Chapter 6:

Intellectual Property

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Chapter Overview (1/2)

• Introduction
• Intellectual property rights
• Protecting intellectual property
• Fair use
• New restrictions on use

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Chapter Overview (2/2)

• Peer-to-peer networks and cyberlockers

• Protections for software
• Open-source software
• Legitimacy of intellectual property
protection for software
• Creative Commons

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6.1 Introduction

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Information Technology Changing
Intellectual Property Landscape
• Value of intellectual properties much greater than
value of media
– Creating first copy is costly
– Duplicates cost almost nothing
• Illegal copying pervasive
– Internet allows copies to spread quickly and widely
• In light of advances in information technology,
how should we treat intellectual property?

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6.2 Intellectual Property Rights

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What Is Intellectual Property?

• Intellectual property: any unique product of the

human intellect that has commercial value
– Books, songs, movies
– Paintings, drawings
– Inventions, chemical formulas, computer programs
• Intellectual property ≠ physical manifestation
• Does right to own property extend to intellectual
property?

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Property Rights
• People have a right…
– to property in their own person
– to their own labor
– to things which they remove from nature through
their labor
• As long as…
– nobody claims more property than they can use
– after someone removes something from common
state, there is plenty left over

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Benefits of Intellectual Property
Protection

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Limits to Intellectual Property Protection

• Giving creators rights to their inventions

stimulates creativity
• Society benefits most when inventions in
public domain

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Prices Fall When Works Become
Public Domain

Table from “Letter to The Honorable Senator Spencer Abraham,” by Randolph P. Luck from LUCK’S
MUSIC LIBRARY. Copyright © 1996 by Randolph P. Luck. Reprinted with permission. 1-11
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6.3 Protecting Intellectual Property

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Trade Secret
• Confidential piece of intellectual property that
gives company a competitive advantage
• Never expires
• Not appropriate for all intellectual properties
• Reverse engineering allowed
• May be compromised when employees leave
firm
• a digital safe that's encased in two feet of
concrete and monitored 24 hours a day by a
video and motion detection surveillance system.
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Trademark, Service Mark

• Trademark: Identifies goods

• Service mark: Identifies services
• Company can establish a “brand name”
• Does not expire
• If brand name becomes common noun,
trademark may be lost
• Companies advertise to protect their trademarks
• Companies also protect trademarks by
contacting those who misuse them
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Screenshot by Xerox. Copyright © 2012 by Xerox Corporation. All rights reserved. Reprinted with permission.

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Patent

• A public document that provides detailed

description of invention
• Provides owner with exclusive right to the
invention
• Owner can prevent others from making,
using, or selling invention for 20 years

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Copyright
• Provides owner of an original work five rights
– Reproduction
– Distribution
– Public display
– Public performance
– Production of derivative works

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Key Court Cases and Legislation

• Gershwin Publishing v. Columbia Artists

• Basic Books v. Kinko’s Graphics
• Davey Jones Locker
• No Electronic Theft Act

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Copyright Creep

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Copyright Creep

• Since 1790, protection for books extended from

28 years to 95 years or more
• Some say latest extension done to prevent
Disney characters from becoming public domain
• Group of petitioners challenged the Copyright
Term Extension Act of 1998, arguing Congress
exceeded Constitutional power
• U.S. Supreme Court ruling
– CTEA does not create perpetual copyrights
– CTEA is constitutional
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6.4 Fair Use

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Fair Use Concept

• Sometimes legal to reproduce a

copyrighted work without permission
• Courts consider four factors
– Purpose and character of use
– Nature of work
– Amount of work being copied
– Affect on market for work

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Sony v. Universal City Studios

• Sony introduced Betamax VCR (1975)

• People started time shifting TV shows
• Movie studios sued Sony for copyright
infringements
• U.S. Supreme Court ruled (5-4) that time
shifting is fair use

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Time Shifting

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Digital Recording Technology

