased valueto national economies, they are also becomingmore important to the world economy. Recentevaluations have found that this complex ofinformation industries is already the thirdlargest in the world economy. In 1980, eachof the industrialized nations spent approxi-mately 4 or 5 percent of its GNP on informa-tion-based products and services.38 Figure 8-2illustrates the large number of sectors in whichmany nations are using information technol-ogies. Another estimate notes that the worldinformation market equaled approximately$350 billion or 18 percent of world trade in1980.39

Policy Implications

Given the growing importance of informa-tion and information-based products and serv-ices to the U.S. economy, its export markets,and thus to its international competitiveness,intellectual property rights are acquiring great-er significance. Policy makers are now recog-

. —“One economist documented these trends by showing that

the introduction of information technology has made work morespecialized and efficient, which in turn has led to greater produc-tivity. Thus, the analysis showed that the quantity of real out-put produced by each production-sector worker in the U.S. econ-omy was 6.4 times greater in the year 1970 than in 1900. CharlesJonscher, “Information Resources and Economic Productivit~”, ”Information Economics and Public Policjr, vol. 1, No. 1, 1983,p. 21.

‘qThe President’s Commission on Industrial Competiti\”e-ness, Committee on Research, Development, and Manufactur-ing, Appendix D, 4’Preserving America’s Industrial Competi-tiveness-A Special Report on the Protection of IntellectualProperty Rights, ” October 1984.

1“Edward W’. Ploman and 1.. Clark Hamilton, Copyright: 1n-te]lectual Propert.v in the Information Age (London: Routledge& Kegan Paul, 1980], p. 217.

‘L’Cees J, Iiamelink, I%msnational Data Flows in an Infor-mation ,4ge i Sweden: Studentlitt.eratur Ab Chartwell-Bratt I.td.,1984), p. 23.


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

France(1978)

Mexico I

nizing the importance of factoring intellectualproperty protection into bilateral and multi-lateral trade relations. Similarly, internationaltrade concerns are looming larger in interna-tional intellectual property relations. Suchgrowing linkages may call for greater atten-tion to these relationships and new ways ofcoordinating and addressing the issues towhich they give rise. Thus, the United Statesmight need to reassess its intellectual prop-erty policy at the national and internationallevels to accommodate these new linkages.

:.. ,.,

:

The United States has already taken somesteps toward recognizing the protection of in-tellectual property rights as a major tradeissue. The recent passage of the Trade andTariff Act of 1984 (Public Law 98-573), for ex-ample, allows the President to take into ac-count nations’ laws and practices to adequatelyprotect intellectual property rights as a con-dition for receiving the trade preferencesgranted under the Generalized System of Pref-erences Program (GSP).40 In addition, the Car-

‘“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)

Phil ippines(1980)

Spain(1978)

Switzerland(1978)

Taiwan(1978)

+

●● I I 1.

Venezuela(1979)

= Mini computers 1

1’K e y — - 1– Small computers

-1 ●

—— = Medium computers

= Large computers~ I

1 J

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 (RomeIntergovernmental Bureau for Informatics, 1985), p 32

ibbean Basin Economic Recovery Act (PublicLaw 98-67) makes the protection of U.S. copy-righted broadcast works a condition for Carib-bean nations to receive U.S. aid.

A number of other strategies are also avail-able to strengthen trade opportunities for U.S.intellectual property products. One such op-tion is to prevent imports of illicit copies ofU.S. products or products illicitly manufac-tured with U.S. patented processes. The pro-posed Process Patent Amendment of 1985 (S.1543 and H.R. 1069), for example, would makeit a violation of patent law to use, sell, or im-port any product made overseas that is pro-duced by an unlicensed patent process.

related to intellectual property protection. Many of the coun-tries that are eligible for GSP benefits are also those countrieswhich do not adequately protect intellectual property rights.These countries include, for example, Argentina, Bangladesh,Brazil, Chile, Colombia, Costa Rica, Egypt, Ecuador, Guate-mala, India, Indonesia, Korea, Mexico, Pakistan, Peru, thePhilippines, Portugal, Sri Lanka, Taiwan, Thailand, Turkey, Uru-guay, Venezuela, and Yugoslavia.

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

Another recently proposed option is to in-clude information products and services withinthe General Agreement on Tariffs and Trade(GATT). This option has broad support for sev-eral reasons. First, including intellectual prop-erty products in the GATT could provide in-ternational enforcement mechanisms in theform of dispute settlement mechanisms andtrade sanctions as final retaliatory mechanismsfor dealing with infringements—mechanismsthat are not currently provided in internationalintellectual property agreements. Second, un-like many international intellectual propertyagreements, the GATT has a broad represen-tation of the industrialized and developing na-tions as well as a history of consensus-buildingamong its member states. Third, the GATTtakes into account the economic developmentneeds of the developing countries, allowingthem differential treatment as a means of as-sisting their development.

There are, however, some negative aspectsto such approaches. Linking the granting oftrade preferences or foreign aid to the protec-tion of intellectual property rights might pro-voke political discord between the UnitedStates and developing nations. Including in-tellectual property products within the GATTalso conflicts with many developing countries’notions of information and information-basedproducts and services and might lead to polit-ical unrest and various forms of retaliation.

Increasing Cultural and PoliticalSignificance of Information and

Information-Based Productsand Services

Historically, there have been political ten-sions between nations whose role as produc-ers of intellectual property allowed themgreater access to such products and nationsthat imported intellectual property products,and had only limited access to them. When theUnited States was still a relatively young anddeveloping country, for example, it refused torespect international intellectual propertyrights on the grounds that it was freely enti-tled to foreign works to further its social andeconomic development.

Developing nations make the same argu-ment today. Many believe they should be ex-empt from measures protecting intellectualproperty created outside their borders. Theyargue that access to information is vital to theirdevelopment. Championing this viewpoint, de-veloping nations were able to get revisions inthe Berne Convention at Stockholm in 1967and in the Universal Copyright Convention in1971. Moreover, the influence of these coun-tries has been felt at meetings of the UnitedNations Conference on Trade and Develop-ment (UNCTAD) and at the recent meeting torevise the Paris Industrial Property Conven-tion.41

As information and information-based prod-ucts and services become more important tosocial and economic development, questionsof information access, which were formerlyquite distinct from political considerations, areacquiring greater political significance.42 Be-cause both developed and developing nationsview intellectual property protections as a ma-jor mechanism for regulating and controllingthe flow of and access to information and in-formation-based products and services, thereis growing political pressure on the interna-tional intellectual property system.43

A case in point is the information gatheredby remote sensing satellites. In 1972 the UnitedStates launched the Land Remote Sensing Sat-ellite (Landsat) as part of a broader resource

“For example, the provisions for developing nations thatwere added to the Universal Copyright Convention in 1971 in-clude exemptions that fall into three categories: 1 ) translationrights subject to compulsory licensing; 2) reprint rights sub-ject to compulsory licensing; and 3) compulsory licensing in gen-eral. Subcommittee on Patents, Copyrights, and Trademarks,Senate Committee on the Judiciary, hearing on “Oversight onInternational Copyrights, ” Sept. 24, 1984, pp. 61-62.

4’Rita Cruise O’Brien and G. K. Helleiner, “The PoliticalEconomy of Information in a Changing International EconomicOrder, ” International Organization, vol. 34, No. 4, Autumn 1980,p. 446.

“These access tensions, for example, have given rise to dis-cussions of a New World Information Order in which develop-ing nations call for freer access to technical and educational ma-terials as well as a redress of the imbalances in the internationalflow of news and cultural products and a New World Interna-tional Economic Order which calls for greater controls over andaccess to technology transfer to Third World nations. Both ofthese orders are intended to strengthen the self-sufficiency ofdeveloping nations.

———

Ch. 8—impact of New Technologies on the International lntellectual Property System ● 229

monitoring and assessment system .44 Uncopy-rightable raw data on all countries generatedby this series on the Earth Resources Satel-lite Program are disseminated to governments,firms, or individuals at very low prices. AsLandsat is currently being transferred fromgovernment ownership to the private sector,data that have been processed and analyzed(by private sources), and thus are copyright-able, such as field-by-field analyses of crop-lands, blight, drought, and mineral resources,are available at a much higher price. Becauseless developed nations have difficulty payingthese prices, or lack the computer technologiesneeded to process and interpret the data them-selves, they often cannot gain access to suchdata. As a result, they believe that they arepotentially at a disadvantage in world agricul-tural commodity markets, where private firmsand wealthier governments can afford and usethe data to make more well-informed, strate-gic decisions:

The importance of information lies in itsrole as a central factor in decision-making, in-cluding all matters related to development.Information is a precondition for identifyingalternatives, reducing uncertainties abouttheir implications, and facilitating their im-plementation. As such, information is a criti-cal resource, not least for enhancing the ne-gotiating capabilities of developing countriesin the pursuit of clearly defined objectives,in particular in dealing with translational cor-porations.45

Many governments of developing countriesalso view information-processing and commu-nication technologies as means to achieve ma-jor societal goals. Likening these technologiesto a change in the “entire nervous system ofsocial organization, many governments con-sider the establishment of information infra-structures to be crucial for development.46

“For a detailed analysis of international remote sensing sat-ellite issues, see U.S. Congress, Office of Technology Assess-ment, Remote Sensing and the Private Sector: Issues for Dis-cussion– A Technical Memorandum, OTA-TM-I SC-20(Washington, DC: U.S. Government Printing Office, March1984).

“United Nations Center for Transnational Corporations,Transborder Data Flows: Access to the International On-1ineDatabase Market (New York: United Nations, 1983).

“Simon Nora and Alain Mine, The Computerization of So-cietj’ (Cambridge, MA: MIT Press, 1980).

These nations want to use information andcommunication technologies for such thingsas: national integration; administrative effec-tiveness; the delivery of formal and informaleducation; teacher training; agricultural infor-mation; medical and health care services; re-gion-specific cultural programming; and cop-ing with natural disasters.47 Many developingcountries believe, therefore, that internationalintellectual property protection, which can actas a regulator of information flows, might in-hibit such use and act as a barrier to devel-opment.

For these same reasons, many developingcountries are wary of certain product patents.They contend that royalty payments requiredby patents should be relaxed for products thatare necessary for development, and in somecases, human survival.48 Many industrializednations oppose this point of view. Having in-curred large costs in the research and devel-opment of products, they believe they are en-titled to recoup their investments by sellingin foreign markets.

One product that caused such a problem isthe patented pharmaceutical product Tagamet(generic name, cimetadine, an anti-ulcer drug),developed by the U.S. company SmithKline-Beckman. By the time the company was readyto market its product in Argentina, 48 percentof its market had already been undercut by alocal firm selling the product at a much lowerprice. Due to Argentina’s lack of patent pro-tection for pharmaceuticals, the local compa-nies could take the product and sell it at a lowerprice because they did not have to recoup de-velopment costs or pay royalty fees. Smith-

“Jorg Becker, Information Technolom’ and a iVew Interna-tional Order (Sweden: Studentlitteratur A13, Chartwell-BrattLtd., 1984), pp. 109-111.

‘“Because many developing nations believe they need to ac-quire technology from the advanced nations, they tend to re-tain patent, trademark, and copyright laws because they pro-vide some security that helps to continue to attract foreignenterprise. However, the intellectual property protection is fre-quently modified. They may offer, for example, compulsorylicense requirements, curbs on the manner in which the royal-ties are paid, exclusion of certain products or subject matterfrom protection, or official examination of the terms on whichforeign rights owners establish their own local operations orgrant licenses to local enterprises. W.R. Cornish, IntellectualPropert-v: Patents, Cop-vright, Trademark, and Allied Rights(London: Sweet & Maxwell, 1981), p. 17.


Kline-Beckman claimed it lost approximately$50 million in revenues because of the lack ofpatent protection in many developing na-tions.49

Growing political tensions between nationsare also occurring with regard to intellectualproperty rights for plants. The United Statesand the other industrialized nations have nonative primary crops. As a result, Western na-tions have traditionally used plant varietiesfrom the Third World to genetically engineernew and better seeds for farm crops. Becausemany of the developing nations do not havethe technology for seed development, they aregenerally forced to buy many of these geneti-cally engineered seeds from the industrializednations. Political tensions between nationsarise because developing nations believe thatthe industrialized nations are exploiting theThird World’s natural resources. They attrib-ute the problem to the granting of intellectualproperty rights:

How is it that we farmers [from the MiddleEast] spent 10,000 years cultivating andbreeding our plants, then someone else fromthe West works on it for 10 years, and onlythen is it called “intellectual property” andbecomes patentable?50

Although most tensions arising out of intel-lectual property rights have been primarily be-tween industrialized and less developed na-tions, political issues related to such rightshave recently begun to emerge between devel-oped nations as well. A case in point involvesthe Strategic Defense Initiative (SDI) researchprogram. Among other goals, political comityand support among nations for defense are ma-jor goals of the SDI research program. For thisreason, the United States is seeking other na-tions’ cooperation and participation in the SDIresearch program.

“Gerald Mossinghoff, President of the Pharmaceutical Manu-facturers Association, testimony ‘on the BenefiCiw CountvI+actices, before the General System of Preferences Subcom-mittee of the Trade Policy Committee, June 24, 1985.

‘OPhillip Hilts, “Battles Sprout Over World Seed Supply:Bureaucrats and Nations Grapple With Charges of Neglect andGenetic 1mperkilism,” The Washington Post, Nov. 4, 1985, p.A3.

However, one of the major impediments togaining the support of other nations is the is-sue of ownership of technology. For example,the United Kingdom made it clear to theUnited States that it would not participate inthe SDI program unless the terms for therights to the technology were stipulated at theoutset of the research. The United States, how-ever, believes that this would be incompatiblewith the Defense Department’s regulations,which do not allow blanket patent and tech-nology transfer guarantees and require con-sideration on a case-by-case basis. Thus, intel-lectual property rights are the source of somepolitical pressures among nations and may ac-tually preclude international political cooper-ation and participation in the SDI program.51

Policy Implications

There are no simple solutions to the politi-cal issues raised by intellectual property rights.Although U.S. economic interests would mostlikely be served better by strict enforcementof intellectual property protections in other na-tions, political relations may also be a consid-eration. Many U.S. intellectual property prod-ucts, for example, help promote U.S. cultureabroad:

Books have unique qualities enabling themto provide foreigners substantive perceptionsand insight into American society and gov-ernment policies which they can get no otherway. . . [T]hey smooth the path for the pur-suit of our foreign policies. It has been saidthat next to people, books are our best am-bassadors of international enlightenment andgoodwill.52

— .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-sadors (Washington, DC: U.S. Library of Congress, 1983), p.72. Recognizing the importance of books to increased under-standing of the United States, the U.S. Government throughthe U.S. Information Agency distributes books worldwide in57 languages; by 1971 it had published and disseminated 19,220editions totaling 157,200.000 copies. Nicholas Henry, ~p~’ght,Information Technology, Public Policy, Part 1: Copyright-PublicPolicies (New York: Marcel Dekker, Inc., 1967), p. 5.


Similarly, copyrighted musical works, audio-visual works, sound recordings, and patentedtechnical works also further international un-derstanding and an appreciation of U.S. cul-ture, and so might aid U.S. relations with bothdeveloping and industrialized nations.

Although many consider it unfair to expectproducers of intellectual property to absorblarge losses in international markets in orderto foster international relations, the culturaland political significance of these productsmight require striking a new balance betweenproducers and importers of intellectual prop-erty products. Political and cultural consider-ations as well as economic concerns might needto be taken into account when adjusting theinternational intellectual property system.These considerations might also need to be fac-tored into U.S. domestic intellectual propertypolicy and international trade and politicalrelations.

Recognizing how important U.S. culturaland educational products are to its relationswith other nations, the United States has es-tablished several programs within the U.S. In-formation Agency (USIA). These programs aredesigned to promote international understand-ing by providing developing and industrializedcountries with American films, radio pro-grams, television programs, music, books, andcultural programs at low or no cost. These pro-grams, however, have been greatly reducedover the last few years. The USIA-sponsoredbook publishing program, for example, whichincludes translation programs and low-pricedbook programs, was reduced from 6,621,000copies in 1956 to 525,000 copies in 1980.53 Asa result, many people have criticized the U.S.Government for failing to meet the ThirdWorld’s cultural and educational needs. Oneformer U.S. ambassador, for example, assertedthat the U.S. Government’s recent neglect ofits overseas book, educational, and culturalprograms denies our foreign policy “one of ourgreatest sources of strength as a nation.”54

“’Curtis Benjamin, U.S. Books Abroad: Neglected Ambas-sadors (Washington, DC: Library of Congress, 1984), p. 91.

“’’’Selling America in the Marketplace of Ideas, ” New YorkTimes Magazine, Mar. 20, 1983.

Another U.S. diplomat pointed out that otherindustrialized nations, such as France, theUnited Kingdom, and West Germany, devotea greater proportion of their national budgetsto public distribution of information productsfor diplomatic purposes than does the UnitedStates.”

The United States has several options foraddressing the political issues raised by newtechnologies. If the United States wishes toaddress the informational needs of developingcountries, for example, it might increase USIAinformation distribution programs, and includeprovisions for the distribution of informationin other international development programsfor education, agriculture, medicine, transpor-tation, etc. Moreover, USIA might implementnew programs to help nations to develop in-formation and communication infrastructures,so they can utilize information in electronicforms such as databases, videotapes, and soft-ware programs:

Information access is easier to transfer tothe developing world than was agriculture orindustrial know-how. While it is not possibleto put the Third World on an equal footingwith the First World in the next ten years,it is possible to communicate the needed ex-pertise now. The best mathematicians in theworld could create expert systems and makethem available to the poorest countriesthrough existing satellite networks and earthstations, relayed by telephones to low-costterminals. Medical diagnosis and training orengineering design could also be redistributedthroughout the world at a unit cost withinnational budgets.56

Another option that the United States mightpursue would be to earmark funds that weretraditionally allocated for foreign aid for thepurchase of intellectual property products.This would give developing countries accessto information and information-based productsand services and at the same time instill re-

5’Allen Hansen, Jr., USIA Public Diplomacy in the Comput-er Age (New York: Praeger Press, 1984).

“Jerome Glenn, “Helping Countries Help Themselves:Keys to Third World Development, ” The Futurist, December1985, pp. 33-35.

232 ● Intellectual Property Rights in an Age of Electronics and Information.-

spect for the protection of intellectual prop-erty rights.

Although these options address the grow-ing political issues relating to intellectual prop-erty rights, they might also conflict with U.S.trade and economic views of intellectual prop-erty. For if the United States contributes manyof its information-based products and servicesto developing countries, it cannot receive theinternational market value of such highlysought after products and services. This, inturn, could have a negative effect on the U.S.balance of payments.

Emergence of New Information-BasedProducts and Services That

Do Not Correspond to TraditionalIntellectual Property Protections

Although rooted in different philosophicaltraditions, the intellectual property systemsof different nations have been harmonized overthe years through the international intellec-tual property system. This cooperation, madepossible by a shared set of goals as well as bynational treatment, led in the past to generalagreement among nations on what constitutedprotectable subject matter, infringement activ-ity, and the like. This process of reaching in-ternational agreement is generally slow, de-pending on years of interplay between nationaland international laws and policies.57

The unprecedented rapid and large-scale de-velopment of new information and information-based technologies, which is illustrated in fig-ure 8-3, has disrupted this formerly stable sys-tem. Such rapid and large-scale technologicalchange has forced nations to respond fasterand perhaps more dramatically in interpret-ing and legislating intellectual property pro-tection. Some nations have enacted intellec-tual property legislation to protect emergingtechnologies, while other nations have not.These divergent reactions have led to great in-consistencies among nations, which, in turn,

“This slow and elastic process of unifying national intellec-tual property law and policies is cited as one of the most impor-tant aspects of the international intellectual property con-ventions.

have made agreement at the international levelmore difficult.

Intellectual property protection for comput-er software is one often-cited example of thediffering levels of protection nations havegranted a new technology:

The debate on both the possibilities and ap-propriate form for protection of software hasnow been continuing for nigh on 15 years.. . . Despite the harmonization of national leg-islation . . . we are still faced with a wholegamut of divergent solutions ranging fromthe full recognition of the patentability ofsoftware and its protection under copyright,through various intermediary solutions, to aradical refusal of any protection for computersoftware. 58

Because the United States was one of thefirst countries where computer software be-came a large and important market, it was herethat the debate over its protection first tookplace.59 Like many other industrialized nations,the United States explored the possibilities ofprotecting software by drawing analogies be-tween the characteristics of software and otherintellectual properties that are protected byexisting legal frameworks, such as copyright,patent, and trade secrets. After many heateddebates and commissioned studies, the UnitedStates, in a 1980 amendment to the 1976 Copy-right Act, explicitly granted copyright protec-tion for software.60

— .——5MKolle, “Computer Software Protection–Present Situation

and Future Prospects, Copyright 13, 1977, p. 70.“In 1982, the worldwide revenues from software amounted

to $13 billion and is projected to quadruple by 1987. U.S. com-panies garner approximately 70 percent of the market. UnitedStates Trade Representative, “USTR Seminar on InternationalCopyright Issues in Computer Software, ” Sept. 24, 1984.

‘The United States implicitly extended copyright protec-tion to computer software in the Copyright Act of 1976, 17 U.S.C.jj 101-810. The National Commission on New TechnologicalUses of Copyrighted Works (CONTU), created by Congress torevise comprehensively the copyright laws of the United States,stated in its final report that “it is clear that. . . those who haveadmini:~tered the portions of the 1909 act concur in the posi-tion that programs are copyrightable. The Copyright Act wasamended in 1980 to expressly state that computer programswere to be included as copyrightable works: Section 101 of theAct was amended by addition of the word “computer program, ”and a definition of that term; Section 117 was amended by theaddition of certain limitations on exclusive rights pertainingspecifically to computer programs. The U.S. courts have alsorecognized 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 explicitlyamended their copyright laws to include soft-ware, some either consider it to be protecta-ble under copyright law through judicial inter-pretation and/or are actively pursuing copy-right protection.61 These countries include Aus-tria, Canada, Colombia, France, Finland, theFederal Republic of Germany, Italy, India, Ja-pan, Korea, Mexico, the Netherlands, SouthAfrica, Spain, Sweden, and the United King-dom.”— — — —

‘ ‘Currently-, Australia, Hungary, the Philippines, and Tai-wan have amended their copyright laws to include computersoftware as protectable subject matter.

‘“United Nations Educational, Scientific, and Cultural Orga-nization (UN F; SC()), World Intellectual Property Organization(WI PO), Group of Experts on the Copyright Aspects of the Pro-tection of Computer Programs, Michael S. Keplinger, “A Sur-vey and Analysis of N’ational I.egislation and Case Law, hlarch1985; and Michael S. Keplinger, “Authorship in the Informa-tion Age: Protection for Computer Programs Under the Berneand the Universal Copyright Conventions, Copyright, March1985, pp, 119-128.

Among those nations that are consideringprotection for software, there is a wide vari-ety of schemes envisioned. Some nations wouldoffer such protection, but with limitations. Awhite paper prepared for the Canadian Gov-ernment, for example, proposes to limit copy-right protection for object code (machine-readable language) to 5 years.63 Other nationshave declared that they will not protect soft-ware under the copyright law, although theymay grant it some type of sui generis protec-tion. Other nations may not protect softwareat all. Brazil, for example, is considering leg-islation that would establish a sui generis formof protection that would require compulsorylicensing of software to Brazilian companiesand compulsory registration of both source and

‘ Consumer and Corporate Affairs and Department of Com-munications, Government of Canada, ‘‘From Gutenburg to Tel-idon: A Guide to Canada’s Copyright Revision Proposals" (Ot-tawa: Ministry of Supply and Services, 1984).


object codes. The proposed protection, more-over, would be for a very short duration. Suchvaried approaches to protecting—or not pro-tecting—software and other rapidly changingtechnologies might impede attempts to reachan international agreement on software pro-tection. 64

The introduction of reprographic technol-ogies offers another example of how new tech-nology is complicating the harmonization ofnational intellectual property law at the inter-national level. The increasing use of these tech-nologies has undermined owners’ rights to col-lect remuneration for the reproduction of theirworks. To cope with these problems, many na-tions have legislated new rights enabling cre-ators to collect compensation for the use oftheir works. The Federal Republic of Germany,for instance, has dealt with the problem byamending its copyright law to include a com-pulsory license that allows authors to collectequitable remuneration for the commercial re-production of their works. In contrast, Francehas introduced a tax on the sale and importa-tion of all reprographic copying machines inits 1976 Finance Act. Part of the collected rev-enues from the tax are paid to the copyrightowners. This law applies only to French copy-right holders, even though France is a mem-ber of both international copyright con-ventions.

Although both of these solutions aim to en-sure rights owners remuneration, they are le-gally inconsistent with one another, and thuswill cause difficulty for international agree-— — —

“The fact that WIPO’S 1978 proposed draft Treaty for theProtection of Computer Software (which includes rules for theminimum protection of software that are closely related to thoseof copyright and unfair competition) has not been ratified illus-trates the problems of finding an adequate protection for soft-ware that can be agreed on internationally. The draft Treatyproposed that in view of the large degree of uncertainty gener-ally related to the existence and form of protection under copy-right, that a special system of protection of software similarto copyright should be set up at national and international levels.The draft Treaty, moreover, calls for the international depositof software. Some individuals believe, however, that Article 11of the Berne Convention is applicable for the international pro-tection of software. Cynthia L. Mellema, “Copyright Protec-tion for Computer Software: An International View, SyracuseJournaf of International Law and Commerce, vol. 11, summer1984, p. 90.

ment. The West German compulsory license,although under the rubric of copyright law,would be incompatible with the solutionenacted by the French. The more serious diffi-culty, however, arises with solutions like thatadopted by France. Because the right to com-pensation is introduced under legislation out-side of the copyright law, the principle ofnational treatment, on which the entire inter-national intellectual property system is built,is seriously undermined.65 The principle of na-tional treatment is challenged because the com-pensation for the reproduction right does notarise from a copyright, and thus foreigners can-not collect compensation for use of their works.In general:

If that device is generally used by govern-ments when dealing with the new uses ofcopyright material arising from new technol-ogy and new means of communication, thefundamental principle of national treatmentand with it the [international] copyright con-ventions based on it, could be seriously erodedin the near future. 66

Another problematic situation arises fromapplying patent law to activities in outer space.Domestically, the National Aeronautics andSpace Administration (NASA) has adopted a

— —“Another example of how a right to remuneration has been

taken out of the copyright sphere can be seen in the rights manycountries have granted to enable creators to receive remunera-tion from home taping activities. In the case of home taping,a levy on recording equipment or blank tape can be treated asroyalty to be divided among copyright holders as in West Ger-many or Austria. However, it can also be treated largely as atax, as in Sweden, where 90 percent goes to public funds and10 percent goes to the rights owners (authors, performers, andphonogram producers). Public lending rights (although an in-direct response to the introduction of reprographic technologies),which entitle authors of literary works to receive a royalty whentheir books are borrowed from a library, have also caused difficul-ties for international harmonization. For example, in the Fed-eral Republic of Germany this right is granted in their copy-right law, and therefore as the Federal Republic of Germanyis a member of both the Berne and UCC Conventions, foreign-ers are entitled to remuneration if their books are borrowed.The Scandinavian countries and the United Kingdom, however,which also grant a public lending right, have chosen to do soby separate legislation outside of the copyright laws and there-fore are not bound to grant the right to foreigners; althoughlike the Federal Republic of Germany, they are also membersof both conventions, Stephen Stewart, The Law of IntematiomdCop~”ght and Neighboring Rights (London: Butterworth & Co.(Publishers) Ltd., 1983), pp. 42-43, 282.

