Property Rights: Intellectual Property in the Internet Age

Contemporary information systems have severely challenged existing laws and social practices that protect intellectual property. Intellectual property is de­fined as tangible and intangible products of the mind created by individuals or corporations. Information technology has made it difficult to protect intellec­tual property because computerized information can be so easily copied or dis­tributed on networks. Intellectual property is subject to a variety of protections under four legal traditions: copyright, patents, trademarks, and trade secrets.

1. Copyright

Copyright is a statutory grant that protects creators of intellectual property from having their work copied by others for any purpose during the life of the author plus an additional 70 years after the author’s death. For corporate- owned works, copyright protection lasts for 95 years after their initial creation. Congress has extended copyright protection to books, periodicals, lectures, dramas, musical compositions, maps, drawings, artwork of any kind, and mo­tion pictures. The intent behind copyright laws has been to encourage creativ­ity and authorship by ensuring that creative people receive the financial and other benefits of their work. Most industrial nations have their own copyright laws, and there are several international conventions and bilateral agreements through which nations coordinate and enforce their laws.

In the mid-1960s, the Copyright Office began registering software programs, and in 1980, Congress passed the Computer Software Copyright Act, which clearly provides protection for software program code and copies of the original sold in commerce; it sets forth the rights of the purchaser to use the software while the creator retains legal title.

Copyright protects against copying entire programs or their parts. Damages and relief are readily obtained for infringement. The drawback to copyright protection is that the underlying ideas behind a work are not protected, only their manifestation in a work. A competitor can use your software, understand how it works, and build new software that follows the same concepts without infringing on a copyright.

Look-and-feel copyright infringement lawsuits are precisely about the dis­tinction between an idea and its expression. For instance, in the early 1990s, Apple Computer sued Microsoft Corporation and Hewlett-Packard for in­fringement of the expression of Apple’s Macintosh interface, claiming that the defendants copied the expression of overlapping windows. The defendants countered that the idea of overlapping windows can be expressed only in a single way and, therefore, was not protectable under the merger doctrine of copyright law. When ideas and their expression merge, the expression cannot be copyrighted.

In general, courts appear to be following the reasoning of a 1989 case—Brown Bag Software v. Symantec Corp—in which the court dissected the elements of software alleged to be infringing. The court found that similar concept, func­tion, general functional features (e.g., drop-down menus), and colors are not protectable by copyright law (Brown Bag Software v. Symantec Corp., 1992).

2. Patents

A patent grants the owner an exclusive monopoly on the ideas behind an invention for 20 years. The congressional intent behind patent law was to ensure that inventors of new machines, devices, or methods receive the full financial and other rewards of their labor and yet make widespread use of the invention possible by providing detailed diagrams for those wishing to use the idea under license from the patent’s owner. The granting of a patent is deter­mined by the United States Patent and Trademark Office and relies on court rulings.

The key concepts in patent law are originality, novelty, and invention. The Patent Office did not accept applications for software patents routinely until a 1981 Supreme Court decision held that computer programs could be part of a patentable process. Since that time, hundreds of patents have been granted, and thousands await consideration.

The strength of patent protection is that it grants a monopoly on the underly­ing concepts and ideas of software. The difficulty is passing stringent criteria of nonobviousness (e.g., the work must reflect some special understanding and contribution), originality, and novelty as well as years of waiting to receive protection.

In what some call the patent trial of the century, in 2011, Apple sued Samsung for violating its patents for iPhones, iPads, and iPods. On August 24, 2012, a California jury in federal district court awarded Apple $1 billion in dam­ages and prohibited Samsung from selling its new Galaxy 10 tablet computer in the United States. The decision established criteria for determining just how close a competitor can come to an industry-leading and standard-setting product like Apple’s iPhone before it violates the design and utility patents of the leading firm. Samsung subsequently won a patent infringement case against Apple that banned a handful of older iPhone and iPad devices. In 2014, Apple sued Samsung again, claiming infringement of five patents cover­ing hardware and software techniques for handling photos, videos, and lists used on the Samsung Galaxy 5. In 2015, the U.S. Court of Appeals reaffirmed that Samsung had copied specific design patents, but reduced the damages asked by Apple from $2 billion to $930 million. This lawsuit returned to court in May 2018 to consider how to calculate the damages caused by Samsung’s infringement.

To make matters more complicated, Apple has been one of Samsung’s largest customers for flash memory processors, graphic chips, solid-state drives, and display parts that are used in Apple’s iPhones, iPads, iPod Touch devices, and MacBooks. The Samsung and Apple patent cases are indicative of the complex relationships among the leading computer firms.