• Copying from vinyl records to cassette tapes

introduced hiss and distortions
• Introduction of compact disc a boon (beneficial)
for music industry
– Cheaper to produce than vinyl records
– Higher quality
– Higher price ⇒ higher profits
• BUT it’s possible to make a perfect copy of a CD

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Audio Home Recording Act of 1992

• Protects rights of consumers to make copies of

analog or digital recordings for personal,
noncommercial use
– Backup copy
– Give to family member
• Digital audio recorders must incorporate Serial
Copyright Management System (SCMS), so
consumers can’t make a copy of a copy

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RIAA v. Diamond Multimedia
(Recording Industry Association of
America)
• MP3 compression allowed songs to be stored in
10% of the space, with little degradation
• Diamond introduced Rio MP3 player (1998)
• People started space shifting their music
• RIAA started legal action against Diamond for
violation of the Audio Home Recording Act
• U.S. Court of Appeals, 9th Circuit, affirmed that
space shifting is consistent with copyright law

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Space Shifting

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Kelly v. Arriba Soft

• Kelly: Photographer maintained Web site

with copyrighted photos
• Arriba Soft: Created search engine that
returned thumbnail images
• Kelly sued Arriba Soft for copyright
infringement
• U.S. Court of Appeals, 9th Circuit, affirmed
that it was fair use
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Google Books

• Google announced plan to scan millions of books held by

several huge libraries, creating searchable database of
all words
• If public domain book, system returns PDF
• If under copyright, user can see a few sentences; system
provides links to libraries and online booksellers
• Authors Guild and publishers sued Google for copyright
infringement (copying books for commercial reasons)
• Out-of-court settlement reached

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Benefits of Proposed Settlement

• Google would pay $125 million to resolve legal claims of

authors and publishers and establish Book Rights
Registry
• Readers would have much easier access to out-of-print
books at U.S. public libraries and university libraries
• University libraries could purchase subscriptions giving
their students access to collections of some of world’s
greatest libraries
• Authors and publishers would receive payments earned
from online access of their books, plus share of
advertising revenues
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Criticisms of Proposed Settlement

• Google should have gone to court

– Google had a good case that its use was a fair use,
based on precedent of Kelly v. Arriba Soft
– If Google had been found not guilty of copyright
infringement, it could have given public access to
books at lower rates
• Agreement gives Google a virtual monopoly over
orphaned works
• Potential chilling effect of Google tracking the
pages that people are viewing
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Court Rejects Proposed Settlement

• March 2011: U.S. District Court for

Southern District of New York rejected
proposed settlement
• Judge ruled agreement would have:
– Given Google significant advantage over competitors
– Rewarded Google for “wholesale copying of
copyrighted words without permission”
– Given Google liberal rights over orphaned works
(uncontactable)
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6.5 New Restrictions on Use

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Counterfeit CDs = Lost Profits

© Reuters/CORBIS
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Digital Millennium Copyright Act

• First big revision of copyright law since 1976

• Brought U.S. into compliance with Europe
• Extended length of copyright
• Extended copyright protection to music
broadcast over Internet
• Made it illegal for anyone to
– Circumvent encryption schemes placed on digital
media
– Circumvent copy controls, even for fair use purposes

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Digital Rights Management

• Actions owners of intellectual property in

digital form take to protect their rights
• Approaches
– Encrypt digital content
– Mark digital content so devices can recognize
content as copy-protected

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Secure Digital Music Initiative

• Goals
– Create copy-protected CDs
– Secure digital music downloads
• Consortium of 200 companies developed “digital
watermarking” scheme
• Failed
– Internet copying became huge before SDMI ready
– Some SDMI sponsors were electronics companies
– Digital watermarking encryption cracked

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Sony BMG Music Entertainment Rootkit

