WIPO: Intellectual Property on the Internet

World Intellectual Property Organization (WIPO)
Intellectual Property on the Internet: A Survey of Issues

5. The digital age and the global economy are now closely linked. Since the 1990s, information technologies have accounted for a large share of investment and made a significant contribution to economic growth, supported by an intellectual property system that has provided effective protection for digital technologies in the new economy. Businesses, individuals and governments have all profited from the benefits delivered by the ever-increasing and broadening use of the Internet. The explosion of the Internet, and the increase in .com enterprises, has profoundly shaken the economic world and has generated new commercial models; they have also affected the legal world by posing new problems, inter alia, in relation to the protection of intellectual property on the Internet. Following a period of sudden growth, in 2001 the businesses of the new economy nevertheless experienced a significant crash, of such a magnitude that questions were raised as to how the Internet would develop in the future.

6. However, after what the Organization for Economic Cooperation and Development (OECD) described as "short-term turbulence" [1] and, even if in certain areas development remains slow, it is likely that the Internet will continue to play a major role in the world economy and intellectual property system. Since the importance of its influence in economic terms can be seen as a result of its own development, it is of interest, by way of introduction, to describe the current developments relating to the Internet by reference to a number of indices. These indices, detailed below, are especially important for this Survey, since they directly affect the world of intellectual property.

7. About 10% of the world’s population is now online, representing more than 605 million users. [2] This figure is increasing more quickly than earlier foreseen, given that 1999 forecasts envisaged 250 million Internet users in 2002. Certain optimistic forecasts even estimate that the world online population could reach one billion by 2005. [3]

8. The number of countries connected to the Internet has increased significantly in the past ten years. Whereas at the beginning of the 1990s, a little over ten countries were connected to the Internet, this figure stood at 214 at the end of 2001. [4] However, the rate of Internet penetration still remains imbalanced throughout the different regions of the world. The regions with the largest numbers of users are mainly the North American (37%), Asian (31%) and European

(29%) regions. However, recent statistics demonstrate that the regional pattern in terms of number of Internet users is changing. In May 2002, the countries or regions with the highest level of Internet penetration were located primarily on the European continent: Sweden (64.6%), Denmark (60.3%), Netherlands (58.07%), United Kingdom (56.88%) and Norway (54.4%); in the Asian region: Hong Kong, SAR of China (59.58%); and in North America: United States (59.22%) and Canada (52.79%). [5] By contrast, although the number of users has increased slightly in Africa, the lack of telecommunications infrastructure means that this region of the world still represents less than 2% of the world online population.

9. A variety of factors explain the variation in the rate of Internet penetration in different regions. The cost of Internet access, which varies widely between countries and regions, is one of these factors. In this regard, the Secretary General of the International Telecommunication Union (ITU) has noted that the costs of access are often higher for developing countries. [6]

10. The culture of the Internet, which was largely Anglo-American in its early stages, is in transformation. Where once the English language dominated, increasingly some of the 6700 languages that are spoken in 228 countries throughout the world are finding a voice on the Internet. It is envisaged that by 2003, non-English speakers will represent one third of the community of Internet users, [7] the major part of this expansion coming from Asia and Latin America. This diversification of the languages used online is in no way surprising when it is considered that 92% of the world population has a mother tongue other than English. It can therefore be anticipated that the Web will increasingly reflect the diversity of cultures and that this will be accompanied by an increase in its non-English content. According to forecasters, the most widely used language on the Web in 2007 will be Chinese. [8] The table below provides some statistics on the languages used online. The effect of this globalization of the Internet on intellectual property and, in particular as regards domain names, is discussed in Chapter III(c) of this Survey.

Source: Global Reach (last revised September 30, 2002), at http://www.global-reach.biz/globstats

11. Faced with users’ demands for faster Internet connections, the technologies that enable access to the Internet have undergone significant changes. Broadband technologies have developed, including ADSL (Asymmetric Digital Subscriber Line). Various methods of Internet access now exist, and include the telephone system (Plain Old Telephone System (POTS)), the Integrated Services Digital Network (ISDN) and ADSL.

12. As shown by the table below, the rate of penetration of each of these technologies varies considerably among the countries of the European Union. It is noted that, despite increased demand for faster Internet connections, the telephone system remains the most popular mode of Internet access. The rate of penetration of other technologies such as ADSL, the high performance of which when compared to the conventional telephone system is well recognized, is still low. Nevertheless, since 2000 there have been rapid developments of these new technologies. In addition, ADSL is now present in all European Union member States except Greece. [9] The countries with the highest rate of ADSL penetration are Sweden (4.6%), Denmark (3.9%), Belgium (3.9%) and Austria (3.3%).

Source: BDRC Ltd. Report, "The Development of Broadband Access Platforms in Europe" commissioned by the European Commission, from Figures 1a and 1b, at pp.7 and 8, August 2001

13. At the international level, it is observed that the development of broadband technologies is uneven among the different regions in the world. The table below, which compares the potential growth of these technologies in Europe, the United States of America and Japan, indicates a high number of subscribers in the United States of America. However, a recent report commissioned by the European Commission, [10] foresees significant development of these technologies in Europe and Japan between 2002 and 2003. In 2003, the rate of penetration of broadband technologies is expected to reach 11% in Europe and 8% in Japan.

Source: BDRC Ltd. Report, "The Development of Broadband Access Platforms in Europe," commissioned by the European Commission, at p.139, August 2001

14. Although these new technologies are still at an early stage of development, their progress merits examination because, in the long term, they could have a significant impact on the intellectual property system. To a large extent, they facilitate the downloading of intangible assets protected as intellectual property, including music and video and, as a result, their growth could substantially increase the number of online transactions relating to these works.

15. According to the OECD, in most countries the Internet is used mainly for e-mail and searching for information relating to goods or services. In the United States of America, for example, e-mail and information searches represent the most common uses of the Internet, constituting 84% and 67% respectively of individuals’ activities online. There is, however, a trend toward other categories of activities, such as purchasing of goods and services, watching films, or listening to the radio. These developments in Internet use inevitably have an impact on intellectual property, insofar as these activities involve works protected by intellectual property laws. This issue is dealt with in Chapters I and III(a) of this Survey.

16. The value of commercial transactions on the Internet has increased substantially over the past five years. Whereas in 2000, it was estimated at US$433 billion, it is envisaged that in 2002 it will represent US$1.9 trillion and, by 2004, US$6 trillion. [11]

17. Despite the significant value of commercial transactions over the Internet (including sale or purchase of goods or services between businesses, households, individuals, public or private organizations, over the Internet), [12] their share of global trade remains small. As indicated in the table below, in certain OECD countries the use of the Internet in commercial transactions represents 0.4 to 3.78% of all commercial transactions. It appears, therefore, that businesses use the Internet mainly as a marketing tool rather than as a commercial tool and that consumers are still reluctant to make transactions over the Internet.

