Intellectual Property In The Digital Economy

If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density at any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property.

– Thomas Jefferson

1. Introduction

With the coming of the Internet and its evolution into a commercial platform, the law on Intellectual Property Rights (“IPR”) has itself evolved rapidly to adapt to the new economy. This is perhaps one area of law that has been pro-active in development, at least in the international arena, to meet the challenges of technology and commerce.

Much of the progress has been industry driven. The movie, the music and the software industries are almost totally dependant on IP rights for revenue. They have been adapt at lobbying international organisations, like the World Intellectual Property Organisation (“WIPO”) and the World Trade Organisation (“WTO”) to encourage member states to enact legislation that strengthens the rights of the IP owners.

Among the important recent developments are:

  1. the WIPO Copyright Treaty (“WCT”) and the WIPO Performances and Phonograms Treaty (“WPPT”) adopted in December 1996;
  2. the establishment of the WIPO Standing Committee on Information Technology in 1998;
  3. the Diplomatic Conference on the Protection of Audiovisual Performances in December 2000[ref]Its aim is to create a new international treaty to safeguard the rights of performers against unauthorised use of their performances in audiovisual media, be it traditional or digital.[/ref]; and
  4. the Joint Recommendation Concerning Provisions on the Protection of Marks, and Other Industrial Property Rights in Signs, on the Internet adopted in September 2001.

While much progress has been made in the international arena, adoption into domestic national legislation has been slow. Understandably so if one considers (as an example) the controversy surrounding the anti-circumvention provisions of the Digital Millennium Copyright Act of the USA[ref]See the website of the Electronic Frontier Foundation at http://www.eff.org[/ref]. To address this, a strategy has been adopted by the United States for IPR matters to be included in bilateral agreements or treaties to ensure adoption into the national legislation[ref]In the Singapore context, the inclusion of the Intellectual Property Chapter in the US-Singapore Free Trade Agreement is an example of such a bilateral agreement.[/ref].

2. The Digital Economy

Notwithstanding the “dot-gone” phenomenon, the Internet is still a valuable platform for commerce that businesses cannot ignore. Its strengths (worldwide reach, cheap international telecommunication etc) are still valid reasons for businesses to adopt the Digital Economy, albeit with caution and study.

There is no such thing as international intellectual property rights. Such rights are conferred by the laws of each country. However, due to the efforts of international organisations like WIPO and bilateral agreements or treaties, there is cross-recognisation and harmonisation, in appropriate circumstances, of the laws in some countries. This weakness is one of the greatest legal challenges of the Digital Economy.

3. IPR Issues in the Digital Economy

The law of Intellectual Property is an attempt by man to “confine and exclusively appropriate” ideas[ref]Somewhat contrarian to the opening quotation from Thomas Jefferson.[/ref] through the application of laws. The tension between the nature of ideas to “freely spread from one to another over the globe, for the moral and mutual instruction of man and improvement of his condition“ and the need “to ensure that the rights of creators and owners of intellectual property are protected worldwide”[ref]Taken from “General information about WIPO”, WIPO Publication No 400(E) ISBN 92-805-0761-3[/ref] so as to spur “human creativity, pushing forward the boundaries of science and technology and enriching the world of literature and the arts“ gives rise to the many issues that plague IP rights. These issues are further complicated by different treatments in the domestic laws of various countries. Some of these issues are discussed below.

(a) IPR Ownership: Open Source Licenses

If you paid someone to build a website for you, you expect to own it. Unfortunately, this may not the case. Often the web developer makes use of third party software, scripts or images or the web developer may wish to retain rights over such IPR. Thus it is important to examine the contract to determine what rights you have over your website and its various components.

There is a strong movement for open source licensing. There are a whole variety of open source public licenses[ref]A good site that explains the various types of licenses is http://www.gnu.org/philosophy/license-list.html[/ref]. The term “open source” commonly refers to a software program or set of software technologies that are made widely available by an individual or group in source code form for use, modification and redistribution under a license agreement. Open source licensing has been commonly used in connection with large-scale commercial-quality software projects in recent years, partly due to the Internet, because it has helped make them more cost effective and efficient for programmers to collaborate on development projects and distribute software among themselves and to customers.