• Millions of audio CDs shipped with Extended

Copy Protection, a DRM system
• Prevented users from
– Ripping audio tracks into MP3 format
– Making more than 3 backup copies
• Relied upon Windows “rootkit” that hid files and
processes; usually only hackers use rootkits
• Huge public outcry once secret uncovered
• Sony BMG stopped production and
compensated consumers
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Encrypting DVDs
• Contents of DVDs encrypted using
Content Scramble System (CSS)
• Need decryption keys to view a DVD
• Jon Johansen wrote a decryption program
for Linux
• 2600 Magazine published the code
• Motion picture studios sued 2600
Magazine and won
• Johansen tried in Norway and found not
guilty
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Foiling HD-DVD Encryption

• Hardware, software, and entertainment

companies created Advanced Access Content
System to encrypt HD-DVDs
• Encryption key posted on Digg.com
• AACS leaned on Digg.com to censor postings
containing key
• Digg users fought back
• AACS “expired” the key and issued a new one
• A month later, a Digg user posted the new key
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Criticisms of Digital Rights Management

• Any technological “fix” is bound to fail

• DRM undermines fair use
• DRM could reduce competition
• Some schemes make anonymous access
impossible

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Online Music Stores Employed
Digital Rights Management
• When iTunes Music Store opened, all music was
protected with a DRM scheme called FairPlay
• FairPlay blocked users from freely exchanging purchased
music
– Songs couldn’t be played on more than 5 different computers
– Songs couldn’t be copied onto CDs more than 7 times
• Songs purchased from iTunes Store wouldn’t play on
non-Apple devices
• DRM-protected music purchased from other online
retailers couldn’t be played on iPod

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Online Music Stores Drop Digital
Rights Management
• Consumers complained about restrictions
associated with DRM
• European governments put pressure on Apple to
license FairPlay or stop using DRM
• Amazon reached an agreement with all four
major music labels to sell DRM-free music
• Apple followed suit in 2009

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Microsoft Xbox One
• Microsoft announced cloud-based gaming experience for
Xbox One (June 2013)
– User could play any game without disc in tray
– Automatic software updates of every Xbox One
• Controversial features of licensing arrangement
– Disc could be shared only once
– Second-hand market restricted
– Xbox consoles would have to check in every 24 hours
• Microsoft backtracked
– No need to connect to Internet
– Freedom to lend, rent, buy, sell discs
– Disc must be in tray to play game
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6.6 Peer-to-Peer Networks and
Cyberlockers (Next Week)

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Peer-to-Peer Networks

• Peer-to-peer network
– Transient network
– Connects computers running same networking
program
– Computers can access files stored on each other’s
hard drives
• How P2P networks facilitate data exchange
– Give each user access to data stored in many other
computers
– Support simultaneous file transfers among arbitrary
pairs of computers
– Allow users to identify systems with faster file
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A Peer-to-Peer Network

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Cyberlockers

• Also called file-hosting services or cloud

storage services
• Internet-based file-sharing services
• Allow users to upload and download
password-protected files
• Support workgroup collaboration
• Make sharing of copyrighted material easy
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Napster

• Peer-to-peer music exchange network

• Began operation in 1999
• Sued by RIAA for copyright violations
• Courts ruled in favor of RIAA
• Went off-line in July 2001
• Re-emerged in 2003 as a subscription
music service
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FastTrack

• Second-generation peer-to-peer network

technology
• Used by KaZaA and Grokster
• Distributes index among large number of
“supernodes”
• Cannot be shut down as easily as Napster

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Comparing Napster and FastTrack

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BitTorrent
• Broadband connections: download much
faster than upload
• BitTorrent speeds downloading
– Files broken into pieces
– Different pieces downloaded from different
computers
• Used for downloading large files
– Computer programs
– Television shows
– Movies
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Concept Behind BitTorrent

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RIAA Lawsuits

• April 2003: RIAA warned file swappers they

could face legal penalties
• RIAA subpoenaed Verizon for identities of
people suspected of running supernodes
• Judge ruled in favor of Verizon
• September 2003: RIAA sued 261 individuals
• December 2003: U.S. Court of Appeals ruled
Verizon did not have to give customer names to
RIAA
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Huge Jury Judgments Overturned