18. The number of individuals who purchase goods and services over the Internet is generally quite small in relation to the overall number of Internet users. This percentage varies considerably between countries. Among OECD countries, Sweden, for example, has the highest figure, given that 43% of individuals residing in Sweden and using the Internet bought goods online in 2000. It is followed by the United Kingdom (33%) and the United States of America (30%). In Finland and Australia, as reported by the OECD, one in seven individuals buys goods on the Internet, and there would appear to be potential for even greater growth given that around half of all households in these countries owned a computer in 2000. This relatively small amount of business-to-consumer (B2C) commerce can be explained, inter alia, by the increasing concern of users with respect to protection of personal data and security of Internet transactions.

19. In the same way that habits of consumption differ from one country to another, the type of goods purchased on the Internet also varies among countries. Overall, computer goods, clothing and digital products represent the largest share of Internet sales. For example, computer goods represent the largest number of Internet sales in the United States of America, Japan and the Republic of Korea. Digital goods such as music, computer software and books also represent a significant source of sales. This is notable insofar as transactions of these goods, which may be the subject of intellectual property rights, either as a mark, patent or copyright, will necessarily have an impact on the intellectual property system and rightsholders.

20. Transactions that take place over the Internet are mainly concluded between parties located in the same territory. The statistics for online sales for nine European Union countries (see table below) indicate that European companies have a strong propensity to sell over the Internet to purchasers located in their countries, or in the European Union. According to the OECD, these results reflect a global trend of European commerce. In addition, they constitute relevant information from the point of view of the discussion of private international law and the extrajudicial settlement of Internet-related disputes (see Chapter IV of this Survey).

21. When the World Wide Web was first developed in the 1990s, it transformed the Internet from a technological infrastructure into a popular network linking people in diverse communities throughout the world. The Internet, and ‘killer apps’ such as the Web, became the instrument by which people throughout the world exchanged and shared ideas, information and, gradually, goods and services. What had begun as a military and research tool became the conduit for electronic commerce forecast to be worth US$6 trillion by 2004, [13] and the harbinger of the ‘information age’. The Web now contains several billion pages of information, growing at the rate of more than seven million pages each day. [14] It is this ready availability of information on every conceivable subject, combined with advancements in digitization, that has made the Internet such a revolutionary tool.

22. There are numerous .com companies that rely on business models that trade in physical objects of intellectual property. The online traders Barnes and Noble and Amazon, for example, utilize vast databases of book, video and music titles and user-friendly purchasing systems to attract consumers away from the shopping mall, and then send these products (each a work of intellectual property) to consumers using postal mail. Travel sites and airline companies such as EasyJet and RyanAir and entertainment ticket sellers such as Ticketmaster, profit through saved overheads by conducting sales online, using e-ticketing or mailing tickets to purchasers. Numerous small and medium sized enterprises have used the Internet in this way, as a marketing tool to locate buyers for their products in a huge global marketplace.

23. It is, however, the digitization of works of intellectual property, by a process that reduces text, visual images and sound to computer-readable binary code of ‘0’s and ‘1’s, grouped in bits and bytes that can travel over the networks, that has enabled intellectual property to transfer so efficiently to the Internet. This rising trend led John Perry Barlow, Internet commentator and co-founder of the Electronic Frontier Foundation, to speak of the "digitization of everything not obstinately physical." [15] Internet traffic has been doubling every six months, [16] and the flow of this data over the Internet, first measured in megabits and gigabits, and now in terabits and petabits (1,000 trillion bits), includes the transmission of works of intellectual property. The Internet offers an unprecedented channel through which foreign markets that number more than half a billion users [17] and the diaspora of nationals living abroad and hungry for access to their cultural heritage, can be exploited.

24. The character of the intellectual property system is evolutionary and while the nature of the rights themselves, to control and exploit the products of one’s creativity and innovation, remains relatively constant, the manner by which they are expressed and exchanged is constantly adapting to developments in the underlying technologies. The invention of, in turn, the printing press, phonograms, radio and television broadcasting, cable and satellite transmission, videocassette recorders, compact disc (CD) and digital versatile disc (DVD) technology and, now, the Internet, has affected both the form and the substance of intellectual property rights. Ever adaptable, intellectual property has now migrated to the Internet and is being modified to suit the online environment in ways that are described in the following chapters. Intellectual property has gained importance in this digital environment as, increasingly, business assets are reflected in intellectual as opposed to physical property. The value of many online companies, for example, may be found in their vast databases of customer information, which may be the subject of intellectual property protection. [18]

25. This migration of intellectual property onto the Internet can be seen with respect to each species of rights. In the field of copyright, vast numbers of works of literature, film and art, and notably computer programs, have already transferred to the digital environment. Software, protected as a form of intellectual property by patent and copyright law, underlies the operation of all digital technologies. [19] Systems software, including utilities and operating systems, enable our computers to operate, while utilities software provides us with the programs that make the digital networks so useful. Much software is protected by intellectual property law, and its theft is endemic. [20] It is estimated that 40% of business software programs worldwide were pirated in 2001, at a cost to the industry of some US$11 billion. [21] As one commentator stated: "[C]omputer security and digital rights are so vexing because their solutions seek to protect technology from itself. How does one make computer systems secure from code writers whose goal is to defeat such security? And how does one protect digital content when technology, by its nature, encourages copying?" [22]

26. Textual works such as books and newspapers are ideally suited to digitization and, although online publishing of popular literature has had a mixed reception with a public accustomed to paper and ink, there is evidence of a growing demand for e-books. [23] There has been real success in the online availability of science, technology and medical publications, where the demand for fee-based research has supported the e-publishing industry. [24] Demand has also grown for the online collections of more than 7,300 libraries that have provided free remote access to the texts of hundreds of thousands of e-books, with particular demand for non-English language texts. [25] One commercial operation, Ebrary, offers consumers paid access to more than 10,000 recently published titles, as well as maintaining a database of digital books for libraries. [26] Online newspaper publishing is also prolific, [27] although many of these initially free sites are now seeking to introduce subscription access. In September 2002, for the first time, The New York Times received more visitors to nytimes.com (1.28 million daily), than its weekday paper circulation (1.2 million daily). Increasingly, numerous journalists and aspiring writers have engaged in online publishing to post ‘blogs’, Web logs or journals, that allow individuals to make their views available to the public without the need for intermediation by large publishing houses or distributors. [28]

27. In the field of fine art, indigenous craft and artifacts, numerous museums and art galleries have digitized their collections and made them available for viewing on the Internet. [29] One such site, Artnet, [30] allows users to access works by over 16,000 artists and in over 1,300 art galleries. Interesting questions have arisen as to whether the digital images of works of art, themselves, become derivative works entitled to copyright protection. [31] There are also many artists using the digital technologies themselves, to create art specifically for the digital networks. [32] One site, the Digital Art Museum, [33] provides an online resource for information and works of digital art.