‘Ibid., p. 43.

Ch. 8—Impact of New Technologies on the International Intellectual Property System • 235.

clear policy of providing maximum protectionfor intellectual property rights to encouragethe use of and commercialization of NASA-supported and developed technology. How-ever, as more research, particularly interna-tional cooperative research, is performed inspace, it may become more difficult to deter-mine which national legal jurisdiction of pat-ent protection applies to it. For example, sec-tions 102 and 104 of the U.S. Code 35 statethat the factors used to determine patentabil-ity under U.S. law or to establish priority ininternational conflicting claims to inventioninclude where an invention was conceived, re-duced to practice, or used. In addition, underthe U.S. patent law patents protect use or man-ufacture only in the United States. As moreU.S. and international research and develop-ment is performed in space, the question arises,therefore, as to how to obtain and enforce U.S.patent rights in space.67

Policy Implications

The speed and scale of technological change,now and in the future, together with the rapiddevelopment of national and international law,are likely to heighten the pressures for the de-velopment of international intellectual prop-erty law.68 As technological change promptsmore need for rapid international consensus,greater international action and coordinationwill become necessary. Consequently, theUnited States might have to participate to the

‘“’’The Applicability of U.S. Patent Laws in Outer Space, ”Telecom Highlights, June 19, 1985, p. 4; and Barbara Luxen-berg (Special Assistant to the Assistant Secretary and Com-missioner of Patents and Trademarks, U.S. Department of Com-merce), “Protection Intellectual Property in Space: PolicyOptions and Implications for the United States, ” presented tothe Georgia Institute of Technology Conference, 1985, Inter-national Space Policy: Options for the Twentieth Century andBeyond, May 16, 1985.

‘After approximately a century without any major copy-right reform, the reform of national copyright laws to adjustthe law to advancing technology has speeded up considerablyin the last three decades. For example, new copyright acts passedin France in 1957, the United Kingdom, 1956; India, 1957; theScandinavian countries, 1959/1960; Germany 1965; Australia,1968; Japan, 1971; the Soviet Union, 1973; and the UnitedStates, 1976; and many Latin American countries, 1970s areevidence of this trend. Stephen Stewart, The International La wof Copyright and Neighboring Rights (London: Butterworth& Co. (Publishers) Ltd., 1983), p. 281.

fullest possible extent in international intel-lectual property fora so that it can both influ-ence international decisions and keep abreastof national and international developments.The United States, moreover, might need totake greater account of how its domestic in-tellectual property legislation could affect orbe affected by the international system.

As discussed above, the extent of U.S. par-ticipation in international intellectual propertyorganizations is relatively limited because ofits withdrawal from UNESCO and its absti-nence from the Berne Convention. This lackof participation might seriously impede theUnited States from monitoring developmentsin international agreements. Moreover, it mayalso weaken the U.S. ability to influence deci-sions about which rights might be incorporatedinto the international agreements with respectto new technologies.

In addition to its lack of international par-ticipation, recently proposed and already legis-lated U.S. intellectual property policies mightbe inconsistent with international intellectualproperty norms. The recent passage of theSemiconductor Chip Protection Act of 1984(Public Law 98-620), for example, created a suigeneris protection for semiconductor chips. Al-though this new type of protection maybe wellsuited for the functional nature of chips, thereis a trade-off with respect to its consistencywith the system of international agreements.Because the Semiconductor Chip ProtectionAct of 1984 is a sui generis approach and doesnot fall under the rubric of copyright or pat-ent law, there is no international agreementunder which the protection of chips can beorganized at the international level. Moreover,section 902 of the act states that foreignersmay only receive protection if their nation alsoprotects mask works. This reciprocity clauseis inconsistent with the principle of nationaltreatment which requires all nations to pro-vide foreigners with the same protection astheir citizens. Exacerbating these problems,some nations, such as the United Kingdom,disagree with the sui generis approach, con-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,has legislated a sui generis protection for semi-conductor chips.

The International Software Protection Actof 1985 (S. 339, 99th Congress) is another ex-ample of a proposed policy that might causeproblems for the present system. This billwould amend the U.S. copyright law to pro-tect a foreign nation’s computer software onlyto the extent that such a nation protectssoftware-the so-called “rule of the shorterterm. ” It also stipulates that, if a nation pro-tects software for a period of less than 25 years,the U.S. will suspend all protection for thatnation’s software. Like the reciprocity clauseof the Semiconductor Chip Protection Act, thisconflicts with the principles of national treat-ment called for in the international intellectualproperty agreements.

The recently proposed renewal of the manu-facturing clause also illustrates how a U.S. in-tellectual property policy might negatively ef-fect U.S. international intellectual propertyrelations. First introduced in the 1891 Copy-right Act, this clause required that literaryworks be printed in the United States in orderto enjoy U.S. copyright protection. The gen-eral purpose of the manufacturing clause wasto protect those who feared that granting un-restricted copyright protection to foreign (spe-cifically British) authors would enable foreignpublishers to dominate the U.S. book market.Recognized by many as a type of “xenopho-bic trade barrier” the manufacturing clause hasbeen weakened over time, and most recentlywas set to expire in July 1986 (Public Law 97-215). 70 However, Congress is currently consid-ering legislation that would extend the manu-facturing clause or make it permanent (S. 1938,S. 1822, H.R. 3465, H.R. 3890, 99th Congress).

The manufacturing clause has created sev-eral difficulties for U.S. international intellec-tual property relations. Because it imposes for-malities (the requirement of U.S. publication)

“R. Hart, “Legally Protecting Semiconductor Chips in theUK, ” European Intellectual Property Review, vol. 9, 1985, pp.258-263.

“’Benjamin Kaplan, An Unhurried View of Copyright (NewYork: Columbia University Press, 1967), p. 124.

on works of foreign origin, it impedes U.S. ad-herence to the Berne Convention. For to jointhe Berne Convention, member nations can-not impose formalities as a condition of copy-right. The manufacturing clause has also beenthe subject of complaints of unfair trade prac-tices by the European Economic Community(EEC), and found to be an import restraint thatis inconsistent with Article XI of the GeneralAgreement on Tariffs and Trade (GATT) .7’ Be-cause it restricts the protection of foreignworks and precludes the United States fromratifying the Berne Convention, this clausemight also lead other nations to believe thatthe United States is disingenuous in its at-tempts to convince other nations to ratify in-ternational intellectual property conventions.

If the United States proceeds with policiesthat are incompatible with either internationalagreements or other nations’ domestic lawsand practices, it might jeopardize its abilityto incite other nations to protect U.S. intellec-tual property products. For unlike many otheritems of international trade, the financial re-turns from intellectual property products arelargely dependent on other nations’ laws andenforcement actions. Therefore, the UnitedStates must ensure other nations’ cooperationand support for the international protectionof intellectual property rights. A coercive ap-proach or the imposition of U.S. policies onother nations might not necessarily serve toelicit other nations support for the interna-tional protection of intellectual property, asone copyright analyst points out:

Of course it would be pure folly to expectall nations of the world, including the newones, to introduce at the present stage thesame copyright regime as we and other well-endowed old-timers are-or, in the case of theSoviet Union, should be–willing to accept.We should recall that in 1891 that this coun-try, claiming to be a have-not, provided nolegal protection whatever for the publishedworks of foreigners. When our legislation of1891 finally did grant rights to such works,— .

“’Ralph Oman, Register of Copyrights, Library of Congress,testimony on “Bills To Make Permanent the ManufacturingClause of the Copyright Act, ” before the Subcommittee on Pat-ents, Copyrights, and Trademarks, Senate Committee on Judi-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 booksamong certain other productions, that man-ufacture be carried out in the United States. . . . But I have brought in the manufactur-ing clause to suggest by example that har-monization is bound to have its difficultiesand, beyond that, to propose that we [theUnited States] ourselves should take anotherstep toward international pacification.72

Ratifying the Berne Convention and rejoin-ing UNESCO are possible to options to bringU.S. law into line with international intellec-tual property law. As previously discussed,these options would have both positive andnegative effects on the U.S. position in the in-ternational intellectual property system.

Another option to address the legal issuesraised by new technologies would be to estab-lish a critical review of how proposed legisla-tion would affect and be affected by the inter-national system; accordingly, legislation mightbe modified to that effect. However, similarto the negative outcomes associated with join-ing the Berne Convention, conforming U.S.laws and practices to international intellectualproperty norms might threaten the integrityof traditional U.S. intellectual property lawsand practices.

Increasing Difficulty of EnforcingIntellectual Property Rights Caused

by Emerging Information andCommunication Technologies

Traditionally, nations granted intellectualproperty rights on the assumption that theycould, in fact, be enforced. In the past, this wastrue; copyright holders could more easily col-lect for uses and detect infringements of theirworks. This was the case because uses of crea-tive works were easily monitored, and infringe-ments easily detectable, and because the geo-graphic scope of use was generally confinedwithin national boundaries.

“’Benjamin Kaplan, “An Unhurried View of Copyright (NewYork: Columbia University Press, 1967), pp. 123-124.

While facilitating the international exchangeof intellectual property, new communicationand information technologies have also under-mined the traditional ways of enforcing intel-lectual property rights. The same technologi-cal advances contributing to economic growth,trade, and international access have also madeit easy and inexpensive to reproduce and pi-rate intellectual property .73 Moreover, thesetechnologies, such as satellites, cable, photo-copying, recording audio and video devices,computers, and electronic storage, retrieval,and distribution systems, are more powerfulthan their predecessors, engendering problemsof enforcement that are much larger and moreinternational in scope.

The level of legal protection for intellectualproperty in many nations also contributes tointernational piracy of U.S. copyrighted works.The problems U.S. copyright owners face abroadwith respect to these conditions can be classi-fied into three categories:

1. nonexistent (ineligibility) copyright pro-tection in a foreign country;

2. inadequate protection in a foreign coun-try; and

3. ineffective copyright protection in a for-eign country .74

The growing problem of international en-forcement is exemplified in the apparent rapidincrease of international piracy of protectedworks. Many U.S. industries have reportedlarge losses due to foreign private copying,commercial piracy, and counterfeiting of theirintellectual property products.75 The U.S. In-

“’International Intellectual Property Alliance, “Internation-al Intellectual Property Alliance: U.S. Government Trade Pol-icy: Views of the Copyright Industries, 1985, p. 10.

“’Subcommittee on Patents, Copyrights, and Trademarks,Senate committee on the Judiciary, “Oversight on InternationalCopyrights: How To Protect the Nation’s Creativity by Pro-tecting the Value of the Intellectual Property, ” Sept. 25, 1985,p. 86.

“Although piracy and counterfeiting each constitute theftof intellectual property, there are small differences in their mean-ing. In addition, private copying, which is not clearly definedas a legal or an illegal practice under most nations’ laws, alsohas a potential impact on the sales of intellectual property prod-ucts. Piracy refers to unauthorized reproduction for commer-cial gain of literary, musical, artistic, and other copyright works.Because pirates do not pay royalties and bear no developmentcosts, they can easily sell their products more cheaply than the



ternational Trade Commission estimates U.S.domestic and foreign sales losses due to pat-ent and copyright infringements at between$6 billion and $8 billion per year.76 Figure 8-4shows the level of infringing activities andsome frequently counterfeited products. TheInternational Anti-Counterfeiting Coalitionand the U.S. Customs Service place losses dueto the infringement of intellectual propertyrights closer to $20 billion annually .77 Anothersurvey undertaken by the International Intel-lectual Property Alliance of the losses due topiracy of U.S. copyrighted records and tapes,motion pictures, and books in 10 selected na-tions estimates annual losses at $1.3 billion(see table 8-3). A poll of the motion picture andtelevision, prerecorded entertainment, andpublishing and advertising industries also re-vealed that 100 percent of the executives sur-veyed cited intellectual property rights in-fringements abroad as a major barrier to salesof their products in international markets78 (seetable 8-4).

Although these estimates provide a generalapproximation of the extent of the piracy prob-lem, there are relatively few data on specificindustries in individual countries and on theactual amounts of revenue lost due to privatecopying, commercial piracy, and counterfeit-ing. Evidence of private copying and piracy(continued from previous page)

rights owners. Counterfeiting refers to unauthorized duplica-tion of a product’s trademark to give a similar appearance ofa specific product. In addition to directly undercutting the origi-nal rights owner’s market, counterfeiters by producing lowerquality imitations of products may also damage the productsquality reputation and further undercut the original market.Although not illegal, private copying generally refers to homecopying of intellectual property products solely for individualconsumption. It has resulted from the ready availability to theconsumer from 1964 onwards of magnetic tape reproductionequipment coupled with blank cassettes, videotape recorderscoupled with blank cassettes, personal computers coupled withblank software, etc. See Gillian Davies Private Copying of Soundand Ad”oviswd Recordings (Oxford: ESC Publishing Limited),1984.

“U.S. International Trade Commission, “The Effects ofForeign Product Counterfeiting on U.S. Industry” (Washing-ton, DC: U.S. International Trade Commission, January 1984).

“Eileen Hill, “Intellectual Property Rights: Commerce De-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 andTelevision, Prerecorded Entertainment, Publishing and Adver-tising Industries, ” September 1984, p. iii.

is generally gathered indirectly: by measuringthe increase of sales and availability of hard-ware that permits easy and inexpensive copy-ing; the increase of sales of blank audio andvideo tapes; the decreasing sales of published,audio, and video works; the decreasing num-ber of journal subscriptions in different coun-tries; the widespread availability of unautho-rized copies of American creative works; or thelevel of ineffectiveness or inadequacy of pro-tection offered in different countries. Thesemeasurements, however, do not directly indi-cate what percentage of the purported piracyis of U.S. products. In other instances, whenoverall estimates of revenues lost to piracy arepresented, the methodology or definitions ofharm used to extrapolate such figures are ofteninconsistent throughout the calculations or arenot readily apparent. For example, much of thesurvey data on the effects of unauthorizedcopying on producers must be carefully inter-preted in light of the way in which harm isdefined:

Two possible definitions [of harm] are sug-gested. Under the first, harm is measured bythe reduction in profits of the producer be-low their level prior to a new unauthorizeduse. Under this definition, harm does not oc-cur if the unauthorized use leaves profits fromall previous uses unaffected. . . Under a sec-ond definition, harm occurs if the new use re-duces profits below the level they would havereached had the producer been able to exploitthe market served without authorization. . .Clearly, these alternative definitions can givevery different answers to the question ofwhether an unauthorized use has harmed theproperty owner. The distinction betweenthem must be kept in mind when examiningthe various claims of harm.79

The definitions of piracy also vary greatlyfrom nation to nation, and they are generallydependent on each country’s intellectual prop-erty laws and on international norms. It wouldseem, therefore, that because American prod-ucts garner a relatively large percentage of for-eign markets, foreign piracy of U.S. intellec-

“Stanley Besen, “Economic Issues Relating to New Tech-nologies and Intellectual Property, ” contract prepared for OTA,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

1

Un

L

S e m i c o n d u c t o r s

Canada I

.uxury goods A i rc ra f t M a c h i n e E l e c t r o n i c \ y ~ ~ ’

ited States parts parts{

uxury goods Spor t ing

Mexico goods

porting goods

Brazil

Most act ive Moderate ❑, / Light M i n i m a l,/

SOURCE International Trade Commission. as cited in Business Week, Dec. 16, 1985

tual property products is also sizable. Theseuncertainties notwithstanding, the major avail-able statistics on piracy and counterfeiting inthe publishing, recording, motion picture, andsoftware industries are summarized below.

The Publishing Industry

According to publishing industry officials,the introduction of technologies such as pho-tocopying, and new electronic storage andprint technologies has led to vast internationalpiracy and private copying of texts and liter-ary works.80 Compounding this is the marriage

80Literar~ works are defined in § 101 of the 1976 CopyrightAct as “. . . works other than audiovisual works, expressed in

of communication technologies with electronicinformation storage and retrieval systems,which has led to more and faster international

words, numbers, or other verbal or numerical symbols or indi-cia, regardless of the nature of the material objects, such asbooks, periodicals, manuscripts, phonorecords, film, tapes, disks,or cards, in which they are embodied. ”

Internationally, literary works are protected under the UCCof which the United States is a member: “Each ContractingState undertakes to provide adequate and effective protectionof the rights of authors and other copyright proprietors in liter-ary, scientific, and artistic works, including writings, musical,dramatic, cinematographic works, and paintings, engravings,and sculpture. Article I, Universal Copyright Convention,Paris, 1971. Literary works enjoy a higher international levelof minimum protection under the Berne Convention of whichthe United States is not a member.

240 • Intellectual Property Rights in an Age of Electronics and /formation

❑

mmalc‘3:

— -—

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

exchanges of printed works, The third factorcontributing to piracy is the lack of adequate,effective, or indeed, any legal protection forU.S. literary works in many nations.

The Association of American Publishers,Inc. (AAP) estimates that the industry loses$1 billion each year to piracy of English-lan-guage books worldwide. Of this, AAP esti-mates that U.S. works account for 70 percent.The AAP also suggests that estimates of lostrevenues would be greater if calculated on thebasis of U.S. legitimate prices instead of onthe basis of estimated revenues earned by pi-rates. The publishing industry has also com-pleted a country-by-country analysis of thepiracy of published or literary works.” Al-though the AAP does not calculate direct evi-dence of actual harm to the industry, its re-port indicates that piracy is more common insome nations than in others. The majority ofthe piracy reported takes place in developingor newly industrializing nations. For example,over 27 U.S. publishers reported evidence ofpiracy of their materials in Taiwan:

‘ .4ssociation of American Publishers, Inc., “Piracy of CopJT-righted Material: A Report Prepared at the Request of the U.S.Department of State,” 1985.

An estimate of at least 560 titles from refer-ence, professional, trade, personal computerand college textbooks have been pirated inTaiwan with approximately 48,000 pirate cop-ies in English and Chinese. . . [in addition]Taiwan is illegally exporting pirated booksto Australia. The books are business and com-puter-related and are published by well-knownAmerican publishers.”In addition to pirating of domestic sales, Tai-

wan as well as other A SEAN countries pirateproducts to export to other nations.83 Approx-—

‘“ Ibid~, ‘p~6.“ASl?AN (Association of Southeast Asian Nations) coun-

tries are Brunei, Indonesia, Malaysia. the Philippines, Singa-pore, and Thailand.

“In January 1983, the Taiwanese police seized a containerbound for Nigeria, purportedly carrying water filter cups andcrash helmets. Hidden inside were 54,000 copies of five Britishtitles that had not been authorized by the copyright holdersfor export from Taiwan. The cargo was valued at $48,000. (Itsselling price in Nigeria would have been at least $250,000). Af-ter long and expensive litigation the penalty for this offensewas 1 year’s imprisonment, but the sentence was suspended.The infringing cargo was destroyed, but no printing plates wereconfiscated and only a small fine was assessed for false declara-tion. If 20 to 40 such shipments are smuggled out of Taiwaneseports each month, then the export value of these shipments atpirate prices would amount to a figure between $60 million and$120 million per year. ” Association of American Publishers,Inc., “Detailed Information on Worldwide Piracy of CopyrightedMaterial and the Copyright Laws and Penalties, ” June 11, 1985,pp. 19-20.


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

Copyright infringement

. — .Algeria. . . . . . . . . . . . . . . .Andean Pact . . . . . . . . . . . . .Argentina . . . . . . . . . . . . . . .Australia . . . . . . . . . . . . . . .Austria. . . . . . . . . . . . . . . . .Belgium. . . . . . . . . . . . . . . . .Brazil . . . . . . . . . . . . . . . . . . .Canada . . . . . . . . . . . . . . . . .Caribbean Region . . . . . . . .Chile . . . . . . . . . . . . . . . . . . .Colombia . . . . . . . . . . . . . .Denmark . . . . . . . . . . . . . . . .Dominican Republic . . . . . .Eastern Block. . . . . . . . . . . .EEC . . . . . . . . . . . . . . . . . .Egypt . . . . . . . . . . . . . . . . . .Finland . . . . . . . . . . . . . . . . .

France. . . . . . . . . . . . . . . . . .Germany, Federal

Republic of . . . . . . . . . .Greece. . . . . . . . . . . . . . .Hong Kong . . . . . . . . . . . . . .India. ..., . . . . . . . . . . . . .Indonesia . . . . . . . . . . . . . .Iran ., . . . . . . . . . . . . . . . . .Iraq ., . . . . . . . . . . . . . . . . . .Israel ., . . . . . . . . . . . . . .Italy . . . . . . . . . . . . . . ..., . .Jamaica . . . . . . . . . . . . . . . . .—.-— — —— .

I

[1

11

[ 1

—-— . . — —Japan . . . . . . . . . . . . . . . . . . .Kenya . . . . . . . . . . . . . . . . . .Korea . . . . . . . . . . . . . . . . . . .Lebanon . . . . . . . . . . . . . . . .Malaysia . . . . . . . . . . . . . . . .Mexico . . . . . . . . . . . . . . . . .Netherlands . . . . . . . . . . .New Zealand . . . . . . . . . . .Nigeria . . . . . . . . . . . . . . . . .Norway . . . . . . . . . . . . . . . . .Pakistan . . . . . . . . . . ..., . .People’s Republic

of China . . . . . . . . . . . . . .Peru . . . . . . . . . . . . . . . . . . . .Philippines . . . . . . . . . . . . . .Portugal . . . . . . . . . . . . . . . .Saudi Arabia. . . . . . . . . . . . .Singapore . . . . . . . . . . . . .South Africa. . . . . . . . . . . . .Spain . . . . . . . . . . . . . . . . . . .Sweden . . . . . . . . . . . . . . . . .Switzerland . . . . . . . . . . . . . .Syria . . . . . . . . . . . . . . . . . . .Taiwan. . . . . . . . . . . . . . . . . .Tanzania . . . . . . . . . . . . . . .Thailand . . . . . . . . . . . . . . .United Kingdom. . . . . . . . . .Venezuela . . . . . . . . . . . . . . .

—

I

1

■[1■[ 1

9

■■

■

■■■■

■L■[1■

■

■■■

■ -- 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 itIt 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, listsmated $5 million to $8 million annually, but over 8,000 pirated books.84

are plunging. Foreign book pirating flourishesbecause it is legal. This country hasn’t signed Other countries where American publishersany 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 ofeign publishers. Korean publishers can copy Co~yrightedMaterial:A Report Prepared attheRequest of thebooks without paying advertising, promotion U.S. Department of State,” 1984, pp. 2-3.


tina, Australia, Brazil, Chile, China, Colombia,Costa Rica, the Dominican Republic, Ecuador,Egypt, West Germany, Greece, Holland, HongKong, India, Indonesia, Iran, Iraq, Jamaica,Japan, Malaysia, Mexico, Nigeria, Pakistan,Panama, Peru, the Philippines, Saudi Arabia,Singapore, Thailand, Venezuela, and the So-viet Union.85

The Recording Industry

As in the publishing industry, recordingcompanies report widespread international in-fringements of sound recordings. The introduc-tion of broadcasting and of less expensive,high-quality duplicating hardware have led toincreased international piracy, counterfeiting,and private copying of sound recordings.86

Another major contributing factor to thispiracy is the lack of adequate or effective pro-tection for U.S. audio works in many countries.Half of the member countries of the UnitedNations, for example, do not yet recognize thereproduction right in sound recordings. Manyof the nations that do not provide adequateprotection for U.S. literary works are also thosethat do not protect U.S. sound recordings.87

..— . ——“’Association of American Publishers, Inc., “Piracy of

Copyrighted Material: A Report Prepared at the Request of theU.S. Department of State, ” 1984.

“ Under U.S. law sound recordings were first explicitly pro-tected by a 1971 amendment (Public Law 92-140, 85 Stat. 391)and under § 101 of the 1976 Copyright Act are thus defined:“material objects in which sounds, other than those accompany-ing a motion picture or other audiovisual work, are fixed byany method now known or later developed, and from which thesounds can be perceived, reproduced, or otherwise communi-cated, either directly or with the aid of a machine or device.

Internationally, sound recordings are protected under the 1971Convention for the Protection of Producers of PhonogramsAgainst Unauthorized Duplication of Their Phonograms ofwhich the United States is a member. The 1961 InternationalConvention for the Protection of Performers, Producers ofPhonograms and Broadcasting Organizations, better known asthe Rome Convention, protects sound recordings internation-ally, as a neighboring right. The United States, however, is nota member of this Convention.

“-These countries include Argentina, Bolivia, Brazil, Chile,Cyprus, Egypt, Greece, India, Indonesia, Italy, Korea, Kuwait,Lebanon, Malaysia, Mexico, Morocco, Nigeria, the Netherlands,Panama, Peru, Philippines, Portugal, Saudia Arabia, Singapore,Taiwan, Thailand, Tunisia, Turkey, and Venezuela. Statementof the Recording Industry of America, Inc., before the U.S. De-partment of State International Copyright Panel, “The Piracyof Copyrighted Sound Recordings in Foreign Countries, ’ Mar.22, 1985, pp. 2-8.

Because many of the developing and newlyindustrializing countries do not afford ade-quate protection for U.S. sound recordings,these countries also are the sites of the major-ity of piracy and counterfeiting of these works.

Singapore is an excellent example of themagnitude of the problem, where it is esti-mated that 70 million counterfeit and piratesound recordings were exported in 1984. Thisincredible total, plus an additional 15 millioncounterfeit units produced in Singapore forinternal consumption, accounted for 90 per-cent of sound recordings manufactured orsold in Singapore last year. A large percent-age of the unlawfully duplicated products wasU.S. owned. This situation exists despiteenergetic efforts of the IFPI (InternationalFederation of Phonogram and VideogramProducers) to combat the problem.88

Several Latin American countries are also re-sponsible for large numbers of pirated andcounterfeited U.S.-owned audio works:

In Panama, as much as 80 percent of themusical tape market is dominated by coun-terfeit and pirate goods. In Peru, the percent-age of illicit tape recordings is approximately70 percent. Bolivia and Chile both report thatapproximately 50 percent of the tape record-ings manufactured and sold there are coun-terfeit or pirate, The huge Mexican markethad a 40 percent penetration of counterfeitand pirate tapes in 1982—equaling approxi-mately 11 million units of $30 million in lostsales.89

In addition to citing specific problems indifferent nations, the Recording Industry ofAmerica, Inc. (RIA) has reported overall sta-tistics on the extent of foreign piracy and coun-terfeiting of U.S. sound recordings. The esti-mated total sales of counterfeit and piratedU.S.-owned sound recordings overseas in 1982was, according to the RIA, well over $250 mil-lion. Based on worldwide market shares for

‘Statement of the Recording Industry of America, Inc., be-fore the U.S. Department of State International CopyrightPanel, “The Piracy of Copyrighted Sound Recordings in For-eign Countries, Mar. 22, 1985, p. 2.