• Jammie Thomas-Rassert
– Federal jury ordered her to pay $1.92 million
– Damages reduced to $54,000
• Joel Tenenbaum
– Jury ordered him to pay $675,000
– Judge reduced award to $67,500
• Does RIAA have to prove someone actually copied the
songs that people made available on Kazaa?
– New York decision: No
– Massachusetts, Arizona decisions: Yes

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MGM v. Grokster
• Entertainment industry interests sued Grokster
and StreamCast for the copyright infringements
of their users
• Lower courts
– Ruled in favor of Grokster and StreamCast
– Cited Sony v. Universal City Studios as a precedent
• U.S. Supreme Court
– Reversed the lower court ruling in June 2005
– Proper precedent Gershwin Publishing v. Columbia
Artists

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Legal Action Against The Pirate Bay

• The Pirate Bay started in Stockholm, Sweden

• One of world’s biggest BitTorrent file-sharing sites
• People download songs, movies, TV shows, etc.
• After 2006 raid by police, popularity increased
• In 2008 the International Federation of the Phonographic
Industry sued four individuals connected with site
• Defendants said The Pirate Bay just a search engine
• Found guilty; sentence to prison and fined $6.5 million
• Meanwhile, The Pirate Bay still operational
• More than 150 proxy servers all over the world
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PRO-IP Act

• Gives federal law enforcement agencies

right to seize domain names of sites
facilitating copyright infringement
• Operation In Our Sites (2010)
– Seized domain names of 10 Web sites making
available full-run movies
– Seized several hundred more domain names
over next 1 ½ years
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Megaupload Shutdown

• Megaupload a prominent cyberlocker

– More than 180 million registered users
– Once world’s 13th most popular Web site
– Source of movies, TV shows, songs, games
• FBI used PRO-IP Act to shut down
Megaupload (January 2012)
• FileSonic and FileServe responded by
disabling sharing functionality
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Legal Music Services on the Internet

• Subscription services for legal downloading

• Some based on monthly fee; some free
• Consumers pay for each download
• Apple’s iTunes Music Store leading service,
surpassing WalMart as top music retailer in
United States
• Still, illegal downloading far more popular than
legal music services

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6.7 Protections for Software

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Software Copyrights

• Copyright protection began 1964

• What gets copyrighted?
– Expression of idea, not idea itself
– Object program, not source program
• Companies treat source code as a trade
secret

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Violations of Software Copyrights

• Copying a program 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

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Important Court Cases

• Apple Computer v. Franklin Computer

– Established that object programs are
copyrightable
• Sega v. Accolate
– Established that disassembling object code to
determine technical specifications is fair use

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Safe Software Development

• Reverse engineering okay

• Companies must protect against
unconscious copying
• Solution: “clean room” software
development strategy
– Team 1 analyzes competitor’s program and
writes specification
– Team 2 uses specification to develop software

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Software Patents (1/3)

• Until 1981, Patent Office refused to

grant software patents
– Saw programs as mathematical algorithms,
not processes or machines
• U.S. Supreme Court decision led to first
software patent in 1981
• Further court rulings led to patents
being granted for wider range of
software
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Software Patents (2/3)

• Thousands of software patents now exist

– Microsoft files ~3,000 applications annually
– Licensing patents a source of revenue
• Secondary market for software patents
– Patent trolls: Companies that specialize in buying
patents and enforcing patent rights
– Companies would rather settle out of court than spend
time and money going to trial
– RIM didn’t settle quickly; ended up paying $612 million
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Software Patents (3/3)
• Critics say too many patents have been issued
– Patent Office doesn’t know about prior art, so it issues
bad software patents
– Obvious inventions get patents
• Companies with new products fear getting sued
for patent infringement
– Build stockpiles of patents as defense mechanism
– Software patents used as legal weapons
• Bezos: software patents should expire in 3-5
years
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Key Differences between Software
Copyrights and Software Patents

