TECHNOS

July 20, 2008

TECHNOS QUARTERLY Summer 1994 Vol. 3 No. 2

Protecting the Goodies in the Digital Candy Store

By Kenneth Wasch

Who owns intellectual property? According to this industry spokesman, the developers and publishers do. While they acknowledge the need for fair use in educational settings, they are adamantly opposed to the pirating of their property by those who would use it otherwise. This essay is an argument for strong regulation of content, especially as it is disseminated on line.

The exponential growth of the Internet has given an estimated 20 million users access to the enormous amount of information available on the system. Seen as a prototype for the developing National Information Infrastructure (NII), the Net is both the subject of and a medium for the debate over protection of digital information. How can intellectual property—commonly referred to as content—be protected on the NII? An increase in federal prosecution of copyright infringers on the Internet illustrates the government's interest in protecting intellectual property rights on these networks and the problems inherent in doing so. But the most important questions surround ownership of software on the Net. Is it technologically feasible to protect digital intellectual property? More to the point, how do we reconcile competing values, such as the free flow of information vs. protection of intellectual property rights?

The evolution of technology provides users with many benefits. But these must be weighed against the potential economic losses if content is not adequately protected. Methods for ensuring protection, such as access control and encryption, and educating the public on copyright law, could prove effective. Ultimately, strong intellectual property laws worldwide will instill respect for the proper use of copyrighted material on line and will deter many from abusing the system.

The Wall Street Journal reported that in 1992, over 800 security breaches were reported on the Internet. Over 1,000 were estimated in 1993. Once the information has been taken, it is often disseminated onto Bulletin Board Systems (BBS), such as the illegal BBS recently raided at the Massachusetts Institute of Technology.* Illegal BBSs can spread the unauthorized use of copyrighted works and the disclosure of valuable trade secrets and confidential personal information on a grand scale. The number of BBSs is estimated at over 50,000 in the United States today, and 17 percent of these are dedicated to software piracy. The Software Publishers Association (SPA) alone monitors nearly 2,000 BBSs for unauthorized copies as part of its campaign to reduce software piracy. Illegal BBSs are a prime example of the problems inherent in protecting goodies in the digital candy store.

(*MIT student David LaMacchia was indicted on one count of conspiring to commit wire fraud in April 1994 by a federal grand jury. He is accused of running a BBS that allowed its users to copy illegally more than $1 million worth of copyrighted software.)

Once a copyrighted work has been stolen and placed on a BBS for further dissemination, the economic damage has already been done to the copyright holder and is almost impossible to completely reverse. The SPA reports that worldwide economic losses to piracy of business applications software was $7.45 billion in 1993, illustrating that additional steps must be taken to protect works against infringement before software is placed on an electronic system.

The development of the information super-highway holds the potential for widespread copyright infringement if we fail to clearly state and protect the copyright of information on the electronic medium. Without adequate trust in the networks, copyright and patent holders will not make their works available to the public or to schools, and the full potential of the information highway will never be realized.

The emerging battle is between content owners and millions of users that potentially could have limitless capability to download (i.e., copy) and further distribute copyrighted materials. This issue is unique to the world of digital content. The software industry is the only industry in the world that empowers its customers to become manufacturing subsidiaries. For every other product we consume, we cannot easily make a second one because we lack the tools, capital, or technical know-how to do so. With software, however, the user of each and every one of the 70 million PCs in use in North America has all of the equipment he or she needs to make a perfect copy. Our industry's only defense is moral suasion or legal enforcement.

The advantage of the emerging NII is that vast volumes of content will be accessible to everyone, including teachers and students. But universal access does not mean that those enormous digital libraries will be available at no charge. The models of the existing on-line services such as America On-Line, the news services, Prodigy, CompuServe, etc., have been successful in blending access to free information with a mechanism to charge for content the owner does not wish to place in the public domain.

The issue here, as in many political issues is that of choice. Content owners, or copyright holders, have the right to decide for themselves if, when, and how much to charge for their works.