28. Intellectual property, through the trademark system, also facilitates the identification of goods and services and allows consumers to distinguish those produced by a certain enterprise. The importance of commercial branding, traditionally achieved through the use of trademarks combined with advertising and marketing strategies, is heightened in an online environment where consumers are naturally cautious, traders may be remotely located and there is little or no physical contact to reassure purchasers of a company’s financial security and bona fides. The Web is a territory where caveat emptor is the rule and, as a result, consumers increasingly rely upon strong brand awareness and brand performance for the confidence to engage in e-commerce. [34] While trademarks are of greater importance in this virtual environment, they are also more vulnerable to infringement, dilution and anticompetitive practices, as described in Chapter III(b) below. Trademark owners expend vast resources, engaging automated ‘web crawling’ software and cybersurveillance firms, to monitor the billions of Web pages and protect their intellectual property rights.

29. Identity on the Internet also goes beyond the trademark system, because of the role played by the Internet domain name system, which facilitates users’ ability to navigate on the network. Domain names are user-friendly addresses that correspond to the unique Internet Protocol numbers that connect our computers to the Internet and enable the network routing system to direct data requests to the correct addressee. Domain names were originally intended to perform a purely technical function in a user-friendly way, but because they are intuitive and easy to remember they now perform a function as business or personal identifiers. Most businesses, whether e-commercial or not, advertise their domain name to signal a Web presence. In this way, although, as such, not a form of intellectual property, domain names now perform an identifying function similar to that of a trademark. Because of the way in which people and search engines operate, most businesses use their trademark or trade name as their domain name, and this has caused conflict with the advent of predatory practices, known as ‘cybersquatting.’ These developments, and international efforts to resolve these conflicts, is described in Chapter III(c) below.

30. The patent system has also migrated to the Internet, as businesses have sought to recoup research and development costs in digital technologies by patenting their online business methods. The Japanese Patent Office defines ‘business method inventions’ broadly as "inventions which are concerned with methods or systems of doing business using computers or the Internet." [35] In fact, the technology-intensive nature of e-commerce means that many of its constituent processes may be patentable subject matter so long as the legal criteria for patentability are met. Some controversy has developed over patents granted with respect to business methods, originally by the United States Patent and Trademark Office and increasingly in other jurisdictions such as Australia, Canada, Japan and the Republic of Korea. [36] High profile patents in America have included the U.S. 5,851,117 (Priceline.com), U.S. 5,960,411 (Amazon.com) and U.S. 5,193,056 (State Street Bank). [37] A case involving State Street Bank, raised awareness of the patentability of business methods, as the United States Court of Appeals held that methods of doing business should be subject to the same legal requirements for patentability as applied to any other processes, that is, they should be new, useful and non-obvious. [38] Patents have since been granted for electronic shopping carts, [39] online credit card payment systems, [40] and for a system to manage personal privacy in a computer network. [41] The European Patent Office has taken a more restrictive approach, requiring that the subject matter of a patentable invention have a ‘technical character’ or involve ‘technical teaching’. Some countries, such as Chile and South Africa, exclude protection for business method patents under their patent laws. [42]

31. The ‘global information society’ foreseen in the early days of the Internet has yet to become a worldwide reality, but the focus on information remains the key to the e-commerce economy. Although a good proportion of the information on the Web is in the public domain, that is, freely available to use and copy, an increasingly significant amount is protected as intellectual property. [43] The enthusiasm excited by the availability of so much online information, easily accessible through browsing and hyperlinking, contributed to a general expectation that this information was free and its use uncontrolled. Even the term ‘hacking’, as initially understood, was a positive concept that implied expertise in computer programming. [44] The intellectual property community has been addressing the challenge of this perception, in an effort to determine and exert legal rights over digital content, ever since. [45]

32. Difficult issues are raised for this community by the vast availability of intellectual property on the Internet, the ease of copying and distribution of copies and the relative anonymity afforded to these digital transactions. Key among these challenges is the expectation among many users that information and intellectual property sourced or downloaded from the Internet should be free of charge. Many .com companies took the approach that it was initially more important to make their products (information) available freely, and thereby establish a market presence, and to address issues of revenue and profit at a later stage. Most of these companies did not endure the burst of the .com bubble in March 2000. Many companies that continue to operate in the online environment have developed other business models, often relying on advertising revenue or value-added service charges to finance their free services and information. Surveys have shown that consumers are gradually becoming more willing to pay for online content. [46] However there remains a general reticence to pay for material that was once free. The business and financial news sites, offered by CNN, ABC and The Wall Street Journal, for example, have been relatively successful in charging for content, as they established an early pattern of charging for information and found customers who saw value in their purchase. [47] This trend suggests that education of online consumers is key, through programs designed to raise awareness at an early age of the value of intellectual property and the realization that unauthorized copying of such works is theft.

33. The intellectual property community, including film and music creators, software developers, authors and publishers, are now exploring ways in which to make their products available online, while protecting their rights and recouping their investment. To some extent, the uptake of fee-based intellectual property services is dependent on the efficient management of these rights, as well as the availability of workable and secure methods of micropayments that would enable pay-per-unit purchases, and the building of consumer confidence in online payment security, privacy and consumer protection. At the same time, however, creators and intellectual property rightsholders need to feel sure that they can protect their property from piracy and control its use, before they will be willing to make it available online.

34. The current levels of online piracy were described by an American litigant as "a 21^st century piratical bazaar." [48] New international laws such as the WIPO Internet Treaties, described in Chapter III(a), adapt the intellectual property laws to facilitate the dissemination of protected material over the Internet. Technological tools such as encryption and watermarking provide practical solutions and, together with digital rights management initiatives, contribute to meeting this concern. However, many creators and rightsholders remain apprehensive. When the American singer-songwriter, Bruce Springsteen, released his new CD ‘The Rising’, only ten advance discs were released and none were available online before being sold in stores, in an effort to thwart online piracy. [49] Conversely, some music executives use online ‘leaks’ of forthcoming musical releases to win fans and media exposure, and thereby boost disc sales.