However open source comes with a number of risks. The most obvious risk is potential liability for IPR infringement[ref]The SCO Linux litigation in the USA is a good example of this risk. SCO Linux claims that Linux contains codes, the copyright of which belongs to SCO Linux. Whether SCO Linux succeeds is not really important since the confusion, fear and uncertainty arising from such litigation may be sufficient to discourage people from using Linux.[/ref]. The typical open source project is an effort that contains contributions from many people. It creates multiple opportunities for contributors to introduce infringing code and makes it almost impossible to audit the entire code base. The risks of this development process are largely borne by the licensees. Contributors do not vouch for the cleanliness of the code they contribute to the project. In fact, the typical open source license is designed to be very protective of the contributor and does not include any intellectual property representations, warranties or indemnities. It contains a broad disclaimer of all warranties that benefits the licensor/contributors. Further, it would be difficult to recover against the licensor for having licensed infringing code. Many of the most prominent open source projects appear to be owned by entities that do not have the financial means to answer an IPR infringement lawsuit.

Open source licenses also do not contain the kinds of representations and warranties of quality or fitness for a particular purpose that commercial software agreements have. Again, the process of developing open source software can contribute to problems in this area. Some open source software projects (like Linux) have one or more stewards who monitor code quality and track bugs. Other initiatives, however, are really more the product of weekend and after-hours hobbyists and do not enjoy the same code quality. Without contractual commitments of quality or fitness, the licensee must accept the risk that the software contains fatal errors, viruses or other problems that may have business consequences.

Developers looking to build a business on open source software also need to consider the problems associated with derivative works created by them. Some open source license forms, such as the General Public Licence (“GPL”), require developers to provide free copies of their derivative works in source code form for others to use, modify and redistribute in accordance with the terms of the GPL for the unmodified program. Developers must be concerned that their “value added” programs might some day be viewed as “derivative works” and need to be made available to the world in source code form for free.

While there are benefits to open source, developers and website owners have to be aware of the about before laying claim to IPR over their website.

(b) Domain Name Disputes

A domain name is an Internet address that refers to a particular server connected on the Internet. Domain names are important in the Digital Economy because they serve as identifiers and address to the websites. Domain names are registered on the first-come, first-served basis. However, this creates a legal conflict with IPR, ie trademarks and business goodwill. Domain name disputes can be divided into: (a) cybersquatting, (b) name conflict, and (c) parody sites.

Cybersquatting happens when a party registers domain names without the intention of using it himself but for the purpose of selling them to other parties for a price. This includes trademarks, well known business names as well as popular generic terms such as “books.com” and “toys.com”. A classic cybersquatting case is British Telecommunications Plc v. One in A Million Ltd[ref][1998] 4 All ER 476, [1999] 1 WLR 903, [1999] RPC 1[/ref]. In this case, the defendant registered famous trademarks as domain names for the sole purpose of selling these names to the trademark owners for a hefty fee. The English Court of Appeal held that such activities constituted trademark infringement.

Name conflict happens when two or more parties claim a legitimate right to use a domain name. Often, their claims rest on trademark rights or to first registration. The U.K. case of Pitman Training Limited and PTC Oxford Ltd v Nominet UK Ltd and Pearson Professional Ltd[ref]Cite: Unreported, 22 May 1997. Court: Chancery Division. Judge: Sir Richard Scott V-C.[/ref] is an example of this. In this case the dispute was about the “pitman.co.uk” domain name. Both Pitman Training and Pearson Professional have legitimate rights to use the Pitman name. In February 1996 Pearson sent a request to Nominet (the UK body responsible for the allocation for the “.uk” domain) for registration of the domain name “pitman.co.uk” for use in their publishing business. The application was noted as received, and confirmed on 21 February 1996.

However, in April 1996, Pitman Training enquired as to whether the domain name “pitman.co.uk” was still available for allocation, and on being told that it was, duly registered it to their business. Pitman Training started to use the domain name in July. On the grounds that Nominet operated a first-come, first-served policy to the allocation of domain names, the court ordered that the name revert to Pearson.

The last category is based on a parody of a mark or domain name. An example would be the registration of “whitehouse.com” by a company dealing with pornography as a parody to the United States president’s official website is at “whitehouse.gov”. Parody is protected speech under United States constitutional law. However, the position is not as clear in Singapore.

