Background Resources Commentary
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1. Some of the most controversial legal issues associated with the online use of intellectual property (IP)-protected material relate to enforcement of the rights involved. The inherent international character of the Internet, along with its potential for anonymous operation, challenges existing enforcement mechanisms and concepts. This creates considerable uncertainty, not only for businesses operating in this environment¹, but also for consumers that, lacking a predictable framework, may similarly be dissuaded from engaging in online contracts. The following summarises some of the issues involved.


(a) Identification of the infringer

Faced with illicit uses of IP-protected material on the Internet, a first concern from the rightsholder’s perspective will often be the identification of the alleged infringer. However, whether or not disclosure of the identity of the user, and other related information, may be requested from service providers, depends on national legislation. Under international standards, the so-called “right of information”, as provided for under the TRIPS Agreement (Art. 47)², does not cover such claims against parties other than the infringer. Some countries’ laws have, however, introduced a more detailed right which may, in principle, allow information claims against service providers, while trying to strike the balance with obviously conflicting interests, such as the protection of confidentiality of information sources, or the processing of personal data.³

(b) Private international law issues

To sue for infringement of IP-protected material in relation to online uses frequently involves cross-territorial action. This will raise questions as to jurisdictional competence, applicable law, and, eventually, the enforcement of a judgment abroad, touching upon complex issues of private international law and procedure. In general, these issues do not form an entirely new debate. Private international law doctrines and principles have long been developed around the globe, and it is certainly not necessary to question these principles altogether. Nevertheless, there is a difference in both degree and nature when applying these concepts to disputes relating to the Internet.

As an illustration, in order to assert jurisdiction in matters relating to tort – including IP infringements - the instrument governing jurisdiction in the European Union establishes special jurisdiction at the courts of the place where the “harmful event” occurred⁴, understood to refer to both the places of the causal event and of the damage. Here, the effects of global Internet transmission are easily felt: would, for instance, the mere online accessibility of allegedly infringing content in a forum be deemed sufficient for localizing a damage in that forum, and thus for a court to exercise jurisdiction? Would such jurisdiction extend over adjudication upon compensation for the entire damage suffered, potentially, in a large number of countries? How should forum-shopping practices be dealt with if redress can be sought in multiple courts?⁵ Case law has, over the past few years, gradually developed standards for the application of private international law principles in this online environment. It is notable, however, that, since these issues are largely unharmonized, the different national or regional private international laws systems continue to coexist.⁶

(c) The risk of being sued abroad

From a legal point of view, an important and specific feature for trading in IP online is that compliance with the laws of the country where the company operates may no longer be sufficient to assure an acute and predictable management of legal risks. A company may well comply with the applicable IP standards as to uses on its own territory, but use on the Internet, obviously, results in instant accessibility in numerous fora, where the resulting uses may not be legitimate. While a number of international treaties provide for harmonized minimum standards of protection of the various areas of IP, national laws may, under certain circumstances, make use of limitations of these standards, or, on the other hand, formulate higher standards of protection. For instance, in the area of copyright, a number of countries provide for extended terms of protection, or apply different positions as to the subject matter of protection.

To operate entirely safely in such an environment would require compliance with the highest standards of protection available on a global scale - a hardly practicable solution. Indeed, such inherent risks have been identified as a realistic concern for e-commerce business.⁷ In practice, companies often try to refrain from transacting business in jurisdictions which they consider, by their protection standards, as “risk” jurisdictions, by, for instance, trying to identify the physical location of a user through user registration or self-identification, or by tailoring their online presence to particular jurisdictions.

With respect to the use of trademarks on the Internet, one possible way to alleviate concerns of conflict with existing rights in other fora has been proposed by the international community in the WIPO “Joint Recommendation Concerning Provisions on the Protection of Marks, and Other Industrial Property Rights in Signs, on the Internet”.⁸ The Joint Recommendation provides that the mere visibility of a sign used on the Internet will be considered as “use” of the sign in a forum only if the use has a “commercial effect” in that particular forum, taking into account, for instance, whether the user of the sign is doing business in that forum, as well as the level and character of commercial activity of the user in relation to that forum.⁹

This problem of conflict arising with different legal standards of protection, and, eventually, being taken before the courts of a foreign jurisdiction, is not limited to IP protection, but may also raise concerns in other areas of law, such as defamation and libel, or goods that are banned from sale in certain jurisdictions. Much debated court decisions such as Gutnick v Dow Jones & Co Inc^.10 and Yahoo! Inc. v LICRA,¹¹ have confirmed that these are considerations to be taken seriously by any company operating online.