35. One approach is to employ business models by which subscribers, eager to access intellectual property in the form of music, film, software or text, can be persuaded to legitimately purchase these products, instead of relying upon illegal markets. Surveys have shown that the priority for users of online music file-trading services was availability of a wide number of compositions, and ready access, while the free price was a lesser consideration. [50] Subscription services, based on secure and monitored access are being explored. In the music industry, for example, subscription music downloads and streaming services are available through a variety of proprietary systems including, eMusic, MusicNet, FullAudio, Rhapsody, Liquid Audio, Inc. and Pressplay, [51] that seek to replace the popularity of more than 200,000 unauthorized online music sharing sites, including Napster, Morpheus and KaZaA. [52] These ‘peer-to-peer’ (P2P) networks enable millions of users to upload and share their music and film files via the Internet, often infringing copyright in the works they trade. As described in Chapter III(a) below, the copyright industry in various countries has taken legal action to prevent the widespread piracy via the P2P networks, with some success, although the problem is not yet solved. Some systems, like Napster, use a centralized server to process the transfers, while others are decentralized and more difficult to regulate, and the industry has grappled with how to target millions of individual pirates and rapidly evolving technological methods. Although the music industry is now embracing the online medium, it continues to grapple with the problem of piracy, as 950 million pirated music discs were sold in 2001, in a world pirate-music market valued at US$4.3 billion. [53]

36. The online distribution of audiovisual works has been held back until recently by the lack of bandwidth, which has prevented the relatively large data files required to transmit video to be downloaded or streamed at a speed or quality acceptable to consumers. Nevertheless, more than a million users are typically online with Morpheus, a P2P site that enables users to trade video files, and most PCs now come with CD burners that can be used to compress and store films on discs without any significant loss in quality. While the technology is still developing to facilitate accessible video-on-demand and digital pay-per-view, the film industry is yet to match the progress of the music industry, and most legitimate film sites are webcasters that distribute short made-for-online film and animation material which is largely experimental and available free of charge. [54] As in the music industry, copyright owners in the film industry are also reluctant to release their audiovisual works online while there is a lack of adequate copy protection that could protect them from rampant piracy, that today sees 400,000 to 600,000 films downloaded illegally every day. [55] For these reasons, major studio executives have forecast that film distribution via the Internet will account for only 4% of revenue by distribution channel by 2010. [56]

37. In the radio and webcasting industry, Internet radio has been luring customers away from traditional media sources by providing access to thousands of global radio broadcasts in real time. [57] Since January 2001, the total audience time spent listening to monitored Web radio stations increased by 749%. [58] For some time, Internet radio was unregulated, however in the United States, the Digital Millenium Copyright Act, 1998, established that webcasters must pay royalties to record companies that hold the song rights for the copyright music they play under statutory compulsory licenses for digital performances. [59] The issue is then what royalty rates such entities can afford to pay as, as discussed above, listeners have not traditionally paid for content received online. Following a June 2002 determination of royalty rates by the United States Government (of 0.07 cents per song per listener), KPIG, the first commercial radio station to stream its broadcasts over the Internet suspended its webcasts, stating that it was not making money from its Internet services and could not afford new royalties. [60]

38. In the changing digital marketplace, convergence of media, communications and information technologies have been mirrored by the convergence of multinational corporate structures, as content providers in the copyright and entertainment industries have merged with communications, cable and online service providers. One example has been the merger in 2000 of America Online (AOL) and Time Warner, to create the world’s largest media conglomerate, a ‘clicks and mortar’ company that combined AOL’s online service capacities with Time Warner and its media offspring (including cable networks CNN and HBO, Time Warner movies and Warner Music) the Time Warner cable network, linking 21 million American homes, and significant media content (32,000 television titles and magazines including Time and Sports Illustrated). [61] Immediately prior to the merger, the combined market value of AOL and Time Warner was US$290 billion, creating a post-merger company valued at US$350 billion, which had fallen by August 2002 to a market capitalisation of about US$45 billion. [62] Similarly, the merger in December 2000 of the trans-Atlantic media and communication group Vivendi with Seagram created the media conglomerate Vivendi Universal, that included Universal Music Group, Vivendi Universal Entertainment and Publishing, MP3.com, American publisher Houghton Mufflin, French broadcaster Canal Plus, joint-ownership (with Vodafone) of the Vizzavi Internet portal, a 44% stake in Cegetal telecom company, as well as utilities units Vivendi Environment. Vivendi Universal reported losses of 13.4 billion euros and a debt of 19 billion euros in 2001, and losses of 12.3 billion euros for the first half of 2002. [63] Arguably, the relative roles of the content provider and access provider, and how these two entities may successfully syndicate, remains a question for a changing marketplace in the digital economy.

39. Intellectual property has migrated to the Internet, both in substance and as a concept vital to the success of e-commerce enterprises. The ‘Wired Index’ of the key businesses in the global economy, published by Wired Magazine, states that these companies "have demonstrated a mastery of five essentials needed to prosper in the technology-enabled, borderless world: innovation, intelligent use of new tools, strategic vision, global reach, and, above all, networked communication." [64] It is notable that the premier criteria, innovation, also serves as the basis for the intellectual property system, such that the promotion of innovation and the protection of its products is the goal of intellectual property law, more imperative than ever in this digital age.

40. This Chapter addresses the developments that have taken place in the field of copyright and related rights, as a result of the impact of digital technologies. It begins with an introduction to ‘digital copyright,’ then addresses the WIPO ‘Internet Treaties,’ and describes emerging developments in law and technologies that relate to the protection and exploitation of copyright works online. Finally, it describes developments in licensing and collective management of rights that enable creators and rightsholders to manage and exploit their rights in the digital environment.

41. The protection of copyright and related rights covers a wide array of human creativity. Much of the creative content that fuels electronic commerce is subject to such protection. Under the most important international copyright convention, the Berne Convention, [65] copyright protection covers all "literary and artistic works." This term encompasses diverse forms of creativity, such as writings, both fiction and non-fiction, including scientific and technical texts and computer programs; databases that are original due to the selection or arrangement of their contents; musical works; audiovisual works; works of fine art, including drawings and paintings; and photographs. Related rights protect the contributions of others who add value in the presentation of literary and artistic works to the public: performing artists, such as actors, dancers, singers and musicians; the producers of phonograms, including CDs; and broadcasting organizations.

42. Digital technology enables the transmission and use of all of these protected materials in digital form over interactive networks. The process of ‘digitization’ allows the conversion of such materials into binary form, which can be transmitted across the Internet, and then re-distributed, copied and stored in perfect digital form. While the transmission of text, sound, images and computer programs over the Internet is already commonplace, this is also becoming true for transmission of audiovisual works such as feature films, as the technical constraints of narrow bandwidth begin to disappear. [66] Materials protected by copyright and related rights, spanning the range of information and entertainment products, constitutes much of the valuable subject matter of e-commerce. [67]

43. Given the capabilities and characteristics of digital network technologies, e-commerce has had a tremendous impact on the system of copyright and related rights, and the scope of copyright and related rights in turn is affecting how e-commerce evolves. It is essential that legal rules are set and applied appropriately, to ensure that digital technology does not undermine the basic tenets of copyright and related rights. From one perspective, the Internet has been described as "the world’s biggest copy machine." [68] Whereas earlier technologies such as photocopying and taping allow mechanical copying by individual consumers, they do so in limited quantities, requiring considerable time, and resulting in copies of lesser quality. Moreover, the copies are physically located in the same place as the person making the copy. On the Internet, by contrast, one can make an unlimited number of copies, virtually instantaneously, without perceptible degradation in quality. [69] And these copies can be transmitted to locations around the world in a matter of minutes. The result could be the disruption of traditional markets for the sale of copies of programs, art, books and movies. [70] In the music industry, for example, the emergence of Internet-based file swapping services such as Napster and others, described below, have enabled a large-scale exploitation of music and recordings without the authorization of the rightsholders. That exploitation was further aggravated by the simultaneous broad commercialization of CD burners and portable MP3 players, adapted to the most commonly used file format.