**Statement of the Recording Industry of America, Inc., be-fore the U.S. International Trade Commission, “The Impactof Foreign Product Counterfeiting on the U.S. Recording In-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-proximately 50 percent of the estimated $515million in counterfeit and pirate sales outsideof the United States in 1982 relates to record-ings originally created and owned by U.S. re-cording companies, performers, lyricists, andcomposers. 90

The Motion Picture Industry

Like the publishing and recording industries,the motion picture industry is also experienc-ing international private copying, piracy, andcounterfeiting of U.S.-owned audiovisual works.91

The Motion Picture Association of America,Inc. estimates, for example, that worldwidelosses due to film and video piracy are now ap-proaching $1 billion per year.92 In addition tothe lack of adequate legal protection of audio-visual works in many nations, the major fac-tor leading to international infringements ofU.S.-owned audiovisual works is the introduc-tion and increased use of information and com-munication technologies. Used individually ortogether, videocassette recorders (VCR), sat-ellites, and cable technologies have been re-ferred to by some analysts as an electronictriad, or the unholy trinity, for copyrightholders of motion pictures.93

— — — —.—“Statement of the Recording Industry of America, Inc., be-

fore the U.S. Department of State International CopyrightPanel, “The Piracy of Copyrighted Sound Recordings in For-eign Countries, ” Mar. 22, 1985, p. 1, 6.

“Motion pictures and other audiovisual works are a protect-able subject matter under the U.S. Copyright Law and weredefined under the 1976 Act in § 101 as “. . . works that consistof a series of images which are intrinsically intended to be shownby the use of machines or devices such as projectors, viewers,or electronic equipment, together with accompanying sounds,if any, regardless of the nature of the material objects, suchas films or tapes, in which the words are embodied. ”

Internationally, motion pictures and audiovisual works un-der Article 1 of the Universal Copyright Convention (1952 and1971 texts) of which the United States is a member: “Each Con-tracting State undertakes to provide adequate and effective pro-tection of the rights of authors and other copyright proprietorsin literary, scientific and artistic works, including writings, mu-sical, dramatic and cinematographic works, and paintings, en-gravings and sculpture. ” Audiovisual works are also protectedinternationally under Article 2 of the Berne Convention for Liter-ary and Artistic Works of which the United States is not amember.

“Motion Picture Association of America, Inc., “Film andVideo Piracy: Manual for Investigators and Prosecutors, ” 1984,p. 3.

‘{Edward W. Ploman and L. Clark Hamilton, Copyright: 1n-

—

The relatively recent advent of satellite tech-nology has had the greatest impact on inter-national video piracy.94 Although terrestrialbroadcasting has permitted some spillover intoother countries of U.S. copyrighted materials,the scope of the satellite footprints is muchgreater and allows other nations greater un-authorized access to U.S. works.95 Althoughtechnical advances are improving the accuracyof the satellite beams, it will never be possibleto shape the beams so precisely that they fol-low the contours of a given country.” Conse-quently, U.S. satellite signals are poached byowners of earth station receivers or by cablesystems, which retransmit them to relatively

tellectmd Property in An Information Age (London: Routledge& Kegan Paul, 1980), p. 153.

The various forms of film and video piracy can be groupedinto three main categories: 1 ) film to tape transfers, 2) duplica-tion of legitimate prerecorded videocassettes and videodisks,and 3) videotaping off television. Additional types of film andvidecl piracy include the unauthorized distribution of film prints,the unauthorized public performance of a legitimately ownedfilm print or videocassette or disk, and the unauthorized inter-ception of subscription TV programming. Motion Picture Asso-ciation of America, Inc., “Film and Video Piracy: Manual forInvestigators and Prosecutors, ” 1984, p. 6,

“’Copyrighted programs carried via satellite are protectedinternationally by the Convention Relating to Distribution ofProgramme-Carrying Signals Transmitted by Satellite of 1974.On Oct. 12, 1984, the United States ratified this Conventionwithout any amendment to domestic law. Commonly referredto as the Brussels Satellite Convention, it obligates contract-ing states to take adequate measures to prevent the unauthorizeddistribution of programming carried by satellite on or from theirterritories. The Convention leaves each state free to choose itsown method of implementation, including designation of thespecific beneficiaries of protection. The Convention, however,exempts signals that are intended for direct reception from sat-ellite by the general public; these broadcast satellite signals aregenerally already regulated under the copyright or neighbor-ing rights regimes of most nations. It also does not apply toindividual reception of satellite signals for purposes of privateviewing. Because there are currently only nine contracting statesto this Convention, the international effectiveness of this treatyremains questionable.

“’Satellite footprints are defined as “the area of the earth’ssurface in which satellite transmissions can be received. . . Notethat a footprint is a fluid concept and not a static one. Its sizewill depend on the technical characteristics of the receiving dishand environmental conditions. Therefore, a particular satellitetransmission will have one footprint when 10-foot earth-baseddishes are being used and another one when 3-foot dishes arebeing used. ” Motion Picture Export Association of America,Inc., “MPEAA Memorandum on the Uses of Satellite Technol-ogy, ” 1984, p. 9.

‘Edward W. Ploman and L. Clark Hamilton, Copyright: Zn-tellect ual Property in An Information Age (London: Routledge& 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.copyright holders.

Canada, for example, takes advantage of itsgeographic proximity to the United States andthe availability of American satellite signals:

Canadian cable systems under court decisionshave no copyright liability under Canadianlaw for their stock in trade, their distributionto their paying subscribers of copyrightedworks contained in the broadcast signals,both Canadian and American, which they cap-ture from the air.97

Piracy of American signals is also a wide-spread problem in Central America. Costa Ricaand the Dominican Republic, for example,pirate large amounts of U.S.-owned pro-gramming:

The most compromising form of piracy inthis country [Costa Rica] is the unauthorizedretransmission of cable TV signals. These sig-nals carry a wide variety of copyrighted ma-terial. Cable Color, a pirate cable system lo-cated in the capital city of San Jose, has asubscriber count of approximately 10,000,while a similar cable TV system, Supercanal,transmits to 3,000 subscribers. Television Re-ceive Only (TVRO) dishes as well as unautho-rized public performances also present a seri-ous problem to the American motion picture,cable, and television industries.

The theatrical and television markets forfeature films and television programmingcontinue to be severely affected by the sig-nal theft practiced by cable TV Dominicanand Telecable National. These two pirate ca-ble TV systems cumulatively service 20,000subscribers in the capital city of SantoDomingo, as well as the second largest Do-minican city, Santiago. Television ReceiveOnly dishes can be found in large numbersthroughout the city.98

Many Caribbean nations are also responsiblefor pirating U.S. programming by satellite.Jamaica is a prime example:

————‘ CBS, Inc., “Statement of CBS Inc. Before the Canadian

Parliamentary Standing Committee cm Communications andCulture, ” April 1985, pp. 1-2.

“Motion Picture Association of America, Inc., “Brief De-scription of Film Piracy, for U.S. Department of State Inter-national Copyright Panel, Mar. 22, 1985, pp. 1-2.

As with nearly every other island in the Car-ibbean, there is wholesale video and signalpiracy in Jamaica. . . Many homes and com-mercial facilities such as hotels have Televi-sion Receive Only dishes that intercept sat-ellite signals without authorization. One ofthese has been operated by the JamaicaBroadcast Company, a government-ownedoperation that has intercepted motion pictureprogramming and rebroadcast it to the en-tire island without charge. The impact of suchpractices is self-evident.99

In many countries, the widespread consumeruse of videocassette recorders has joined in-adequate or ineffective legal protection inpromoting increased piracy of American audio-visual works. These pirated copies are, in turn,sometimes rebroadcast on cable or local broad-casts. Many of the countries where piracy ofliterary and musical works is rampant also areresponsible for widespread video piracy.

Several ASEAN countries, for instance, aremajor centers of piracy of U.S. audiovisualworks. In addition to pirating for domesticsales, many of these nations export largeamounts of pirated and/or counterfeited copies.Both Korea and Indonesia are well known forthese activities:

Due to the absence of adequate and effec-tive copyright legislation in relation to for-eign works, the videocassette piracy problemin Korea is serious. Pirated copies of Amer-ican films are widely available and service a550,000 VCR population in South Korea. Manyof these are reputed to come from U.S. mili-tary bases in the country. Some hotels areusing videocassettes for in-house entertain-ment without licensing agreement, and thereis unauthorized use of American films bybroadcast television stations. . . .

In a country with 600,000 videocassetterecorders, the piracy of American motion pic-tures is 100 percent. This is due to the absenceof adequate and effective copyright legisla-tion which, in turn, inhibits legitimate mar-ket entry. ’no

Motion Picture Association of America, Inc., "Brief De-scription of Film Piracy, for U.S. Department of State Inter-national Cop}’ right Panel, Mar. 22, 1985, p. 3.1

‘ “’Motion Picture Association of America, Inc., “Brief De-scription of Film Pirac~r, for CJ, S. Department of State Inter-national Copyright Panel, Mar. 22, 198.5, p. 3.


Other countries where video piracy occurs in-clude Brazil, Canada, Costa Rica, Cyprus, theDominican Republic, Egypt, France, HongKong, Indonesia, Israel, Italy, Jamaica, Ko-rea, Malaysia, Mexico, the Netherlands, Nige-ria, Pakistan, Panama, Peru, the Philippines,Saudi Arabia, Singapore, South Africa, Spain,Sweden, Taiwan, Thailand, Turkey, UnitedKingdom, Venezuela, and West Germany.101

The Software Industry

Because few major studies of the problemhave been undertaken, there are few data onthe extent of foreign piracy of U.S. softwareproducts. 102 This is so largely because softwareis a relatively new industry, and also becausemicrocomputers are much less widely usedabroad than in the United States. 103 Recently,however, the International Intellectual Prop-erty Alliance undertook a major study on theextent of international piracy of U.S. softwareproducts. This study found that the U.S. soft-ware industry is losing significant annual salesbecause of copyright violations in Brazil ($35million), Egypt ($3 million), Korea ($20 million),Malaysia ($7 million), the Philippines ($4 mil-lion), Singapore ($20 million), Taiwan ($34 mil-lion), and Thailand ($2 million).104

Given the precedent of foreign piracy of otherU.S. intellectual property products and the ex-

“’lElizabeth Greenspan, “Film and Video Piracy, ” Interna-tional Media Law, 1983.

‘()’Published anecdotal evidence of foreign software piracy isalso rare. Some examples, however, have been cited by the AAP:“Pirated software [in Taiwan] is sold for 1 percent of the U.S.list price, or $3.50 for a best-selling U.S. software product likeVISICALC or WordStar or others that sell for approximately$350 in the United States. Often the pirate gives away 5 or 10pieces of software with a Pineapple (or pirated Apple) comput-er. Pirated computer books may also be included in this pack-age. ” Other countries where software piracy occurs include Bra-zil, Greece, Korea, and Singapore. Association of AmericanPublishers, “Piracy of Copyrighted Material, ” a Report Pre-pared at the Request of U.S. Department of State, ” Mar. 22,1985.

‘(’’’The Software Publishers Association informally estimatesthat for every legitimate copy of U.S. software abroad thereare approximately 5 to 10 pirated copies, telephone conversa-tion, July 8, 1985.

‘“’ International Intellectual Property Alliance, “Piracy ofU.S. Copyrighted Works in Ten Selected Countries: A Reportby the International Intellectual Property Alliance to the UnitedStates Trade Representatives, ” August 1985.

pected growth of foreign demand for comput-ers and computer products, the piracy of soft-ware abroad may soon become a larger concernto U.S. software manufacturers. Consequently,over the long term more in-depth analysis anddocumentation can be expected. With such in-formation, U.S. software manufacturers mightmore effectively deter international piracy.

Policy Implications

Although these statistics can only measurethe harm from private copying and piracy in-directly, they make it clear that piracy is a moreserious problem at the international level thanat the domestic level. Because of the increas-ing importance of information-based productsand services to the U.S. economy and interna-tional trade, deterring foreign piracy of U.S.intellectual property products will most likelybecome a high priority for the United States.As new technological developments erode tra-ditional enforcement mechanisms and permitgreater international dissemination of suchproducts, the United States will need to seekto improve enforcement of U.S. intellectualproperty rights abroad. Moreover, given theinadequacy of enforcement abroad, the UnitedStates might want to pursue ways of ensur-ing that countries strengthen their legal pro-tection and enforcement mechanisms for bothforeign and domestic works.

Currently, the United States is taking someaction to ensure adequate protection. It is, aspreviously discussed, using the granting oftrade preferences as an incentive for the estab-lishment of legal protection and increased en-forcement efforts to protect intellectual prop-erty products. Moreover, the United States hasbegun a series of bilateral discussions withother nations concerning international enforcement. These include discussions with Japanon the protection of software under Japanesecopyright law; discussions with Canada on theissue of protecting cable retransmissions ofU.S. broadcast programming; and discussionswith Caribbean nations on the unauthorizedinterception and retransmission of U.S. sat-ellite-transmitted motion pictures and otherprogramming. These meetings have proved

Ch. 8—impact of New Technologies on the International Intellectual Property System ● 247

successful: Japan has decided to protect soft-ware under copyright; Canada is consideringthe copyright status of cable retransmissions;and the Jamaican broadcasting authorities arebeginning negotiations.105

The United States is also initiating educa-tional seminars on intellectual property rightsfor industry and government representatives,local attorneys, and educators of developingcountries. In early 1985, for example, U.S. dele-gations from the Copyright Office, the Patentand Trademark Office, and the Department ofState went to Indonesia, Malaysia, and Thai-land to present lectures on crucial internationalintellectual property legal issues and the needto provide adequate and effective laws and en-forcement mechanisms to deter infringement.These have been particularly useful becauseeach of these nations is considering revisionsto its copyright laws and is examining how tobest protect new technologies, such as com-puter software.106 In addition, the U.S. Gov-ernment has recently begun to offer trainingprograms for patent, copyright, and trademarkadministrators of other nations.

There are also other options the UnitedStates might pursue to mitigate internationalpiracy. The United States, for example, couldmore actively participate in international in-tellectual property for a, the positive and neg-ative aspects of which have already been dis-cussed.

To complement these efforts, the UnitedStates could also encourage U.S. industry,both producers and users of intellectual prop-erty products, to participate more actively ininternational associations that fight interna-tional piracy. Such associations include, for ex-ample, the International Federation for Phono-gram and Videogram Producers (IFPI), theFederation Against Software Theft (FAST),

‘f’r’Michael Kirk, Assistant Commissioner for External Af-fairs, United States Patent and Trademark Office, Departmentof Commerce, testimony on “Copyright Enforcement, beforethe Subcommittee on Patents, Trademarks, and Copyright, Sen-ate Committee on the Judiciary, Apr. 17, 1985, p. 7.

‘ “’For a good case study of U.S. bilateral efforts to reducepiracy in a nation, see “Protection From Commercial Counter-feiters in Taiwan for U.S. Firms, ” Law and Policy in Interna-tional Business, vol. 16, No. 2, 1984.

and the Federation Against Copyright Theft(FACT).107

The United States might also expand cur-rent talks with developing countries on intel-lectual property law and piracy of U.S. prod-ucts. These seminars, which might be eitherbilateral or sponsored through a multilateralagency, could provide developing countrieswith information on how to construct adequateand effective intellectual property laws and en-forcement mechanisms. They might also beused to outline the importance of protectingintellectual property rights for developing na-tions as international trade partners, as wellas for the growth of their domestic intellectualproperty industries.

A more coercive option would be to imposetrade sanctions or other retaliatory measureson nations that do not enforce U.S. intellec-tual property rights. This option, however, en-tails trade-offs in terms of the political dis-cordance that such sanctions might provokebetween developing nations and the UnitedStates. Some trade experts, for example, warn“that with no international consensus on howto defend intellectual property rights, any at-tempt to impose U.S. views on others couldjeopardize efforts to improve agricultural andmanufacturing trade. ’’108

Growing Convergence of InternationalIntellectual Property Issues With

Other International Issues

Nations have come to view information andinformation-based products and services ascomponents for improved productivity and

‘“7A current example of industry efforts to reduce interna-tional piracy of U.S. prcducts is Ashton Tate’s cooperation withthe International Trade Administration, the Association of DataProcessing Service Organizations (ADAPSO), Lotus Develop-ment Corp., MicroPro International, and other software com-panies to develop a series of seminars on intellectual propertyrights and regulations for exporting software. They are alsoconsidering the establishment of ‘{an industry-financed war chestto provide funds to fight piracy through Iegal channels as weIIas through public education. “ “Ashton-Tate Fights at Homeand Abroad, ’ Download, March 1986, pp. 11-12.

‘“’Bruce Stokes, “Intellectual Piracy Captures the Atten-tion of the President and Congress, ” National Journal, Feb. 22,1986, pp. 443-445.


international competitiveness, internationaltrade, and as a means to achieve major socie-tal goals. As a result, international intellectualproperty issues are increasingly tied to inter-national competitiveness, trade, development,and political issues. These linkages, togetherwith the growing convergence of communi-cation and information technologies, are cre-ating new intersections between internationalintellectual property issues and other interna-tional issues, such as space and telecommuni-cation issues.

The convergence of information and infor-mation-based products and services and com-munication technologies is largely due to theoverall goal shared by many nations to buildinformation infrastructures for both social andeconomic development.109 As information andinformation-based products and services areincreasingly used with electronic communica-tion systems, the communication policies thatgovern such systems intersect with intellec-tual property policies. Thus, products and serv-ices that have traditionally been regulatedseparately are now used in new combinations:

Current changes in technology are produc-ing new patterns, with traditional services be-ing combined into unexpected hybrid shapesand uses, in defiance of the established cate-gories. . . Cable systems can be combinedwith terrestrial broadcasting, and either oneor both of these with satellite systems. Thecombination of technical systems corre-sponds to an integration of services: televi-sion and facsimile combine in telefacsimile;the data bases used for electronic photocom-posing can also be used for information re-trieval. The combination of television andtelephone is at the origin of the videophone,and these, together with computerized datasystems, result in teletext and videotex serv-ices. In fact, certain videotex services alreadyrepresent a combination of telecommunica-tions, computer, broadcasting, print, and in-formation systems.110

‘@In an information society, such that it is envisioned, therewill be a greater interdependence between information and com-munication technologies as nations seek to construct what theFrench Government calls “the entire nervous system of socialorganization. ” Simon Nora and Alain Mine, The Computeriza-tion of Society (Cambridge, MA: MIT Press, 1980).

““Edward W. Ploman and L. Clark Hamilton, Cop~ight:lnt.elkctuaf Property in an information Age (London: Routledge& Kegan Paul), p. 151.

Because of these new combinations, new usesand distribution channels are developing thatmay have been unanticipated by the legal sys-tem. Consequently, two traditionally unrelatedlegal or regulatory regimes are now in contactwith each other. Conflicts may arise when theseregimes have mutually exclusive policy ob-jectives.

A case in point is the unavoidable satellitespillover or footprints that cut across nationalfrontiers. While this spillover is not materiallydifferent from spillover in terrestrial broadcast-ing, it is, however, much greater in scope andsubject to different legal protections and re-gimes. Under the Radio Regulations of the In-ternational Telecommunications Union (ITU),space is considered common property, for ex-ample, which cannot be owned by individuals,corporations, or governments.111 Althoughsuch regulations recognize the privacy of trans-missions, there are no enforcement mecha-nisms or remedies for the violation of rights.Not finding this spillover acceptable and want-ing to enforce their rights, rights owners haveinsisted on extended protection. Their de-mands, however, conflict with the internation-ally agreed upon principle of the law of the com-mons, which has developed in the context ofspace and telecommunications law. Thus, ef-forts to protect the intellectual property em-bodied in satellite signals may need to be han-dled in widely differing legal and regulatorycontexts. 112

Also exemplifying the multifaceted natureof intellectual property issues is the increas-ing number of institutions that deal with suchissues. At present, the World Intellectual Prop-erty Organization deals with the administra-tion of rights; the United Nations Educational,Scientific, and Cultural Organization overseesinternational information flows for the bene-fit of education, science, and culture, and de-velops communications policies for the devel-opment of infrastructures; the InternationalTelecommunications Union allocates frequency

“’see Article N28/7 of the Radio Regulations, also the FinalActs of the World Administrative Radio Conference—Broad-casting Satellites, 1977.

“’Edward W. Ploman and L. Clark Hamilton, Copyright:Intelkctual Property in the Information Age. (London: Rout-ledge & Kegan Paul, 1980), p. 155.

— —


bands and promulgates technical standards inthe area of telecommunications; the United Na-tions Centre on Translational Corporationsoversees transborder information-related serv-ices; and the United Nations Conference onTrade and Development and the General Agree-ment on Tariffs and Trade regulate the tradeof some information-based products and serv-ices.113

Policy Implications

Because the present set of international le-gal and regulatory regimes and institutions aregenerally linked to a particular technology, newcombinations of older technologies might, likenew technologies, create inconsistencies be-tween traditionally separate policies and in-stitutions. To deal with such cross-cuttingissues, the international protection for intel-lectual property may need to be considered ina larger social, legal, and technical context. TheUnited States, therefore, might want to de-velop an integrated approach or policy to dealwith the cross-cutting nature of internationalissues. In addition, it may need to improve thecoordination among domestic agencies that areresponsible for international and intellectualproperty issues.

Currently, there is no agency in the U.S. Gov-ernment that has centralized responsibilitiesfor dealing with the cross-cutting internationalintellectual property issues. Instead, variousFederal agencies perform different and sepa-rate functions with respect to international in-tellectual property rights. ’l’

The Department of State plays a lead rolein coordinating other Federal agencies and rep-resenting the United States at multilateral andbilateral intellectual property negotiations.Both the Patent and Trademark Office and theCopyright Office are responsible for monitor-ing international legal developments, repre-senting the United States in their respective

——“‘Gregorio Garzon Clariana, “Legal Framework for Interna-

tional Information, ” Translational Data Report, vol. 8, No. 2,pp. 101-107.

“’These agencies are each described in more detail in Chap-ter 9, “The Federal Role in the Administration of IntellectualProperty Rights. ”

—

international conventions, and advising Con-gress and the Administration on developinginternational intellectual property policy.

The National Telecommunications and In-formation Agency (NTIA) plays an importantrole in the protection of copyrighted materialtransmitted outside the United States via tel-ecommunication technologies. It also partici-pates in negotiations of international agree-ments on the use of satellites for rebroadcastmaterials.

For trade-related international intellectualproperty issues, the U.S. Trade Representa-tive plays a major role. Its responsibilities in-clude monitoring foreign nations’ efforts toprotect intellectual property and then, accord-ing to such an analysis, recommending whethersuch nations should be eligible to receive tradepreferences. The International Trade Admin-istration also monitors international enforce-ment of intellectual property rights and pro-vides this information and counseling onexport opportunities and problems to the busi-ness community. The U.S. International TradeCommission is an independent quasi-judicialagency that determines whether unfair tradeacts related to imports, which often involvepatent, trademark, or copyright infringements,are harmful to U.S. industries.

The U.S. Information Agency takes primaryresponsibility for culturally oriented intellec-tual property policy. It oversees the distribu-tion of U.S. intellectual property products suchas films, books, and music to other nations forthe promotion of better understanding theUnited States and its citizens.

Recognizing the fragmentation of policyresponsibilities for international intellectualproperty issues within the Federal Govern-ment, several policy coordination groups forintellectual property policy have been recentlyformed. These groups include the CabinetCouncil on Commerce and Trade (WorkingGroup on Intellectual Property), the Trade Pol-icy Committee (Subcommittee on IntellectualProperty), and the Senior Interagency Groupon Communication and Information Policy(Working Group on Copyright and IntellectualProperty).

250 . Intellectual Property Rights in an Age of Electronics and Information— —

These efforts to coordinate area good starttowards recognizing the many issues involvedin international intellectual property policy.However, given the increasing legal, social, po-litical, and economic factors affecting intellec-tual property rights, the current U.S. Govern-ment organization for international intellectualproperty issues might make it very difficultto address these multifaceted issues in a com-prehensive fashion.

To deal with these cross-cutting issues, theUnited States might establish a governmentalagency responsible for both domestic and in-ternational intellectual property rights. Thisagency would subsume all the administrativeresponsibilities of the Copyright Office, thePatent and Trademark Office, and the respon-sibilities of other agencies involved with intel-lectual property rights. Internationally, itwould represent the United States on all mat-ters that relate to intellectual property rights.

Such an agency would also have centralizedin-house capabilities to analyze the effects ofnew technological developments on the inter-national intellectual property system and theU.S. position in relation to the system. Usingthis analysis, it could advise Congress on pos-sible domestic and international intellectualproperty strategies.

At the same time, the establishment of suchan agency has several drawbacks. The consoli-dation of responsibility for intellectual prop-erty rights, for example, would take expertiseon intellectual property rights from agenciesthat need it, such as the Department of Com-merce and the Library of Congress. Similarly,consolidation might also inhibit existing ac-cess to expertise on legal, trade, and foreignpolicy, made possible by multi-agency involve-ment. Finally, such a proposal would probablymeet resistance from the agencies themselves.

IMPLICATIONS FOR FUTURE U.S. INTERNATIONALINTELLECTUAL PROPERTY POLICY

As described throughout this chapter, theUnited States is undertaking and consideringmany options to address international intel-lectual property issues. Table 8-5 summarizessome of the major policy strategies availableto the United States for dealing with many ofthe international intellectual property issuesbrought about by new technologies. It furthergives major examples, issues or stresses thatwould be addressed, and suggests both posi-tive and negative outcomes of such strategies.

There is no single, clear-cut strategy that theUnited States could adopt to comprehensivelyaddress all of the international intellectualproperty issues engendered by new technol-ogies. A policy strategy designed to deal withinternational trade and enforcement issues,such as those already legislated (sections ofthe Trade and Tariff Act of 1984 and the Carib-bean Basin Economic Recovery Act), for ex-ample, fails to address any of the internationalpolitical issues presented by new technologies.

Strategies designed to focus on political issues,moreover, do not readily address internationalintellectual property trade issues.

