Intellectual Property Rights And The Internet: Digital Distribution And The Technological Threat To Intellectual Property

1. Contents

In the New Economy language, "contents" are the different goods and services which may be hosted in electronic memories, remotely commanded and distributed among Internet final users, as they are supported in interactive digital bases.

For the time being, most contents are constituted by intangible assets protected by Intellectual Property institutes: written texts, music, designs, photographs, audiovisual productions, etc. These goods satisfy users’ needs for information, culture, education, entertainment and are constantly used by them, replacing other sources which provide the same contents such as printed or broadcast journalism, books, cinema, video tapes, phonographic records, etc.

Phonogram and audiovisual producers are substantial contributors to the industry of contents. Their intellectual creations, phonograms, and audiovisual works not only constitute valuable intellectual property but also include the copyrights of authors, musical composers and performers, among others, who have licensed their contributions to the producers.

It is habitual to remember the significant cultural unity showed by the Americas compared with other regions of the world. We are favored by the fact that we only speak three main languages and that the languages of the other countries, which do not belong to the main American linguistic communities, are extremely familiar. Therefore, the Americas’ public consumes contents coming from their Hemisphere more than those coming from other regions of the world such as Europe or Asia.

The Americas are also considerably fit to produce their own contents because of the cleverness of their philosophers and artists as well as the corporate capacity of the intellectual property-based industries. In addition to the powerful engine conformed by the important multimedia groups settled in the North Hemisphere, the Americas exhibit an active nucleus of content producers spread throughout its countries. The Americas’ public is used to share the important American names in culture, science and arts; the entrepreneurs of the region have vast experience in shared businesses and local exploitation of licenses from other American countries.

The most important commercial exchange among the countries of the Hemisphere related to intangible assets protected by copyright is certainly performed at regional level.

Within user-oriented (B2C) electronic commerce, the electronic commerce of contents is clearly deemed to play a leading role. The elimination of physical supports allows intellectual property industries to focus their creative and financing efforts on the production of intangible assets; thus being able to increase intellectual contributors’ profits and at the same time offering such assets to the public at reduced prices due to the market expansion and the consequent growth of demand. The advantages of online distribution would add an additional incentive to the several advantages that the transition onto the virtual environment offers to the producers of intangible assets.

Contents are the most advantageous of the commodities as to their fitness for online distribution; they are also the only ones that find in electronic support means which grant them maximum advantages in the production stage as well as the best economy and scattering equation in the public distribution stage.

Notwithstanding the above-mentioned, anyone may observe that up to date, the producers of contents have not been able to take commercial advantage of the online environment. Almost all the exuberant mass of bits supporting contents accessible through Internet is offered free of charge by their legitimate owners or has been put at users’ disposal without their authorization. Therefore, the rapid growth of contents in Internet up to the moment is mainly contributing to satisfy the need for intangible assets inherent to the Information Society. However, it is in no way contributing to enrich the flow of economic compensation from the Internet public towards the different owners of such assets.

The same kind of resources which simplify the production and distribution of digital contents are used to reproduce and exploit them in the digital environment evading the control and authorization of their copyright owners.

Once on a digital base, contents may be easily accessed and copied, resulting then simple to upload them to Web sites from where they can be downloaded by other users, who in turn may copy and re-distribute them.

The risks include not only the action of "pirates" who try in several different ways to take advantage of others’ creative labor in order to obtain parasitical profit, but also the damaging "non-profitable" activity of thousands of Internet users eager to share others’ cleverness and sensitivity without compensating whoever produced them. For example, the Napster case, a software resource that indexes information on links allowing users to connect directly to the hard disks of thousands of computers loaded with (illegal) copies of commercial phonograms: as of July 2000, it was estimated that 20 million people used Napster and 315,000 visitors per day downloaded 14,000 phonograms per minute from an available catalog of 860,000 phonograms, equivalent to 3,500 gigas of records.

In fact and due to the circumstances described before, Internet has not yet allowed copyright owners and producers of contents to make profit of the advantages that online environment should imply for them according to the above mentioned.