44. These challenges face the copyright industry at a time when the share of copyright in national economies is reaching unprecedented levels. The economic value of the copyright industry in the United States alone is estimated at US$91.2 billion (motion pictures, music and television), according to International Intellectual Property Alliance (IIPA). [71] The share of copyright industries currently represents 5.24% of the U.S. gross domestic product, growing more than twice as fast as the rest of the economy, a growth largely attributed to America’s strong copyright laws and effective enforcement mechanisms. Similarly, a study of the copyright industries in the MERCOSUR countries reveals that the share of copyright-protected activities in the value added of Uruguay was 6% in 1997, and of Brazil was 6.7% in 1998, accounting in the latter for 1.3 million jobs. [72] This significance gives weight to the copyright industries’ search for technical and legislative solutions to protect copyright from digital piracy.

45. It is therefore critical to adjust the legal system to respond to the new technological developments in an effective and appropriate way, and to do so quickly and continuously, because technologies and markets evolve increasingly rapidly. This will ensure the continued furtherance of the fundamental guiding principles of copyright and related rights, which remain constant whatever may be the technology of the day: giving incentives to creators to produce and disseminate new creative materials; recognizing the importance of their contributions, by giving them reasonable control over the exploitation of those materials and allowing them to profit from them; providing appropriate balance for the public interest, particularly education, research and access to information; and thereby ultimately benefiting society, by promoting the development of culture, science, and the economy.

46. Significant issues in the field of copyright have been examined for a number of years through various public and private processes, at WIPO and other international organizations, and at national and regional levels. Significant progress has been made, with international consensus having already emerged on some of these issues. In 1996, two treaties were adopted by consensus by more than 100 countries at WIPO: the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT) (commonly referred to as the "Internet Treaties"). [73] The treaties, each having reached their 30^th ratification or accession, both have entered into force: the WCT on March 6, 2002, and the WPPT on May 20, 2002. [74]

47. The WIPO Internet Treaties are designed to update and supplement the existing international treaties on copyright and related rights, namely, the Berne Convention [75] and the Rome Convention. [76] They respond to the challenges posed by the digital technologies and, in particular, the dissemination of protected material over the global networks that make up the Internet. The contents of the Internet Treaties can be divided into three parts: (1) incorporation of certain provisions of the TRIPS Agreement [77] not previously included explicitly in WIPO treaties (e.g., protection of computer programs and original databases as literary works under copyright law); (2) updates not specific to digital technologies (e.g., the generalized right of communication to the public); and (3) provisions that specifically address the impact of digital technologies.

48. The following paragraphs address: (a) the scope of rights protected under the Internet Treaties, highlighting new developments in response to digital technologies; (b) issues relating to enforcement and management of rights; and c) the status of implementation of the Internet Treaties internationally.

49. The definition of rights, which determines their scope, is a key issue, as intellectual property is neither more nor less than the sum of the rights granted by law. Under existing treaties and national legislation, the owners of copyright and related rights are granted a range of different rights to control or be remunerated for various types of uses of their property. For both groups of rightsholders, these rights include rights of reproduction and of certain acts of communication to the public, such as public performance and broadcasting. The development of digital technologies, that enable transmission of works over networks, has raised questions about how these rights apply in the new environment. In particular, when multiple copies are made as works traverse the networks, is the reproduction right implicated by each copy? Is there a communication to the public when a work is not broadcast, but simply made available to individual members of the public if and when they wish to see or hear it? Does a public performance take place when a work is viewed at different times by different individuals on the monitors of their personal computers or other digital devices?

50. Perhaps the most basic right granted under both copyright and related rights is the right of reproduction, which under the Berne Convention covers reproduction "in any manner or form." [78] This right is at the core of e-commerce, because any transmission of a work or an object of related rights presupposes the uploading of that work or object into the memory of a computer or other digital device. In addition, when the work or object is transmitted over networks, multiple copies are made in the memory of network computers at numerous points. It is therefore necessary to determine how the reproduction right applies to such copies.

51. In 1982, at a meeting of government experts co-organized by WIPO and UNESCO, a broad-based understanding was reached that uploading into a computer memory should be considered as an act of reproduction. This understanding was reconfirmed in 1996 in agreed statements to the WCT and WPPT, which state:

The appropriate application of the reproduction right in the case of temporary copies in computers’ random access memory (RAM) continues to be a subject of debate at the national and international levels. The key question is whether such copies always require the consent of the rightsholder in order to avoid infringement. Carefully tailored exceptions for such copies in certain circumstances have, for example, been enacted in the United States of America in the Digital Millennium Copyright Act (‘DMCA’), [80] and adopted by the European Community in its Directive on the harmonization of certain aspects of copyright and related rights in the information society (the E.U. Copyright Directive), both of which are described below. [81]

52. The WCT (Article 8) and the WPPT (Article 14) also clarify the extent of rightsholders’ control when works, performances and phonograms are made available to the public for downloading or access on the Internet. For example, Article 14 of the WPPT provides:

This type of transmission differs from broadcasting, in that the material is not selected and delivered by an active transmitter like a broadcaster to a group of passive recipients. Rather, it is transmitted interactively, that is, on demand from individual users, at a time and place of their choosing. The treaties require that an exclusive right be granted to control such acts of "making available," while leaving it to individual countries to decide how to categorize this right under national law.

53. Issues related to moral rights are also given new importance in the digital environment, as the new technologies offer unprecedented means for users to manipulate or ‘morph’ copyright works, creating rights in derivative works, and possibly infringing the original authors’ moral rights of integrity. The WPPT (Article 5(1)) recognizes moral rights of attribution and integrity, as follows:

54. Issues of enforcement and management are not new, but take on added dimensions and urgency when works are exploited on digital networks. As noted above, the technologies pose substantial practical challenges. In order for legal protection to remain meaningful, rightsholders must be able to detect and stop the dissemination of unauthorized digital copies, accomplished at levels of speed, accuracy, volume and distance that in the past were unimaginable. And for e-commerce to develop to its full potential, workable systems of online licensing must evolve, in which consumers can have confidence. The answer to these challenges to a great extent will lie in the technology itself.

55. The WCT and the WPPT also break new ground in recognizing the emerging role to be played by technological protection measures, and by online management and licensing systems. They require Member States to provide two types of technological adjuncts to the protection of copyright and related rights, in order to ensure that the Internet can become a safe place to disseminate and license protected material.