On the international front, the Internet Corporation for Assigned Names and Numbers (ICANN) has issued a Uniform Domain Name Dispute Resolution Policy in 1999[ref]Available at http://www.icann.org/udrp/udrp-policy-24oct99.htm[/ref]. In Singapore, SGNIC has issued its own Singapore Domain Name Dispute Resolution Policy in November 2001[ref]Available at http://www.nic.net.sg[/ref]. The Singapore policy is based on ICANN’s uniform policy.

It is pertinent that e-commerce developers check the trademark register before registering a domain name. Successful registration of a domain name does not mean that there would not be a trademark infringement. On the other hand, trademark owners who are contemplating on going on the Internet should consider early registration because the possibility that the required domain name has been registered is high. This is particularly true if the trademark is made up of common words.

(c) Deep Linking & Framing: Infringing Copyright & Trespass

The practices of “deep linking” (when one site links to a page of another site other than the other site’s home page) and “framing” (when one site places a page of another site within frames of the first site) has been a great source of controversy in the Internet community.

Both practices allow the user to bypass the home page of the linked site, a page that often contains advertising, terms and conditions and proprietary information relevant to the use of the linked site. Often users may not even realise that they have been relocated to a new web site.

In the USA, the key case is Ticketmaster Corp v Tickets.Com Inc[ref]U.S. District Court, Central District of California, March 27 2000. Judgment of US District Judge Harry Hupp.[/ref]. While Ticketmaster made many claims, the relevant ones concern copyright infringement and trespass. Judge Hupp held that (a) there was no copyright infringement since “hyperlinking does not itself involve a violation of the Copyright Act since no copying is involved. The customer is automatically transferred to the particular genuine web page of the original author. There is no deception in what is happening. This is analogous to using a library’s card index to get reference to particular items, albeit faster and more efficiently” and (b) there was no trespass because of the US doctrine of preemption. As such the judge dismissed Ticketmaster’s claim for trespass and copyright infringement.

There is one reported case in Singapore concerning deep-linking, Pacific Internet v Catcha.com[ref]Pacific Internet Ltd v Catcha.com Pte Ltd at [2000] 3 SLR 26. The reported judgment was on Catcha.com’s application to strike out Pacific Internet’s case and not on the substantive issues of trespass, copyright infringement, passing off etc.[/ref]. Like in the Ticketmaster Case, the judgment also concerns preliminary issues. However, the learned judge came to a different conclusion that the Ticketmaster Case. He decided that in the Ticketmaster Case, the trespass claim was dismissed because of the US doctrine of preemption, a doctrine that does not exist in Singapore. He also decided that if Pacific Internet’s allegations can be proved, then Catcha.com’s access is unauthorised and a claim for trespass may succeed.

In the United Kingdom, the key case is The Shetland Times Ltd v. Dr Jonathan Wills and ZetNews Ltd[ref](1996) S.C.L.R. 160[/ref]. Both parties offered Internet-based news services. In October 1996, “Shetland News” reproduced verbatim a number of headlines from the online edition of the Shetland Times as hypertext links to the corresponding news articles. This resulted in users bypassing the homepage (which contained all the advertisements) of the Shetland Times website. Shetland Times argued that Shetland News infringed their copyright. Granting an interim interdict (interlocutory injunction), the judge ordered that until the final judgment, all links to the “Shetland Times” from Shetland News website should be removed.

There is nothing in the decision to suggest that copyright can be employed to prevent the use of hypertext links from one site to another, and the legal question was not whether links infringe copyright, but whether headlines are literary works and deserve copyright protection. The case has been settled out of court in November 1997, so there is no final judgment that can be used as a legal precedent for future linking cases.

So, does this mean that deep-linking is permitted? Judge Hupp leaves open the possibility for a claim of copyright infringement and unfair competition in cases where the user could be confused as to the source of content or be oblivious to the fact that he had been linked into the interior of another site. How about where there is no confusion as to source, where the user knows he has been transported into another site? I believe that the answer will still be “No”. Taking the cue from the learned Judge in the Pacific Internet Case, “It is not incredible and certainly not ridiculous to assert that the plaintiffs have consented to a visit to the web sites, and even downloaded a copy of it for personal use, but have not consented to the kind of commercial exploitation as alleged, in which case the access may be unlawful.”

To control deep-linking or framing, have a linking agreement (or include it as part of your terms of use) on your site. Specify in this agreement the pages that you allow others to link to and the description you want for that link. An appropriately drafted clause will certainly strengthen your position that you have not consented to linking or framing for the purposes of commercial exploitation.