Taking into account the points already exposed, it may be concluded that the copyright owners and producers of contents could only become protagonists and beneficiaries of electronic commerce if they can rely on safety measures for the assets they put at the public’s disposal in the online environment, in such a way that the deleterious actions of pirates and infringers are seriously obstructed. In order to achieve this, they rely on two main types of tools provided by information technologies:

• the "technological measures", and
• the "electronic information on copyright management".

The so called "technological measures" are different software resources which allow the incorporation into digital files providing logical support to the contents of any type of feature which guarantees the exercise of the powers derived from copyright, such as:

• measures to prevent the copy of files into a computer memory;
• measures to prevent the printing of digital texts;
• measures to convert a file into a "bit current" for the temporary enjoyment of the contents only;
• measures to "mark" the file with some kind of identification;
• measures to control the use of the contents;
• and any other similar measure.

The code sectors included in the digital files are known as "electronic information on copyright management", which, when processed by computers, allow:

• to identify containing files and the contents supported there;
• to specify the conditions under which the use of the contents is licensed;
• to indicate the price of the royalties to be paid by the final users to perform each mode of use;
• to support the necessary information so that the royalty payments may be transferred to the beneficiaries’ accounts as agreed by them;
• and others aimed to facilitate online exploitation of intellectual property.

In order to achieve both the efficiency of the "technological measures" due to their compatibility with any kind of data processing and transmission systems, and the purpose of "electronic information on copyright management" throughout Internet, a high level of standardization is imperative.

Copyright owners and producers make considerable efforts to reach a consensus regarding standards. While the results of such efforts are not in sight yet, any contribution from the governments of American countries tending to the selection and enforcement of adequate technical regulations at regional level will constitute an important incentive for the effective development of the electronic commerce of contents in the market of the area.

No matter how trustable the "technological measures" may result and how firm the union between the "electronic information on copyright management" and the contents marked on them may be, there are still resources which may be attacked by those who can apply powerful tools provided by the Information Science and Communication in order to infringe the intangible assets protected by copyright.

Thus, the concept of legal tutorship for the "technological measures" and for the "electronic information on copyright management" completing the protection guaranteed by the Right to intangible assets has been developed, outweighing the disadvantages suffered by the owners when they are subject to the deleterious action of neglectful users, unfair competitors and any kind of pirates.

The WIPO Copyright, and Performances and Phonograms Treaties introduced these new principles into the field of substantive law ¹. Such treaties were signed on December 1996 by a large number of American countries, and many of them ratified them later ². These valuable international instruments will only be enforced when its member states reach a number of at least thirty. It is not surprising then, that content producers industries of the Americas are expecting all the countries of the region to ratify these treaties, so that the international protection of their goods starts to be effective!

While the international regime becomes enforceable, there are many American countries that have amended their copyright laws to include the protection of "technological measures" and "Information destined to copyright management" ³, and many others have the same kind of projects in an advanced stage ⁴. Intellectual creators, and content producers industries of the region expect eagerly these legislative progresses, since they are convinced that the sooner the countries reach a high level of regional harmonization on this matter, the quicker an interregional traffic of contents will develop in the Hemisphere.

Recently, the eighth meeting of the Joint Committee of Government and Private Experts on Electronic Commerce of ALCA took place in Miami, where "online distribution of contents" was considered as a manifestation of electronic commerce in order to study and provide recommendations for the Ministers of Trade of the ALCA’s countries tending to encourage the inter-hemisphere electronic commerce of contents. As a member of the private sector of Argentina and the MERCOSUR, the Argentine Chamber of Phonograms and Videograms Producers and their Reproductions– CAPIF, presented to such Joint Committee the recommendations draft that we transcribe below as a summary of the measures that the content producers of the region expect from the governments of the Hemispheric countries:

That bearing in mind the dependence of copyright owners and producers of contents regarding the technological measures to be adopted in order to guarantee the effective exercise of the powers derived from copyright in the online environment, regulations providing legal protection to such measures are to be sanctioned as soon as possible.

That in order to guarantee copyright owners that they will be able to benefit from the exploitation of their intangible assets in the online environment using techniques that enable a more efficient and economic administration of such assets, regulations providing legal protection to the electronic information destined to copyright management are to be sanctioned as soon as possible.

