Digital Economy and Intellectual Property

Just as people are using different ways to characterize our current society, such as the information ear, the age of post industry, and the age of globalization, people are also using different ways to characterize our current economy, such as the knowledge based economy, the information economy, and the digital economy. All of these summarizations are trying to stress or emphasize some striking characters of our current society or current economy.

The concept of digital economy is stressing that our current economy is significantly impacted or influenced by digital technology or information technology. That is, the digital technology or information technology are producing new ways of working, new means and manners of communication, new goods and new services, and new forms of community. Because of the digital technology and the Internet, many services and intangible products, such as distance education, legal services, health services, banking, insurance, and many copyrighted works, can be provided directly on line. As for tangible goods, such as food, cars, computers, books, people can order and contract through the Internet, and then get them delivered physically. By this way, business cost is reduced, the quality of services is improved, and the consumers are benefited. As a result, a new kind of economic pattern is coming into being.

In relating with the copyright system, there is a cultural industry. Because the cultural industry is based on the works or materials protected by copyright system, it is also called as copyright industry in some countries. Copyright industry is playing a very important role in many countries’ economy. For example, according to a report issued by International Intellectual Property Alliance, the US copyright industry created $ 348.4 billion in 1997, which accounted for 4.3% of US GDP. In 1997, there are about 3.8 million workers in the US copyright industry, which accounted for 2.9% of total US employment. And from 1996, the US copyright industry has been the largest industrial sector in foreign sales and exports. In this respect, the Indian copyright industry, especially its software industry, also plays an important role in Indian economy and exports. Because of the digital technology and the Internet, almost all the copyrighted works or materials can be digitalized and delivered on line, and the copyright industry or cultural industry has become one important component of the digital economy.

The US Department of Commerce issued two reports with regard to digital economy in 1999 and 2000. Both of the reports discussed the potential impact on the economy by digital technology, such as the Internet and electronic commerce. Interestingly, the first report used the title “The Emerging Digital Economy”, means that this new pattern of economy is emerging or shaping. The second report, titled “Digital economy 2000”, announced that the digital economy and the digital society are no longer emerging; they are here in the US.

Different legal questions:

The digital economy is based on the digital technology or information technology. The basic elements or main points of the digital economy are computers, the Internet, and the related electronic business, electronic commerce, new services, new goods, and new working ways.

Consequently, many legal questions come into being, such as electronic contract, consumer protection, the Internet security, and the reliability of the electronic commerce. In one word, because of the rapid development of the Internet, the rapid expansion of the Internet users, the current legal system is meeting challenges in different levels. These challenges are even related to the jurisdiction by judicial system, and the administrative management by sovereign governments.

The digital technology raised many challenges to the current legal system. In this respect, the intellectual property laws, such as copyright law, patent law, trademark law, and unfair competition law, have been challenged as well. And the international society and many sovereign states have responded to meet the challenges.

Copyright:

Among the intellectual property laws, the copyright system was first challenged and has been changed a great deal so far. From the beginning of 1990s, many important industrialized countries, such as the United States, the European Union, Japan, and Canada, conducted detailed studies on the Internet and its impact on the copyright system, and published their reports in 1995 and 1996. In December 1996, WIPO diplomatic conference adopted WIPO Copyright Treaty (WCT) and WIPO Performance and Phonogram Treaty (WPPT). In October 1998, the United States passed the Digital Millennium Copyright Act. In April 2001, the Parliament of European Union passed the Information Society Directive. Besides, many other industrialized countries, such as Japan, have amended their copyright law to implement WCT and WPPT. Still, many other countries, such as China, are amending their copyright laws.

Traditionally, copyrighted works are published in the form of papers, films, and tapes, etc. Because of the digital technology and the Internet, however, almost all of the copyrighted works, such as computer software, newspaper, articles, novels, stories, music, photos, can be digitalized and provided directly on line. For example, according to Microsoft, within a few years, all of the software it produced will be delivered on line, rather than traditional CDs. Today countless Internet users are connecting their personal computers to the Internet, listening music, watching movies, and downloading copyrighted documents and photos, etc. All of this totally changed the scenario or backgrounds in which the current copyright system is existed.

To respond the challenges by the digital technology and the Internet, the international society and the sovereign states adopted two methods. The first method is to interpret the traditional rules into the new environment of the Internet. The striking example is the definition of the reproduction right in the two new treaties WCT and WPPT, and in the Information Society Directive of European Union. That is, the definition of reproduction covers every kind of reproduction, including permanent and temporary production, and direct and indirect production. The second method is to create new rules in light of the copyright protection in the Internet. The typical example is the right of communication or making available to the public in WCT and WPPT. That is, the owners of the copyright and the neighboring rights have an exclusive right to control their works while the works are communicated in the Internet. As these rights are concerned, the Information Society Directive of the European Union clearly implemented the right of reproduction and the right of communication or making available to the public. Whereas, the DMCA of the US does not mention these two rights. Americans believe that these rights in WCT and WPPT can be interpreted from the existing rights and there is no necessary to create any new rights.