(d) Metatagging & Spamdexing

Most web pages contain hidden key words and phrases, called “metatags”, that are used by search engines. When a web surfer uses a search engine, it looks for matches between the search term entered and the metatags of millions of web pages. When the search term matches a given web page’s metatag, the web page shows up as a “hit” among the list of search results. The web surfer can jump directly to one of the listed sites by simply clicking on it.

However, some companies have included competitors’ trademarks as metatags in their web pages, such that a search for “A Co.” results in a listing for “Z Co.”. Because of the importance of protecting the goodwill of one’s valuable trademarks, companies have begun to investigate metatag use of their marks or company names and, when appropriate, to bring suit to stop the use of their marks as metatags for their competitors’ websites.

“Spamdexing” is the practice of including information (including the trademark of others) in a Web page that causes search engines to index it in some way that produces results that is biased in favour of the website. Sometimes, the more creative will be able to think of ways to “legitimately” place such words in their webpages, eg. a webpage by A Co. will have an article commenting on products of Z Co. in which Z Co.’s name is found all over the article.

Courts in USA have found that the inclusion of a competitor’s trademarks (as metatags or for spamdexing) may, in appropriate situations, constitute trademark infringement, unfair competition, and/or false advertising. The small body of case law also indicate that the courts in USA are reluctant to completely stop the use of metatags containing third-party trademarks as long as it can be shown that there is a legitimate reason for such use. Much depends on the metatag itself and whether it is a trademark only or is also an ordinary word which a person would use in attempting to find information on the Internet. In addition, courts will consider whether the adoption of the metatag in question is done for the purpose of misleading and, even if that is the purpose, whether there is still a legitimate rationale for the use of the term as a metatag.

(e) Business Method Patents

Until recently “business methods” were considered per se unpatentable. All of this changed on July 23, 1998 when the U.S. Court of Appeals for the Federal Circuit, decided the case of State Street Bank v Signature Financial Group[ref]149 F.3d 1368 (Fed. Cir. Jul. 23, 1998).[/ref]. This case, as well as later cases, ruled that automated business methods can be patentable inventions. Following this case, the number of business method patents filed in USA, Europe, Japan and Singapore increased greatly.

The State Street Bank case concerns a patent that covered an automated system for transferring assets between a number of mutual funds pooled together for tax reasons as a partnership. The court ruled that, the automated business method invention at issue in the State Street Bank case to be patentable.

With the maturing of the Internet, many Internet-related companies, in the wake of the State Street Bank case began to focus their patent efforts more on the new business methodologies being developed. Because many of the more successful Internet companies were creating new and compelling business models, protecting these models with patents became quite imperative. Two well-known examples are the Priceline.com and the Amazon.com patents.

Priceline.com obtained a patent on “reverse auctioning,” which is at the core of the company’s business model – consumers may bid via the Internet on, for example, airline tickets which may or may not be available, and if the bid is accepted, a purchase transaction is automatically completed.

Amazon.com obtained a patent on its so-called “1-Click” purchasing technology, whereby users can enter their billing information once and thereafter purchase books and the like via the Internet with one click of the mouse.

Both Priceline.com and Amazon.com filed patent infringement lawsuits against third-parties, Priceline.com sued Microsoft, and Amazon.com sued its online competitor Barnesandnoble.com. Amazon.com was able to convince the judge to grant an injunction against Barnesandnoble.com, effectively forcing Barnesandnoble.com to remove its infringing functionality. This injunction was subsequently lifted[ref]In lifting the injunction, the court concluded, “While it appears on the record before us that Amazon has carried its burden with respect to demonstrating the likelihood of success on infringement, it is also true that BN has raised substantial questions as to the validity of the ‘411 patent. For that reason, we must conclude that the necessary prerequisites for entry of a preliminary injunction are presently lacking. We therefore vacate the preliminary injunction and remand the case for further proceedings.“[/ref].

The court in the State Street Bank case ruled that patent laws were intended to protect any method, whether or not it required the aid of a computer, so long as it produced a “useful, concrete and tangible result”. Thus for a business model to be patentable, it must meet the following:-

  1. The method must fall within the classes of patentable subject matter. This requirement is easy to meet since anything that is created by man falls within these classes. Laws of nature, natural phenomena, and abstract ideas do not.
  2. The method must be useful. This requirement is also fairly easy to satisfy, because any functional purpose will suffice. A business need only demonstrate that its method provides some concrete tangible result.
  3. The method must be novel. That means it must have an aspect that is different in some way from all previous knowledge and inventions.
  4. The method must be non-obvious, meaning that someone who has ordinary skill in the specific technology could not easily think of it.

