Previous PageTable Of ContentsNext Page



By Dr. Daniel Gervais (1)

1. Background: Copyright and Electronic Commerce

Electronic commerce is about to explode according to many experts. In February 1999, Forrester Research predicted that from US$20 billion in 1998, e-commerce would reach more than $50 billion this year and $320 billion by 2002. By comparison, Microsoft Corporation had revenues of approximately $15 billion in 1998. Confirming this tendency, in addition to Forrester itself, Jupiter Communications, Yankee Group and International Data Corporation also predicted an increase in consumer online spending (credit card purchases and use of "electronic wallets") of more than 100% per year.

This phenomenon by and large is limited to a group of highly industrialized countries, but the Internet is fast becoming a truly global network and international payment systems now routinely allow payments to be made across national boundaries, typically using credit card accounts.

The next question is: what is electronic commerce? Or, in other words, what can consumers and businesses buy or trade over the Internet?

A significant part of electronic commerce consists of so-called catalog sales, where a computer screen replaces traditional paper catalogs, often with a broader selection, constantly updated choices and prices and, of course, world-wide access. In this form of e-commerce, the digital bits are used to sell atoms. Perhaps the best example is, which has successfully been selling books and compact discs over the Web.

Then there are two forms of e-commerce that do not involve atoms. Bits are used to buy or sell bits. This happens, first, when the information necessary for a transaction to take place is exchanged online. Online brokerage services, allowing users around the world to place trading orders on the major bourses are a good example.

Yet, probably the most exciting form of e-commerce is the sale of bits sold in packets representing works protected by copyright. Logically, since most literary and artistic works can be digitized or are created digitally, the Internet should be the best way to access such works (as opposed to buying packaged bits). For example, why not purchase a file containing a song, or a scientific article online, rather than having to locate a physical copy of the CD or journal? Naturally, there are cultural and practical reasons why certain types of works protected by copyright might not be successfully sold on the Internet. A novel is something we want to read on the plane, the train or perhaps in a good armchair or even in bed. There the look and feel of a bound book may be hard to replace. Yet, most purchases of copyrighted material, in particular in the business-to-business environment, could be done easier and better online.

The same could be said concerning the creation of new works. Creators throughout history have relied on preexisting material, consciously or unconsciously. It has been said in that regard that the past is prologue and, according to Blaise Pascal, all men are a continuum, a single man as it were, continually learning and adding to our predecessors' realizations. The Internet allows creators worldwide to access all works put at their disposal to create new works. This also allows creators in all countries to access preexisting works across boundaries and cultures, progressively creating a huge global library for all those with access to the network. This should accelerate economic development as access to state-of-the-art technical information and best practices from around the world become readily available. A good example is patent information: patents from several major patent offices can now be searched online and the full text of patents can be downloaded.

Why then does it seem to take such a long time for this type of e-commerce to develop? The simple answer is: copyright. Only two years ago, it was trendy to suggest that copyright and the Internet (or its multimedia cousin, the World Wide Web) went together like fire and water, and that as a result, copyright would soon be either evaporated or extinguished. In the past 12 months, the increasing bandwidth and user base of the World Wide Web as well as new compression algorithms have made it possible to download new types of works, not just plain text, ASCII or PDF files. The most talked-about phenomenon was clearly music, notably due to the MP3 phenomenon. This expanding power of the Web to deliver content online should have marked the end of copyright as we know it. Paradoxically, the reverse seems to be happening, as recently noted in The Economist (1ter). A number of "secure" initiatives, sometimes referred to as "copyright management systems," have been proposed and several systems are in advanced "beta testing" phase. Without going into all the detail on these efforts, the critical point to bear in mind is that several large publishing houses now offer high-quality content over the Web or have plans to do so soon. Music producers have also decided to harness the power of the Internet to sell music, as soon as a proper technical solution is found.

For example, readers of scientific, technical and medical literature can find thousands of high-quality journals offered online (usually in addition to the paper copy). From Academic Press' IDEAL, to Science Magazine, to Elsevier's Science Direct and Springer-Verlag's LINK and dozens of other systems could be mentioned here. Hundreds of magazine and newspaper publishers are following the same path and major newspapers in many countries are available online in full text, often on the same day as the paper publication. In the United States, examples include the New York Times, The Wall Street Journal Interactive Edition, The Washington Post, Newsweek, Business Week and many, many others. One oft-cited advantage of the online versions is that they can be word-searched and archives are often searchable as well.

The business models for delivering content protected by copyright vary. The most common models could be summarized as follows: in some cases, the material is available for free and can be searched without identifying oneself. However, most often publications will offer free registration before they allow users to search their content. This process provides content owners with valuable demographic (market) information and allows them to compile possible e-mail lists for future direct marketing efforts. In other cases, while an abstract of the first few lines will be used to illustrate the content, fees may be charged to download the full text. Finally, other content providers prefer the subscription model which can be a subscription to the electronic version only, or combined with a paper subscription (in some cases, the electronic version is offered as a "bonus" for subscribers to the paper version).

What is common among most content providers, however, is that the material thus provided online is subject to a "mouse-click contract" and/or terms and conditions limiting what the user can legally do with the material. Such restrictions typically limit the use to a single user, and allow that user only to read and possibly print a single copy. Redistribution or reuse of the material in any way is generally prohibited. While in the world of text publishing (newspapers, journals and magazines) this is by and large done on an honor basis (based on law and contract), other industries seem to prefer technical solutions, such as digital containers and encryption systems, to enforce those terms and conditions.

In this paper, we define Electronic Copyright Management Systems (ECMS) in a way that covers all of the above, namely first when the owner wishes to apply standard terms and conditions and perhaps enforce them using technological measures, but also cases where a user might need additional rights to reuse the content, for example, to make additional copies, post the material on an Intranet or Internet site, create a CD-ROM or DVD, etc.

