Background Resources Commentary
			Shortcuts: View comments

1. The digital environment presents a revolutionary business proposition for intellectual property (IP) creators and consumers. When the World Wide Web (WWW) was first developed in the 1990s, it transformed the Internet from a technological infrastructure into a popular network, linking diverse communities around the world and enabling people to exchange ideas, information and goods and services. IP has gradually migrated online and the Internet, together with the applications upon it, is changing the way in which a great deal of IP is produced and consumed. Numerous dot.com companies, such as Amazon and eBay, have developed business models that profit from trade in tangible IP goods, such as books, DVDs and CDs. Many more enterprises use the Internet as a powerful tool for marketing and reaching consumers for IP products in dispersed new global markets. Increasingly, however, content protected by IP rights is being created in or converted to digital form, and business models are evolving that correspond to the opportunities and challenges posed by the Internet.

2. In the online world, the gap between producer and consumer has narrowed. Users of IP are no longer passive consumers, but have become interactive players in the value chain, customizing products and, in some circumstances, becoming involved in the creative process itself. One independent music label in the United Kingdom, Loca Records, releases music under a Creative Commons license that allows any fan to listen, share and remix the tunes, provided they are not used commercially.¹ In this way, listeners become creators. The musician David Bowie has taken the view that, in the future music industry, rather than relying upon copyright protection, freely available songs will function as advertisements for touring and live performances. In 2004, Bowie released a song from his Reality album and invited fans to “mash-up” or remix it, to be submitted in a contest in conjunction with his Reality Tour.² The ready availability of digital technology and media has lowered the threshold for becoming a content provider and, as a result, many more people are creators and authors, effectively IP rightsholders, with choices to make as to how to exercise their IP rights.

There is debate over whether there is a need for the copyright system to adapt to support this interactive, collaborative creativity; there is also concern that copyright law, if restrictively applied, could stifle these emerging forms of creativity. Take the case of unauthorized sampling of music, which may violate copyright in a sound recording (usually owned by the artist or record company) and in the underlying song itself (usually owned by the songwriter or music publishing company: a decision in 2004 by the US 6^th Circuit Court of Appeals ruled that the author’s permission was required to remix a minimal 1.5 second sample of Funkadelic’s “Get Off Your Ass and Jam” song, even if the sample was unrecognizable in the new song.³

3. As IP has transitioned from analog to digital form and as digital technologies themselves have evolved, the way that IP-protected content is used or exchanged is also changing, often in unanticipated ways. Peer-to-peer (P2P) file sharing, for example, was not foreseen as a global phenomenon but now seems an integral part of the end-to-end, distributed character of the network, consistent with the anonymous nature of online communication and philosophies of hacking, sharing and open access which characterize many online communities. By 2005, P2P file sharing accounted for an estimated 60% to 80% of all Internet traffic by volume. The total number of persons logged onto the major P2P networks at any one time is approximately 10 million users, sharing over 10,000,000 GB (10 Petabytes) worth of data.⁴

For the IP industries, these trends represent a significant threat and a potentially valuable opportunity. The sizeable uptake of P2P technologies may provide a profitable business model, if IP rightsholders can employ these popular systems to exchange authorized IP goods. However, content in digital form is vulnerable to copying, perfectly and in infinite quantities for global distribution at the click of a mouse. Currently, it is estimated that more than 90% of files shared over P2P systems are unauthorized; according to estimates by the International Federation of the Phonographic Industry (IFPI), in January 2005 alone some 870 million copyright infringing music files were available online. The film industry, initially protected from widespread unauthorized use of its works by the comparatively large size of audiovisual files and lack of bandwidth, is also increasingly threatened by unauthorized file sharing of films as bandwidth increases and compression technologies improve. The Motion Picture Association (MPA) estimates that 400,000 to 600,000 films are illegally downloaded every day. Unauthorized copies of the recent blockbuster, Star Wars III: Revenge of the Sith, could be downloaded using the BitTorrent P2P software six hours before it was released in theatres and, within 24 hours, it had been downloaded 10,000 times.⁵ This file sharing was also made simpler by the broad commercialization of CD burners, portable MP3 players and rewritable DVD players.