In fact, many policy strategies designed toaddress specific issues may exacerbate otherstresses on the international intellectual prop-erty system. Treating intellectual property, forexample, solely as international trade issuescould provoke problems of international polit-ical relations, even to the point of incitingretaliation from other nations; but focus on in-ternational political relations might forecloseexport opportunities for the U.S. domestic in-tellectual property industry. Similarly, treat-ing international intellectual property issuesas separate from other international policiesmight lead to conflicts with international in-formation and communication policies andother foreign policies.

Although many of the policy strategies foraddressing international intellectual propertyissues are not mutually exclusive, the United

for Addressing International Intellectual Property Issues

P o l iCY a c t i o n

Ratify the Berne Convent Ionfor the Protection of

Literary and Artistic Works

Rejo in Uni ted Nat ionsEducat ional and Cul tura lOrganizat ion (UNESCO)

Nego t i a t i ons , educa t i on –

seminars, and trainingprograms on intellectualproperty rights forother nations

Bilateral intellectual propertyagreements with nations thatare not members of anyinternational Intellectualproperty agreements

Legislation with specificinternational reciprocityclauses

Table 8-5.—Policy Options

ExamplesIssues or stresses

to be addressed

Internat ional izat ionof in te l lectualproperty

Pol i t icalLegalEnforcement

Internationalizationof intellectualproperty

PoliticalLegalEnforcement

property could organize seminars and train -iIng programs for foreign officials responsi-ble for the administration of Intellectualproperty rights, such as those alreadyundertaken in Indonesia, Malaysia, andThailand.

Where countries are not members of interna-tional Intellectual property conventions, theUnited States could establish specificbilateral Intellectual property agreements,such as those already established withRomania, South Africa. and Thailand.

Domestic Iegislation that would make specificin te l Iec tua l proper ty r igh ts in the Uni ted

States available to foreign nationals only iftheir nation granted comparable rights toU S nat iona ls , such as those rec iproc i tyclauses in the Semiconductor Chip Protec-tion Act (Public Law 98-620) and the pro-p o s e d I n t e r n a t i o n a l C o m p u t e r S o f t w a r eProtec t Ion Act o f 1985 (S. 399, 99 thCongress)

LegalEnforcement

LegalEnforcement

Possible positive outcomes Possible negative outcomes

U.S. would appear more genuine in its support Disrupts traditional U S intel -for international Intellectual property pro- Iectual property laws andtection, and consequently it might be more practices, such as registra-

e f fec t ive in conv inc ing o ther nat ions to tion and deposit

enact legal and enforcement measures forIntellectual property protection and to ratifyIn ternat iona l in te l lec tua l proper ty agree-men ts

U.S. might have more political strength fromwhich to Influence International Intellectualproper ty po l icy deve lopment .

U.S. would appear more genuine in its support U S would need to make eco-for international Intellectual property pro- nomic and political conces-tection, and consequently it might be more sions particularly to addresseffective in convincing other nations to the concerns of developingenact legal and enforcement measures for nationsIntellectual property protection and to ratify Requires additional fundinginternational intellectual property agree-ments

U.S. might have more political strength fromwhich to influence International Intellectualproperty policy development

U.S. might Increase its ability to Influence thenumber and subjects of studies on copy-right and new technologies undertaken bythe UCC

Prov ide o ther count r ies wi th an unders tand- Requi res add i t iona l fund inging of the importance of protecting intellec-tual property rights.

Promote in ternat iona l harmonizat ion o f na-tions’ domestic Intellectual property laws

Permit the establishment of Intellectual prop- Disrupts Integrity of traditionalerty relations with countries that are cur- system of international lntel-rently not members of any international In- Iec tua l proper ty ageements .te l lec tua l proper ty agreements

Provide leverage to induce other nations to Disrupts in tegr i ty o f t rad i t iona lenact adequate and/or enforce international system of in ternat iona lintelIectual property rights In te l lec tua l proper ty

agreements

Table 8-5.— Policy Options for Addressing International Intellectual Property Issues—Continued

Issues or stressesto be addressedPolicy action

Trade preferences contingenton nations’ laws and effortsto enforce InternationalIntellectual property rights

Examples—Where countries receive trade preferences

and/or foreign aid and do not have adequatelaws or enforcement measures for the pro-tection of Intellectual property, the UnitedStates could make the receiving of suchbenefits contingent upon the improvementof Intellectual property laws and enforce-ment efforts, as called for in the Trade andTariff Act of 1984 (Public Law 98-573) andin the Caribbean Basin Economic RecoveryAct (Public Law 98-67).

Information-based products and services

Possible positive outcomes

Provide leverage to induce other nations toenact adequate legal protection and/or en-force International Intellectual propertyrights

Possible negative outcomes

Provokes new difficulties forU.S. international political re-Iations

Trade and EconomicEnforcement

Trade sanctions againstnations which do notrespect internationalIntellectual property rights

Trade and EconomicEnforcement

Provide a retaliatory mechanism against na-tions that do not have adequate legal pro-tection and/or do not adequately enforce in-ternational intellectual property rights.

Provokes new difficulties forU.S. International political re-Iations and/or retaliationfrom other nations, particu-Iarly from developingnations

could be included in international tradeagreements that have trade sanction penal-ties already in place, such as in the GeneralAgreement on Tariffs and Trade (GATT),

Imposition of trade penalties on nations thatimport goods that infringe U.S. intellectualproperty rights, such as the penalties calledfor in the Process Patent Amendment(S.1543 and H R. 1069, 99th Congress).

Increased funding with focus on–developingcountries’ specific needs for information -based products and services, such as those

Strengthen U.S. Government-sponsored informationdistribution programs

Political Promote International political and culturalunderstanding.

Provide incentives for countries to respect in-ternational Intellectual property rights.

Requires additional funding

distibution programs sponsored by theU S information Agency (US! A), the PeaceCorps, and the Library of Congress.

Funding for developing countries specificallyearmarked for the purchase of information -based products and services.

Foreign aid to nations forpurchase of Intellectualproperty products

Political Promote International political and culturalunderstanding.

Provide incentives for countries to respect in-ternational Intellectual property rights.

Promote the development of domestic intel-lectual property industnes in other nations.

Provide a forum for better coordination amongthe governmental agencies responsible forvarious aspects of international intellectualproperty protection

Requires additional funding.

Permanent coordinating bodyfor all governmentagencies involved withintellectual property issues

Standing coordinating body that would con-sist of representatives from all agencies in-volved with Intellectual property rights Is-sues, such as the working groups of theCabinet Council on Commerce and Trade,the Trade Policy Committee, and the Inter-agency Group on Communications and In-formation Policy

Institutional Complicates decisionmakingprocess for International in-tellectual property policy bydecentralizing Individualagencies’ policymakingresponsibilities

Establishment of governmentagency for Intellectualproperty

Institutional Provide a mechanism for presenting a moreunited U.S. position on international intel.

Loss of direct access to exper-tise or Intellectual propertyprotection needed by individ-ual government agencies

Combining under the jurisdiction of one gov-ernmental agency alI of the responsibilitiesfor the administration of Intellectual prop-erty rights, includlng all International intel-lectual property policies,

Iectual property issues.Provide a mechanism to centralize expertise

on foreign policy and Intellectual propertywithin the Federal Government.


Ch. 8—Impact of New Technologies on the International Intellectual Property System ● 253—

States must recognize the trade-offs involvedin choosing one policy strategy over another,or the possibility that two policy strategiesmight conflict. Given such potential policy con-flicts, the United States will need to make fun-damental decisions about how it wishes to viewintellectual property (for example, as an itemof trade, an item to enhance its foreign diplo-matic relations, etc.) and design its overall in-ternational intellectual property policy strat-

egies accordingly. Such decisions are likely tobecome more important in light of the enhancedrole of the new technologies in economic andsocial development. Decisions about interna-tional intellectual policy, moreover, will needto be made in conjunction with many otheraspects of U.S. foreign policy—from interna-tional issues of defense, trade, and foreign aidto issues of international information and com-munication policy.

Chapter 9

Federal Role in theAdministration of Intellectual

Property Rights

— . — — — — —

Contents

P a g e

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257

Development of U.S. Intellectual Property Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258Goals for Granting Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258Federal Role in the Administration of Intellectual Property Rights . . . . . . . . . . . . . . 259Early Development of the Governmental Institutions for the Administration of

Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

Present Institutional Arrangements for the Administration of IntellectualProperty Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262

Patent and Trademark Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262Copyright Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263Copyright Royalty Tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264Other Supporting Agencies Within the Federal Government . . . . . . . . . . . . . . . . . . . . 265Federal Courts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268Non-Federal Agencies: Collecting Societies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

Emergence of New Technologies and Their Implications for the Present FederalInstitutional Arrangements for the Administration of IntellectualProperty Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271

Rapidity of and Uncertainty With Respect to, Changes in Information andCommunication Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271

Growing Demand for Nontraditional Copyright Solutions Requiring a RegulatoryApproach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272

Need for Greater Understanding of and Information About the Processes By WhichIntellectual Properties Are Created, Published, Distributed, and Used . . . . . . . . . . 273

Development of Technologies That Do Not Correspond to Traditional IntellectualProperty Categories, and the Creation of Sui Generis Intellectual PropertyLegislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274

Growing Convergence of Intellectual Property Issues With OtherInternational Issues.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275

Growing Convergence of Intellectual Property Issues With Other InformationPolicy Issues.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276

Implications for Future Institutional Arrangements for the Administration ofIntellectual Property Rights. ........, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276

No Action: Leave Major Decisions to the Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276Encourage the Use of Collecting Societies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280Strengthen and Increase the Responsibilities of Existing Agencies . . . . . . . . . . . . . . 281Establish a Central Federal Intellectual Property Agency . . . . . . . . . . . . . . . . . . . . . . 282Considerations for the Choices of Institutional Arrangements . . . . . . . . . . . . . . . . . . . 282

Chapter 9

Federal Role in the Administrationof Intellectual Property Rights

FINDINGS

Assuming that the granting of exclusiveproperty rights to individuals would automat-ically lead to the creation and public dissemi-nation of information, the Nation’s first leg-islators ascribed to government a relativelyinactive role in the intellectual property sys-tem. Accordingly, the Federal role and cor-responding institutions have evolved to performminimal regulatory functions. The system wasdesigned to be self-enforcing; the governmentinstitutions granted rights, registered works,and the individual creators and users were re-sponsible for protecting their rights and en-forcing them through the courts.

Today, however, the emergence of new in-formation and communication technologies isplacing new demands on governmental insti-tutions responsible for the administration ofintellectual property rights. The questionarises, therefore, of whether existing Federalinstitutional arrangements for the administer-ing intellectual property rights, as initially

designed, can adequately cope with new tech-nological developments and the new responsi-bilities that may be placed on them.

To manage these stresses, Congress has sev-eral options that it could pursue. These optionsrange from leaving the agencies as they existto completely restructuring them. Before con-sidering institutional arrangements for theadministration of rights, however, Congressmust first make overall decisions about the in-tellectual property system itself. Congressmust determine which goals it wishes to pro-mote, which laws and practices to establish,and how to balance competing interests in lightof the effects of new technological develop-ments. It must also determine whether the roleof government in the intellectual property sys-tem should be regulatory or nonregulatory.Only after such decisions are made, can Con-gress begin to construct institutional arrange-ments for the administration of intellectualproperty rights.

INTRODUCTION

The granting of intellectual property rightscan be viewed as a public policy tool designedto achieve policy goals. Historically, govern-ments have granted intellectual propertyrights to meet different policy goals. Suchgoals, for example, have included economic de-velopment or industrial policy, regulation oftrade, censorship, promotion of public learn-ing, and the development of a national culture.The particular role governments play in intel-lectual property systems depends to some ex-tent on the goals the policy is designed tofoster.

Early in the evolution of the United States,the Founding Fathers clearly viewed intellec-

tual property policy as a means to promote theprogress of science and the useful arts, and todisseminate such knowledge to the public,They believed, moreover, that public dissemi-nation of information would help to meet theother overriding societal needs of the time—to develop an industrial base, create a nationalliterature, and maintain the level of knowledgeamong citizens required to sustain a demo-cratic polity.

Assuming that the granting of exclusiveproperty rights to individuals would automat-ically lead to the creation and public dissemi-nation of information, the Nation’s first leg-islators ascribed to government a relatively

257


inactive role in the intellectual property sys-tem. This role corresponded to their preferencefor a free market approach, and alleviated theirfears of overly centralized government. Ac-cordingly, the Federal role and correspondinginstitutions have evolved to perform minimalregulatory functions. The system was designedto be self-enforcing; the government institu-tions granted rights, registered works, and theindividual creators and users were responsi-ble for protecting their rights and enforcingthem through the courts.

Today, however, the emergence of new in-formation and communication technologies isplacing new demands on governmental insti-tutions responsible for the administration ofintellectual property rights. In reaction to thedevelopment of new technologies, for example,policymakers have passed legislation that callsfor government to take on new or increasedresponsibilities. This raises the question, therefore, of whether existing Federal institutional

arrangements for administering intellectualproperty rights, as initially designed, can ade-quately cope with new technological develop-ments and the new responsibilities that maybe placed on them.

To examine the current Federal role in theintellectual property system and how it maychange in response to new technology, thischapter will:

1.

2.

3.

4.

describe the development of the goals andrationale for the Federal role in the intel-lectual property system and under whatconditions it worked effectively;characterize the current Federal institu-tional arrangements for dealing with in-tellectual property issues;describe how technological developmentsmay be stressing such arrangements; andexplore the implications for future institu-tional arrangements.

DEVELOPMENT OF U.S. INTELLECTUAL PROPERTY POLICY

Goals for Granting IntellectualProperty Rights

In the United States a unique set of social,political, economic, and technological factorsgave rise to a specific set of policy goals thatintellectual property rights were designed toachieve. These factors, moreover, shaped thedesign of the Federal role in the administra-tion of intellectual property rights. ’

During the early history of the UnitedStates, the Founding Fathers adhered to thebelief in the right of the individual to own prop-erty and pursue his intellectual interests.2 The

‘See ch. 2 for a discussion of how different historical circum-stances influenced governments’ use of intellectual propertyrights to achieve varying economic, political, and social goals,

‘John Locke, for example, was one of the most influentialphilosophers on the Framers of the U.S. Constitution. Lockestated, for example, that “Every man has a property in his ownperson. The labor of his body and the work of his hands we maysay are properly his." Garry Wills, Inventing America: Jeffer-son Declaration of Independence (New York: Doubleday &Co., Inc., 1978), pp. 229-239; and Bruce Bugbee, Genesis of Amer-ican Patent and Copyright Law (Washington, DC: Public Af-fairs Press, 1967), pp. 84-125.

early legislators also recognized the impor-tance of a democratic polity, which requiredpublic dissemination of knowledge to functionadequately. 3 Because the United States wasa developing country, its policy makers alsowished to stimulate industrial growth, particu-larly in light of the burgeoning industrial rev-olution taking place in England.4

The Framers of the U.S. Constitution rec-ognized that the granting of intellectual prop-erty rights was one way to achieve such basicsocial, political, and economic ideals. They be-lieved that granting these rights would pro-

‘These beliefs originated from the ideas of John Locke andJean Rousseau. See, for example, John Locke, Second Treatiseon Civil Government, 1690, and Jean Jacques Rousseau, So-cia) Contract, 1762. Gordon Wood, The Creation of the Amer-ican Republic, 1776-1787 (North Carolina: University of NorthCarolina Press, 1969), pp. 53-65; and Bruce Bugbee, The Gene-sis of American Patent and Copyright Law (Washington, DC:Public Affairs Press, 1967), pp. 84-125.

‘Hunter Dupree, Science in the Federal Government: A His-tory Policies and Activities to 1940 (Cambridge, MA: TheBelknap Press of Harvard University Press, 1957); and BruceBugbee, Genesis of American Patent and Cop~ight Law (Wash-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 toproduce and disseminate works, which wouldpromote public education and industrialgrowth. To provide an initial framework forthis policy, the Framers included the clausein the U.S. Constitution:

To promote the Progress of Science and use-ful Arts, by securing for limited Times to Au-thors and Inventors the exclusive Right totheir respective Writings and Discoveries.(Section 1, Article 8, clause 8.)5

In The Federalist, James Madison clearlyestablishes the overall purpose of grantingrights to individuals, which was the automaticpromotion of the public good:

The utility of this power will scarcely bequestioned. The copyright of authors has beensolemnly adjudged, in Great Britain, to be aright of common law. The right to useful in-ventions seems with equal reasons to belongto the inventors. The public good fully coin-cides in both cases with the claims of individ-uals. The States cannot separately make ef-fectual provision for either of the cases, andmost of them have anticipated the decision ofthis point, by laws passed by the insistenceof Congress.6

A later, more definitive interpretation of thisoverall purpose—the stimulation of the crea-tion and dissemination of information to thepublic—was stated in a legislative report onthe Copyright Act of 1909:

The Constitution does not establish copy-rights, but provides that Congress shall have

“The inten~e~ goals of this clause become very apparentwhen the original two proposals concerning intellectual prop-erty which were proposed during the Constitutional Conven-tion are examined:

Madison’s proposals envisioned a national legislature with theauthority to ‘To secure literary authors their copy rights for alimited time, To establish a University, To encourage by premi-ums and provisions, The advancement of useful knowledge anddiscoveries’; The other set of proposals was offered by CharlesPickney, and included the following contemplated powers: ‘Togrant charters of incorporation, To grant patents for useful in-ventions, To secure to Authors exclusive rights for a . cer-tain time, To establish public institutions, rewards, and immu-nities for the promotion of agriculture, commerce, trades, andmanufactures.

Bruce Bugbee, The Genesis of American Patent and CopyrightLaw (Washington, DC: Public Affairs Press, 1967), p. 126.

‘Alexander Hamilton, James Madison, and John Jay, TheFederalist Papers, No. 43 (New York: The New American Li-brary of World Literature, Inc., 1961), pp. 271-272.

the power to grant such rights if it thinks best.Not primarily for the benefit of author, but pri-marily for the benefit of the public, such rightsare given. Not that any particular class of citi-zens, however worthy, may benefit, but be-cause the policy is believed to be for the bene-fit of the great body of people, in that it willstimulate writing and invention to give somebonus to authors and inventors.’

Federal Role in the Administration ofIntellectual Property Rights

The Federal role in the administration ofrights evolved in a way that clearly reflectedthe goals of the U.S. intellectual property sys-tem. Similar to the development of the goalsof intellectual property rights, political, eco-nomic, and technological factors influenced thetype of role that Congress designed for the gov-ernment in the administration of such rights.

First, Adam Smith’s ideas of a free market,non-interventionist approach that could pro-vide economic incentives and an efficient mech-anism for markets and economic growth wereincreasingly accepted.8 Reacting against theEnglish Government which used excessive reg-ulatory controls, Americans also favored theJeffersonian notion of a government with asfew regulatory functions as possible.’ Addi-tionally, the major technology of the time, theprinting press, allowed the granting of rightsto lead automatically to the dissemination ofinformation. This was so because works hadto to be published in order to enjoy protection.Moreover, in the absence of inexpensive repro-duction technologies of today, publishers couldmore accurately estimate the returns on theirinvestments and, thus had more direct eco-nomic incentives to publish works. Rights

7House Report No. 2222, 60th Cong., 2d sess., as cited inAlan Latman and Robert German, Copyright for The Eighties(Charlottesville, VA: Michie, Bobbs-Merrill, 1981), p. 12.

“Charles Beard, An Econonu”c Interpretation of the Constrtution of the Um”ted States (New York l%= press, 1965); andAdam Smith, The Wealth of Nations, 1776 (New York: The Mod-ern Library, 1937).

‘Alexander Hamilton, James Madison, and John Jay, TheFederalist Papers, No. 39-46 (New york: The New AmericanLibrary of World Literature, Inc., 1961), pp. 240-300; and JulianBoyd (cd.), The Papers of Thomas Jefferson (Princeton, NJ:Princeton University Press, 1950).

58 – 922 :1 – 86 – 10


owners could also enforce their rights them-selves because infringements were relativelyeasy to detect.

Under these circumstances, the early legis-lators believed that the intellectual propertysystem could function adequately with mini-mal government intervention if left to its owndevices:

When printing was the only informationtechnology of any significance, eighteenth cen-tury policy makers conceived of an arrange-ment for knowledge-dissemination and com-pensation in society that was elegant in itsabsence of centralization and administration.Lawyers set up the machinery for granting ex-clusive rights to copy to those who wrote andto those who controlled the presses; AdamSmith’s “invisible hand” took care of the de-tails. As Madison noted, copyright providedan efficient means of achieving the constitu-tional goal of promoting science and the use-ful arts because it was one of the fortuitouspolicies in which the ends of the individual cit-izen and the goals of the collectivity could bemade synonymous. Copyright, in short, wasnot a bad idea at the time.10

Consequently, the legislators of the Patentand Copyright Acts of 1790 designed a rela-tively inactive role for the Federal Governmentin the intellectual property system. These Actsclearly delineated the exclusive rights to begranted and the conditions under which theywould be granted, and established the role ofgovernment as simply a register of works seek-ing protection. The acts also required creatorswho wanted to protect their works to publishthem in local newspapers. The registrationfunction, like the publication requirement,closely corresponded to the goals of intellec-tual property policy. For the repositories ofsubmitted works and the publication of thoseworks in public institutions were primarily forthe public to access and learn from, thus ful-filling the original intent of the granting intel-lectual property rights.

The institutional arrangements for register-ing works were also created by the legislation

“Nicholas Henry, Copyright, Information Technology, Pub-lic Policy (New York: Marcel Dekker, 1967), pp. 56-57.

of 1790.11 The Patent Act established a PatentBoard, which was made up of the Secretaryof State, Secretary of War, and the AttorneyGeneral. Referring to themselves collectivelyas the “Commissioners for the Promotion ofUseful Arts, ” the members of the board wereempowered to issue a patent for any device orprocess “if they shall deem the invention suffi-ciently useful or important. The statute alsoestablished a Register of Patents, to be keptby the Secretary of State.12 The Copyright Actrequired the local District Courts (nearest towhere the person seeking protection lived) andthe Secretary of State to register and serveas depositories of creative works.13 And thecourts, of course, served to interpret any prob-lems rights owners or users might have enforc-ing their rights.14

Early Development of the GovernmentalInstitutions for the Administration of

Intellectual Property Rights

Since 1790, several factors have affected theevolution of the governmental institutions setup to administer intellectual property rights.These include the increasing number of crea-

— —“Before such institutional arrangements were established,

Congress was responsible for granting both copyrights and pa-tents on a case-by-case basis. Increases in numbers of creatorsseeking protection for their works was a major impetus for Con-gress to establish institutions to register and deposit works.

‘iBruce Bugbee, Genesis of Patent and Copyright Law(Washington, DC: Public Affairs Press, 1967), p. 149.

“’’The copyright law of 1790 stated that an author desiringprotection thereunder was to deposit a copy of his work withthe clerk of the District Court where he lived, but he was alsorequired to send a second copy of his production to the LT. S.Secretary of State within six months. The clerk of the DistrictCourt was to record this work according to a detailed formprescribed in the statute, and could charge a sixty-cent fee forthis service. Duplicates under seal could be issued at sixty centseach, and the grantee was required to publish, within twomonths, a copy thereof in at least one newspaper for a four weekperiod–an interesting carry over of a feature which the Senatehad dropped from the general patent bill prior to its passage.Bruce Bugbee, The Genesis of Patent and Cop~”ght Law (Wash-ington, DC: Public Affairs Press, 1967), p. 147.

14, ,. . The courts at the beginning construed the Act (the

Copj’right Act of 1790] very strictly and hence the author wasobliged to proceed with the utmost caution along the tortuouscopyright route lest any slip prove his undoing. ” Alan Latmanand Robert German, Copyright for The Eighties (Charlottes-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 thegrowing number of types of works that Con-gress has included as protectable subject mat-ter under intellectual property law.

In response to such changes, Congress has,over time, transformed the original institutionsinto larger, more distinct governmental agen-cies with increased responsibilities, admin-istrative or otherwise. In spite of these modifi-cations, these government agencies responsiblefor intellectual property rights have remainedlargely nonregulatory, their role being to reg-ister and deposit works, and to disseminateknowledge to the public.

Copyrights

Like the patent system, the copyright sys-tem of 1790 was amended soon after its crea-tion. The major change expanded the types ofsubject matter to be protected under U.S. copy-right law. Such expansion of the law to covernew types of works added increasing respon-sibilities to the Federal institutions which reg-istered works.15

Reflecting such increases, the Federal copy-right institutions grew in size and administra-tive functions. In 1859, the responsibility ofregistering works was transferred to the De-partment of the Interior. Then in 1870, whenCongress was enacting patent legislation, itundertook a major reform of the copyright sys-tem. Congress assigned the registering ofcopyrights and the depositing of works to theLibrary of Congress, which had been estab-lished in 1800. Under this statute, the Librar-ian of Congress received and maintained allcopyright records and deposit copies, whichthe District Courts had held under the old, de-centralized system. In 1897, a separate Copy-right Office was established within the Libraryof Congress, where it remains today. Much like

“Over time, legal protection, for example, has been ex-tended to include: designs, engravings, and etchings (1802); mu-sical compositions (183 1); dramatic compositions (1856); pho-tographs and negatives (1865); statues and models (1870); allwritings of an author (1909); motion pictures (1912); soundrecordings (1972); original works of authorship (1976); computersoftware (1980); and mask works (sui generis protection) for semi-conductor chips (1984).

the changes made in the patent system, thetransfer of the registration and deposit func-tion to a centralized library clearly reflectedthe wish to promote public dissemination ofintellectual creations.16

Patents

A few years after the Patent Board was es-tablished in 1790, the large numbers of pat-ent applications became too time-consumingfor the board members whose primary respon-sibilities were as members in the Cabinet.17 Toremedy this situation, Congress, in 1789,dropped the requirement that inventions besufficiently useful or important to receive a pat-ent, and replaced the examination process per-formed by the Cabinet members with simpleregistration. In 1802, Congress enacted legis-lation that created a Patent Office as a distinctdivision within the Department of State.18

Dissatisfaction with this process and the in-creasing number of applications for patents ledto legislation in 1836 that enlarged and ele-vated the status of the Patent Office to a sep-arate bureau within the Department of State.The statute also authorized the President toappoint a Commissioner of Patents, who inturn was to appoint a full-time staff of ex-aminers and other clerks and assistants. It alsoreinstated the process of examining patent ap-plications for novelty, utility, and invention.As under the laws of 1790 and 1793, applica-tions were to be submitted with specifications,drawings, and when necessary, models. Thestatute further directed the Commissioner todisplay the models in a gallery open to the pub-lic, thus further promoting the public dissem-ination of knowledge.

— —“’The Thomas Jefferson Building of the Library of Con-

gress, for example, was established by the Copyright Act of1870 to house the growing collections that were being acquiredas a result of the copyright deposit system.