2. There is a tension between the international – or ‘a-national’ – character of the digital environment and the largely national and territorial character of court litigation. Whoever engages in online activity may have to protect their rights, or be held liable, in potentially any jurisdiction, and under the law of potentially any country, that is connected to the Internet. Since national laws and practices differ widely, multi-jurisdictional litigation always carries the risk of producing inconsistent results. In addition, courts cannot always respond to the efficiency demands of parties who are used to the speed of online transactions, and provide only few confidentiality safeguards which may be needed to preserve a reputation or a vital business relationship. Finally, the expertise needed to properly address the increasingly complex technical issues involved in online disputes is not always readily available in national court systems.

Alternatives to court litigation, in particular arbitration and mediation, allow parties to avoid many of these disadvantages, and to sidestep the complicated private international law issues of determining a competent jurisdiction and the applicable law. Arbitration and mediation provide a single international forum for resolving a dispute in its entirety – regardless of its territorial links; they can be tailored to fit the efficiency demands of parties, as well as their confidentiality concerns; and they allow parties to select expert arbitrators or mediators who know the business, technical and legal issues that may be involved in the dispute. WIPO, therefore, in 1994 established an Arbitration and Mediation Center to offer arbitration and mediation procedures, which are specifically tailored to meet the specific needs of technology, entertainment and other disputes involving IP.

Since arbitration and mediation are based on a private contract between the parties, they are less suitable in extra-contractual infringement disputes, or if one of the parties seeks to establish a public legal precedent, such as a general declaration of patent validity or invalidity. Arbitration and (in particular) mediation proceedings work best if they can be based on a pre-existing relationship between the parties, such as a license agreement, a franchise, or a distribution contract. Such relationships will often exist in Internet transactions since most of the content distributed over the Internet, as well as much of its infrastructure, is protected by intellectual property rights which are shared through licensing agreements. Thus, e-commerce contracts, both in business-to-consumer (B2C), as well as in business-to-business (B2B) relationships, often involve licensing agreements, and can therefore provide a basis for arbitration or mediation clauses.

3. Technological protection measures (TPMs), such as passwords and encryption, are increasingly being used by copyright rightsholders as a means of exercising and enforcing their rights in digital content. Countries acceding to the WIPO Internet Treaties (WCT and WPPT) must provide “adequate legal protection and effective legal remedies” against the circumvention of effective TPMs used by authors, performers and other rightsholders to restrict acts which are not authorized by the rightsholders concerned or permitted by law.¹² These treaty obligations are phrased in general, flexible terms, but different approaches have been taken to implementing them in national law, ranging from the US Digital Millennium Copyright Act (DMCA)¹³ approach to the more minimalist Australian approach (at least initially – new legislation is expected to bring the anti-circumvention provisions of the Australian Copyright Act closer into line with the DMCA pursuant to the US-Australia Free Trade Agreement).

The application of TPMs to digital content is at the center of international copyright debates. On the one hand, rightsholders have a legitimate interest in applying TPMs in order to exercise and enforce their rights in digital copyright content; yet it is increasingly argued that rights of access to digital content for certain development purposes, particularly where education and research materials are concerned, should in certain cases take precedence over TPMs as an enforcement mechanism. Even if this proposition were generally accepted, how can it be achieved and who is to decide?

4. Neither the WIPO Internet Treaties nor national laws implementing them require (“mandate”, in legal language) the application of TPMs/DRMs to digital copyright content. Rather, the treaties require that where TPMs are applied by copyright rightsholders, national legislation must provide remedies against circumventing TPMs without authorization. This means that at present much de facto control over access to and use of digital content to which TPMs are applied is left in the hands of rightsholders, though some recent legislation has tried to build in safeguards to ensure, for example, continued access to content by beneficiaries of copyright limitations and exceptions. In addition, DRM technologies enable data collection concerning users’ online use habits, raising concerns about violations of individual privacy rights which many believe are not addressed adequately or consistently across jurisdictions.