That since the technologies for online distribution and the electronic information destined to copyright administration allow the individual management and control of intellectual property rights, the free exercise of the powers derived from intellectual property should be legally granted to their owners in the online environment, prohibiting any kind of compulsory licenses or involuntary collective management.

That as the available technologies allow enforcement authorities to detect infringements against copyrights and to individualize infringers, such authorities should be trained and instructed to include among their objectives the surveillance of the compliance of the copyright laws by those who operate in the online environment based on their respective jurisdiction.

That a clear and foreseeable legal and tax frame, non-discriminatory but balanced and neutral in the relationship between electronic and traditional commerce is developed quickly and within a regional system as harmonic as possible.

Particularly:

8.5.1 Online Hiring

That regulations which acknowledge electronic writing and signature as suitable means to express legal will, and therefore contractual consent, are introduced within the frame of basic legal principles at regional and Pan-American level.

8.5.2 Consumer Defense

That regulations which ensure an adequate level of consumer defense are developed and harmonized so as to guarantee electronic traders throughout the Hemisphere fair competition conditions.

8.5.3 Customs

That regulations which organize an adequate Customs treatment to small import and export operations typical of electronic commerce are developed and harmonized.

8.5.4. Excise Tax

That ALCA’s countries study and agree upon an equitable regime regarding excise taxes within the electronic commerce environment, which should neither become a barrier for electronic commerce nor prevent consumers from performing online operations.

8.5.5. Income Tax

That ALCA’s countries study and agree upon a regime to ensure copyright owners and producers of contents tax advantages which should not be lower than those received by producers of goods in the Inter-regional commerce, particularly regarding tax withholding on incomes derived from copyright royalties exploited in countries other than the country of residence of the copyright owners.

That regulations ensuring an efficient regime for the means of payment used in the electronic commerce operations are developed and harmonized in such a way that consumers and financing entities are guaranteed a reliable legal frame.

If a Virtual World and a New Economy exist today, it is thanks to the wisdom of their intellectual creators and the entrepreneur skills of the industries that promote the research and development of information technologies.

If the Information Society could take advantage of the immense treasure of goods related to science, culture, education, journalism and entertainment accumulated and distributed through electronic nets, it is also thanks to the talent of the intellectual creators and the entrepreneur skills of the content producers industries.

The people and the corporations that have made so important and valuable contributions to the Information Society, wish to share the advantages of the New Economy and stop being victims of free online distribution of their precious goods. The incorporation of the intellectual creators and the content producers industries of the region to the exercise of the electronic commerce highly depends on the decision of the governments of the Americas countries to ensure an encouraging and efficient legal frame for them. If the legal frame adds advantages for the inter-regional content exchange, it is very likely that the comparative advantages highlighted in the first points of this paper will transform content online distribution into one of the most important branches of electronic commerce in the Americas.

Article 11 - Obligations concerning Technological Measures

Contracting Parties shall provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors in connection with the exercise of their rights under this Treaty or the Berne Convention and that restrict acts, in respect of their works, which are not authorized by the authors concerned or permitted by law.

Article 12 - Obligations concerning Rights Management Information

(1) Contracting Parties shall provide adequate and effective legal remedies against any person knowingly performing any of the following acts knowing, or with respect to civil remedies having reasonable grounds to know, that it will induce, enable, facilitate or conceal an infringement of any right covered by this Treaty or the Berne Convention:

(i) to remove or alter any electronic rights management information without authority;

(ii) to distribute, import for distribution, broadcast or communicate to the public, without authority, works or copies of works knowing that electronic rights management information has been removed or altered without authority.

(2) As used in this Article, “rights management information” means information which identifies the work, the author of the work, the owner of any right in the work, or information about the terms and conditions of use of the work, and any numbers or codes that represent such information, when any of these items of information is attached to a copy of a work or appears in connection with the communication of a work to the public.

³ For example, United Stated of America with its Digital Millenium Copyright Act or the Dominican Republic, with its recent amendment of its Copyright Act.

⁴ For example, the Argentine Republic whose Justice Ministry produced a draft for the full implementation of the dispositions of the TRIP’s Agreement and the WIPO treaties.

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