“For example, under the Patent Act of 1790, approximately57 patents were granted: 3 in 1790,33 in 1791, 11 in 1792, and10 in the early weeks of 1793. Bruce Bugbee, Genesis of Ameri-can Patent and Copyright Law (Washington, DC: Public Af-fairs Press, 1967), p. 149.

‘“Bruce Bugbee, Genesis of American Patent and Cop~ightLaw (Washington, DC: Public Affairs Press, 1967), p. 150.


In 1849, the Patent Office was transferred nally, in 1925, the Patent Office was placedto 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 totional 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 THEADMINISTRATION OF INTELLECTUAL PROPERTY RIGHTS

Although the U.S. intellectual property lawshave been revised many times since 1790, thebasic institutional arrangements have, withminor changes, remained intact—performingminimal, indirect regulatory functions. Theseinstitutions administer basic laws, register anddeposit works, and provide support services.20

They have, moreover, shown a remarkable re-siliency to technological change, thus far.

In adjusting to technological development,many of the institutions have undergone sim-ilar changes. First, each of the institutions hasincreased in size, reflecting the growing num-ber and types of works to be protected. Sec-ond, each has begun to use information tech-nologies to perform more efficiently. Third, to

‘“Donald Curran, Acting Register of Copyrights, for exam-ple, speaking before the Patent, Trademark, and Copyright Sec-tion of the American Bar Association, said that “the FederalGovernment does not now in any but the most tangential way‘‘regulate’ the copyright industries. . . ‘‘ Information Hotline,vol. 17, No. 10, November 1985, p. 4.

Regulation can be defined as:Federal laws or rules which impose government standards and

significant economic responsibilities on individuals or organiza-tions outside the Federal establishment. . . Regulation is car-ried out by Federal agencies through such means as setting orapproving prices, rates or fares, profits, interest rates, and wages;awarding licenses, frachises, certificates, and permits; or estab-lishing and enforcing standards of behavior such as worker safetyrules, air quality levels, public disclosure of financial informa-tion, or prohibitions of price, racial, religious, or sexual discrimin-ation.

Although almost all government activities involve a rule or aregulation, there are varying degrees of regulation. The admin-istration of intellectual property rights, for example, relies onthe law to define property rights and lets those who possessthem negotiate their value either in the marketplace or in a pri-vate, decentralized fashion. A more regulatory approach wouldrely on public authorities to directly determine and allocate thevalue of intellectual property. Domestic Council Review Groupon Regulatory Reform, “The Challenge of Regulatory Reform:A Report to the President” (Washington, DC, 1977), p. 47.

deal more effectively with the growing inter-nationalization of intellectual property issues,all of the institutions individually and jointly,have increased their international activities.Fourth, in reaction to the increasing complex-ity of new technologies (particularly cable) thathave given rise to new stakeholders, a newagency has been established that departs fromthe traditional role of government regardingintellectual property rights.21 And finally, thecourts have become increasingly burdenedwith cases involving more complex technicalissues. A brief characterization of the principalinstitutional actors involved with the admin-istration of property rights and some of thecurrent issues they face are provided below.

Patent and Trademark Office

The U.S. Patent and Trademark Office (PTO)is located within the Department of Commerce.Similar to the Copyright Office, PTO has nojurisdiction over questions relating to enforce-ment of patents, nor over matters that con-cern the promotion or the utilization of patents.PTO's major function is to administer the pat-ent laws as they relate to the granting of pa-tents. It examines applications for patents to

— —“The functions have become more regulatory in the sense

that the government is actively deciding the value of royaltiesfor intellectual works. The first time that an exception was madeto the traditional copyright approach was in the Copyright Actof 1909 which required copyright proprietors of musical worksto license their use in mechanical recordings for a royalty of2 cents. Since 1909, three other exceptions have been made forcable retransrnissions, musical recordings used in juke boxes,and noncommercial broadcasters use of music and other crea-tive works.

. —— -——

Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 2 6 3

ascertain whether the applicants are entitledto patents under the law and grants the pa-tents when they are so entitled. PTO alsoadministers the trademark laws and reviewstrademark applications to determine whetherthey meet statutory criteria for registration.22

Furthering the goal of increasing public ac-cess to knowledge, PTO also publishes issuedpatents and various publications about patentsand patent laws. It also maintains public searchrooms for the public to use to examine issuedpatents and records and supplies copies ofrecords and other papers on demand.

In addition to the examining groups, PTO hasa number of sections, divisions, and branchesthat perform various other services, such asreceiving and distributing mail, receiving newapplications, handling sales of printed copiesof patents, copying of records, inspecting draw-ings, and recording assignments.23

PTO has grown tremendously since it wasfirst established. At present, it has approxi-mately 3,100 employees, of whom about halfare examiners and technical and legal staff.over 100,000 patent applications are receivedannually. Because of the large number of ap-plications, there is a 25-month backlog of440,000 cases. To remedy this situation, PTOis in the process of automating its search files.The goal is to complete automation by the early1990s.24

Copyright Office

The U.S. Copyright Office is located in theLibrary of Congress. As noted earlier, its loca-tion is important to both the Library and theCopyright Office, representing a symbioticrelationship between the two. The Copyright

—. —“’U.S. Department of Commerce, Patent and Trademark Of-

fice, “General Information Concerning Patents: A Brief intro-duction to Patent Matters’ [ Washington, DC: U.S. GovernmentPrinting Officer 1984), p. 5.

“U.S. Department of Commerce, Patent and Trademark Of-fice, “General Information Concerning Patents: A Brief intro-duction to Patent Matters” (Washington, DC: U.S. GovernmentPrinting Office, 1984), p. 5.

“Discussion with Donald Quigg, Acting Commissioner ofPatents, March 1985.

.

Office, through its deposit requirement, col-lects copies of all the works it receives whichit then makes available to the Library of Con-gress’ collections. This function, sometimes re-ferred to as “America’s cultural policy, ” hasbeen critical in developing the Nation’s store-house of intellectual material.25 The Libraryof Congress in turn supplies the Copyright Of-fice with administrative support. This coop-erative arrangement has existed for over 150years and helps to accomplish a major goal ofintellectual property protection—the dissem-ination of knowledge to the public.26

The divisions of the Copyright Office areorganized by function. In addition to theRegister’s Office, there are six operational di-visions:

1.

2.

3.

4.

5.

6.

the Acquisitions and Processing Division—which performs the general housekeep-ing and accounting work of the office andthe enforcement of the mandatory depositprovisions of the copyright law;the Examining Division—which deter-mines whether the requirements of the lawhave been met for materials submitted forregistration;the Cataloging Division—which catalogsall copyright registrations and recordeddocuments;the Information and Reference Division—which provides the public with generalinformation on copyright, conducts searchesfor the public in the Copyright Office cat-alogs, and produces on request certifiedcopies of office records;the Records Management Division—which maintains the records of the Copy-right Office; andthe Licensing Division—which deals withpayments made to the office under thecompulsory licensing provisions of the law

‘r’ Discussion with Donald Curran, Acting Register of Copy-rights, March 1985.

‘hFor an interesting discussion of the relationship betweenthe Copyright Office and the Library of Congress, see DonaldCurran,-’’The Copyright Office and the Library of Congress, ”remarks of Donald Curran, acting Register of Copyrights tothe American Bar Association, Section Patent, Trademark, andCopyright Law, Washington, DC, July 9, 1985.


that relate to coin-operated phonorecordplayers (jukeboxes) and cable systems.27

The number and types of works registeredhave grown enormously since the CopyrightOffice was established. For example, between1790 and 1869 a total of 150,000 works wereregistered. Today, approximately 500,000works are registered annually with the Copy-right Office. 28 The staff of the Office has grownto 561 with an annual budget of $16.2 million.29

In addition to expanding its organization withincreased registrations, the Copyright Officehas recently begun to use information technol-ogies to automate many of its functions. Thishas greatly improved its efficiency, particu-larly in the registration process.

Copyright Royalty Tribunal

The Copyright Royalty Tribunal (CRT) is themost recently established government agencythat deals with intellectual property rights. Itwas established by the 1976 Copyright Act asan independent agency within the legislativebranch. CRT was created to administer sev-eral compulsory licenses that Congress, partlyin response to new technological developments,also set forth in the 1976 act. A compulsorylicense permits the use of copyrighted mate-rial under certain circumstances without thepermission of the copyright owner, provideda government-set payment is made to the copy-right owner. Such licenses are:

●

●

●

retransmissions by cable systems of dis-tant broadcast signals by television andradio stations;the use of musical records in jukeboxesfor profit;the use of music and certain other crea-tions by noncommercial broadcasters; and

“’’86th Annual Report of The Register of Copyrights,1983” (Washington, DC: Library of Congress. 1984), p. 1.

“’86th Annual Report of the Register of Copyrights, 1983”(Washington, DC: Library of Congress. 1984), pp. 32, 34.

“Appendix to the Budget of the United States Governmentfor Fiscal Year 1986.

Ž the use of music on phonorecords.30

CRT has six responsibilities for the admin-istration of the four compulsory licenses:

1..

2.

3.

4.

5.

6.

adjust the compulsory license rate for re-transmission by cable systems of distant,non-network broadcasts by televisionstations;determine the distribution of fees de-posited with the government by cablesystems;determine the compulsory license paid tothe Register of Copyrights for the per-formance of non-dramatic musical compo-sitions by jukebox owners;determine the distribution of fees depos-ited with the government by jukeboxowners;adjust the mechanical compulsory licenserate on the sale of non-dramatic musicalworks embodied in phonorecords (thesefees are paid to copyright owners withoutgovernment involvement, via the HarryFox Agency); anddetermine reasonable terms and rates forpublic broadcasting entities’ use of musi-cal, pictorial, graphic, and sculpturalworks (these fees are paid without govern-ment involvement) .31

Five appointed commissioners are respon-sible for holding hearings to determine ratesand distribute royalties.

Because CRT performs functions that aremuch more regulatory in nature—that is, itsrulemaking proceedings to set royalty ratesand its adjudication function which entails dis-tribution of collected royalties to claimants-itdiverges sharply from the traditional role of

— . — -“Statement of Wilbur Campbell, Deputy Director, Account-

ing and Financial Management Division, General Accountingoffice before the Subcommittee on Courts, Civil Liberties, andthe Administration of Justice, Committee on the Judiciary, U.S.House of Representatives, “The Operation of the CopyrightRoyalty Tribunal, ” June 11, 1981, p. 3.

31 Statement of Wilbur Campbell, Deputy Director, Account-ing and Financial Management Division, General AccountingOffice before the Subcommittee on Courts, Civil Liberties, andthe Administration of Justice, Committee on the Judiciary, U.S.House of Representatives, “The Operation of the CopyrightRoyalty Tribunal, ” June 11, 1981, p. 4.

Ch. 9—Federal Role in the Administration of Intellectual Property Rights ● 265.—

the Federal Government in the administrationof intellectual property rights. For this reason,CRT has recently run into some sharp criti-cisms. 32

Other Supporting Agencies Withinthe Federal Government

Department o f Commerce

Four offices and agencies within the Depart-ment of Commerce support intellectual prop-erty activities in various ways. The growingneed for support reflects the increasingly com-plex technical, political, and economic dimen-sions of intellectual property rights issuesbrought about by technological development.Such support draws on the industrial, techni-cal, and scientific expertise of the followingagencies.

International Trade Administration. The In-ternational Trade Administration (ITA) wasestablished by the Secretary to strengthen theU.S. international trade and investment posi-tion. ITA provides counseling to members ofthe business community on export opportuni-ties and problems. ITA offices abroad help toidentify potential markets. A recent reorga-nization along lines proposed by the GraceCommission has brought together industrialspecialists in such areas as computers andtelecommunications with trade promotionstaff to bring more specialized knowledge totrade negotiations.33 ITA administers the Ex-port Administration Act to ensure that exportactivity is consistent with national securityand foreign policy objectives. A current pri-ority is prevention of the illegal transfer of tech-nology. Control of technical data poses enforce-ment problems because such intangibles asconsulting arrangements and training of for-eign nationals are covered. In issuing exportlicenses, clearances are routinely required fromthe Departments of State and Defense.

—.“See for example, hearings held before the Subcommittee

on Courts, Civil Liberties, and the Administration of Justice,Committee on the Judiciary, U.S. House of Representatives,‘(The Copyright Royalty Tribunal, ” July 11, 1985.

“President’s Private Sector Survey on Cost Control, “Re-port on the Department of Commerce” (Washington, DC: U.S.Government Printing Office, 1983), p. 24.

National Telecommunications and Informa-tion Administration. NTIA is the executivebranch agency principally responsible for thedevelopment of domestic and internationaltelecommunication and information policy.The agency also manages the various govern-ment agencies’ use of the electromagnetic spec-trum and has research laboratories for techni-cal support. Because of the close relationshipbetween telecommunications and intellectualproperty and its role in developing informa-tion policy, NTIA participates in U.S. Govern-ment delegations to international intellectualproperty negotiations. NTIA also makes rec-ommendations on legislative and regulatoryissues regarding intellectual property and com-munication issues.

National Technical Information Service. NTISserves as a government clearinghouse for tech-nical information. NTIS issues notices to thepublic that a government agency has appliedfor a patent. Private organizations and indi-viduals can then determine whether to applyfor a license.

NTIS acts as an agent in support of the pat-ent process for nine departments and agencies.These are the Departments of Commerce,Health and Human Services, Interior, Agri-culture, Army, Air Force, Transportation, Vet-erans Administration, and the EnvironmentalProtection Agency. NTIS makes special pro-motional efforts to encourage licensing andalso licenses those agencies’ patents.

Office for Productivity, Technology, and In-novation. OPTI, headed by an Assistant Sec-retary of Commerce, was created to developmeasures to improve the competitive positionof the United States in world markets. The pas-sage of legislation (Public Law 96-517) in 1980provided nonprofit organizations and smallbusinesses with the first right of refusal to ti-tle in inventions made under government con-tracts and grants. Authority to implement thispolicy was transferred to OPTI from the Of-fice of Federal Procurement Policy of the Of-fice of Management and Budget by Public Law98-620. A Presidential memorandum issued in1983 directed agencies to permit all contrac-tors and grantees to take title in inventions


to the extent permitted by law. Implementa-tion of this directive is monitored by OPTI,which works with agencies in preparing pro-curement regulations. OPTI is also develop-ing policy to cover the ownership and the useof technical data arising from federally sup-ported research and development. This is ahighly controversial area with little precedentfor guidance.

Department of Justice

The Antitrust Division of the Departmentof Justice includes an intellectual propertysection that monitors the interface between an-titrust and intellectual property matters. Thesection helps develop legislation with poten-tial antitrust implications, such as the recentlypassed National Cooperative Research Act,which removes certain antitrust barriers to co-operative R&D. It also provides the Adminis-tration’s position on intellectual property mat-ters to other regulatory agencies, and presentsthe Administration’s opinion to the courts, ifrequested in a pending case.

The Department of Justice also representsthe Patent and Trademark Office in civil caseswhen, for example, it is alleged that the agencyacted improperly in approving or refusing apatent application. It also represents the Copy-right Office in similar circumstances.

Department of State

The Department of State’s international ac-tivities in the protection of intellectual prop-erty are carried out through its Office ofBusiness Practices. The Department of Statecoordinates U.S. participation in the interna-tional intellectual property treaties to whichthe United States is a party, such as the Con-vention for the Protection of Industrial Prop-erty and the Universal Copyright Convention.Within the Federal Government, the Depart-ment of State initiates or participates in theapproval of papers circulated among agenciesto achieve coordinated positions in multilateraland bilateral negotiations on intellectual prop-erty issues. To elicit industry viewpoints, theDepartment of State has created an Advisory

CommitteeProperty.

on International Intellectual

Office of the U.S. Trade RepresentativeThe Office of the U.S. Trade Representative

(USTR), created by statute in 1975 in the Ex-ecutive Office of the President, is responsiblefor setting and administering trade policy.USTR also administers part of the Trade andTariff Act of 1984, which refers specifically tothe protection of intellectual property. Underthis act, the President is authorized to deter-mine which developing countries may exportgoods to this country duty free, on the basisof each country’s efforts to protect U.S. intel-lectual property products as well as other cri-teria. USTR is also responsible for issuing astatutorily required annual report to Congresson trade problems, including a report on na-tions that are not respecting U.S. intellectualproperty rights.

International Trade Commission

The International Trade Commission (ITC)is an independent quasi-judicial agency thatdetermines whether unfair acts related to im-ports harm U.S. industries. Investigationsoften involve allegations of patent, trademark,or copyright infringement. The intellectualproperty owner or licensee usually initiates ac-tion by making a complaint to ITC. ITC maythen conduct hearings before an administra-tive law judge. A final decision is rendered bythe Commissioners. The agency is authorizedto issue orders excluding goods from entryand/or cease-and-desist orders. Exclusion ordersare enforced by the Bureau of Customs. ITCworks closely with the Department of Com-merce’s International Trade Administration,which maintains information on industries thatmight be harmed by unfair trade practices.

Policy Coordination

Reflecting the growing number of economic,political, social, and international factors sur-rounding intellectual property issues, variousFederal agencies have recently begun to coordi-nate their efforts to deal with these multi-faceted questions. Responsibility for policy co-


ordination on intellectual property is mainlyvested in four interagency coremittees that aredescribed below.

Cabinet Council on Commerce and Trade. TheCabinet Council on Commerce and Trade ischaired by the Secretary of Commerce, whohas appointed the Commissioner of Patentsand Trademarks as Chairman of its WorkingGroup on Intellectual Property. The basic taskof the Working Group is to coordinate the po-sitions of Federal agencies, especially in devel-oping U.S. positions in foreign negotiations.Seven agencies of the executive branch are rep-resented on the working group. The CopyrightOffice representative also participates in themeetings.

The working group is concerned with bothinternational and domestic issues that requirea unified government position. These have in-cluded:

1. obtaining a coordinated position for theBrussels Satellite Convention, which wassubsequently ratified;

2. proposing controls for imports from thirdparties that do not respect U.S. trade-marks;

3. recommending changes in the Freedom ofInformation Act to protect trade secrets;

4. coordinating agencies’ positions on the re-cently passed semiconductor chip legis-lation; and

5. assessing needed changes in the “firstsale” doctrine.

Trade Policy Committee. The Trade PolicyCommittee is chaired by the U.S. Trade Rep-resentative and has a subcommittee on intel-lectual property chaired by USTR. In compli-ance with the Trade and Tariff Act of 1984,it examines international protection of intel-lectual property as a trade barrier. In tradematters, the committee’s focus is on bilateralnegotiations. Seven executive branch agenciesare members of the subcommittee.

The subcommittee facilitates cooperationamong agencies in carrying out responsibili-ties assigned to USTR under the recent legis-lation. These include:

1.

2.

3.

4.

identifying the kinds of trade barriersthat result from protection of intellectualproperty;identifying the policies and practices ofindividual countries that cause seriousproblems in the United States;compiling information in support of bi-lateral negotiations; andpreparing the annual report to Congressthat highlights problem areas and U.S. ef-forts underway to improve them.

Senior Interagency Group on Communicationand Information Policy. The Senior InteragencyGroup on Communication and InformationPolicy was created in 1980 and is co-chairedby representatives from the Departments ofState and Commerce. Its Working Group onCopyright and Intellectual Property, which in-cludes representatives from nine governmentagencies, is chaired by a representative of theDepartment of Commerce’s National Telecom-munications and Information Administration.

The task of this working group is to coordi-nate and exchange information on each of theagency’s efforts to improve international pro-tection for U.S. intellectual property rights.The working group has recently been workingto ensure that U.S. programmers receive re-muneration for the cable retransmissions oftheir material by Canadians and Mexicans. Aseparate Working Group on Transborder DataFlow, chaired by a representative from the De-partment of State, coordinates U.S. positionsin the Organization for Economic and Commu-nity Development (OECD) Committee on In-formation, Computer, and CommunicationPolicy.

Federal Coordinating Council for Science,Engineering, and Technology. The Federal Co-ordinating Council for Science, Engineering,and Technology is chaired by the director ofthe Office of Science and Technology Policy(OSTP). Its Working Group on IntellectualProperty is chaired by the Assistant Secretaryof Commerce for Productivity, Technology,and Innovation. This group addresses issuesthat arise in the process of carrying out legis-lative and administration policy on the owner-


ship of intellectual property created duringgovernment-sponsored research and develop-ment. Nineteen agencies are represented on theworking group.

This working group is used by the AssistantSecretary to help coordinate the execution ofresponsibilities assigned to Commerce by Pub-lic Law 98-620. Guidance is provided to agen-cies that are drafting Federal AcquisitionRegulations that authorize vesting title to in-tellectual property in small businesses and non-profit organizations performing research anddevelopment for the government. Similar ef-forts are underway pursuant to the Presiden-tial directive that encourages all governmentcontractors and grantees to take title to theextent permitted by law. The working groupis drafting guidelines for the disposal of tech-nical data arising from government-supportedresearch and development, and is preparingmodel agreements that include provisions forintellectual property for use by governmentlaboratories undertaking cooperative effortswith private companies.

Federal Courts

From the very beginning of Federal intellec-tual property protection, courts have playeda central-albeit not highly visible—role in theimplementation of intellectual property laws.Although the availability of courts for the reso-lution of private disputes is generally takenfor granted, and not often considered part ofthe system, it is clear that access to the Fed-eral judicial system has always been a crucialelement of intellectual property policy. As fo-rums for intellectual property dispute resolu-tion, courts have: 1) developed doctrines defin-ing the scope of protections; and 2) providedofficial sanctions for misallocation of rightsand rewards under intellectual property law.

The role of the courts in resolving privatedisputes and in developing legal doctrines maybecome more central with the advent of new

information and communication technologies.34

The volume of legislation dealing with tech-nological intellectual property is growing rap-idly and is likely to be matched by an increas-ing volume of litigation.35 The economic stakesinvolved in the allocation of technological prop-erty rights by the courts are large and will as-sure the availability of extensive resources forlitigation. 36 The resulting surge of scientific andtechnological disputes into the judicial arenais likely to put substantial strain on the institu-tional resources of the judiciary and to raisequestions about judicial expertise in resolving

34Judicial decisions on the allocation of proprietary rights innew information technologies and on access to new forms ofcommunications occupy position of singular importance. WhatJustice Cardozo said about the’’ preferred position’ of the FirstAmendment–’’that it is the matrix, the indispensable condi-tion, of nearly every other form of freedom’ ‘–may well be saidabout access to information and the means of its communica-tion. At a time when the dimensions of advance in these tech-nologies are seen as equal in importance to the advent of theindustrial revolution and when the potential for the monopoli-zation of control they embody surpasses anything organizedsocieties have known so far, the power of courts to demarcaterights of ownership in and access to knowledge is the powerto decide whether or not the new information and communica-tion technologies will be used to increase the public dissemina-tion of information. The shortcomings of intellectual propertyrights adjudication must be seen against that challenge. SeePalko v. Connecticut, 302 U.S. 319 (1937).

“l~or a comprehensive list of legislation in the 98th Con-gress dealing with various aspects of the new information tech-nology, see Report, 8th Amual Copyright Law Conference, Mar.7, 1!385, Washington, DC. The volume of litigation over ques-tions of copyrightability has increased dramatically. Althoughthe available data on copyright litigation does not distinguishbetween traditional copyright disputes and those involving newtechnologies, the number of copyright cases filed in Federalcourts increased from 899 in 1976 to 2,226 in 1983. Annual Re-port of the Director of the Administrative Office of the UnitedStates Courts, 1984.

‘In 1982, an estimated 2.8 million personal computers weresold in the United States. Another 5 million, for a total of morethan $24 billion in sales, were expected to be sold in 1983, Bythe end of the century 80 million personal computers will bein use. Estimates of total software revenues for 1982 run ashigh as $45 billion, by 1987 packaged personal computer soft-ware sales alone are expected to reach $4.8 billion. In 1984, grossrevenues from the sale or license of computerized databases sur-passed $3 billion. Pamela %rnuelson, “CC)NTU Revisited: TheCase Against Copyright Protection for Computer Programs inMachine Readable Form,” Duke Law Journal, No. 4, 1984, pp.705-712.

Ch. 9—Federal Role in the Administration of Intellectual Property Rights c 269

novel and ever more complex scientific and eco-nomic issues raised by the regulation of newintellectual property .37

Non-Federal Agencies:Collecting Societies

Traditionally, many copyright owners havelicensed use of their literary, dramatic, musi-cal, and artistic works, as well as other formsof intellectual property, on the basis of trans-action contracts worked out between individ-uals. The introduction of commercial broad-casting technologies, beginning in the 1920s,gave copyright owners new opportunities forpresenting their works and new difficulties incollecting fees for use. Copyright owners havefound it increasingly difficult to control oradminister their rights on a case-by-case ba-sis. Users also have faced difficulties in iden-tifying and remunerating creators of works.As described below, these problems providedsignificant pressure for the establishment ofsystems of administering rights on an ag-gregate basis through collecting societies.

Music

The use of a collective system of adminis-tering intellectual property rights in the mu-sic industry was prompted by two events.First, the 1909 revision of the Copyright Actextended to the owners of music copyrightsthe exclusive right to authorize the public, for-profit performance of their works. Soon after,radio extended once-local performances to amuch larger audience. Film and television fol-lowed, bringing further increases in the scaleand scope of public musical performances.

——-—.— ——‘“The practical value of the categorical copyright protection

for computer software, for example, will be determined largelyby judicial decisions on the copyrightability of particular formsand types of programs and by judicial definition of the scopeof the protections that will be accorded by software copyright.

What copyright owners lacked in the faceof these new opportunities for performance andprofit was an efficient mechanism for collect-ing the money to which the law entitled them.To setup such a system, a group of prominentcomposers formed the American Society forComposers, Authors, and Publishers (ASCAP).Established to collectively license use of mu-sical works and to monitor performances andinfringements of the law, ASCAP was success-ful in lowering the cost and simplifying theprocess of licensing transactions.

A second, much smaller, collecting societywas founded in 1930 by Paul Heinecke. Calledthe Society of European Stage Authors(SE SAC), the organization’s membership wasmade up mostly of Europeans. Today, SE SAChas a large repertoire of American music.

In 1940, a dispute between ASCAP and agroup of broadcasters produced the third mu-sic collecting society, Broadcast Music Inc.(BMI). The broadcasters charged that ASCAP’slicensing fees were too high, and so split offto form their own society. BMI supplied itsmember broadcasters with music from sourcesnot controlled by ASCAP. Although the broad-casters resolved their dispute with ASCAP in1941, BMI continued to operate and is still amajor competitor to ASCAP.

Print

In pr int publ ishing, the pressure for a co l -lect ive approach began to bui ld in the 1950s ,when authors and publ ishers saw a threat totheir t radi t ional sources o f income from pho-t o c o p y i n g t e c h n o l o g i e s . M i c r o g r a p h y w a s t h ef i rst such technology , and i t was fo l lowed inthe 1960s by advances in photocopying tech-n i q u e s a n d m e c h a n i c a l p a p e r - h a n d l i n g c a -p a c i t y .