Because of the digital technology and the Internet, some new elements are added to the copyright system. One of the elements is the protection of technological measures. In the traditional way, works are protected by the copyright. Now in the Internet, the works are not only protected by the copyright, but also protected by some technological measures. In order to protect the works that are protected by technological measures, the copyright system begins to protect technological measures. This is the provision in WCT, WPPT. This is also the provision in the DMCA of the United States and the Information Society Directive of the European Union. This new provision is threatening the traditional theory of fair use or the limitations and exceptions of the copyright. In the traditional way, if one can get a copyrighted work, one can fairly use it. According to the new provision, before fairly using a copyrighted work, one must legally get the copyrighted work. That means one cannot circumvent the technological measures in order to get the copyrighted work. If, because of the technological measures, one could not get the copyrighted work, there is no fair use. In this respect, even if a work is in the public domain but protected by some technological measures, one may have no chance to use it.

In German copyright system, there are five integrated parts, i.e. substantial copyright law, copyright contract law, neighboring rights, collecting societies law, and the enforcement. Among the five parts, copyright contract law is an important one but often neglected by many developing countries. Because of the digital technology and the Internet, because the licensing and using of the copyrighted works have changed dramatically, some rules of the copyright contract law must be amended accordingly. In this respect, Prof. Gerhard Schricker, Prof. Adolf Dietz and other professors in Max Planck Institute for Foreign and International Patent, Unfair Competition, and Copyright Law in Munich have drafted a copyright contract act in light of the digital technology. It is interestingly that this scholarly-drafted act has been accepted by German Justice Administration and now is being debated in German parliament.

Like copyright contract law, the collecting societies law is also an important but often neglected part in the copyright system. Because of their way of business operation, the collecting societies in the industrialized countries are sensitive to the digital technology and the Internet. They have taken advantage of the Internet to register copyrighted works, to issue licenses, to collect royalties. Still there are challenges for these societies. At the movement, most Internet subscribers believe or they hope that everything in the Internet is free, or should be free. They may freely listen to music, watch movies, and download documents. As one of the executives in GEMA said, the Internet subscribers should be educated that they must pay for every copyrighted works in digital world, just as they pay for the copyrighted works in analogue world.

One of the striking differences between the continental European copyright system and the US copyright system is the attitude toward to the moral right. Although continental European copyright system emphasizes moral right, the moral right itself has changed a great deal because of the digital technology and the Internet. In Berne Convention, there are two moral rights, i.e. the right to attribution of authorship, and the right to respect for integrity of one’s work. There are other two moral rights existing in some copyright systems, i.e. the right to control disclosure and the right to retract the published works. As for the attribution of authorship, who is the author of the computer created works? As for the retracting of the published works, because of so many temporary reproductions exist in many servers, personal computers, how can the author retract his work if he wants to do so? Besides, while the copyrighted works are communicated in the Internet, they must be changed more or less to meet the different requirements by the people in different countries. Therefore, the right to respect for integrity of one’s work is less important. In one word, moral rights are weakened in the Internet.

Other Intellectual Property Fields:

The digital technology and the Internet also raised some challenges to trademark law and unfair competition law. One example is the domain name. A domain name is consisted of a series of names or words that can be recognized by computer systems. In respect with business and commercial organizations, a domain name may be consisted of the business names, organization names, and even trademarks. If a third party used another’s trademark to register a domain name, it would infringe the other’s trademark and cause confusions in consumers. If a third party used another’s business name to register a domain name, it would constitute unfair competition and took advantage of the other’s reputation. This means that the trademark law and the unfair competition law must respond to these actions. In April 1999, after more than two years discussions, WIPO issued its final report on the domain name protection and trademark, i.e. “the Management of Internet Names and Addresses: Intellectual Property Issues”. In November 1999, the United States passed “Anticybersquatting Consumer Protection Act”, which is one part of “Intellectual Property and Communications Omnibus Reform Act of 1999”. Besides, WIPO, the United States, and many other countries, have established arbitration procedures to deal with the dispute on domain names.

In contrasting with copyright law, patent system is less challenged by the digital technology and the Internet. However, patent law plays a crucial role in the development of the Internet and the digital economy. Every new invention concerning the digital technology and the digital economy, especially those inventions concerning computer software, computer hardware, communication, electronic business, and electronic commerce may be protected by patent law. For example, the US Patent Office has granted several patents to electronic business methods and published a report on how to examine the applications of business methods.

The digital technology and the Internet also created some new ways for patent application and examination. In the year 2000, WIPO adopted Patent Law Treaty, which sets some basic principles for the implementation of electronic filing. The trilateral cooperation between the Japanese, American, and European Patent offices is going to overcome the duplication examinations by different national and regional offices.

Conclusion:

In light of the discussions above, we may conclude that the concept “digital economy” is used to characterize the current economy, and it is stressing that our current economy is built on the basis of the digital technology and the Internet. Because the digital economy is concerned with almost every economic activity, it raised many legal questions or challenges in different levels, such as contract, consumer protection, and intellectual property. Among the intellectual property fields, the copyright system was first impacted by the digital technology and the Internet. The international society and many sovereign states have responded the challenges by adopting new treaties or enacting new laws. It is without doubt that along with the rapid development of the digital economy, and the Internet, there will still be many new challenges to the whole legal system, including the new challenges to intellectual property system. We must respond these challenges timely and properly.

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[1] Li, Mingde, Professor of Law, Intellectual Property Center, China Academy of Social Sciences; arbitrator, China International Economic and trade Arbitration Commission.