2. Defining the Concepts

2.1 Defining Copyright Management

Before we can understand electronic copyright-management systems, we need to understand the concepts that underlie such systems, starting with "copyright management" itself. Copyright-management systems are basically databases that contain information about content (works, manifestations of works (1bis) and related products) and, in most cases, the author and other current rightholders. That information is needed to support the process of authorizing the use of those works by others. A copyright-management system thus usually involves two basic modules, one for the identification of content and one for licensing (or, rarely, for other rights transactions, such as a full assignment). In many cases, ancillary modules such as payment or accounts receivable are also considered part of the system, but the core of a copyright-management system is content and rights identification and a licensing tool.

A copyright-management system can be used by individual rightholders or by third parties who manage rights on behalf of others. A rightholder might use the system to track a repertory of works, manifestations, or products, or an organization representing a group of rightholders might use a copyright-management system to track each rightholder's rights and works. Such an organization might be a literary agent representing a number of writers, or, more commonly, a collective management organization such as an authors' society. (Most collective management organizations are members of the International Federation of Reproduction Rights Organisations (IFRRO), or of the International Confederation of Societies of Authors and Composers (CISAC).

In a collective management organization model, the mandate to authorize third parties may come directly from rightholders under a voluntary (contract-based) system, or it may follow from government regulations that impose a non-voluntary license or that create a right to remuneration that must be managed collectively.(2)

With respect to pricing, in some cases rightholders set the price for each type of use of each piece of content. In the vast majority of cases, however, prices are contained in tariffs applicable to a class of content and/or users. An annual fee, often referred to as a blanket license, is sometimes set by law and covers an entire repertory of works. Repertory licenses are useful in cases where more precise management would be either too costly or simply impossible. A good example might be music performing rights, where a radio station typically purchases an annual blanket license to broadcast music. By contrast, at Copyright Clearance Center in the United States, rightholders set the prices for various types of use.

Another approach, the transactional fee, gives the user a license to use a specific work or manifestation for a defined purpose. The user typically applies for the license when he/she needs the rights in question. For example, educational institutions in the United States that produce paper and electronic "coursepacks" (collections of material from various sources, usually considered a supplement to textbooks) generally must obtain prior authorization for each piece of content used; the use of music in advertising or, in most cases, to make a commercial recording, also requires a transactional fee that covers only that specific use. In the transactional model, collective management organizations either grant a license based on agreed terms set in advance by the rightholder, or they act as an intermediary between the rightholder and the user to establish terms.(3)

2.2 Defining Electronic Copyright Management

Applying the above concepts, we see that copyright management functions can be made easier with computers, which can act both as huge rights databases and automated licensing engines. Such computerized systems allow rightholders to automatically grant licenses to users without human intervention, which has the benefit of keeping transaction costs low and making licensing an efficient, "Internet-speed" process. That is, licenses to use a specific work can be granted automatically to individual users. For example, a corporation or an individual author or user can purchase the right to use an image, video clip, or song to republish it in a magazine article; or a publishing house might purchase the right to reuse previously published material. These systems may also be used to deliver content in cases where the user does not have access to such content in the required format. Finally, digital technology can also be used to track usage ("metering" and "monitoring"), look for unauthorized uses (programs known as "spiders" scour the Web looking for unauthorized copies of material on Web sites) or to encrypt material and thus limit further uses of the material.

For transactional licenses, an electronic copyright-management system basically acts as a licensing "engine." There are various implementations of such systems that range in technical sophistication. In the least sophisticated, a user mails, faxes, or e-mails a license request to a collective management organization that processes it manually and returns an answer to the user. In a slightly more automated environment, the organization uses an electronic works-and-rights database, but still processes the license request manually. Another step up in the ladder of automation is where an internal computer-based licensing system processes the request. With a full electronic copyright management system, the user searches available content and rights online, submits a license request electronically (usually via the World Wide Web), and receives a response from the electronic copyright-management system without any human intervention. That last option is, in my opinion, the only real electronic copyright-management system.

3. ECMS Issues and Obstacles

There are several clusters of issues that are hindering the development of ECMS solutions. They are grouped below in three main areas: legal, standards-related, technology and privacy.

3.1 Legal Issues

The principal legal issues that need to be addressed in electronic copyright-management systems are ownership of rights and works, rights to be conveyed, what the conveyance allows, and whose laws apply in case of a conflict involving more than one country. What follows is a short inventory of the most pressing issues, those critical to the success of e-commerce of copyrighted material.

3.1.1 Rights issues

3.1.2 Applicable law issues

3.1.3 Moral rights

The question also arises to know how will the so-called moral rights apply? While the business of electronic copyright clearly involves economic rights, it is impossible to ignore moral rights. These are rights of the author to oppose mutilation of a work and to claim its authorship even after a full assignment of all economic rights. Good electronic copyright-management systems should be able to handle ambiguity; they should not be limited to saying Yes and No. Already, sophisticated electronic copyright-management systems are in use that can help protect moral rights two ways. First, since the system allows a contract to be agreed upon between rightholder and user (with or without an intermediary), the parties may stipulate that alteration of the work is not allowed and/or that authorship must be recognized in a certain way. Second, rightholders can impose special conditions. For instance, with an electronic copyright-management system a photographer could insert language to restrict the use of her work to companies that she considers appropriate, specifically excluding, e.g., tobacco or alcohol-producing companies.(5)

5. Conclusion

Practical copyright management solutions must also be found to ensure that the potential of global digital networks is available to all. WIPO's mandate and in particular its WIPONet initiative would seem to be ideal starting points to create the necessary building blocks and establish a global rights information and licensing network.

[Annex I follows]

Previous PageTop Of PageNext Page