56. The first technological adjunct is generally referred to as an "anti-circumvention" provision, and is addressed in the WCT (Article 11) and the WPPT (Article 18). For example, Article 11 of the WCT provides:

Such provisions relate to the need of rightsholders to rely on technological measures to protect their works against infringement on the Internet. No matter how ingenious the technology used to protect works against unauthorized use, equally ingenious ways may be developed to circumvent it. The resulting level of insecurity could prevent rightsholders from disseminating their valuable works on the Internet. Given the inability to achieve total security, a realistic goal is to make the technology sophisticated enough to deter the ordinary consumer from seeking to circumvent, while granting legal redress against those who represent a greater threat – hackers and those engaged in circumvention as a business. [82] Toward this end, the treaties require Member States to provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures used by rightsholders to restrict unlawful and unauthorized acts. The treaty language is general enough to allow significant flexibility to national governments in determining the details of appropriate implementation. [83]

57. As a second technological adjunct, the treaties protect "rights management information," providing legal support to rights management systems, under the WCT (Article 12) and the WPPT (Article 19). For example, Article 12 of the WCT provides:

Rights management systems operate on the basis of electronic data that is attached to the works and objects of related rights. [84] The data may identify the author or performer, the rightsholder, and the work or object itself, and may further describe the terms and conditions for its use. Under the treaties, Member States must provide adequate and effective legal remedies against the deliberate removal or alteration of such information, and against the dissemination of works, performances or phonograms from which such information has been removed or altered, where these acts are performed with at least reasonable grounds to know that they will induce, enable, facilitate or conceal infringement. This will enhance the ability of rightsholders to exploit their property on the Internet, and allow consumers to rely on the accuracy of the information they receive so they can feel secure transacting online.

58. National legislation, in conformity with the treaties, makes provision against the circumvention of technologies designed to protect copyright works. Both the E.U. Copyright Directive, and the United States Digital Millennium Copyright Act (DMCA), [85] require protection for digital rights management systems that protect copyright in digital form. The E.U. Copyright Directive (Article 6.2) requires Member States to provide legal protection against the "manufacture, import, distribution, sale, rental, advertisement for sale for rental, or possession for commercial purposes of devices, products or components of the provision of services" for the purposes of circumventing technological measures, including encryption, scrambling or other copy control mechanisms. The DMCA, Title I, creates civil and criminal liability for circumvention of copyright protection technologies and for the knowing provision of false copyright management information or intentional removal of the same, providing a technical adjunct to the rights established by copyright law. [86]

59. Faced with the threat of piracy heightened by the use of digital technologies, rightsholders are increasingly turning to technology to provide protection for their intellectual property. This approach is supported by the legal measures against circumvention of such technologies, in the WIPO Internet Treaties, as described above. Technological systems of protection include: anti-copy devices, access control, electronic envelopes, proprietary viewer software, encryption, [87] passwords, watermarking, [88] fingerprinting (user authentication), metering and monitoring of usage, and remuneration systems. Several industry and technology initiatives to set standards in various industries have emerged over the years, although none have yet established uniform standards for technological protection measures. [89]

60. The music industry, for example, has developed copyproof compact disc (CD) technology that prevents CDs being played on computer disc drives. Copyproofing employs various technologies either by including errors in the data encoded on the CD, which allows the disc to be played on a standard CD player, but not on a CD-ROM, or by masking audio files as data files so that the CD-ROM drive cannot recognize the music. [90] The fact remains that these methods can currently all be circumvented. In the United States Government, various efforts have been made to pass copy protection legislation that will prevent the sale of any consumer ‘digital media device’ (broadly defined as any hardware or software that reproduces, displays or retrieves or accesses any copyright work) that does not meet Federal Government copy-protection standards. [91] At the same time, the Government is exploring initiatives to mandate the introduction of copy-protection devices for digital television broadcasts. [92]

61. In a case brought under the DMCA, Universal City Studios, Inc. v. Reimerdes, [93] the defendant was found liable for copyright infringement for posting DeCSS, a decrypter for the Content Scramble System (CSS) used to encode motion pictures on DVDs, so as to enable them to play on Linux. [94] The Court rejected the defendant’s argument that an injunction would prevent fair use of the decrypted material. Another case, United States of America v. Elcom Ltd. a/k/a ElcomSoft Co. Ltd, and Dmitry Sklyarov, [95] concerned criminal liability under the DMCA for circumvention of copyright protections in electronic book software sold by Adobe Systems Inc., where the circumvention program was legal under Russian law, but banned by the DMCA anti-circumvention measures. This case has been viewed as a test of the constitutionality of the DMCA, and the breadth of protection it grants over non-digital material, at a perceived risk to preservation of individual rights of free use. [96]

62. As mentioned above, the WCT entered into force on March 6, 2002 and the WPPT on May 20, 2002. As at October 2002, the WCT has 37 and the WPPT has 38 States party. Since their adoption in 1996, the treaties have been implemented in a number of important legislative instruments, including the E.U. Copyright Directive, and the United States Digital Millennium Copyright Act (DMCA), summarized below.

63. For most countries, particularly those already in compliance with existing treaties, the implementation of the Internet Treaties does not require major rewriting of the law on copyright and related rights, nor any fundamental change in policy or the structure of their legal systems. Typically, a country may need to clarify the scope of existing rights to add the right of "making available" on demand. Because the scope of related rights has traditionally been more limited, additional rights such as moral rights may need to be added to protect performers or record producers. Although not required by the treaties, a country may choose to make adjustments to the limitations and exceptions to rights it provides. Finally, each country must provide adequate and effective legal remedies against the circumvention of technical protection measures and the deliberate deletion or alteration of rights management information, although these provisions are drafted generally in the treaties so as to give national legislators flexibility in their implementation.

Three of the most important of these issues are currently under discussion at WIPO with a view to the possible development of new international instruments, namely: audiovisual performers’ rights, broadcasters’ rights, and sui generis protection for databases that do not qualify for copyright protection. The first two are already protected by multilateral treaties, but require updating and improvement; the latter would establish a new form of international protection. Additional activities in other fields are also under consideration. [100]

(a) Scope of Copyright Protection in the Digital Environment

67. Exceptions and limitations to copyright. The copyright system has traditionally maintained a balance between protecting creators’ property rights and the exclusive right to control use of copies of their work, and the public good in fair access to and use of such materials. Copyright laws permit exceptions to copyright, in order to maintain this balance. In the United States, for example, this balance has been enshrined in the principle of ‘fair use’ [101] limitations on the rights of authors, while in other countries such as Australia and the United Kingdom, the concept is recognized by way of statutory exceptions to copyright infringement for ‘fair dealing.’ [102]

68. This balance is now in question because of digital technologies, and the way in which they have changed how we access and use information. [103] In the physical world, we can access copyright materials without infringing copyright, by borrowing a book from a library, for example. [104] Online, each access to such material involves an act of copying, where the simple act of viewing a website requires the computer to make temporary local copies of the data in our computers’ random access memory (RAM). In addition, increasingly, copyright works are not sold, in the way that a book or videocassette was sold in the past, but are licensed under certain terms and conditions of use. Our access to copyright works is increasingly governed by contract, which may impact on the application of exceptions and limitations, the traditional checks and balances of the copyright system, aimed at preserving the rights of consumers and the public interest.

