Intellectual Property Any unique product of the human intellect that has commercial value (e.g. Books, songs, movies, inventions, programs) Intellectual Property is not its physical manifestation in some medium Does our accepted notion of right to own property extend to intellectual property?

Concept of Property Rights Locke’s Second Treatise of Government Right to property in your own person Right to the benefits of your own labor Right to things removed from nature through your own labor Extends to land by farming Makes sense as long as 2 conditions hold...

Extending to Intellectual Property Ownership of physical objects vs. ideas Paradox 1: two people create the same intellectual artifact. Therefore, intellectual objects differ from physical by uniqueness. Paradox 2: a copy is made, but the original media is not “stolen”. How is this different from stealing a physical object?

Benefits of Intellectual Property If no natural rights to intellectual property, society may still grant rights. Most people want to be rewarded for spending time to create something. Society benefits by encouraging creativity. Some people are altruistic and put ideas in the public domain

Limits to Intellectual Property Tension between need to reward creativity and disseminate ideas as widely as possible Compromise: Time limit to exclusive right “Happy Birthday to you” copyrighted in 1935. Under the Copyright Term Extension Act of 1998, it’ll remain copyrighted until...

Trade Secrets They never expire Value is in confidentiality; so only useful for things that stay confidential Does not protect against reverse-engineering. Ideas can spread by hiring employees from a company with a trade secret.

Trademarks and Service Marks Grants exclusive use of terminology to identify products and services Promotes consumer confidence in predictability of brand performance incentive to brand owner to maintain reputation

Patents Cover Inventions for 20 years Puts idea in public domain but gives inventor exclusive rights

Copyrights Confer Five Principal rights: Right to reproduce the copyrighted work Right to distribute copies to the public Right to display copies in public Right to perform the work in public Right to produce new works derived from the copyrighted work

Copyright Legal Tests Gershwin Publishing Corp. v. Columbia Artists Management, Inc. (1965-71) Basic Books v. Kinko’s Graphics Corp. (1980’s-91) Davey Jones Locker / Richard Kenadek (1994) No Electronic Theft Act of 1997

Copyright Creep Copyright act 1790: 28 years 1831: 42 years

Fair Use - factors What is the purpose and character of the use? What is the nature of the work being copied? How much of the copyrighted work is being used? How will this use affect the market for the copyrighted work?

Fair Use Lawsuits Sony v. Universal City Studios: Movie studios sued Sony over the Betamax VCR. The court decided it was fair use due to “Time Shifting”. RIAA v. Diamond Multimedia Systems Inc.: RIAA sued over the new Rio digital portable music player. Court upheld fair use due to “Space Shifting”.

Digital Technology & Fair Use With the advent of CDs, copies of copies are as good as the original MP3 is 1/10th the size of original music files, making internet sharing practical Large increase in high-speed internet connections Personal DVRs

Digital Millennium Copyright Act Passed in 1998 to bring U.S. into compliance with international copyright agreements. Significantly curtails fair use (e.g. illegal to copy any digitally recorded work) Illegal to sell or discuss online any software designed to circumvent copy controls Protects music broadcast over the internet

Digital Rights Management Tracking and controlling the use of content Encryption Digital mark

Secure Digital Music Initiative Consortium of 200 entertainment and tech companies to create copy-protected CDs Unsuccessful for 3 reasons: Internet copying mushroomed before protections could be put in place Sponsors were making money selling MP3 players The digital watermarking scheme was cracked

Encrypting DVDs Content Scramble System (CSS) 16-year-old Jon Johansen and DeCSS for Linux (1999) 2001 Ruling against 2600 Magazine for publishing the code 2003 Johansen acquitted in Oslo

Making CDs Copyproof Several systems being considered CD-ROM drives vs. CD players. (“Yellow Book” standard vs. “Red Book”) Macrovision SafeAudio Large community of programmers to crack encryption schemes People can always record what they hear.

Criticisms of DRM Technological fixes are bound to fail Undermines fair use principle Could reduce competition Some schemes prevent people from accessing content anonymously.

Peer-to-Peer Networks “A transient network allowing computers running the same networking program to connect with each other and access files stored on each other’s hard drives.” Stimulate exchange of data by allowing wide access, supporting simultaneous file transfer, and identifying best source for rapid transfer.

Napster Began in 1999 to facilitate exchange of music files Sued by RIAA in Dec 1999. Went offline in 2001

FastTrack Decentralized peer-to-peer network designed by Niklas Zenniström and Janus Friis. Used by KaZaA and Grokster Similar technology Neonet is used by StreamCast’s Morpheus Supernodes deliver most content

BitTorrent Developed by Bram Cohen to overcome the upload bottleneck Files are broken into pieces and transmitted from multiple computers simultaneously. Revenge of the Sith available via BitTorrent before it was in theaters.