There is also the question whether patent offices around the world are properly equipped to examine business method patent applications to determine if these processes are novel and nonobvious. One reason why patent examiners are considered ill-equiped is that, when determining novelty, they have traditionally reviewed past patents and other information in their libraries. Because the Internet revolution is new, this almost guarantees that the patent offices will not detect similar Web-based methods and software processes developed recently.

While many people continue to question the appropriateness of patents for business methods, nobody questions the power that patents may provide to their owners. The rights granted to a patent owner – the ability to exclude others from making, using, selling, offering to sell and importing – at best present an incredible opportunity to the owner, and at worst present a competitor with a major business obstacle.

5. Fair Use Doctrine And the Internet

“Fair Use” is a US doctrine that allows people to make copies of copyrighted materials for certain uses such as academic research, critical review, parody and satire, teaching, and news reporting. Equivalent principles are found in various other countries. In Singapore, a similar concept of “fair dealing” is found in Sections 35 to 40 of the Copyright Act.

The following types of uses are usually deemed fair use under the USA legislation:

  1. Criticism and comment (example: quoting a work in a review or criticism for purposes of illustration or comment)
  2. News reporting (example: summarising an address or article, with brief quotations, in a news report)
  3. Research and scholarship (example: quoting a short passage in a scholarly, scientific or technical work for illustration or clarification of the author’s observations.
  4. Nonprofit educational uses (example: photocopying of limited portions of written works by teachers for classroom use)
  5. Parody – that is, a work that ridicules another, usually well-known, work by imitating it in a comic way

The fair dealing provisions in the Singapore Copyright Act are more limited. Fair dealing is only permitted for the purpose of:

  1. research and private study;
  2. criticism or review;
  3. reporting current events;
  4. judicial proceedings or professional advice;
  5. back-up of a computer program; and
  6. inclusion in collections for use by educational institutions.

The “fair use” doctrine has been described as “the most significant and, perhaps, murky of the limitations on a copyright owner’s exclusive rights”. The doctrine has its roots in more than 200 years of judicial decisions in USA and has been embodied in Section 107 of the US Copyright Act[ref]Reproduced here: Section 107. Notwithstanding the provisions of sections 106 and 106A, thefair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include:-

i. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
ii. the nature of the copyrighted work;
iii. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
iv. the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.[/ref]. Fair use is an affirmative defense to an action for copyright infringement. It is potentially available with respect to all manner of unauthorised uses of all types of works in all media. When the fair use doctrine applies to a specific use of a work, the person making fair use of the work does not need to seek permission from the copyright owner or to compensate the copyright owner for the use of the work.
It has been used in:-

  1. the Sklyrov Case[ref]Dmitry Sklyarov was arrested at DefCon, a Computer and Internet conference for hackers in Las Vegas, on 16th July 2001, after he delivered a presentation on the flaws of the security features of Adobe’s eBooks software. In August 2001, Sklyarov was charged for breaching the anti-circumvention provisions of the DMCA, the first person every to be so charged. Sklyarov’s employer, ElcomSoft Co Ltd, develops software to recover computer passwords and provide computer security. They claim that their software and consulting services are used by many legitimate organisations including U.S law enforcement agencies. They also have software that exploits the flaws in Adobe’s software.[/ref] to argue that the ElcomSoft’s software allows users who have bought an eBook to:
    1. transport the eBook to the user’s laptop or a PDA or a computer other than the one on which the eBook was first downloaded;
    2. make a back-up copy as a protection against hard disk failure or in order to prepare for an operating system upgrade;
    3. cut and paste snippets of eBooks for use in academic research, educational and teaching purposes, critiques, commentary and parody;
    4. print the eBook or a section of it, in order to read it; and
    5. use alternative operating systems, such as Linux, and viewing devices (such as PDAs) to view eBooks (Adobe’s eBook Reader only operates on PCs and Macs).
  2. the DeCSS Cases to argue that the Digital Millennium Copyright Act is still subject to the fair use doctrine and that the comments and links by online magazines is fair use.
  3. the Napster and Napster-Look-A-Like Cases to argue that there are no direct infringers, ie that “All of the Users are Innocent Fair Users” or that the technology is capable of substantial non-infringing (fair) uses.