The copyright law provides a few exceptions that allow copying under specific exemptions for certain educational and charitable uses and under the aegis of “fair use” of a copyrighted work. In deciding whether a particular use is fair use under the copyright law, one must consider the following:

The purpose and character of the use, including whether it is for commercial or nonprofit educational purposes.
The nature of the copyrighted work (i.e., copying from factual works is tolerated more than copying from more creative fictional works).
The amount of material that is used in relation to the entire work (i.e., the more that is copied, or the more significant the portion that is copied, regardless of the quantity, the less likely that fair use will apply).
The effect of the use upon the potential market for or value of the copyrighted work (i.e., if the use has an adverse impact on the market for the original work, it will not constitute fair use.)

These considerations are wholly applicable to the use of digital goodies. When an illegal BBS downloads an entire work, whether it is in an educational setting or not, that is clearly not a case of fair use.

As is evident by the amount of piracy currently occurring on the Internet, placing copyrighted works on the Net or on a BBS without some type of protection would be unrealistic. Without adequate protection from infringement, only those who were careless or ignorant of the problems would trust confidential or valuable information to a system rife with hackers and thieves who could easily violate the system.

There may be some technological solutions to the problems of protecting intellectual property on networks. The use of access control and encryption technology is seen by many as the best way to ensure widespread use of the NII. Access control ensures that only authorized users gain access to the work, and encryption is a failsafe; even if a cracker gets in, he can't read the content.

Present security on the Internet is not sufficient to protect confidential electronic messages from being intercepted. The coinventor of public key cryptography, Martin Hellman, notes that while the National Security Agency refuses to use the Internet for just this reason, it is the driving force behind restricting public usage of adequate encryption.

There are also non-technological means of protecting digital goodies. While controlling and preventing unauthorized access to copyrighted works through the use of encryption is the most aggressive means of preventing copyright infringements, the SPA has found that educational programs are very effective in deterring unauthorized reproduction and use of copyrighted works. By educating Internet and future NII users—including teachers and students—of the copyright law and the penalties for infringements, copyrighted works placed on these systems may be protected from massive illegal use.

Not only do we need to ensure that users within the United States understand and respect the copyright law, we must also ensure the same understanding on a global level. SPA research shows that while Western countries lead the world in the magnitude of revenues lost in 1993, with U.S. losses estimated at $1.57 billion, the piracy rates in the emerging economies far exceeded this number. In 1993, India and Pakistan had the highest piracy rate at 95 percent, with Korea and Brazil at 89 percent, Malaysia at 88 percent, and Taiwan and Mexico at 82 percent.

To ensure that any copyrighted works placed on the Internet will be protected abroad, stronger intellectual property protection laws must be implemented on a global scale. Through support of U.S. ratification of multilateral agreements, like GATT-TRIPS and NAFTA, that will protect the dissemination of copyrighted works, the United States can continue to provide an example and influence the need for strong intellectual property protection. It is ultimately through implementation and knowledge of strong worldwide copyright laws that we can hope to protect intellectual property on the Internet and the NII.

The evolution of national and global networks cannot be allowed to undermine intellectual property protection. Some contend that tough penalties for infringement can be eliminated in favor of good cryptography on networks, and the development of high moral standards among users who would never dream of copying works illegally.

Well, the times are a-changin'—but not that fast. Copyright laws are a long way from becoming obsolete. Privacy and security are paramount issues, but the concerns of law enforcement about the widespread availability of cryptography cannot be cast aside. And although education to instill proper behavior on the networks is important, it is not a panacea. U.S. software publishers need to rely on the certainty of good intellectual property laws in order to feel comfortable enough to make adequate research and development investments. It is naive to believe that everyone on the networks will behave responsibly.

While technological advances will assist the general public in coming to a greater awareness and respect for intellectual property rights, ideological and cultural differences among the wide variety of users necessitate constant vigilance in the form of strong and progressive intellectual property protection.

Computer Illustration by Bill Dillon.

Kenneth Wasch is the executive director of Software Publishers Association, the principal trade group of the microcomputer software industry, which he founded in 1984. The Washington, D.C.-based organization represents software publishers, developers, distributors, and all those affiliated with the software industry. Wasch is a contributing columnist for Computer Reseller News and has been named for three consecutive years to the MicroTimes list of 100 outstanding leaders in the industry.