During the process of revising the Copyright

Act , Congress suggested that publ ishers andauthors might set up a cooperative mechanismfor co l lect ing and d isburs ing revenues . Upon


passage of the 1976 act, a group of publishingand other associations formed the CopyrightClearance Center (CCC). Established in 1977,CCC was designed to monitor and collect fromconsumers who want to photocopy copyrightedworks and to distribute revenues to the copy-right holders.

Film

With the introduction of cable and satellitetransmission, the film industry followed theexample of the music and publishing industriesand set up a collecting society. Before thattime, the reproduction of film prints was ex-pensive, and profitable exhibition was gener-ally visible, so illicit use was easily discouraged.But with satellite and cable, the film industryfaced greater difficulties, particularly in for-eign countries, in collecting fees for use of theirworks.

In response to these new technologies, aninternational collecting society called L’Associ-ation de Gestion International Des OeuvresAudio-Visuelles (AGICOA) was organized in1982. The society was founded to negotiate useof films between national collecting societiesand copyright holders, to monitor the use offilms, to collect royalties from those who usethem, and to distribute royalties to copyrightholders around the world.

Collecting Societies in Practice

Generally speaking, the main purpose of col-lecting societies has been to alleviate the prob-lems of administering individual propertyrights by setting up a central clearinghousemechanism. Easing the cost and complexityof licensing is also important; users can obtaina blanket license to use any of the registeredworks.38 Collecting societies, moreover, at-tempt to serve as forums for negotiations be-tween the various interested parties and tryto educate the general public about intellec-tual property protection.

‘“In some cases, however, users prefer to pay on a per-usebasis. ASCAP, BMI, and the CCC each offer these types of trans-actional licenses. AGICOA generally operates on a pay-per-usebasis.

To accomplish these objectives, each collect-ing society performs similar functions. For ex-ample, each has a department responsible forlicensing users of copyrighted works. They tryto identify new users and see that both newand established users are properly licensed andpay the required fees. Their responsibilitiesalso include convincing users that they mustin fact pay user fees; this is sometimes diffi-cult. In some cases, some collecting societieshave resorted to lawsuits to exact payment andenforce licensing terms.39 Although the blan-ket license entitles users to access to all of thesociety’s works, the fees charged vary accord-ing to particular classes of use.40 The negotia-tion of fees is conducted with various indus-try groups, such as the American Hotel andMotel Association, the National Associationof Broadcasters, the Association of AmericanPublishers, and the Authors League of Amer-ica. Each collecting society has some mecha-nism for adjudicating disputes in cases whereusers feel the fees are too high.

In addition to maintaining lists of licensees,the collecting societies have departments thatare responsible for recording and updating thelist of works registered with the society. Mostof the collecting societies maintain these filesin an electronically accessible database. Thestaff members in this section also respond toinquiries from the public, users, or rightsholders.

Because it would be uneconomical to log andmonitor every use of every registered work,collecting societies generally rely on sample

“ASCAP brings, for example, approximately 400 to 500such infringement actions every year. Over 99 percent of thesecases are settled before trial.

‘“The musical performance rights societies, for example, usedifferent methods but similar criteria for deterrnininguser licensefees. The criteria for broadcast users include, for example, ad-vertising revenues and the size of their markets. For nonbroad-cast users such as “general establishments, ” the societies usefactors such as the price of a drink, seating capacity, the fre-quency of music performances, and the type of rendition. Hoteland motel fees take into account total entertainment expendi-tures; concert rates depend on admission price and seating ca-pacity; background music users such as Muzak pay a fee basedprimarily on the number and character of subscribers.

.—


surveys of use for determining the distribu-tion of revenues to their creator and publishermembers.’ ] The exact distribution of revenuesto individual rights owners is calculated by for-mula.42

“’This is usually performed in a special survey department.Although the music collecting societies and the CCC andAG ICOA all use different survey methods, the ot’erall intentof the survey is similar. Upon receipt of the survey data, thesocieties identify writers and publishers of the registered works.Some of the societies report that the use of information tech-nolo~” has greatly improved the efficiency of the survey andident}flcation process.

“In the case of the music performance societies, these cal-culations are made with weighting formulas, whereby differentuses of works earn different amounts of performance credits.For uses of printed works, the CCC uses rates determined byeach of the copyright holders for calculating its survey data.

Most of the collecting societies have sepa-rate international departments that have re-ciprocal agreements with individual collectingsocieties abroad. These agreements provide forthe exchange of revenues that foreign socie-ties collect for American societies’ registeredworks. Collecting societies also belong to therelevant international associations.

After calculating the credits, the music performance rights so-cieties divide 50 percent of their revenues among writers accord-ing to the credits they earned and 50 percent to publishers ac-cording to the credits they earned. The CCC pays all of itscollected revenues (less overhead) to its publisher members (whomay or may not have agreements to share these revenues withauthors) according to calculations made with the usage surveydata. Automated information systems have also greatly stream-lined the remuneration process.

EMERGENCE OF NEW TECHNOLOGIES AND THEIRIMPLICATIONS FOR THE PRESENT FEDERALINSTITUTIONAL ARRANGEMENTS FOR THE

ADMINISTRATION OF INTELLECTUAL PROPERTY RIGHTS

As illustrated above, the Federal institutionsestablished to administer intellectual propertyrights have shown a resilience to technologi-cal developments over time. Today, however,new information and communication technol-ogies are of a new order of magnitude andscope, and so are placing correspondinglygreater pressure on the entire intellectual prop-erty system. The present institutional arrange-ments were not designed to deal with the manykinds of problems generated by these technol-ogies. To explore how new technological de-velopments are affecting the viability and ef-fectiveness of the institutions now involvedwith intellectual property issues, a brief charac-terization of such developments and their po-tential institutional implications is providedbelow.

Rapidity of, and Uncertainty WithRespect to, Changes in Information

and Communication Technologies

Technological advances in, and the growingconvergence of, computer and communicationtechnologies, have combined with the deregu-

lation of the telecommunication industry, togreatly enhance the public’s access to infor-mation products and services. These same twodevelopments significantly affect the processesof creating, producing, and using intellectualproperties. As a result, they are likely to havea somewhat disruptive effect on the nature ofthe intellectual property system as it existstoday.

The unprecedented speed and unpredictabil-ity of these changes confound efforts to designlegislation that will continue to be relevant anduseful. It was for this reason, for example, thattechnological gaps soon developed in the 1976copyright law and its 1980 amendments wereenacted, although the law itself was specifi-cally designed to take emerging technologiesinto account. As illustrated in the case of Ap-ple Computer, Inc. v. Franklin Computer Corp.,for example, the law failed to address the im-portant question of whether copyright law ap-plied to operating code that is readable for themost part only by machine, or to informationembedded in hardware. And as the case of SonyCorp. of America v. Universal City Studios

8–92 2 “~ – 86 – 11


demonstrates, the law failed to anticipate therapid growth of the home market for videocas-sette recorders (VCR) and how this widespreaduse of VCRs might affect the intellectual prop-erty rights of the film industry. It is not sur-prising, therefore, the past few years havebrought greater demands on the courts andmany more bills related to intellectual prop-erty which seek to accommodate legislationwith changing technologies.

Given the rapidity of, and uncertainty withrespect to, changes in information and com-munication technologies and their impact onthe intellectual property system, the questionarises as to whether the existing institutionsthat were established to address intellectualproperty issues are either equipped with or arecapable of developing an ongoing process toassess and plan for technological change.

Growing Demand for NontraditionalCopyright Solutions Requiring a

Regulatory Approach

The rapid development of information andcommunication technologies, combined withgreater public access to them, has strainedmany of the traditional mechanisms for pro-tecting intellectual properties. This growth anddevelopment has also stressed the system bywhich creators, producers, and distributors ofintellectual properties are remunerated. For ex-ample, because many of these technologies per-mit decentralized access and require electronichandling of information, their use can be car-ried out privately and is, therefore, less sub-ject than in the past to monitoring and con-trol. Moreover, by generating new uses andusers of intellectual properties, these technol-ogies are convoluting the process by which in-tellectual properties are created, published, dis-tributed, and used. Similarly, they are alteringsome of the traditional roles, and relationshipsof actors in the intellectual property system.As a result, many of those involved are seek-ing new kinds of rights and forms of remuner-

ation.43 Directors, for example, are looking forways to receive property rights protection fortheir individual contribution to stage and filmproduction. 44 The Motion Picture Associationof America, moreover, is seeking the right tobe paid a fee by owners of satellite dishes whoreceive transmitted broadcasts.45

To overcome some enforcement problemsgenerated by the new technologies and takeinto account the new kinds of claims for rights,a number of laws and bills have been enactedor introduced that depart from the traditionalintellectual property scheme and require sig-nificant government involvement for their im-plementation. Under a compulsory licensingscheme, for example, Section 116 of the 1976Copyright Act requires jukebox operators topay royalties to the copyright owners of non-dramatic works. To execute this requirement,the law obliges the Copyright Office to regis-ter and license operators of jukeboxes and theCopyright Royalty Tribunal (which at the timewas not yet constituted) to determine whichclaim for fees are legitimate and allocate roy-alty payments equitably. Similarly, the pro-posed Home Recording Act of 1983, designedto circumvent the problems of enforcement bycompensating copyright owners with a royaltypayment, calls on the Copyright Office to ini-tiate arbitration proceedings to determine theroyalty schedule and requires the CopyrightRoyalty Tribunal to determine and allocate thefunds collected among competing claimants.

“’l’his is not the first time that technology has given rise tonew kinds of rights. Looking back at the history of intellectualpro~wrty laws and practices, one can see that, with the develop-ment of new technologies, pressure for the establishment of newkinc~s of rights emerged. Recording technology, for example,gaw: rise to the demand for a “mechanical recording right. ”Unhke traditional rights which were granted to an entire classof work, such as a book or a motion picture, these new kindsof rights were designed to remunerate the specific use to whicha w(}rk was put.

440TA Workshop, “The Impact of Technology on the Crea-tive Environment, ” Apr. 24, 1985,

“~% Public Law 94-549, Communications Act Provisionsfor Earth Stations.


With the exception of the fledgling Copy-right Royalty Tribunal, however, U.S. institu-tional arrangements for addressing intellectualproperty issues were designed, for the mostpart, to function within a free market, non-regulatory framework. To the extent that newlegislative initiatives call for a more regulatoryapproach to solving intellectual property prob-lems, the question is raised as to whether andas to how well the existing set of institutionswill be able to take on new roles and adapt toa new environment.

Need for Greater Understanding of andInformation About the Processes By Which

Intellectual Properties Are Created,Published, Distributed, and Used

Under the traditional copyright scheme,there is little need to know the precise eco-nomics of the process by which intellectualproperties are created, published, distributed,and used. For under such a system, propertyrights are defined and granted to authors bylaw, and the economic value of those rights isdetermined and distributed by market forces.To the extent that intellectual property lawis tending towards a more regulatory approach,however, more information and a greater un-derstanding of this process will be needed.

The widespread deployment and use of thenew information and communication technol-ogies has complicated the traditional intellec-tual property process, making it difficult-butperhaps also more important—to know whereeconomic value is added, and thus, how to de-termine economic incentives and rewards.These technologies, for example, have not onlypermitted more people to use intellectual prop-erties in new and different ways, they have alsoextended the process and the opportunitiesthroughout to enhance the value of creativeand innovative works. No longer is there one“author,” but rather a series of “authors”whose claims to intellectual property rightsmust be sorted out. No longer does one pub-

— .

lisher put out a book, or one producer releasea film, but rather a variety of publishers andproducers whose economic stakes need to betaken into account.

To resolve the numerous and varied compet-ing intellectual property claims within a regu-latory framework, as opposed to within a mar-ket framework, wiLl be very difficult. It willrequire policy makers to develop an analyticrationale for the optimum charging of fees andthe economically efficient and socially equi-table distribution of rewards. To do so, theywill need to know about all of the parties atstake in relatively great detail, and also un-derstand their roles in the intellectual prop-erty process, and how each might fare underalternative scenarios. The considerations speci-fied in the Home Recording Act of 1983 forsetting royalties illustrate the kinds of infor-mation that might be required to develop sucha rationale. No less than 10 factors are cited,including:

●

●

●

the value to an individual of the right toreproduce copyrighted works;the projected effect of royalty fees on thestructure and financial condition of themotion picture and audiovisual productionindustries and the video recording deviceor media importing and manufacturing in-dustries; andthe relative roles of copyright owners andimporters and manufacturers of videorecording devices or media with respectto creative and technological contributionto the development of motion pictures andother audiovisual works.

At present, reliable information of this kindis not readily available. Given the growing com-plexities in the intellectual property process,brought about, in part, by technological devel-opments, it is exceedingly difficult for exam-ple, to determine such things as authorship;the point at which new value is added on toan existing intellectual property and who hasadded it; and what actually constitutes copy-ing or use and, therefore, might require re-


muneration. 46 Accurate estimates of damagesdue to infringement of intellectual propertyrights are also difficult to obtain. Most of thoseavailable are not only unsystematic in theirapproaches; they are also somewhat suspectinsofar as most have been commissioned bythe very parties whose interests are at stake.47

When legislation calls for a regulatory ap-proach instead of a market approach for ad-dressing intellectual property issues, provi-sions may be needed to increase the analyticand expert support available to those organi-zations called on to implement and adminis-ter the law. One recent legislative proposalthat moves in this direction is the proposedFree Market Copyright Act of 1983, whichabolishes the offices of two of the five commis-sioners attached to the Copyright Royalty Tri-bunal and requires the Tribunal to appoint ageneral counsel and chief economist.

Development of Technologies ThatDo Not Correspond to Traditional

Intellectual Property Categories, andthe Creation of Sui Generis

Intellectual Property Legislation

The framers of the U.S. Constitution distin-guished between writings and inventions, andset up separate rules and incentive systemsfor each. This distinction was relatively clearcut as long as the term writing merely de-scribed an art, rather than embodying the artitself. Today, however, this distinction isharder to maintain as new technologies emergethat do not clearly fit into either one or theother category. Because information technol-ogies allow symbols to define a process andfunction as part of a machine, for example, theytend to blur the boundary between writingsand inventions, between ideas and their expres-sions, and between functions and their repre-

4hFor a discussion of these problems, see Christopher Burns,Inc., “The Economics of Information, ” contract report preparedfor OTA, 1985.

“Stan Besen, Econom”c Issues Relating to New Technol-ogies and Intellectual Property, contract report prepared forOTA, 1985, pp. 45-55.

and /formation

sensations. This blurring of the boundaries hasraised the question of what kind of intellectualproperty protection is most appropriate forthese technologies and led to the establishmentof sui generis intellectual property legislation.

Computer software was one of the first of11 e new information technologies to raise ques-tions of this kind. Controversy surrounded theissue of the copyrightability of computer soft-ware since the mid- 1960s, when the CopyrightOffice first began to register programs in theirobject code form under its “rule of doubt. ”Much of the controversy was rooted in the 1909Supreme Court decision in White-Smith Pub-lishing Co. v. Apollo Co., which held that aplayer piano roll was not copyrightable sinceit did not embody a system of notation thatcould be read and, thus, was not a copy of amusical composition but rather a part of adevice for mechanically performing music. Be-cause program object code was said to resem-ble a piano roll in its unperceptability, ques-tions were raised as to whether it could becopyrighted. After considerable controversyand litigation, this issue was finally resolvedwithin the traditional intellectual propertyscheme by including computer programs withinthe domain of copyright protection.48

Unlike the case of computer software, thequestion of how semiconductor chips mightbest be protected was resolved not within theframework of existing intellectual propertylaw, but rather with sui generis legislation. Un-der traditional intellectual property law, the

“’The 1980 Amendments to the 1976 Copyright Act, for ex-ample, specifically included computer programs, databases, andworks created by the use of computers within the realm of copy-right protection. Many of the remaining issues were resolvedwith the court case, Apple Computer Inc. v. Franklin ComputerCorp., in which the Third Circuit Court of Appeals held thatcomputer programs, whether in object or in source code, whetherwritten or embedded in ROM, and whether an applications pro-gram or an operating systems program, are “literary works”within the meaning of the 1976 Copyright Act, and hence sub-ject to copyright protection.

This is not to say that there are no alternative views aboutthis decision. See, for example, Pamela Samuelson, “CONTURevisited The Case Against Copyright Protection for ComputerPrograms in Machine-Readable Form, ” Duke Law Journal, No.4, 1984.

—. —

Ch. 9–Federal Role in the Administration of Intellectual Property Rights ● 275

semiconductor chip was unprotected. Becauseit was a utilitarian article, it did not fit withinthe traditional concept of copyright. On theother hand, the level of originality embodiedin a chip mask did not meet the standards re-quired for patent protection. To provide pro-tection for this new technology without under-mining the integrity of the law and thehistorical principles underlying the distinc-tions between copyright and patent protection,Congress created anew class of protection withthe passage of the Semiconductor Chip Pro-tection Act of 1984. Although similar in manyrespects to existing copyright law, it differsinsofar as it provides protection for only 10years, requires mandatory registration, per-mits reverse engineering, and excludes fromprotection designs that are commonplace, sta-ble, or familiar. Because the registration pro-cedures resemble those for copyright, theCopyright Office was given the responsibilityfor administering the new law.

The organizational structure was establishedto administer intellectual property law evolvedin accordance with the distinctions that hadbeen made between patent and copyright pro-tection. To the extent that new technologiesrequire intellectual property protection thatfalls outside of the traditional realms, they mayrequire significant institutional changes.

Growing Convergence of IntellectualProperty Issues With Other

International Issues

Historically, intellectual property laws andpractices in the United States developed withlittle regard for what was taking place in therest of the world. For example, although manyother countries granted copyright protectionto foreign works or authors, the United Stateswithheld such rights throughout its first 100years.49 And while other European states un-

“1t was only in 1891, with the passage of the Chace Inter-national Copyright Act that the IJ nited States extended copyr-ight relations to any nation found and proclaimed by the Presi-dent to afford adequate protection to American works--subject,as stated, to a domestic manufacturing requirement and \’ari-ous unfamiliar forma lit ieq in this country.

dertook to regulate their copyright relationsmultilaterally through the Berne Conventionof 1886, the United States continued until 1955to act bilaterally in its intellectual propertydealings with foreign governments.50

Presently, however, the new technologieshave greatly increased the flow of informationand information products and services acrossnational boundaries, thus enhancing theirvalue in international trade. Because intellec-tual property protection is needed to preservethis value, intellectual property policy is in-creasingly being brought to bear in mattersinvolving international trade policy. The Tradeand Tariff Act of 1984, for example, requiresthat the protection of U.S. intellectual prop-erty rights be one of the elements consideredin the renewal of the benefits of the general-ized system of preferences (GSP). Similarly,the Caribbean Basic Economic Recovery Actof 1983 withholds foreign aid from those coun-tries who fail to honor intellectual propertyrights.

The growing importance of informationproducts and services has also linked intellec-tual property policy with general matters ofinternational politics. Viewing informationtechnologies and information products andservices as a means to social and economic de-velopment, many developing countries viewU.S. intellectual property policies as a barrierto their own advancement.

To the extent that intellectual property is-sues continue to converge with those of inter-national trade and international politics, ques-tions arise as to whether the present organi-zational structure, designed to consider intel-lectual property from a domestic frame of refer-ence, is adequate or whether some more for-mal coordination among agencies dealing withinternational issues may be necessary.

‘“In 1955, the United States acceded to the IJni\ersal Cop~’-right Convention {I-ICC). The UCC was created for- the expresspurpose of bringing the United States into the internationalcopyright communit~’. Negotiated and established under theauspices of U h“E SC(), it prmrided a 4 ‘low bridge to the’ Berne(’convention b~’ a combination of minimal substanti~e require-ments and the super-cession of U.S. formalities b~ a simple “[JCCnotice’ consisting of the~ familiar ‘‘c’ inside a circle.


Growing Convergence of IntellectualProperty Issues With OtherInformation Policy Issues

The structure and the basic assumptionsunderlying American intellectual propertylaws and practices were designed when theUnited States was an agrarian society, in whichcommunication and information use and ex-change played relatively minor roles in society.In this society, decisions about intellectualproperty could be made relatively independ-ently from other policy issues. For it was as-sumed that, through the operation of the law,social and economic goals would be jointlyserved, thus maximizing the benefits to soci-ety.51

Today, however, the role of information tech-nologies and information products and serv-ices have grown dramatically. These technol-ogies and their applications are being used notonly by individuals to enrich their lives, andby businesses to enhance their productivity;they are also being used by governments asa means to achieve major societal goals. Forexample, the French Government likens thegrowing connection of information-processingand communication technologies throughoutthe world to a change in “the entire nervoussystem of social organization, ” and plans toplay a major role in their development, direct-

“lLeon Seltzer, Exemptions and Fair Use in Copyright: TheExclusive Rights Tensions in 1976 Copyright Act (Cambridge,MA: Harvard University Press, 1978), p. 12.

ing it to be consistent and supportive of theNation’s overall societal goals.52

[n the information society, such as it hasbeen envisioned, information and communica-tion technologies will be more interdependent,and intellectual property issues may increas-ingly converge with other matters of infor-mation policy-such as telecommunication pol-icy or privacy policy .53 Anticipating suchconnections, S. 786, a bill entitled the “Infor-mation Age Commission Act of 1985, was re-cently introduced into the Senate. If passed,this legislation would establish a commissionto investigate comprehensively, issues relat-ing to the information age, such as intellectualproperty rights, computer education, computercrime, and privacy.

To the extent that intellectual property is-sues converge with other information policy-related issues, the question is raised as towhether the present set of intellectual prop-erty institutions are capable of dealing withthese issues as they cut across one another.

52Simon Nora and A lain Mine, The Computerization of So-ciety (Cambridge, MA: MIT Press, 1980).

%ee U.S. Congress, Office of Technology Assessment,Cor~puter-Based National Information Systems, Technologyand Public Poh”cy Issues, September 1981, and OTA staff memoran,~um, lnstjtution~ options for Addressing Information Pol-icy [ssues: A Pdiminai-y Framework for Analyzing the Choices,No~’ember 1983. For other discussions and characterizationsof the information society, see, for example, Susan Artandi,“M m, Information, and Society: New Patterns of Interaction, ”Journal of the American Society for Information Science, Jan-uar:{ 1979; and Daniel Bell, The Coming of Post-Industrial So-ciet, v (New York: Basic Books, 1973).

IMPLICATIONS FOR FUTURE INSTITUTIONALARRANGEMENTS FOR THE ADMINISTRATION OF

INTELLECTUAL PROPERTY RIGHTS

As described throughout this chapter, new No Action: Leave Major Decisionstechnologies are placing considerable burdens to the Courtson the Federal agencies responsible for admin-istering intellectual property rights. To man- Congress, of course, does not have to act andage 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 systempletely restructuring them. would not experience devastating effects, the


burdens would remain and would perhaps in-crease over time with new technological devel-opments. These burdens, moreover, wouldmost likely fall to the courts.

The ability of the courts to deal with theemerging intellectual property issues will bedetermined by several factors:

1. the increasing volume of intellectual prop-erty legislation and the extent to whichit departs from traditional legal concepts;

2. the limited resources available to thecourts and the confining attributes of ad-judication; and

3. the inadequacy and bias of adjudicativeinformation.

Volume of New Intellectual PropertyLegislation and Novelty of Legal Issues

Compared to the relative stability of copy-right law during the 66 years which elapsedfrom the enactment of the 1909 Copyright Actto the 1976 Revision of the copyright law, legis-lative activity on intellectual property issueshas increased significantly during the last 10years. Altogether 54 bills dealing with new in-tellectual property issues were introduced inthe 98th Congress, 1983-85.54 The SoftwareCopyright Act of 1980, for example, amendedSection 117 of the 1976 act to allow for thecopyrightability of computer programs with-out specifically enumerating computer pro-grams.55 Another 4 years later the Semicon-ductor Chip Protection Act of 1984 establishedan entirely new class of protection for an in-formation technology that does not fit com-fortably into either the patent or copyright cat-egories of traditional intellectual propertylaw.56 Additional legislation dealing with suchdiverse new technology subjects as commer-cial lending rights, home taping, cable copy-right, aspects of the operation of the Copyright

““OTA staff memorandum, Feb. 26, 1985; and American BarAssociation, 8th Annual Copyright Law Conference, Washing-ton, DC, Mar. 7, 1985.

“Jon Baumgarten, “Copyright and Computer Software,Databases, and Chip Technology, ” Proceedings, 8th AnnualCopyright Law Conference, Washington, DC, Mar. 7, 1985, p.289.

‘Public Law 98-620, November 1984.

Royalty Tribunal, the compensation of copy-right owners through royalty payments, “work-for-hire, ” or computer software piracy andcounterfeiting has been enacted or is under con-sideration. This volume of new legislation ismatched by the novelty of some of the majorissues raised by it. For example, the protec-tion of software under copyright law raises anumber of definitional problems that call forthe interpretation of statutory language andits application to new technological and scien-tific processes.

Because some of the legislation on new in-tellectual property reflects a tendency to estab-lish regulatory policies and institutions, courtswill find themselves in the familiar-but never-theless burdensome—position of having to re-view a host of administrative law issues aris-ing out of administrative rules concerninglicensing or the mechanics of copyright regis-tration.57 As the Copyright Office becomes thecentral institution responsible for copyrightregistration and administration, courts willhave to resolve issues of regulatory policy.58

To the extent that registration of computerprograms and computerized databases will ne-cessitate the adoption of new procedures andpolicies by the Copyright Office, that agency’ssubstantive decisions and rulemaking processare likely to be subject to extensive challengesbefore the courts.

Unavoidably, enforcement of copyright incomputer programs will involve courts in ad-judication over the enforcement process itself.Since it is likely that computer copyright pro-tections will be less self-executing than tradi-tional copyright, new enforcement schemes willbecome necessary for the application of civil

—‘“Inclusion of object–or machine–code within the reach of

copyright protection under the Act raises novel questions aboutthe existence of a prerequisite of human interaction withcopyrightable material. It poses the problem of how to recon-cile the fact that computer programs can be published with thefact that they can-at the same time–be kept secret to protecttheir commercial value. It demands distinctions between“utilitarian” workers and those conveying information or dis-playing an appearance.

‘“The Semiconductor Chip Protection Act of 1984, PublicLaw 98-620, though not applying copyright protections, makesthe Copyright Office responsible for registration and depositof semiconductor chip design (mask works).

278 • Intellectual Property Rights in an Age of Electronics and lnformation—

or possibly criminal sanctions.” Investigationsof suspected infringement will affect areas pro-tected by privacy expectations and fourthamendment guarantees and are likely to comewithin the reach of first amendment protec-tions. Computer crime legislation-like thatenacted at the end of the last Congress-hasalready been criticized by the U.S. Departmentof Justice as too difficult to enforce.