Although there is very little that an IPR holder can do about such challenges, awareness will avoid being caught by surprise.

6. Validity of Online Contracts: Webwrap/Clickwrap contracts

The Ticketmaster Case also highlights another important issue: the validity of online contracts. Ticketmaster relied on an online contract with terms prohibiting deep-linking. Judge Hupp has this to say about online contract: “Many web sites make you click on ‘agree’ to the terms and conditions before going on, but Ticketmaster does not. Further, the terms and conditions are set forth so that the customer needs to scroll down the home page to find and read them. Many customers instead are likely to proceed to the event page of interest rather than reading the ‘small print’. It cannot be said that merely putting the terms and conditions in this fashion necessarily creates a contract with anyone using the web site.”

Online contracts play a pivotal role in the management and protection of IP rights on the Internet because of the differing laws on IPR validity and enforcement. However, the validity and enforcement of these online contracts are itself the subject of uncertainty[ref]There maybe even jurisdictions that outright prohibit online contracts although I do not know of any.[/ref].

In an early initiative to introduce certainty with respect to the legal environment for electronic contracts, the United Nations Commission on International Trade Law (UNCITRAL) completed work on a Model Law on Electronic Commerce in 1996. The Model Law aimed to establish equal treatment under the law for online and off-line contracts (i.e., a “media neutral environment”), by providing norms and rules that serve to validate contracts formed through electronic means, define the characteristics of a valid electronic writing and signature, and provide guidance on the legal recognition of data messages (i.e., the admissibility and evidential weight to be given to data messages). Contracts in electronic commerce should continue to meet with the traditional, technology-neutral principles that are necessary for validity. The establishment of these principles has usually been the province of national or local law.

In Singapore, the Electronic Transactions Act (“ETA”) deals with online contracts. The ETA is modeled on the Uncitral Model Law on Electronic Commerce.

In practice, online contracts can appear in many forms:

  1. as terms and conditions that can be viewed by clicking on an easily located link (an example could be the Terms of Use for a Website); and
  2. as terms and conditions that a user has to review and do a specified act, like clicking on a button, before moving to the next page (an example could be the terms and conditions of the software licence before downloading the software).

Although not terms of art, I would call contracts under type (a) “web-wrap contracts” and those under type (b) “click-wrap contracts”[ref]Many writers use one to mean the other without distinction since the terms are not terms of art. Care should be exercised when reading articles to determine how the terms are used.[/ref].

Since online contracts created by “web-wrap” or “click-wrap” are standard form contracts prepared by or for one party (usually the vendor), the Unfair Contract Terms Act applies. If goods are sold, the Sale of Goods Act will also apply.

From the various cases on shrink-wrap contracts, click-wrap contracts are most likely to be enforceable if the buyer has (a) clear notice of the applicable contract terms, (b) a reasonable chance to review those terms prior to completing a purchase, and (c) to perform an act to affirmatively indicate consent to those terms before completing the purchase (hence the requirement to click on an accept button). In addition, it is advisable to provide the buyer with an easy option that will enable the buyer to print out a copy of the click-wrap contract to keep for future reference.

However to require this for all surfers to your website (even if they are not conducting any commercial transaction) may be too inconvenient. The solution may then be to have an easily located link to your terms and conditions with introductory words like “Please read the terms of use at this link. By proceeding further into the website, you are deemed to have read and agree to be bound by such terms of use.”

The increasing recognition under the law of electronic means for contracting is an important step that will facilitate the continuing development of electronic commerce. However, even when parties observe the requisite contractual principles and formalities in their online agreements, this does not guarantee that they have minimised their potential problems in contracts for the protection and exploitation of intellectual property. Questions of jurisdiction, applicable law and enforcement should be carefully considered “at the time of contracting” to bring added certainty, and where possible limit potential exposure, for businesses and consumers engaging in electronic commerce on global networks.

7. Digital Rights Management

Digital Rights Management (“DRM”) is a collection of tools, technologies and processes that protect intellectual property rights in digital content commerce. The digital content or material can be e-books, software, movies, pictures, music or any other copyrighted work that can be reduced to digital form.