So far, TPMs/DRMs are applied to only a small percentage of copyright content made available to the public overall, but this percentage will increase as ICT penetration, Internet access and digital content offerings increase worldwide. Should rightsholders be subject to new requirements to apply TPMs/DRMs responsibly? Is it appropriate to initiate thought processes towards promoting what might be called the sustainable use of DRMs/TPMs?



Questions to consider

• How can IP owners protect their rights in a digital environment? Are traditional enforcement mechanisms through court litigation sufficient?
• Can territorial IP laws and systems be reconciled with the global character of the Internet to enable digital commerce in IP?
• Which country’s courts are competent to decide on infringing activity carried out over the Internet, and which country’s law should be applied?
• Do unresolved issues of private international law (e.g., which law applies to a transaction or dispute, which courts have jurisdiction to decide a case or enforce a judgement) pose a real problem to businesses trading in IP online?
• What is the role of alternative means of dispute resolution in addressing IP conflicts on the Internet? Should ADR be adapted to the online environment?
• What can be learned from effective alternative dispute resolution procedures such as the Uniform Domain Name Dispute Resolution Policy, processes and procedures?
• How can enforcement of IP rights, and the need of rightsholders to protect themselves from economic harm as a result of infringement, coexist with effective safeguards of users’ rights, such as individual privacy?
• Is there a need for safeguards against inappropriate use of digital rights management technologies? What challenge do digital rights management tools pose to the balance between copyright and exceptions such as fair use? To individual privacy?
• Is DRM an adequate response to the deficiencies of traditional enforcement mechanisms in an online environment?

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1 See, for instance, references in International Chamber of Commerce (ICC) Roadmap for Internet Governance, 2005. (Adobe PDF)

2 Article 47 of the TRIPS Agreement reads: “Members may provide that the judicial authorities shall have the authority, unless this would be out of proportion to the seriousness of the infringement, to order the infringer to inform the right holder of the identity of third persons involved in the production and distribution of the infringing goods or services and of their channels of distribution.”

3 See, for instance, Article 8 of Directive 2004/48/EC of the European Parliament and of the Council of April 29, 2004, on the enforcement of intellectual property rights.

4 Article 5 (3) Council Regulation EC 44/2001. (Adobe PDF)

5 For instance, as concerns alleged trademark infringements on the Internet, it has been suggested to restrict jurisdiction of courts in a country to cases where the content of the website in question is - allegedly - “directed” towards this country; see for instance, decision I ZR 163/02 - “hotel-maritime.dk”, of the German Supreme Court in Civil Matters of October 13, 2004. Another question relates to potential forum shopping within a jurisdiction, here, countries increasingly seek to concentrate jurisdiction in specialized chambers or courts, see the International Bar Association (IBA) “Survey of Specialized IP Courts” (2004). (Adobe PDF)

6 In the field of contractual business-to-business relations, though, it should be noted that the debate of an international instrument has advanced considerably: under the so-called “Judgments Project” of the Hague Conference of Private International Law, a draft Convention is being developed which aims to establish a predictable framework for both jurisdiction and the recognition and enforcement of foreign judgments in cases where parties have agreed upon (exclusive) forum selection clauses.

7 International Chamber of Commerce (ICC)/ American Bar Association (ABA) survey “Global Internet Jurisdiction” (2004). (Adobe PDF)

8 Joint Recommendation Concerning Provisions on the Protection of Marks, and Other Industrial Property Rights in Signs, on the Internet.

9 Articles 2 and 3, WIPO Joint Recommendation.

10 Gutnick v Dow Jones & Co Inc [2001] VSC 305 (August 28, 2001), Judgement of the Supreme Court of Victoria, Australia.

11 Yahoo! v. Licra, US Court of Appeals 9^th Circuit, August 23, 2004,. reversing Yahoo! Inc. v. La Ligue Contre le Racisme et L'Antisemitisme, 145 F. Supp. 2d 1168 (N.D.Cal. 2001). (Adobe PDF)

12 Article 11 WCT, Article 18 WPPT.

13 United States Digital Millennium Copyright Act of 1998. (Adobe PDF ). Refer also to the United States Copyright Office Summary of the DMCA. (Adobe PDF).