Judicial Resources and Capacity: Attributesof Adjudication

The capacity of the Federal courts to dealwith a significant increase in their workloadon a complex new subject is circumscribed bythe limited resources of the courts, alreadyshort on machinery and staff, and alreadystruggling with a growing backlog of cases.

In addition to the purely quantitative prob-lems it poses, the increasing volume of litiga-tion over new intellectual property rights raisessubstantive questions of how well the specialattributes of the adjudicatory process aresuited to this task. Courts will have to decidecopyright questions in the context of imper-fect information about the course of techno-logical change, of doubt over the economic con-sequences of the allocation of new proprietaryrights in information technology, of lack ofpublic support or understanding, and in theabsence of comprehensive legislative guidance.

Courts as Decisionmakers Without ControlOver Their Agenda. The very fact that courtsdo not control their own agenda explains whythe judiciary is sought after as a decision-making institution and why its decisions mayat the same time be unsatisfactory from a largepolicy perspective. As long as legal questionsare presented in the right form and forum andat the right time—conditions of adjudicationdefined with precision in advance-they will

“Imposition of criminal penalties for software piracy intro-duces difficult factual problems about intent and innocent in-fringement. Legislators themselves are concerned over the civilliberties implications of criminal laws which grant “broad Fed-eral jurisdiction that permits Federal agents to traipse aboutwith impunity in the data banks of individuals and corpora-tions.” In addition computer crime legislation is likely to raiseFederal-State jurisdictional issues.

get answers. Answers are justified by refer-ence to evidence, reasoning and legal doctrine.Once the judicial process has been set in mo-tion, decisions must be made.

Yet from a larger policy perspective the ac-cessibility of the judicial process may be aliability. Since judges must respond to com-plaints and reach decisions one case at a time,they cannot devise a coherent program or pol-icy: they cannot await congressional action,they cannot ask for legislative clarification ofunclear language, they cannot anticipate thecourse of future action even where evidenceindicates that the course of events will under-mine the basis of their decision.60

Because accessibility to particular courts israndom, determined by jurisdictional rules andidiosyncratic characteristics of an individuallitigant residence or business operation, andbecause courts are generally not specializedaccording to subject matter, different courtsin different regions of the country may dealwith the same legal question at the same timewithout a method of coordination and consoli-dation. Until the Supreme Court chooses to de-cide between contradictory or conflicting lowercourt outcomes in such cases, inconsistentpractices maybe pursued in different areas orby different computer industries during the notinconsiderable period of time which may elapsebefore a “unifying” Supreme Court decisionis reached.

Judicial passivity precludes courts frominfluencing-much less re-directing—policy de-velopments questionable on legal or constitu-tional grounds, if no litigants come forwardto challenge such policy. Thus the copyright-ability of machine-readable forms of computerprograms became established policy despitethe fact that the Copyright Office had profoundquestions about the statutory and constitu-

‘% 1979, after the CONTU Final Report had been issuedbut before the Report recommendations had been enacted bythe 1980 Software Amendments, one court applied the 1909Act to hold that machine-readable versions of computer pro-grams were not copyrightable subject matters. There was noway a court, equipped to see only the past, could have decidedthat case by reference to legislative action yet to come, no mat-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-gan to register computer programs under its“rule of doubt” in 1964.61 From a policy per-spective the nonsystematic invocation of ju-dicial controls not only allows procedures andpolicies of doubtful legal validity to continue,but also judicial silence may serve as a signalof approval when, in fact, courts did not havethe occasion for judgment.

Inadequacy of Adjudicative Information

Among the resources at the disposal of in-stitutions explicitly designed to make socialpolicy is the availability of expert or special-ized knowledge, of procedures for the evalua-tion of alternative strategies or policies andof studies projecting the consequences of alter-native choices. Courts lack most of these re-sources.

Judicial Expertise. Judges are not experts,they are generalists par excellence.62 They are,by and large, “lawyer-generalists” before theirappointment and must remain so to serve fun-damental goals of equality and neutralitywithin the legal system. To discourage judge-shopping, cases are assigned on a random ba-sis. Sitting alone in courts of general jurisdic-tion district judges must be prepared for anysubject matter. While appellate courts oper-ate as collegial bodies, the continuous re-assignment to different panels provides littleopportunity for a lasting division of labor orthe development of expertise. Yet while thegeneralist judge is an essential-even neces-sary-part of the legal system, the lack ofexpert knowledge and specialization leavesjudges unprepared for dealing with matterscalling for expertise and skills in particularfields. In part, the difficulty stems from thescale and complexity of technical issues. Inpart, it results from the fact that judges haveto deal with cases quite isolated from their

‘‘CarY, “Copyright Registration and Computer Programs, ”Bulletin of tie C~p.Vrig~t Society, vol. 11. ‘No. 362, ~964.

“Grossman, “Socml Backgrounds and Judicial Decision-making, Harvard Law Review, vol. 79, No. 1551, 1966, and Carpand Wheeler, “Sink or Swim: The Socialization of a Federal Dis-trict Judge, ” Journal of Public Law, vol. 29, No. 359, 1972.

larger context and on the basis of nonprob-abilistic legal reasoning. Both factors creategaps in decisions and make them uncertainguides for the policies they inevitably build.

The tension between the conflicting needsof the judicial system for generalists able toaddress all subjects and specialists with par-ticular subject expertise could, in theory, beresolved by providing judges with informa-tional resources which would allow them to be-come sufficiently expert to deal with new is-sues as they arise. A good argument can bemade, however, that the adjudicatory processdoes not serve that need.

The Informational Bias of the AdjudicatoryProcess. From a policy perspective informationproduced in the course of adjudication is par-tial in the dual sense that it is both incompleteand biased. Information is incomplete and frag-mented, because the judicial focus tends to bedelineated by the issues which the litigantschoose to raise.63 Litigation over the copyright-ability of computer programs has produced ju-dicial decisions which holds as a matter of stat-utory interpretation that communication witha human audience is no longer required undercopyright law64 without, however, dealing atthe same time with the constitutional impli-cations of the nondisclosure which results fromregistration of machine-readable programsonly.65

Adjudication does not provide mechanismsfor routine feedback on the consequences ofdecisions and it provides only limited oppor-tunities for locating specific issues in theirbroader social context. The judicial processmakes little or no provision for reviewing theconsequences of decisions. The contrast be-

“In the controversy over the patentability of living micro-organisms legal arguments focused on the intended coverageof the patent laws and the distinction between a living organ-ism and an invention, but not on the consequences of extend-ing the concept of proprietary rights to the creation and com-mercial use of new life forms.

“Apple Computer, Inc. v. Franklin Computer Corp., 714F.2d 1240, 1247-48, 3d Circuit, 1983.

“Pamela Samuelson, “CONTU Revisited: The Case AgainstCopyright Protection for Computer Programs in Machine Read-able Form, ” reprinted from Duke Law Journal, No. 4, 1984, pp.705-712.

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

tween the intensive examination of antecedentfacts and the near total neglect of subsequentor consequential facts—i.e., the impact of a de-cision on economic, social, or scientific behaviorand developments, is striking. Judges have nomechanism for assessing what the conse-quences of keeping source codes secret are forthat free flow of information which courts havein the past always found to be essential in or-der to promote the Progress of Science and theUseful Arts."66

Information is biased in the sense that theadversary process subjects virtually all of theinformation brought before a court to the serv-ice of stakeholders. Not all interest groups withstakes in the outcome of a particular case arerepresented and those interests which are rep-resented are not necessarily balanced in theresources they can bring to bear on litigation.Although conclusive data are not available, itis clear that lawsuits over software copyrightare almost elusively fought between cor-porate interests; so far neither individuals–as creators or consumers—nor other public orprivate entities representing nonproprietarypublic interests have played a role in the deci-sive cases. The litigation pattern thus reflectsthe early prominence of major corporations inthe registration of computer programs.67

Confining Conditions of Judicial Decisionmaking

The rapid rate and complexity of technologi-cal change aggravate the inherent liabilitiesof the judicial process and may make intellec-tual property law issues less manageable forthe courts and may, by extension, make theoutcome more counterproductive from a sci-ence and social policy perspective. It is in thissense that superimposing technological infor-

“%ee for example, Graham v. John Deere Co., 383 U.S. 1 at5-6, 1965.

“Between 1964 and 1976, 1205 programs were registeredwith the Copyright Office; 971 or 80 percent were owned bycorporations-IBM and Borroughs Corp, Hersey disent, Na-tional Commision on Technological Uses of Copyrighted Works(CONTU), Final Report (Washington, DC: Library of Congress,1978).

mation policy issues on judicial institutionsprimarily structured to decide individual casesin the context of traditional intellectual prop-erty law may prove detrimental to both thecourts and those with large stakes in litiga-tion over these issues. Future changes in in-formation and communication technology arelikely to leave courts perpetually a step behindthe task they must perform.

Encourage the Use ofCollecting Societies

Congress might also encourage thecollecting societies to deal with some

use ofof the

institutional problems presented by new tech-nologies. A number of indicators suggest thatcollecting societies have been quite success-ful in meeting their goals. The longevity of themusical performing rights societies, and themodeling of other collecting societies afterthem, suggest that both users and creatorshave been generally satisfied with their per-formance over time. Collecting societies havealso increased the size of their repertories, thenumber of users, and the amount of revenuesover the years.

68 Decreasing operating costsand increasing efficiency further indicate thatcollecting societies are accomplishing theirstated objective of reducing transactional costsfor both users and creators.69

‘Whe combined annual collections of ASCAP, BMI, andSESAC, for example, grew from $13.5 million in 1946 to $190.5millifm in 1976. BMI reports an annual increase in their reper-toire of approximately 100,000 and an increase in revenues from$53.1 million in 1975 to $150 million in 1984. In the year 1984-85, the number of writer members has increased from 43,000to 45,000 and the number of publisher members increased from25,000 to 26,000. Although the CCC and AGIOCA are both toonew to determine such overall trends, both currently report in-creases in the participation of users and proprietors. LeonardFeist, 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, March1985.

“BMI, for example, decreased its operating costs from 19percent of total revenues in 1975 to 15 percent in 1985. Collect-ing societies have been able to lower the cost per transactionin part because an increasing number of users and creators areusing their services. The major factor in lowering costs, how-ever, has been the introduction of information technology, nowused at various points in their operations.

Ch. 9—Federal Role

Although successful and effective in manyways, collecting societies also have problemsthat could limit their usefulness as a model fora broader range of information market situa-tions. In particular, because collecting socie-ties administer the rights for many creativeworks, they have been accused of monopolizingthe markets and exercising unreasonable re-straint on trade. These concerns have promptedantitrust suits; since 1941, both ASCAP andBMI have been operating under consent de-crees.70 In addition, problems of developingsufficient transactional volume to efficientlycollect and disburse funds, and problems ofequitable representation of members with dis-parate claims to compensation have plaguedtheir otherwise smooth and effective opera-tion.71

During the congressional hearings that ledto the 1976 revision of the U.S. copyright law,many discussions focused on how new tech-nologies undermine copyright owners rights.The enormous difficulties these technologiescreated for both users seeking licenses and cre-ators seeking remuneration for their workswere usually cited as the basis for establish-ing broader exemptions or conditions in thenew legislation. As an alternative, many of the

“ In 1941. the antitrust division of the Department of Jus-tice filed a civil complaint against ASCAP charging the organi-zation with violations of the Sherman Act. The result was aconsent decree that significantly altered three components ofA .SCA P‘s operations. First, .4 SC A P was prohibited from dis-criminating against similarl~’ situated licenses. This order wasprompted by the society’s practice of withholding certain mu-sic in an attempt to extract higher fees. Second, the consentdecree prohibited ASCAP from acquiring exclusive rights tolicense members’ performance rights. Third, ASCAP was re-quired to offer other licenses in addition to blanket licenses.

The consent decree was amended in 1950 following numer-ous problems with license terms, membership restrictions, anduneven royalty distribution, as well as new problems arisingfrom motion pictures and television. Among other things, theseamendments gave users more options, set up procedures to han-dle fee disputes, and established more objective criteria for dis-tributing royalties. More amendments followed in the 1960s.

‘Collecting societies have been criticized by some copyrightholders who feel that the distribution of royafties is often un-fairly biased in favor of a few very popular and powerful mem-bers, Because of alleged inequities in the us~sampling or royalty-calculation methods, some believe they are inadequately repre-sented in the bargaining process. Economies of scale enjoyedby large, powerful societies serve as effective barriers to weakercreat,ors’ formation of competing collecting organizations.

in the Administration of Intellectual Property Rights ● 281

participants in their 1976 hearing process pro-posed that a collective approach might be fea-sible for literary works and other types ofintellectual property where reprographic, per-formance, and recording rights were becom-ing more relevant in light of new technologies.72

As new information and communication tech-nologies give rise to new creative works andnew uses of traditional creative works, simi-lar difficulties will arise for both users and cre-ators. For example, amplification of distantsignals and their distribution by cable to users,or the distribution of computer programs viavideotex systems to users, will increase the ac-cess, distribution, and use, of creative works,thus creating enforcement problems and largertransactional costs. Given these new chal-lenges to the administration of intellectualproperty rights, collecting societies may be onealternative to institutional problems posed bynew technologies.

Strengthen and Increase theResponsibilities of Existing Agencies

Strengthening the capabilities of the currentagencies involved with intellectual propertyrights is another option that Congress mightconsider. The Patent and Trademark Office,the Copyright Office, and the Copyright Roy-alty Tribunal could each be given additionalresources for research and policy planning, andthe authority to regulate and adjudicate. Otheragencies’ responsibilities for intellectual prop-erty rights could be strengthened and mademore explicit. For example, creating a positionof Assistant Secretary for Intellectual Prop-erty Right within the Office of the U.S. TradeRepresentative, could provide a higher levelof attention to this aspect of internationaltrade, within the U.S. Government and in ne-gotiations with other nations.

“’Leonard Feist, An Introduction to Popular Music Publish-ing in America (New York: National Music Publishers Associa-tion, Inc., 1980), pp. 56-57.


Establish a Central Federal IntellectualProperty Agency

To comprehensively address the new institu-tional needs, Congress might consider restruc-turing the institutional arrangements for in-tellectual property rights. Congress could, forexample, establish a new Federal agency thatwould administer all aspects of intellectualproperty rights. Given the new institutionalneeds, this central intellectual property agencycould assume the following responsibilities:

all of the current responsibilities of theCopyright Office, the Patent Office, theCopyright Royalty Tribunal, and otheragencies that are involved with intellec-tual property rights (this would exclude,however, the deposit function of the Copy-right Office which would remain with theLibrary of Congress);rule-making and determination of ratessuch as compulsory license fees and dis-tribution percentages as required by legis-lative mandates;standard administrative adjudicatoryfunctions (similar to those of other gov-ernment agencies) where preliminary dis-putes involving patent, copyright, and suigeneris protections, licensing fees, distri-bution percentages, etc., could be resolved;administration of all sui generis protec-tion schemes that fall between copyrightand patent protection;development of international policy posi-tions and representation of the UnitedStates at all international intellectualproperty rights negotiations and con-ferences;collection and analysis of information onmarkets and damages, solicitation andanalysis of industry viewpoints, and solic-itation and analysis of the public’s viewsand evaluation of their access to informa-tion products and services;policy planning and research on techno-logical developments and their effects onthe intellectual property system; andadvice to Congress on developments in in-tellectual property and suggest legislationas needed.

This central agency would be particularly ef-fective in implementing any short-term solu-tions that Congress might choose to addresscurrent intellectual property issues. It could,moreover, plan and oversee any longer termsolutions that Congress might wish to select.In addition to relieving many of the stresseson the Federal institutions, such an agencywould also alleviate many of the continual pres-sures due to rapid technological change cur-rently facing both Congress and the courts.

On the other hand, centralizing responsibil-ities might also have negative impacts. Manygovernment agencies, for example, currentlyrely on the proximity of the intellectual prop-erty rights agencies for needed information andexpertise. Consolidating the responsibilities forintellectual property rights under one agency,therefore, could deprive other parts of the U.S.Government direct access to needed informa-tion to carry out their functions. The intellec-tual property agencies, moreover, would bedeprived of direct access not only to adminis-trative support but to other areas of expertise,such as international affairs and trade.

Considerations for the Choices ofInstitutional Arrangements

Before considering institutional arrange-ments for the administration of rights, Con-gress must first make overall decisions aboutthe intellectual property system itself. For asthis report has shown, institutional arrange-ments must reflect the goals they are designedto promote. Congress, therefore, must deter-mine which goals it wishes to promote, whichlaws and practices to establish, and how to bal-ance competing interests in light of the effectsof new technological developments. It mustalso determine whether the role of governmentin the intellectual property system should beregulatory or nonregulatory. Only after suchdecisions are made, can Congress begin toconstruct institutional arrangements for theadministration of intellectual property rights.

Chapter 10

Strategic Choices for Congress

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Contents

P a g e

Problem for Congress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285

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

Be Resolved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294

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Chapter 10

Strategic Choices for Congress

PROBLEM FOR CONGRESS

The system of intellectual property rightsand practices, as it has evolved in the UnitedStates, represents a balance of social, politi-cal, and economic interests that was arrivedat over time and in response to changing his-torical circumstances. The basic frameworkwas provided for in Section 8, Article 1 of theConstitution, which authorized Congress togrant exclusive ownership rights, for a limitedperiod of time, for writings and inventions. Thepurpose of the grants of rights was twofold:1) to foster the progress of science and the use-ful arts, and 2) to encourage the creation anddissemination of information and knowledgeto the public.

Although this system of intellectual prop-erty rights was originally designed around thetechnologies of its time, the approach that itembodied was flexible enough to incorporatenew technological developments as they ap-peared. Today, however, advances in technol-ogies are so far reaching that they pose fun-damental questions about the system itself.They raise issues, for example, about the appro-priate goals of the system, the basic frameworkof the law, the mechanisms for enforcing rights,the criteria for granting incentives and re-wards, as well as about the scope of the intel-lectual property problem itself.

Concerned about the problem that the newtechnologies pose, interested parties are urg-ing Congress to initiate legislation to takethese technological developments into account.Holders of existing intellectual property rights,for example, concerned lest the new technol-ogies undermine their ability to enforce theirproperty rights, are calling on Congress to pro-vide new ways to assure their remuneration.Creators of new kinds of information productsand services are requesting Congress to extendexisting law to include their creative activitieswithin its provisions. In addition, the creatorsand providers of goods and services that, prior

to the information era, were of little economicvalue are looking to intellectual property lawto justify for themselves a greater economicrecompense. Meanwhile, the general public,having greater expectations of, and growingincreasingly accustomed to, the informationproducts and services afforded by the new tech-nologies, as well as their reduced costs and in-creased accessibility, are looking to Congressto preserve these gains.

Faced with a growing number of requestsfor congressional action, in addition to a ubiq-uitous and rapidly changing technology, theproblem for Congress is to try to take the mag-nitude and the scope of technological changeinto account, while balancing interests and re-sponding to present day concerns. The resolu-tion of these issues maybe more difficult thanin the past when information-based productsand services were peripheral to the perform-ance of many social and economic activities,and when people had lower expectations abouttheir use and the profits that might be derivedfrom them. In such an environment, issues in-volving the granting of intellectual propertyrights were easily worked out among the ma-jor players without much disagreement or pub-lic involvement.

Today, on the other hand, given the varietyof opportunities that the new technologies af-ford, the increased value of information, chang-ing relationships among the traditional par-ticipants in the intellectual property system,and rising expectations about the benefits ofthese technologies, the number of stakeholderswith disparate interests and competing claimson the system will be greater than ever before.Under these circumstances, the resolution ofintellectual property issues will be more prob-lematic, requiring that more viewpoints betaken into account, and that policy decisionsabout the distribution of incentives and re-wards be made much more explicit.

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OTA APPROACH

It was to assist Congress in addressing theseissues that the Office of Technology Assess-ment was asked to undertake this assessment,Intellectual Property Rights in an Age of Elec-tronics and Information.

In thinking about how the new communica-tions and information technologies might af-fect intellectual property rights, OTA hasadopted abroad approach, looking at the kindsof stresses that technology might place on theintellectual property system, as a whole, andon each of its parts. Such an approach was re-quired because the new technologies do not nec-essarily have a direct effect on intellectualproperty rights. Rather, more often than not,their influence on the law is felt indirectly, asa result of such things as technologically in-duced changes in norms, values, and expecta-tions, as well as in the ways in which intellec-tual works are created, produced, marketed,and distributed.

Such an approach has also been useful be-cause, given the political intensity of the in-tellectual property debate today, and the higheconomic s takes involved , i t i s extremely im-portant to v iew the s i tuat ion in i ts ent irety .Those involved in the policy debate have often

def ined issues narrowly , in terms l imited tothe ir own interests and wor ld v iews .

E x a m i n i n g h o w t h e n e w i n f o r m a t i o n a n dc o m m u n i c a t i o n t e c h n o l o g i e s m i g h t a f f e c t t h einte l lectual property system, OTA found thatthese technologies are creating a wide variety

of opportunit ies and problems that , taken to -gether, present Congress with five major stra-teg ic cho ices : 1 ) what po l i cy goals to pursue ,2) whether and when to act, 3) what legal frame

work to use, 4) how broadly to define the prob-lem, and 5) within what inst i tut ional frame-

work should issues be resolved. These choices,and a description of some of the issues and op-t ions that they entai l , are d iscussed be low.

What Policy Goals To Pursue

Which policy goals a particular intellectualproperty system is designed to serve depends,in large measure, on history, circumstances,and the particular needs of a society at the timewhen such considerations are being made. Con-cerned primarily about building a nation, andthus about the need to establish communica-tion links, develop a unified market, forge acommon culture, and build a democratic pol-ity, the Founding Fathers intended the grant-ing of intellectual property rights to increasethe flow of knowledge and information through-out the country. The granting of rewards wasnot considered to be an end in and of itself,but rather a means to achieve the goal oflearning.

Given the changing role of information insociety, the question is raised as to whethera goal established for an agrarian era is stillappropriate in an information age. Because in-formation-based products and services nowconstitute a major source of economic growth,and are essential to our balance of trade, somepeople, for example, are urging that the intel-lectual property system be restructured to givepriority to economic goals. They propose anumber of changes in the system that wouldpresumably foster such a goal. One suggestion,for example, is to extend protection to infor-mation itself. Such protection, it is argued,would create a whole new source of economicwealth. Another proposal, designed to induceinvestment in information production, calls forthe elimination of the requirement that inven-tions be reducible to practice, thereby allow-ing for the protection of ideas. Such types ofprotection have traditionally been denied onthe grounds that they would inhibit the dis-semination of knowledge and ideas.

There are others, however, who oppose changesdesigned to favor economic goals. Instead of

—Ch. 10–Strategic Choices for Congress “ 287

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increased protection, they prefer to see the newtechnologies used to enhance access and thesharing of information resources. While ac-knowledging that the development of informa-tion-based products and services are importantto the economy, opponents of stronger protec-tion point out that information is equally im-portant for social, political, and cultural pur-poses. Librarians and educators, for example,are concerned that, if treated primarily as acommodity, information will be less availablefor learning.

Looking at these issues, OTA found that thepotential for conflicts among cultural, econom-ic, and political goals is indeed heightened inan information age. The ease with which thesystem has historically been able to mutuallyserve all goals is no longer possible, given thatthe value of information-based products andservices is being enhanced simultaneously inall realms of life. And even if, as some havesuggested, increased intellectual property pro-tection significantly increases the productionof information and information-based productsand services, it is uncertain whether goods de-signed primarily with a profit motive in mindwould be the most suitable for noneconomicends. Nor would their production in and of it-self lead to their widespread distribution. For,as is pointed out below, producers of works dis-tributed electronically do not have as much in-centive to make them publicly available as doproducers of works distributed in hard copy.

Conflict among goals may also increase be-cause, viewing information as a new source ofwealth, many people are looking for profitwhere they never have before. Given theseheightened expectations of economic rewards,the amount of economic growth that might re-sult from extending property rights may in-deed be insufficient to eliminate conflicts aboutintellectual property goals.

In an information age, therefore, Congresswill most likely have to make more explicitchoices among policy goals. Alternatively,other policy mechanisms, apart from the grant-ing of intellectual property rights, might beused to foster some goals not supported by thepresent system. For example, other kinds of

economic incentives, such as subsidies or taxexemptions, might be granted, which wouldhave fewer negative consequences for learn-ing and the creative environment,

Whether and When To Act

In making intellectual property policy, Con-gress has always had to reckon with techno-logical change. Over time, Congress has alteredcopyright law to incorporate such technologi-cal developments as designs, engravings, andetchings (1802); photographs and negatives(1865); mechanical recordings (1909); motionpictures (1912); sound recordings (1972); com-puter software (1980); and mask works forsemiconductor chips (1984). Then, in 1976, thecopyright law was completely revised in an ef-fort to deal, once and for all, with the impactsof technological change. This revision, how-ever, failed to meet its objective. Almost assoon as it was passed, the new law was out ofdate.

With the new information and communica-tion technologies, the pace of technologicalchange is accelerating. Thus, once again, Con-gress is faced with choices of whether, how,and when to respond. Should Congress, for ex-ample, do nothing? Should it respond imme-diately to those needs deemed to be most press-ing; or should it wait until it has a betterunderstanding of the long-term impact of tech-nology on the intellectual property system?

Should Congress Take Any Action?

Stakeholders in the system disagree aboutthe extent and seriousness of intellectual prop-erty problems, and thus about whether Con-gress should take any action at all. Not par-ticularly affected by the new technologies,many traditional copyright holders, such asbook publishers, are satisfied with the systemas it presently exists. Advocates of the freemarket approach also prefer that Congresstake no action. They believe that, as marketsdevelop, so too will natural solutions to theproblems stemming from technological change.Others oppose change, fearing that major al-terations in the law will be disruptive, andmerely lead to greater uncertainty.


Holding quite a different position are thosewho call for specific changes in the law to bemade in response to particular problems asthey arise. Included in this group are, for ex-ample, people from the motion picture and re-cording industries who, although concernedabout how technology affects their ability toenforce their rights, still want to profit fromthe new home market that the new technol-ogies afford. To allow them to do so, they pro-pose a royalty on the sale of blank tapes andrecording devices. By assuring them remuner-ation, legislation of this sort would make theirenforcement problems irrelevant. Similarly,television program suppliers would like to seespecific changes in the law made to deal withproblems they deem crucial to their interests.Believing that government rates are lower thanthose established in the market, they proposechanges in the law that would require cableoperators to bid for programming in the mar-ket place. Groups such as these, however, aregenerally reluctant to view intellectual prop-erty problems as being linked, and to makeoverall, structural changes in the system. Suchan approach, they argue, will detract fromthose problems in need of immediate solutions.