The digital content is electronically signed using digital signatures, encrypted using a Public/Private Key Infrastructure (“PKI”). Buyers of the digital content can check online with a trusted third party to determine who the creator/publisher of the material is and whether the store is an authorised distributor/seller. Once the buyer is satisfied with the digital material, he can then purchase it online. The process also authenticates the identity of the parties and the transaction using PKI and digital certificates. This ensures non-repudiation of the transaction. Purchasing may involve downloading the digital material to the buyer’s own computer. The digital material is usually encrypted and requires a form of access control using a code or key to decrypt it. This ensures that only the buyer or other authorised persons can view the material. Such access controls may also prevent unauthorised copying of the digital material.

The digital material may also contain some form of invisible watermark that identifies the creator and the publisher of the work. Sometimes the watermark also identifies the buyer. The terms of the sale/distribution may also be contained within or referred to by the digital material using rights specification language (“RSL”). RSL refers to the mechanisms for describing the creator’s and/or publisher’s rights associated with the digital material, be it pay-per-view, free preview or other business models. RSL helps in identifying when an infringement has occurred.

It must be remembered that DRM assists in the distribution of copyrighted digital content. DRM is the “technological adjunct” to the legal framework for digital e-commerce and copyright laws. As an illustration, watermarks and RSL identifies the participants and the terms of a transaction. Software called web crawlers can search the web and read these watermarks and RSL to locate illegal content.

While such technology does not prevent the illegal distribution of intellectual property[ref]Any technical solution can be cracked with sufficient time and resources. The solution WIPO has proposed is to have legislation that prevents the unauthorised development and use of such cracks.[/ref], it does enable the detection of illegal copies and therefore make easier the investigation and enforcement of copyright laws. Thus, in addition to the existing framework for copyright enforcement, legislation specific to DRM must also be in place.

The WCT and the WPPT contain provisions obligating member states (a) to prevent circumvention of technological measures (“TM”)[ref]”Technological Measures” have been variously defined in each country’s legislation. WIPO does not have a definition. Generally, the phrase refers to technologies, systems or programs used to identify and protect copyrighted works.[/ref] used to protect copyrighted works, and (b) to prevent tampering with the integrity of rights management information (“RMI”)[ref]The WCT defines “Rights Management Information” as “information which identifies the work, the author of the work, the owner of any right in the work, or information about the terms and conditions of use of the work, and any numbers or codes that represent such information, when any of these items of information is attached to a copy of a work or appears in connection with the communication of a work to the public”. The WPPT has an equivalent definition.[/ref]. These obligations serve as “legal adjuncts” to DRM technology. They provide the legal protection to DRM systems that the international copyright community deems critical to the safe and efficient exploitation of works on open access networks.

Provisions covering these 2 areas are found in the USA Digital Millennium Copyright Act, 1998 (“DMCA”) and in the EC Copyright Directive (Directive 2001/29/EC). The Singapore Copyright Act only contains provisions preventing the tampering of RMI.

Perhaps the most interesting cases involving DRM and the DMCA are the DeCSS Cases concern posting on the Internet of the DeCSS code. With this code, it is possible to descramble the files on commercial DVDs. The DVD industry (represented by an association “DVD-CCA”) and the MPAA quickly responded by trying to prevent the CSS decryption programs from being distributed on the Internet. They allege that such programs amount to theft of trade secrets, copyright infringement, and/or trafficking in technology that circumvents DRM systems.

The people who put the DeCSS code on the Internet claim that the code enables fair use of the DVD and facilitates the playing of legitimate DVDs on unsupported operating systems like Linux. Several cases were commenced by either DVD-CCA or the movie studios against persons who had posted the codes on the Internet and others who had hyperlinks to such codes. These cases test the scope and constitutionality of the DMCA’s anti-circumvention provisions, whether posting or linking to site with the DeCSS code violates the Act. In one case (Universal City Studios, Inc. v. Reimerdes) an injunction was granted on 17 August 2000 prohibiting such linking. Preliminary injunctions have also been granted in some of the other cases.