Software Copyright Software Patent

What is protected? Object Program, Software process with
screen displays practical utility
Is getting protection expensive? No Yes
Is getting protection time consuming? No Yes
Is reverse engineering allowed? Yes No

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6.8 Open-Source Software

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Criticisms of Proprietary Software

• Increasingly harsh measures being taken

to enforce copyrights
• Copyrights are not serving their purpose of
promoting progress
• It is wrong to allow someone to “own” a
piece of intellectual property

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Open-Source Definition

• No restrictions preventing others from selling or

giving away software
• Source code included in distribution
• No restrictions preventing others from modifying
source code
• No restrictions regarding how people can use
software
• Same rights apply to everyone receiving
redistributions of the software (copyleft)
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Beneficial Consequences of Open-
Source Software
• Gives everyone opportunity to improve program
• New versions of programs appear more
frequently
• Eliminates tension between obeying law and
helping others
• Programs belong to entire community
• Shifts focus from manufacturing to service

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Examples of Open-Source Software

• BIND
• Apache
• Sendmail
• Android operating system for smartphones
• Firefox and Chrome
• OpenOffice.org
• Perl, Python, Ruby, TCL/TK, PHP, Zope
• GNU compilers for C, C++, Objective-C, Fortran, Java,
and Ada

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Screenshot from OpenOffice.org, a registered trademark of Apache Software Foundation.
Copyright © 2012 by Apache Software Foundation. Reprinted with permission.
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GNU Project and Linux

• GNU Project
– Begun by Richard Stallman in 1984
– Goal: Develop open-source, Unix-like operating
system
– Most components developed in late 1980s
• Linux
– Linus Torvalds wrote Unix-like kernel in 1991
– Combined with GNU components to make an O.S.
– Commonly called Linux
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Impact of Open-Source Software

• Linux an alternative to proprietary versions

of Unix
• Linux operating system on 95% of the
world’s 500 fastest supercomputers

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Crititique of the Open-Source
Software Movement
• Without critical mass of developers, quality can
be poor
• Without an “owner,” incompatible versions may
arise
• Relatively weak graphical user interface
• Poor mechanism for stimulating innovation (no
companies will spend billions on new programs)

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6.9 Legitimacy of Intellectual
Property Protection for Software

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Do We Have the Right System in Place?

• Software licenses typically prevent you

from making copies of software to sell or
give away
• Software licenses are legal agreements
• Not discussing morality of breaking the law
• Discussing whether society should give
intellectual property protection to software
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Rights-based Analysis

• “Just deserts” argument

– Programming is hard work that only a few can do
– Programmers should be rewarded for their labor
– They ought to be able to own their programs
• Criticism of “just deserts” argument
– Why does labor imply ownership?
– Can imagine a just society in which all labor went
to common good
– Intellectual property not like physical property

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A Consequentialist Argument Why
Software Copying Is Bad

Beth Anderson

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Utilitarian Analysis
• Argument against copying
– Copying software reduces software purchases…
– Leading to less income for software makers…
– Leading to lower production of new software…
– Leading to fewer benefits to society
• Each of these claims can be debated
– Not all who get free copies can afford to buy software
– Open-source movement demonstrates many people
are willing to donate their software-writing skills
– Hardware industry wants to stimulate software industry
– Difficult to quantify how much society would be harmed
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Conclusion

• Natural rights argument weak

• Utilitarian argument not strong, either
• Nevertheless, society has granted
copyright protection to owners of computer
programs
• Breaking the law is wrong unless there is a
strong overriding moral obligation or
consequence
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6.10 Creative Commons

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Streamlining Creative Re-use
• Under current copyright law, eligible works
are copyrighted the moment they are created
• No copyright notice does not mean it’s okay
to copy
• Must contact people before using work
• That slows down creative re-use
• Free Creative Commons license indicates
– Which kinds of copying are okay
– Which rights are being retained
• Flickr and Magnatune two well-known sites
using Creative Commons licenses
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Screenshot from Creative Commons. Copyright © 2011 by Creative Commons. Reprinted with permission. 1-88
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