3. Trademarks

Trademarks are the marks, symbols, and images used to distinguish products in the marketplace. Trademark laws protect consumers by ensuring they re­ceive what they paid for. These laws also protect the investments that firms have made to bring products to market. Typical trademark infringement viola­tions occur when one firm appropriates or pirates the marks of a competing firm. Infringement also occurs when firms dilute the value of another firm’s marks by weakening the connection between a mark and the product. For in­stance, if a search engine firm copies the trademarked Google icon, colors, and images, it would be infringing on Google’s trademarks. It would also be diluting the connection between the Google search service and its trademarks, poten­tially creating confusion in the marketplace.

4. Trade Secrets

Any intellectual work product—a formula, device, pattern, or compilation of data—used for a business purpose can be classified as a trade secret, provided it is not based on information in the public domain. Protections for trade se­crets vary from state to state. In general, trade secret laws grant a monopoly on the ideas behind a work product, but it can be a very tenuous monopoly.

Software that contains novel or unique elements, procedures, or compila­tions can be considered a trade secret. Trade secret law protects the actual ideas in a work product, not only their manifestation. To make this claim, the creator or owner must take care to bind employees and customers with nondisclosure agreements and prevent the secret from falling into the public domain.

The limitation of trade secret protection is that, although virtually all soft­ware programs of any complexity contain unique elements of some sort, it is difficult to prevent the ideas in the work from falling into the public domain when the software is widely distributed.

5. Challenges to Intellectual Property Rights

Contemporary information technologies, especially software, pose severe chal­lenges to existing intellectual property regimes and, therefore, create significant ethical, social, and political issues. Digital media differ from books, periodicals, and other media in terms of ease of replication; ease of transmission; ease of alter­ation; compactness, making theft easy; and difficulties in establishing uniqueness.

The proliferation of digital networks, including the Internet, has made it even more difficult to protect intellectual property. Before widespread use of networks, copies of software, books, magazine articles, or films had to be stored on physical media, such as paper, computer disks, or videotape, creating some hurdles to distribution. Using networks, information can be more widely reproduced and distributed. The BSA Global Software Survey conducted by International Data Corporation and The Software Alliance (also known as BSA) reported that 37 percent of the software installed on personal computers was unlicensed in 2018 (The Software Alliance, 2018).

The Internet was designed to transmit information freely around the world, including copyrighted information. You can easily copy and distribute virtually anything to millions of people worldwide, even if they are using different types of computer systems. Information can be illicitly copied from one place and distributed through other systems and networks even though these parties do not willingly participate in the infringement.

Individuals have been illegally copying and distributing digitized music files on the Internet for several decades. File-sharing services such as Napster and, later, Grokster, Kazaa, Morpheus, Megaupload, and The Pirate Bay sprang up to help users locate and swap digital music and video files, including those protected by copyright. Illegal file sharing became so widespread that it threat­ened the viability of the music recording industry and, at one point, consumed 20 percent of Internet bandwidth. The recording industry won several legal bat­tles for shutting these services down, but it has not been able to halt illegal file sharing entirely. The motion picture and cable television industries are waging similar battles. Several European nations have worked with U.S. authorities to shut down illegal sharing sites, with mixed results.

As legitimate online music stores such as iTunes and streaming services such as Pandora expanded, illegal file sharing significantly declined. The Apple iTunes Store legitimized paying for music and entertainment and created a closed environment from which music and videos could not be easily copied and widely distributed unless played on Apple devices. Amazon’s Kindle also protects the rights of publishers and writers because its books cannot be cop­ied to the Internet and distributed. Streaming of Internet radio, on services such as Pandora and Spotify, and Hollywood movies (at sites such as Hulu and Netflix) also inhibit piracy because the streams cannot be easily recorded on separate devices and videos cannot be downloaded so easily. Despite these gains in legitimate online music platforms, artists and record labels have ex­perienced a 50 percent decline in revenues and the loss of thousands of jobs since 2000.

The Digital Millennium Copyright Act (DMCA) of 1998 also provides some copyright protection. The DMCA implemented a World Intellectual Property Organization Treaty that makes it illegal to circumvent technology- based protections of copyrighted materials. Internet service providers (ISPs) are required to take down sites of copyright infringers they are hosting when the ISPs are notified of the problem. Microsoft and other major software and information content firms are represented by the Software and Information Industry Association (SIIA), which lobbies for new laws and enforcement of ex­isting laws to protect intellectual property around the world. The SIIA runs an antipiracy hotline for individuals to report piracy activities, offers educational programs to help organizations combat software piracy, and has published guidelines for employee use of software.

Source: Laudon Kenneth C., Laudon Jane Price (2020), Management Information Systems: Managing the Digital Firm, Pearson; 16^th edition.