The RMI provisions are not without their own problems. Take the Singapore legislation as an example[ref]Many of the issues here are not peculiar to Singapore and exist in other legislation as well.[/ref]. The definition of RMI in s.260(4) is wide. My name and other particulars on an electronic copy of this article would be RMI and if someone removes it, there will be a breach of s.260(2). There is no requirement for the digital material or the RMI to be encrypted or secured. It can be said that since there is no criminal penalty at present, this is not a problem. However, one must question whether the civil remedies provided is “adequate legal protection and effective legal remedies” as required under the WCT and WPPT. If it is not, then Singapore will have to pass further legislation if she wants to comply with WIPO requirements. In any even, under the US-SFTA, Singapore is obliged to pass legislation imposing criminal penalties for intentional infringement.

It is likely that in digital content commerce, there will be click-wrap contracts[ref]Online agreements that require a user to click on a button to signify his acceptance of the terms.[/ref] with terms and conditions governing the use of the digital materials concerned. Sometimes, the terms and conditions of use appear in the digital material itself[ref]They can appear either as part of the text of the digital material or in the rights specification language.[/ref]. Most (if not all) of such agreements already have provisions that disallow removal of RMI. Most go beyond the requirements of s.260. How do the terms of such agreements and that of s.260 interact? Of course, for persons who are not parties to such an agreement and who remove or alter the RMI, the plaintiff will have to rely on s.260[ref]It is possible to rely on tort although s.260 is a much more straightforward route.[/ref]. Otherwise, I envisage the providers of RMI will sue on the agreement (where the obligations are stricter and the remedies wider) and rely of s.260 as an alternative course of action.

This brings us to the next issue: Who can sue? Section 260(2) says “the person who provides the rights management information”. This can either be the copyright holder, the publisher, an agent or even the DRM service provider. This becomes more complicated if the person who provides the RMI is different from the person who is distributing the digital material. The former has to rely on s.260 and may not be able to rely on the agreement while the latter will be able to rely on any click wrap agreement but not s.260. Of course this shortcoming can be addressed with the appropriate contractual clause.

What happens if someone removes the RMI but not for the purpose of infringing the copyright of the digital work, an essential ingredient of s.260. An example will be a library removing the RMI (with the consent of the copyright holder) from digital materials to ensure that the archived materials will continue to be viewable after the technology becomes obsolete. Clearly there will be no breach of s.260(2). However, what if someone obtains a copy of this sanitised digital material and then (knowing the circumstances why the RMI was removed) distributes it? There may not be any breach of s.260 although there is infringement of copyright.

Remedies are another issue. Although s.261(1) allows a plaintiff to claim for damages, I fail to see how any damage will arise solely from a breach of s.260(2). Any damage that will arise will be the result of infringement of copyright of the underlying digital material. While s.261(2) allows the court to order the delivery up of an article (ie. the program?) by means of which the RMI is removed, can the court also grant an injunction preventing that person from using the same software to remove the RMI from other digital materials? If so, Singapore may have anti-circumvention legislation via the “backdoor”. This of course will be academic shortly, again thanks to the US-SFTA.

In Singapore, the laws on DRM have few requirements giving a free hand to developers of the technology to be flexible, enabling them to meet the changing demands of copyright holders and their consumers. The legislation is independent of any particular DRM system or its underlying technology. Singapore is also obliged under the US-SFTA to enact the more anti-circumvention legislation. Hopefully, with the lessons from the DMCA experience in the USA, the more controversial issues can be avoided. At present, DRM providers may have to rely on the Computer Misuse Act[ref]Since TM circumvention measures may involve alterations in computer software, its output or in electronic files or programs, an offence under s.5 (Unauthorised modification of computer material) of the Computer Misuse Act. See also my earlier comment on “back-door” introduction of anti-circumvention legislation.[/ref] to prosecute any person who makes use of circumvention technology to modify any digital materials.

Notwithstanding the criticisms of DRM, to the writers, artists, musicians and software developers, DRM is an important tool to help manage copyright in the digital world. The balance is not to let it stifle research and development. These can be safeguarded through other mechanisms like compulsory licensing or limited statutory exceptions which legislation will have to enact.

8. Conclusion

It can be seen from a quick tour of the IPR landscape in the Digital Economy that there are many legal issues and pitfalls for the unwary. To maximise safeguards for your IPR:-

  1. understand, identify and monitor the legal issues and pitfalls;
  2. develop policies to identify, develop, enhance and protect your IPR;
  3. utilise suitable legal tools like asserting copyright, registering patents & trademarks and using suitable click-wrap contracts; and
  4. utilise suitable technological measures for IPR protection.