69. A number of questions are raised about exceptions and limitations to rights in the digital environment. Are existing exceptions and limitations, written in language conceived for other circumstances, too broad or too narrow? Some exceptions, if applied literally in the digital environment, could eliminate large sectors of existing markets. Others may implement valid public policy goals, but be written too restrictively to apply to network transmissions. New circumstances may also call for new exceptions. These questions must be examined in light of the international standard established for the permissibility of exceptions and limitations to certain rights, known as the ‘three-step test’. Under this test, as set out in the Berne Convention and TRIPS Agreement, exceptions are permitted "in certain special cases" that "do not conflict with a normal exploitation" of the work and "do not unreasonably prejudice the [owner’s] legitimate interests." [105]

70. As to the scope of these exclusive rights, the WIPO Internet Treaties continue to provide flexibility to individual countries to develop exceptions and limitations that are appropriate to their particular circumstances. The general ‘three-step’ test applied to the reproduction right in the Berne Convention and to all rights in the TRIPS Agreement is extended to apply to all rights in the Berne Convention and in the WCT (Article 10) and the WPPT (Article 16). An important agreed statement in the WCT (concerning Article 10) and the WPPT (concerning Article 16) clarifies that this test permits countries to extend existing exceptions and limitations into the digital environment, or to add new ones, as appropriate. For example, the WCT provides:

"Agreed statement concerning Article 10: It is understood that the provisions of Article 10 permit Contracting Parties to carry forward and appropriately extend into the digital environment limitations and exceptions in their national laws which have been considered acceptable under the Berne Convention. Similarly, these provisions should be understood to permit Contracting Parties to devise new exceptions and limitations that are appropriate in the digital network environment.

It is also understood that Article 10(2) neither reduces nor extends the scope of applicability of the limitations and exceptions permitted by the Berne Convention."

71. As described above, the goal of policy makers is to achieve an appropriate balance in the law, providing strong and effective rights, but within reasonable limits and with fair exceptions. If this effort is successful, the result should be a positive impact from all perspectives. Trade in copyrighted works, performances, phonograms and other protected objects will become a major element of global e-commerce, which will grow and thrive along with the value of the material that is traded. If rightsholders are secure in their ability to sell and license their property over the Internet, they will exploit this market fully and make more valuable works available through this medium. Appropriate limitations and exceptions will continue to safeguard public interest uses. The result will be a benefit to consumers, a benefit to rightsholders, a benefit to service providers, and a benefit to national cultures and economies – a true ‘win-win’ situation.

72. Preserving authors’ rights online. Attention has been drawn to the scope of copyright law in an online context, in a practical sense, by two significant cases in the United States of America. They raise the question to what degree authors retain the right to control and license their works, when those works are re-compiled or re-distributed electronically in the digital environment. In the case of The New York Times, Co. v. Tasini, the United States Supreme Court affirmed a decision in favor of the American National Writers Union against various news distributors, which had been selling freelance writers’ material to electronic databases, including Lexis/Nexis, without any additional payment or negotiation of electronic rights with the authors. The Court found that the electronic re-publication of the writers’ works constituted copyright infringement, and that the writers were entitled to receive royalties for the secondary use. [106] This reasoning was also upheld in National Geographic v. Greenberg, where the United States Supreme Court declined to hear an appeal from an earlier Appeals Court decision that the reproduction of freelance photographers’ work in a searchable CD-ROM collection of past magazine editions involved a new use, for which the original authors were entitled to receive royalties. [107] Through such cases it is becoming clear, at least in some jurisdictions, that the legal characterization of uses of copyright works in an electronic context is being addressed so as to preserve and reaffirm the rights of creators in the digital environment.

73. Open source software movement. The ‘open source’ movement in the software industry has adopted a different stance towards asserting intellectual property rights in software, which are traditionally proprietary and protected by copyright law, and in some jurisdictions patent law. [108] Open source refers to the development of software which is publicly available in source code form, in conformity with the certification standard issued by the Open Source Initiative (OSI). [109] The software, although usually copyright protected, is distributed free of licensing restrictions and thus encourages users to run, modify, copy and distribute the software freely, so long as certain conditions are met, including that the program’s source code remains publicly available and the holder of the source code license does not collect royalties. The movement is designed to encourage collaborative software development, to remove programming errors or bugs and promote derivative works.

(b) Liability of Internet Service Providers

74. One issue of some concern in the intellectual property and Internet communities is the question of who should be liable for copyright infringement that takes place online. This issue is raised by the very nature of digital networks. When a work is transmitted from one point to another, or made available for the public to access, numerous parties are involved in the transmission. These include entities that provide Internet access or online services (‘ISPs’ or ‘OSPs’). When such service providers participate in transmitting or making available materials provided by another which infringe copyright or related rights, are they liable for the infringement? Such liability could arise in one of two ways: if the service provider itself is found to have engaged in unauthorized acts of reproduction or communication to the public, or if it is held responsible for contributing to or making possible the act of infringement by another.

75. Such issues have arisen under Chinese copyright law, for example, in the case of Wang Meng. v. Century Interconnecting Telecom Co. Ltd, which involved a service provider on whose website was posted works of six well-known Chinese novelists without their permission. [110] The defendant argued that China’s Copyright Law does not address the Internet, and therefore that digital works could not infringe copyright. The Court found for the plaintiffs, holding that no derivative work was created simply by the process of digitization and that Chinese copyright law gave the author the exclusive right to exploit and profit from the work both online and off. The ISP was found to be in a position to control the distribution of the works, and was therefore liable for infringement.

76. The liability issue has significant international implications. Because the Internet is a borderless medium and its markets are global, it is critical that compatible approaches to this issue be adopted around the world. It is not necessary that the approaches be identical: they may differ depending on the particular circumstances and legal traditions in any given country. But they must be interoperable if global networks and electronic commerce are to develop smoothly. This issue was the subject of a WIPO workshop in 1999, that examined national and regional legal frameworks, notice and takedown systems, and the possibilities for international harmonization. [111] WIPO continues to monitor developments regarding this issue, including legal decisions, marketplace events and emerging legislation.

77. During the Diplomatic Conference on the WIPO Internet Treaties in 1996, the issue was intensively debated. The ultimate result was that the treaties are essentially neutral on the subject, with the issue of liability left to national legislation to determine. There is, however, one reference to the issue, in an agreed statement to the WCT, which provides that: "[i]t is understood that the mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Treaty or the Berne Convention." [112] The statement clarifies that the mere provision of wires used to communicate, for example, does not constitute an act of communication. But the statement is limited in its application; it does not cover a number of activities that service providers may engage in, and it does not deal with concepts of liability for contributing to the infringement of another.