Seeking more fundamental changes in theintellectual property system are those who areconcerned lest intellectual property law bestretched to the point where it can no longerbe consistently applied, or meet its intendedpolicy goals. This view is heard most frequent-ly among members of the legal and judicialcommunities. Such people are most outspokenin opposing the provision of copyright protec-tion for computer software. Noting that re-verse engineering may be precluded undercopyright law, they argue that the extentionof such protection may actually serve to in-hibit learning and innovation.

When To Act

Decisions about when to act are clearly re-lated to decisions about whether to act, andto decisions about whether to deal with prob-lems separately, as they appear, or in a com-prehensive fashion. Thus, those who favor aspecific piece of legislation designed to dealwith a particular problem also tend to press

for action now; whereas those concerned aboutthe overall system are willing to postpone ac-tion until Congress has the information andunderstanding required to deal with intellec-tual property issues as a whole.

In considering these choices, OTA foundthat technological developments are, indeed,affecting the intellectual property system inall of its aspects. Moreover, because we are nowonly just beginning to move into an electronicera, the full impact of the new technologies willnot become completely apparent for some timeto come. Thus, even if Congress decides to actin some areas now, it will need to be preparedto reconsider these actions at some point inthe future. Acknowledging that this is the case,however, it is still useful to distinguish betweenshort-, mid-, and long-term problems, becausedifferent kinds of problems may merit differ-ent kinds of solutions.

Short-Term Problems.–A number of prob-lems can be considered to be pressing on thegrounds that stakeholders are seeking imme-diate legislative action, that societal stakes areparticularly high, or that technological changeis occurring so rapidly that, if Congress wantsto deliberately channel its impacts, it will haveto act sooner rather than later. OTA has iden-tified three such problems: the problem of en-forcement, the problem of private use, and theproblem of functional works.

The Problem of Enforcement. –One problemthat will require attention in the short termis that of enforcement. Taken together, im-provements in the cost, speed, and capabilitiesof information technologies are underminingthe mechanisms by which intellectual propertyrights have traditionally been enforced. De-vices such as optical disk storage systems mayallow individuals to collect entire libraries ofworks in their homes. Under laboratory con-ditions, moreover, fiber optic technology is nowcapable of transferring 100 average-length nov-els over a distance of 150 miles in 1 second.Such capability can be expected soon in sys-tems that are available to the public. Technol-ogy is also making the copying, transfer, andmanipulation of information and intellectualworks more private. Personal computers canstore, process, and communicate the entire con-

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t e n t s o f c o m m e r c i a l d a t a b a s e s w i t h o u t t h eknowledge or consent of the compilers of suchworks. In the face of these developments, copy-

r ight ho lders are f inding i t harder to detect ,p r o v e , a n d s t o p i n f r i n g e m e n t s .

If this problem remains unresolved, creators,producers, and distributors of intellectual prop-e r t i e s m a y b e c o m e i n c r e a s i n g l y r e l u c t a n t t o

distribute their works in forms over which theyhave little physical control. Moreover, if piracybecomes the norm, the legitimacy of the intel-lectual property system may i tse l f be cal ledinto quest ion , and the opportunit ies for po l i -cymaking in this area s igni f i cant ly reduced.

I n f o r m a t i o n t e c h n o l o g i e s p r o v i d e p r o p r i e -tors with some technolog ica l opt ions for deal -ing with enforcement . Pr ivate , computer ized ,e lectronic systems, for example , a l low propr i -etors to maintain control by limiting and mon-i tor ing access . The government might providesupport for such options were it, for example,t o p r o v i d e i n d u s t r y w i d e s t a n d a r d s f o r t h e s et e c h n o l o g i e s . S t a n d a r d s s u c h a s t h e s e , h o w -ever, may be very difficult to impose, since theyw o u l d r e q u i r e a c o o p e r a t i v e a g r e e m e n t b e -

t w e e n h a r d w a r e a n d s o f t w a r e p r o d u c e r s , Anumber of proprietors, moreover, would rathermaintain their f reedom of act ion than rece ivesuch support. Nor are such kinds of solutionsp a r t i c u l a r l y p o p u l a r a m o n g c o n s u m e r s , w h ofee l that they would reduce the value o f thep r o d u c t a n d p e r h a p s c o n s t i t u t e a t h r e a t t ot h e i r p e r s o n a l p r i v a c y .

R e c o g n i z i n g t h a t t e c h n o l o g i c a l s o l u t i o n smay make their products less appealing to theconsumer, a number o f copyr ight holders arenow calling on Congress to establish new waysof insuring their remuneration instead of newmechanisms for enforcing rights. The most fre-quent ly ment ioned proposal o f th is k ind is aroyalty, or tax, on blank audio and video tapes.

Based on interviews with and surveys of thepublic, OTA found that many people would bereasonably disposed to such an opt ion. They

favor a law that would allow them the freedomto copy , without making them personal ly re -sponsible for making judgments about the pro-priety of their actions. One of the unintended

Ch. 10—Strategic Choices for Congress • 289

consequences of such a law, however, mightbe to encourage private copying.

Unlike consumers, however, hardware pro-ducers are adamantly opposed to options thatwould add a surcharge to their products. Theyargue that, before any such proposals beadopted, much better estimates of damageneed to be made, and these estimates need tobe weighed against the benefits that copyrightholders gain from the new markets that hard-ware such as videocassette recorders provide.

Decisions about whether or not to seek newways to provide incentives to creators and pro-ducers of intellectual works will also need totake into account the Federal administrativerequirements and costs that such steps mightentail. Given the current nonregulatory climatein the country, and recent efforts to curtail theactivities of the Copyright Royalty Tribunal—the only Federal institution currently involvedwith distributing intellectual property royal-ties—it is difficult to imagine how existing in-stitutions might effectively administer sucha policy.

In light of the problem of enforcing intellec-tual property rights, public support for the un-derlying principles of the law will become in-creasingly critical. However, at present, theaverage citizen is quite unaware of the issuesinvolved. A recent OTA survey of the publicfound, for example, that over two-thirds ofthose surveyed said that they were not at all,or were only slightly, familiar with the sub-ject. Moreover, an equal proportion felt thatintellectual property issues had very little todo with them personally. Notably, however,those who owned home technology, or whowere under 40, were more aware of the issues.It would appear, therefore, that Congress hasa brief window of time in which to establishpolicy. Under these circumstances, policymak-ers may want to undertake a dialog with thepublic in order to ascertain its viewpoint andto enhance its understanding of what is atstake for members of the public in the presentdebate over intellectual property issues.

The Problem of Private Use.—A secondshort-term problem is that of establishing pol-


icy for the private use of information technol-ogies. As is the case with enforcement, if Con-gress does not take the initiative in this areanow, it maybe unable to do so later, when pub-lic attitudes and behaviors have become moreentrenched.

Technology is spawning whole new opportu-nities in the development and use of informa-tion-based goods. A central question for intel-lectual property law is who shall benefit fromthese opportunities. In the Supreme Court’s‘‘Betamax” decision, for example, the questionwas whether proprietors or users would bene-fit, either directly or indirectly, from homevideorecording capabilities.

As even newer technologies affect individ-uals’ ability to copy, store, and modify infor-mation, such questions are likely to multiply.However, because it evolved in a period whenduplication and storage technologies were cen-tralized and deployed in a commercial context,copyright law offers little guidance to courtsin resolving such conflicts. Neither the exist-ing framework of rights, nor limitations onthose rights—such as the fair use doctrine—clearly apply to the private use of information-based goods.

Stakeholders strongly disagree about whoshould benefit from new opportunities. Copy-right holders would like to profit from theexpanded home use of intellectual works. More-over, they argue that, given the new technolo-gies, private use, considered in the aggregate,will cause them extensive harm. Users, on theother hand, view the new technologies as aboon, reducing their costs and increasing theiraccess to intellectual works. As the OTA sur-vey of the public illustrates, while acknowledg-ing that copying is wrong when done for profit,or as a part of a business, most people see pri-vate copying of copyrighted works as beingacceptable. Producers of copying equipmentalso oppose restrictions on private use.

Some survey research has been conductedon the financial benefits that would accrue toproprietors if they were remunerated for newtechnological uses. OTA found, however, thatestimates of harm such as these are, in and of

— ——. .

themselves, insufficient to help Congress re-solve the issue of who should benefit from newuses, since they presuppose—and cannot be thefoundation for–a legal right to profit from thenew uses of copyright works made availableby technology. Whether Congress wishes toconsider new uses as harmful will depend onthe goals that it seeks to promote throughcopyright law, and where it believes the bene-fits of new technologies should be allocated.

The Problem of Functional Works.–Func-tional works, such as computer programs, arti-ficial intelligence, and algorithms also presentproblems for the law that will need to be re-solved within a short timeframe. Neither copy-right nor patent law is entirely appropriate forsuch works. And, because they are very costlyto develop, there is a strong incentive for in-dustries to pirate them. For these reasons, itis generally agreed that rules governing theirprotection will be required shortly, if theseworks are to be developed and widely deployed.The resolution of this issue becomes increas-ingly important, moreover, as these workscome to play a dominant role in domestic andinternational economies. Potential options fordealing with functional works are described below, in the discussion of the legal framework.

Mid-Term Problems.–Other problems, al-though no less important, are less ripe for im-mediate action. Included in this categorymight be, for example, the problem of assign-ing value and distributing rewards in cases ofderivative use, that of protecting the integrityof works in an electronic environment, and thatof attributing and assigning authorship whenworks are generated by means of interactiveor electronic processes.

Engendered by technologies still in their in-fancy, these problems are only now just emerg-ing, and our understanding of them is severelylimited. Sound government policy requires anaccurate understanding of how informationmarkets operate and of the role that these tech-nologies might play in the creative environ-ment. Yet, at present, such an understandingdoes not exist. Although there have been a few

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Ch. 10—Strategic Choices for Congress “ 291

isolated efforts at collecting comprehensivedata about information-based commodities,there is neither enough data nor sufficientquantitative analysis on which to make soundpolicy judgments. Most data is fragmentary,incomparable, and available only through in-terested parties.

As the new technologies are developed anddeployed, however, these problems, and the is-sues to which they give rise, will become moreand more pressing. New participants will en-ter on the scene, as new technological oppor-tunities appear. Not party to previous intel-lectual property agreements, many of them willhave their own distinct attitudes about whoshould have access to works and materials, andabout what kinds of activities and pursuitsshould be rewarded. These new stakeholderswill lobby to have their needs and their per-spectives taken into account. As a result, newcontroversies about the intellectual propertysystem are likely to arise.

The Problem of Derivative Use.—The newtechnologies multiply the possibilities of cre-ating new works from old ones. Using comput-er and video technologies to electronically snipand paste, for example, a film artist, can re-arrange footage in the same way a writer re-arranges words on his word processor: insert-ing and deleting images, frame by frame;taking whole sequences from one place andshifting them to another; scrolling through se-quences again and again. All this is done ina matter of seconds. In the same fashion, allinformation content can serve as the basis fornew derivative products and creative works.

With these capabilities to store, retrieve, andmanipulate information, there come a multi-tude of new opportunities to expand the vari-ety, scope, and sophistication of information-based products and services. Taking advan-tage of these opportunities, the informationindustry—database businesses, software andhardware providers, publishers, cable televi-sion, information analysis centers, and clear-inghouses –has grown rapidly in the last fewyears. In the domestic software industry alone,for example, there are now an estimated 1,200

companies and thousands of individual free-lancers creating and producing software, andproviding services worth some $40 billion an-nually.

Given the growth of opportunities to createderivative works, issues will emerge with re-spect to who shall profit from them. Underexisting intellectual property law, copyrightholders have the right to benefit from all worksbased on their work. And, clearly, copyrightholders want this right to extend to all newuses of their work. Many of those who are sec-ondary information providers, however, opposethis point of view. In an information age, theyargue, the most valuable information is thatwhich is the most appropriate and the mosttimely. Custom designed, formatted, or pack-aged, this kind of information is by its naturederivative. To encourage its development anduse, they claim, incentives and rewards mustbe provided not as they have in the past to theoriginal creators, but rather to those who, mak-ing use of the new technologies, add new eco-nomic value to intellectual works.

The Problem of Artistic Integrity. —The easewith which information can be electronicallysnipped and pasted raises problems for crea-tors, not only with respect to how they can as-sure a profit from their works, but also withrespect to how they can safeguard its integrity.For the same images and sounds that the art-ist, photographer, or musician stores to be re-used for his or her own purposes, can be ac-cessed, manipulated, revised, copied, and usedin a multitude of ways by others, with or with-out permission. Some creators worry that, un-der these circumstances, a “cavalier attitudewill develop toward taking whatever you wantand doing whatever you want with it. Suchan attitude is already evident in the worlds ofadvertising and publishing as well as in theartistic community itself. Moreover, the scopeof this problem is likely to increase as thesetechnologies become cheaper and more widelyavailable.

In the United States, intellectual propertylaw has traditionally been unconcerned withprotecting the integrity of a creator’s work.

292 . Intellectual Property Rights in an Age of Electronics and Information——— —

In the new electronic environment, however,creators may become as concerned about theintegrity of their works as they are about theirprofits. If, in the future, intellectual propertyprotection is to be an effective incentive forcreativity, it may need to secure artistic in-tegrity as well as financial rewards.

The Problem of Assigning Authorship andof Measuring Value Added.—To effectivelygrant and to equitably distribute intellectualproperty rights requires that authorship or in-vention can be clearly assigned, and that newvalue added to intellectual works can be accu-rately measured. Today, however, because ofthe fluid, interactive, and functional nature ofthe new technologies, it is becoming increas-ingly difficult to perform either of these tasks.With intellectual works being simultaneouslycreated, published, and communicated overelectronic networks, the possibility of discov-ery or invention on-line, once a vision of thefuture, is now a reality. Such a developmentgreatly complicates the process of determin-ing originality and authorship, and of assign-ing rights. Similarly, with advances in artifi-cial intelligence, computer-aided design, andcomputer-generated software, it will becomemore and more difficult to determine what cre-ators have actually created. Given these trends,it is likely that, in the future, the number ofcontroversies about the distribution of rewardsis likely to increase. Moreover, as the economicvalue of information-based products and serv-ices increases, such disagreements may becomeall the more intense.

Long-Term Problems.–Even if a number ofissues are effectively dealt with in the shortterm, another major revision of intellectualproperty law can still be expected in the fu-ture. Fundamental changes in technology arenow taking place. And, although technology,for the moment, is multiplying the forms thatworks can take, and the means by which theycan be transmitted, eventually all works willbecome available in compatible, digital, com-puter-processible form. Such developments willnot only antiquate many of today’s solutions;they may also give rise to new problems re-quiring new kinds of answers. For, as more and

more works appear in digital form, the scopeof today problems may expand so greatly soas to alter their very nature.

In the short term, for example, the enforce-ment problem may be amenable to a solutionthat requires a royalty on blank tapes. Al-though it might be difficult to establish anadministrative structure to collect and distrib-ute such royalties, the task is not an impossi-ble one. However, if such an administrativeapparatus had to be expanded to deal with theincreasing number of works delivered on-line,the problems of effectively executing such ascheme may be so great as to, perhaps, negatethe solution itself.

Another problem that will probably take onmore importance in the future is that of ac-cess. For, as is described below, when worksare intangible in their form, copyright holdersmay, under some circumstances, be able to re-strict access to them. Such a problem may notwarrant legislative attention now, because itsextent is limited. However, if and when intan-gible works become the norm, the problem, be-ing cumulative, may loom much more serious.

What Legal Framework To Use

The intellectual property system was care-fully designed to balance the public and theprivate interest. Because the new informationand communication technologies do not fitneatly within the existing framework of thelaw, the balance may be harder to achieve inthe future. Questions arise, therefore, with re-spect to how the new technologies should bedealt with according to the law, and whetheror not a new conceptualization of the law maybe required. Two particular problems that OTAhas identified in this regard are the problemof functional works, and that of intangibleworks.

Patents, Copyrights, and Functional Works

Traditionally, intellectual property law pro-vided two basic forms of protection: patent lawand copyright law. These schemes reflected abasic distinction between invention andauthorship. Inventions are essentially useful

Ch. 10—Strategic Choices for Congress • 293— ——

devices or processes, whereas works of author-ship convey information or ideas. And, al-though both schemes encouraged the produc-tion and dissemination of ideas, they did soin two different ways. Patent required disclo-sure, and copyright required publication. More-over, the types of protection granted reflectedthe differences between inventions and writ-ings. Copyright prevented commercial copy-ing; patent prevented commercial use.

The clear distinction between inventions andwritings is beginning to break down. With thenew technologies, writings act like inventions.Although considered to be writings, computerprograms, for example, can run machines. Theycan, moreover, create new programs, and evencontrol industrial processes. In the future, in-formation itself will play a functional role. Apiece of information entered into a databasein one city, for instance, may automatically re-tool a factory in another. These developmentsraise questions about whether these new in-formation-based products can be accommo-dated within the old legal framework, or wheth-er some new categories of protection might notbe required.

A subject of debate since the mid- 1960s, thisquestion has defied conclusive resolution.Some people believe that a 1980 amendment,incorporating computer programs into copy-right law, adequately settled the issue. Thisis the view, for example, espoused by manytraditional copyright lawyers and by represent-atives of the computer hardware and softwareindustries. However, a number of lawyers,many with engineering backgrounds, now chal-lenge the wisdom of this approach. They ar-gue that computer programs are hybrid works,sharing traits of both patentable and copy-rightable works. They fear that, if the law isnot revised, not only will functional works beinadequately protected, but also the sharingof ideas and knowledge, necessary for innova-tion, will be curtailed.

Looking at this question, OTA found thatthe distinction between writing and inventionsis indeed breaking down with respect to func-tional works such as computer software and

semiconductor chip masks. Because there aremany kinds of these works, they may requiretheir own framework for protection. Includedwithin this category would be works of artifi-cial intelligence, algorithms, firmware, and re-combinant DNA. Like computer software, theseworks use information to affect a process.

The sui generis law for protecting chip masksmight serve as one model for such works. OTAfindings suggest, however, that it might be bet-ter to develop a more comprehensive approachthat would treat functional works as a major,separate class of intellectual property law. Tak-ing into account the particular characteristicsof functional works, the law might be more ac-curately targeted to achieve specific policy out-comes, and thus serve as a more robust policytool. Moreover, with a new category of law,both producers and users would face less un-certainty each time a new type of functionalwork were introduced. In addition, if the lawwere reconceptualized now, it might be possi-ble to address a much older problem in copy-right—that of distinguishing between artisticand factual works, a problem which is becom-ming more troublesome in the light of the newtechnologies. OTA suggests that a fruitful ba-sis for such a revision might be found in thedistinctions between works of art, works offact, and works of function.

Copyright Framework and Intangible Works

The copyright system was based on the at-tributes of a print culture: works were fixedin a tangible medium; they were expensive toreproduce on a large scale; and, in order forthe creator to profit from his work, he had topublish it in copies. A novel, for instance, hadto be set in type, printed, and bound. Becauseof the expense entailed, copying was a com-mercial venture. A conspicuous activity, it wasrelatively easy to police. Moreover, because theonly way of selling such a work was to sell cop-ies, public dissemination went hand in handwith profit-making. Although the author re-tained the right to print and publish the novel,he relinquished control of copies of it with eachsale. This promoted both the interest of theproprietor as well as that of the public.


Works disseminated through electronicmedia are different from traditionally printedworks. And their unique characteristics makeit more difficult to balance public and privateinterests through copyright. Unlike a novel,a television program or a database entry neednot be fixed in a copy to be sold. Thus, its cre-ator or proprietor does not have to dissemi-nate ‘copies in order to profit from them. Un-der these circumstances, the proprietor retainscontrol over access to his work, and may de-cide to intentionally restrict it in order to en-hance his profit. Were this to occur, the pub-lic interest may suffer.

On the other hand, technology may also fa-vor the user at the expense of the copyrightholder. New reproductive technologies, suchas audio and video recorders, are now wide-spread, allowing many individuals to cheaplyand easily copy intangible works. If these pri-vately made copies compete with sales of theoriginal works, the proprietors’ profits may besignificantly diminished.

Whether, in any given situation, it is the pro-prietor or the public who will suffer is extreme-ly hard to determine. Indeed, under certain cir-cumstances, both parties may jointly benefitfrom advances in technology. Generally speak-ing, however, it is clear that, given the grow-ing number of works being distributed elec-tronically, it will now be harder to achieve thebalance between the public and the proprietorsinterest under the copyright system.

How Broadly To Define The Problem

Historically intellectual property issues weresomewhat isolated policy concerns. Becauseinformation did not assume the same social andeconomic importance that it does today, intel-lectual property decisions were less likely toimpinge on other areas of public policy.

OTA found, however, that intellectual prop-erty policy can no longer be separated fromother policy concerns. To the extent that in-formation is, in fact, central to most activities,decisions about intellectual property may bedecisions about the distribution of wealth and

social status. Furthermore, given the unlimitedscope of the new technologies, and the growingtrade in information-based products and serv-ices, U.S. intellectual property policy is nowinextricably tied to international affairs. Com-munications policy, too, is now linked to intel-lectual property policy as more and more in-tellectual property is being transmitted viamedia such as cable television, telephone lines,and communication satellites. Today, more-over, intellectual property issues give rise toconcerns about privacy, as copyright holdersseek technical means to monitor use. In mak-ing decisions about intellectual property pol-icy, therefore, a whole new range of considera-tions will need to be taken into account, anddecisionmakers in all these areas will need tostrive for greater coordination.

Within What Institutional FrameworkShould Intellectual Property Issues

Be Resolved?

Traditionally the intellectual property sys-tem required little institutional support. Thesystem was designed to be self-enforcing: thegovernment granted rights and registeredworks, while individual creators and users wereresponsible for protecting their rights.

As the previous findings demonstrate, how-ever, the system is no longer so simple. Tech-nology is creating new demands. Many morepeople with disparate interests are makingclaims on the system. Technology is advanc-ing faster than the law and institutions canadapt. More and more, laws are being proposedthat require that government play a regula-tory role. In addition, given the growing com-plexity and diversity of information markets,more information is needed to make sound pub-lic policy decisions. The need for policy coordi-nation is also greater as intellectual propertyissues converge with other issues.

This institutional question has not beenwidely discussed among stakeholders. In thecurrent anti-regulatory climate, many are re-luctant to recommend the creation of new in-stitutions. For example, the proposed legisla-

Ch. 10—Strateg(icChoices for Congress “ 295

tion to impose a royalty on blank tapes andrecording equipment would require that theCopyright Office collect monies and that theCopyright Royalty Tribunal distribute them–this despite the proposed dissolution of theCopyright Royalty Tribunal. Similarly, the re-cent passage of the Semiconductor Chip Actrequires a patent-like examining procedure inthe Copyright Office, even though it has nosuch expertise,

OTA found, however, that intellectual prop-erty issues cannot be resolved without deal-ing with the question of institutional capabil-ities and change. In the absence of institutionalchange, the courts will increasingly be calledon to resolve highly complex technical issuesand to make policy in this area. The judiciary,however, may not be the best suited for thisrole.

The pace of technological change will con-tinue to put pressure on existing institutionalarrangements. One way of dealing with suchstress might be to establish a central govern-mental agency to address intellectual propertyissues as they emerge. Such a step would beconsistent with an approach that deals withimmediate issues in the short term, while pre-paring to address longer term issues later. Suchan agency might, for example, monitor tech-nological change, and assess the ways in whichthe law might deal with it. It might, moreover,provide the necessary expertise to deal withcomplex technologic issues and collect and ana-lyze information about information marketsand information use. It might even assume aregulatory function, distributing rewards oradjudicating disputes. Finally, such an agencymight coordinate intellectual property policywith policy in other, related areas.

Appendix

Appendix A

List of Contractor Reports

Copies of the following contractor reports com-pleted in support of this assessment are availablefrom the National Technical Information Service,5285 Port Royal Road, Springfield, VA 22161 (703)487-4650.

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James Beniger, “Information Technologies andCommodities in the Development of Intellec-tual Property : Changing Rights and Prac-tices, ” prepared for OTA, April 1985.Clifford Berg, “Organization for Protection ofintellectual Property Rights, ” prepared forOTA by the National Academy of Public Ad-ministration, June 1985.Stanley M. Besen, “Economic Issues Relatingto New Technologies and intellectual Prop-erty, ” prepared for OTA by the Rand Corp.,December 1984.Anne Wells Branscomb, “The Accommodationof Intellectual Property Law to the Introduc-tion of New Technologies, ” prepared for OTA,December 1984.Christopher Burns and Patricia Martin, “TheEconomics o f Information , prepared for OTAby Christopher Burns, Inc., April 1985.Herbert S. Dordick, “ Inte l lectual Property :Protecting Rights and Privileges in an Elec-tronic Age, ” August 1984.Jose-Marie Griffiths and Donald W. King, “Im-pact of information Technology on Informa-tion Service Providers and Their Clientele, ”prepared for OTA by King Research, Inc., July1985.Roland S. Hornet, “New Technologies and In-tellectual Property Rights: The internationalDimension, “ prepared for OTA, August 1984.Kenneth L. Kraemer, John Leslie King, andDavid G. Shetter, “Innovative Use of Informa-tion Technology in Facilitating Public Accessto Agency Decisionmaking: An Assessment ofthe Experience in State and Local G o v e r n -

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merits, ” prepared for OTA by the Irvine Re-search Corp., March 1985.L. Ray Patterson, “Copyright and New Tech-nology: The Impact on the Law of Privacy, An-titrust and Free Speech, ” prepared for OTA,August 1985.W. Curtiss Priest, “The Character of Informa-tion: Characteristics and Properties of Infor-mation Related to Issues Concerning Intellec-tual Property, ” prepared for OTA, February1985.Carroll Pursell, “Historical Case Studies of theInfluence of Intellectual Property Laws onTechnological Change, ” prepared for OTA, Au-gust 1985.A. Allan Schmid, “A Conceptual Frameworkfor Organizing Observations on IntellectualProperty Stakeholders, ” prepared for OTA,February 1985.Petra T. Shattuck, “The Judicial Impact ofLegislation Extending Copyright Protection toComputer Software, ” prepared for OTA, April1985.Petra T. Shattuck, “Public Attitudes and theEnforceability of Law, ” prepared for OTA,June 1985.Richard Jay Solomon, “Intellectual Propertyand the New Computer-Based Media, ’ pre-pared for OTA, August 1984.Richard Jay Solomon and Jane Yurow, “Inter-national Intellectual Property Issues Engen-dered by New Technologies, ” prepared forOTA, May 1985.“Public Perceptions of the Intellectual Prop-erty Rights Issue, ” prepared for OTA by ThePolicy Planning Group, Yankelovich, Skelly &White, Inc., February 1985.“The Intellectual Property Rights Issue: TheSmall Businessman’s Perspective, ” preparedfor OTA by The Policy Planning Group, Yan-kelovich, Skelly & White, Inc., May 1985.

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