RIAA Lawsuits April 2003 RIAA warns Grokster and KaZaA users Subpoenaed Verizon for names behind IP’s of Supernodes. Sept 2003, RIAA sues 261 individuals Oct 2003, RIAA sends letters to 204 more Dec 2003, Court rules Verizon does not have to identify customers.

MP3 Spoofing Record industry attempt to make downloading MP3’s less reliable. Overpeer has posted spoofs of 30,000 songs. BearShare and KaZaA counter with ratings system

Universities in the Middle RIAA sued 4 students in 2003 asking $100 billion in damages. In 2002, U.S. Naval Academy seized PC’s of 92 students and punished 85 of them In 2003, New Jersey Inst. Of Tech. Banned file sharing on its networks Penn State signed an agreement with Napster so students could download music legally.

MGM v. Grokster Defendants networks were used to transfer billions of files each month About 90% on Grokster were copyrighted Grokster and StreamCast promoted themselves to investors as a new Napster Internal StreamCast memo wanting more copyrighted content than competitors Grokster sent users a newsletter touting ability to deliver copyrighted songs Defendants provided tech support to help locate and play copyrighted songs.

Legal internet music services Napster, Rhapsody, pressplay, MusicNet America Online (2003) Apple iTunes Started April 2003 99 cents to download can use on 3 computers, copy to CD, iPod By Sept 2004, 70% market share

Software Copyrights First appeared in 1964 Copyright act of 1976 explicitly recognizes that software can be copyrighted. Typically object code copyrighted, source code is trade secret.

Violations of Software Copyrights Copying a program onto a CD to give or sell to someone else Preloading a program onto the hard disk of a computer being sold Distributing a program over the internet. APPLE v. FRANKLIN COMPUTER SEGA v. ACCOLADE

Software Patents Supreme Court Diamond v. Diehr, ruled in 1981 that a computer controlled process of curing rubber could be patented. Separating mathematical algorithms from inventions Existing Technical Knowledge (prior art) Bad patents

Safe Software Development Two independent teams Spec team isolated from development team

Open-Source Software Movement to create software by decentralized contributions Design that does not restrict ownership

Consequences of Proprietary Software Copyrights are trying to enforce restrictions on a medium for which they are not suited Copyright is now stifling innovation, rather than promoting it Ownership of intellectual property is less valuable than collaborative intellectual strengths

Open-Source Definition No restrictions on sale or give-away Source code included for distribution No restrictions on use or modification Re-use cannot place more restrictions on licensing

Beneficial Consequences of Open Source Larger pool of potential improvement – by every user Rapid evolution every time someone adds an improvement Eliminates copyright issues Indefinite continued development Promotes additional user services

Examples of Open-Source BIND – domain name service for the entire Internet Apache – runs web servers Sendmail – for sending email Perl – web programming Various languages and compilers (Python, GNU C, etc.)

GNU Project and Linux Examples of open source in action Creation of fully functional editors, compilers, and operating system Distribution free, with sellers able to provide packages with extra functionality if desired

Impact of Open-Source Exerts downward pressure on competing systems, such as proprietary OSes Provides stable, supported platforms for businesses at low cost

Critiques of Open-Source May be low quality if lacking developers May run afoul of build forking Higher barrier to use, with focus more on utility than interface Poor for stimulating innovation due to lack of monetary returns

Legitimacy of IP Protection Rights-based: Difficult proposition; not easily handled like physical ownership Utilitarian: Piracy damages revenue, which declines innovation, and therefore is harmful to society (unethical).

Creative Commons Decentralized creative rights Noncommercial for non-derivative works freely available to all Increased exposure

Off the Book: Economics of IP IP fits format of “public goods” (Microeconomics, Hal E. Varian) Increasing ease of distribution moves away from “pay for exclusive use” model Transformation to public good requires change in market strategies for IP

Off the Book: Ethics of Big IP Companies RIAA, MPAA increasingly restrict user rights and infringe upon rights of general public Treat each customer as a revenue stream instead of as a beneficiary of an IP – unethical by Kant Stifle innovation and damage competition – unethical by utilitarianism

Off the Book: Ransom Method Means to provide income for creators without standard distribution models Account holds money or commitment; product released when threshold reached Encourages release of “sample” works Requires established creator to generate enough revenue

Off the Book: Micropatronage Uses massive scalability of internet exposure to generate income from tiny donations by many users Requires exposure over large networks May lack starting capital Requires internet-distributable model

Off the Book: Classical Patronage Relies on government or wealthy individuals to provide funding Can provide a common pool for creators Runs into problem of “art only for the wealthy” Risks message being subverted by patron