4. Increasingly, IP-based industries and individuals are developing new business models that harness the growing popularity of digital distribution models. These address the problem of hacking and unauthorized copying either by applying technological protection measures to condition access and limit copying, or innovative business practices that maximize the value of the IP by encouraging rather than seeking to limit distribution.⁶ For example, some businesses such as iTunes and Yahoo! Music rely on a traditional sales model based on mass market distribution with convenient purchasing at low prices, aiming to make legitimate purchase more attractive than unauthorized copying and thereby achieve high volume sales. Other IP businesses, including online news sites such as The New York Times, and software providers such as Adobe Systems Inc.⁷ and Hewlett Packard⁸, effectively give away some of their IP products but rely upon revenue from complementary and value-added services or products like advertising, customer support or upgrades. The widespread uptake of a company’s free software can help its product become widely accepted and used, thereby creating a vibrant market for the company’s fee-based services.

Interestingly, the abundance of free information online has changed public perception of what is or should be “free”. The lack of effective quality control on the Internet has also heightened the need for an intermediary entity to filter, or otherwise vouch for content. In the analog world of the creative industries, this role was traditionally filled by the music recording labels or motion picture studios, who selected, developed and marketed creative works of music or film by attaching their brand, and quality assurance, to the product. To date, this critical role has been largely unfilled in an online environment where the problem is often described as too much information, not too little.

5. Changes in the way that we use domain names to navigate the Internet has also had an impact on the IP system; in this case, relating to the use of trademarks and service marks. Domain names are user-friendly addresses that correspond to the unique Internet Protocol numbers that connect our computers to the Internet and enable the network routing system to direct data requests to the correct addressee. Domain names were originally intended to perform a purely technical function in a user-friendly way, but because they are intuitive and easy to remember they now perform a function as business or personal identifiers. Many businesses advertise their domain names to signal a Web presence, whether they conduct commercial activities online or not. Therefore domain names, although not a form of IP, now perform an identifying function similar to that of a trademark. Because of the way in which people and search engines traditionally operate, most businesses use their trademark or trade name as their domain name, and this caused conflict by cybersquatting (involving the pre-emptive registration of trademarks by third parties as domain names).⁹ The way in which we use domain names has evolved naturally along with the way we use the Internet, but is not a reflection of trademark law. The challenge, then, has been to find ways for domain names to coexist in the existing legal framework of trademarks – the two WIPO Internet Domain Name Processes, and ICANN’s Uniform Domain Name Dispute Resolution Policy (UDRP) are efforts to provide a solution.¹⁰



Questions to consider

• Does the IP system encourage or hinder the emergence of new business models in the IP industries, such as music and film?
• Does the IP system have a role to play in facilitating the transition of traditional analogue business models to the digital environment?
• How can peer-to-peer (P2P) file sharing most appropriately be regulated, if at all?
• What role does IP protection for information and communications technologies play in developing infrastructure for digital networks to sustain the Information Society?
• What is the relevance of identifiers such as trademarks in electronic commerce and how can they be protected?
• Does abuse of such private identifiers affect society at large or is it a purely private problem?
• The UDRP provides trademark owners with efficient enforcement mechanisms against abuse of their rights in the domain name system - does it also take account of the interests of domain name registrants?
• Are there other identifiers that may need protection from abusive registration and use as domain names?

_____________________

1 See Loca Records. See also Katie Dean, “Record Label Sings New Tune” Wired News (November 20, 2003).

2 See “David Bowie Fans Get the Chance to Alter ‘Reality’” Sony Media Software (April 7, 2004).

3 Bridgeport Music, Inc. v. Dimension Films, 383 F. 3d 390 (6^th Cir. 2004). The decision is under appeal. See Katie Dean, “Remixing to Protest Sample Ruling” Wired News (September 22, 2004). For backround, refer to Ben Challis “The Song Remains the Same: A Review of the Legalities of Music Sampling” MusicJournal.org, (December 2003).

4 Source - CacheLogic.com.

5 See Andrew Zangrilli, “DOJ Takes Down BitTorrent” The Blogbook (May 25, 2005).

6 See “The Digital Dilemma: Intellectual Property in the Information Age” Committee on Intellectual Property Rights and the Emerging Information Infrastructure, Computer Science and Telecommunication Board, Commission on Physical Sciences, Mathematics and Applications, National Research Council (National Academy Press, Washington DC, 2000), at Chapter 6.

7 See http://www.adobe.com.

8 See http://opensource.hp.com.

9 WIPO Report “Intellectual Property on the Internet: A Survey of Issues” (WIPO Document 856), at para.29. See also Report of the First WIPO Internet Domain Name Process “The Management of Internet Names and Addresses: Intellectual Property Issues” (WIPO Publication No.439).

10 See WIPO Arbitration and Mediation Center’s Frequently Asked Questions on Domain Names.