78. Since 1996, a number of legislative solutions to this issue have begun to emerge. [113] These statutes differ as to whether they address copyright only, or take a ‘horizontal approach’– that is, a rule governing liability of service providers regardless of the grounds for illegality of the transmitted material. In other words, the horizontal approach covers not only copyright infringement but also other laws such as libel or obscenity. [114] There are laws now in force in Germany and Sweden, which approach the issue from a horizontal perspective. Japan also has introduced the ‘Provider Liability Law’, [115] which states that a provider is liable only if it is technically possible to prevent transmission of the infringing material; and the provider knows of the existence of the material and; (i) knows that it is infringing or (ii) reasonably ought to know that it infringes (Art. 3 (1)). A person whose rights have been infringed can ask a provider to disclose information about the person transmitting the material if the information is necessary for a legal claim or other legitimate reason (Art. 4(1)).

79. The European Community has adopted a Directive on Electronic Commerce with provisions that will harmonize the treatment of liability among its Member States, again using a horizontal approach. [116] Some commentators have argued that there are inconsistencies between the E.U. Copyright Directive and the E.U. E-Commerce Directive on the issue of online service provider liability. [117]

80. The alternative approach of implementing copyright-specific laws to determine online service provider liability, has been adopted by other countries, including Hungary, Ireland, Singapore and the United States of America. In the United States of America, Congress enacted copyright-specific legislation as part of the 1998 Digital Millennium Copyright Act (DMCA), after legislation in past years establishing different standards in other areas of the law. As part of the DMCA, the ‘Online Copyright Infringement Liability Limitation Act’, establishes ‘safe harbors’ to shelter ISPs from liability for copyright infringement in certain circumstances. [118] The DMCA sets down guidelines with respect to copyright infringement online, although it does not define when a provider is liable for copyright infringement and, in this respect, the existing principles of U.S. copyright law apply. Instead, the DMCA defines those categories of provider activity where providers are exempt from liability for damages [119] provided that: the provider is merely acting as a ‘passive conduit’ for the information, is not the producer of the information, and has responded expeditiously to remove or disable access to infringing material upon notice from the copyright holder (the so-called ‘notice and takedown’ provisions). To qualify for immunity, the provider must also implement a policy that terminates the subscriptions of repeat infringers, and accommodate and not interfere with technical measures put in place to protect and identify copyright works.

81. In one U.S. case testing these ‘safe harbor’ provisions, ALS Scan, Inc. v. Remarq Communities, Inc., the issue was whether a service provider was liable for providing access to ‘adult’ news groups that contained unauthorized copies of the plaintiff’s photographs, after having been informed that the site was infringing. [120] In this case, the provider argued that it would only remove the materials when the infringing items were identified and listed with sufficient specificity, a difficult task given the number of photographs on the site. The Court found that the plaintiff had met its notice requirement and that, once notified, the provider could not rely upon the immunity granted by the DMCA. Action was also initiated in the United States of America under the DMCA, when 13 record companies requested the Court to order four ISPs to block access to a China-based website, Listen4ever.com, that was alleged to violate U.S. copyright laws. [121] The English-language site offered thousands of copyrighted songs for free download, before going offline upon initiation of the legal action.

(c) Rights of Performers in a Digital Environment

82. While the WPPT does protect the rights of performers, its provisions relate to the aural aspects of performances, and not to audiovisual performances. This is because diverse systems have evolved to protect audiovisual performers in different parts of the world, some based on legal rights and others on contract, and a compromise between the systems is difficult to achieve. While such performances are protected by many national laws, and also by the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, no multilateral treaty covers the rights of performers in authorized audiovisual fixations of their performances. The possible extension of international protection for performers to cover audiovisual performances might be perceived as a general question, not specific to e-commerce. It is, however, highly relevant because audiovisual performances will be used in an increasing measure on the Internet, through film and music videos for example, as available bandwidth increases. [122] Moreover, digital technologies permit the unauthorized manipulation and distortion of performers’ images and voices (e.g., morphing). A satisfactory solution of this issue is therefore an important component of an overall clarification of the rights involved in e-commerce.

83. In December 2000, WIPO organized a Diplomatic Conference on the Protection of Rights in Audiovisual Performances. [123] While the scope of this Conference included a number of basic questions regarding that protection, it was also an important attempt to establish appropriate rights in connection with the convergence of the digital and audiovisual worlds. The Conference resulted in a general understanding between the participating government delegations concerning most substantive provisions of a WIPO audiovisual performances treaty, except for the international recognition of transfer of rights under national law.

84. The deadlock was related to the consequences that the international recognition of statutory transfers of exclusive rights could entail. Those countries in favor of such recognition demand to have certainty and clarity on the producer’s ability to exercise the exclusive rights of authorization for the effective exploitation of films in a global environment. Opposition to that recognition is founded mainly in the concern that this could imply the application of domestic rules on the legal regulation of transfer or entitlement or rights in respect of the exploitation of films all over the world.

85. The Diplomatic Conference recommended to the WIPO Assembly of Member States, at its meeting in September 2001, to reconvene the Conference with the aim of finally adopting the new treaty. However, during the Assembly, Member States considered that it was necessary to continue consultations to resolve outstanding issues over the above-mentioned provision. They therefore decided to carry the issue over to the 2002 session of the WIPO Assemblies. [124] In the absence of such contacts, at the 2002 meetings the General Assembly approved the Director General’s proposal that the International Bureau should conduct informal consultations with interested parties to explore the possibilities of convening an "informal ad hoc meeting" in the first half of 2003 "for the purpose of having informal exchanges on the remaining differences and possible ways of resolving them." Meanwhile, WIPO is maintaining a close dialogue with governments and non-government organizations to bridge the existing gaps and to find possible ways forward in the negotiations. [125]

(d) Rights of Digital Broadcasters

86. Webcasting and digital film and television. The Internet offers manifold opportunities for copyright content providers and distributors to supply their material to a global audience, including via; (i) webcasting and (ii) digital film and television online.

(i) Webcasting

87. Webcasting, also known as ‘streaming’, is the process of digitally transmitting musical recordings, and radio and television broadcasts over the Internet. [126] The process is designed not to create permanent copies on end-listeners’ computer hard drives, although software is available that allows users to convert streamed audio files into other formats which can then be transferred via peer-to-peer (P2P) systems, described below. [127] Some legislatures have responded to this new method of distribution of copyright works.

88. The United States Digital Millennium Copyright Act (DMCA), for example, provides a statutory license for webcasters whose services are not provided on-demand, and gives copyright holders the exclusive right to authorize webcasts that are provided on-demand. [128] ‘On-demand’ transmissions are interactive broadcasts where the user chooses which songs to listen to from the website. Apart from broadcasting transmissions, the DMCA addresses four categories of webcasting: (1) sites providing original programming; (2) sites broadcasting secondary transmissions for analog radio; (3) aggregator sites facilitating access to commercial radio stations; and (4) entertainment sites that provide both audio and entertainment news.

89. The practice of retransmission of terrestrial radio stations’ over-the-air broadcasts via the Internet has also raised copyright concerns. In National Football League et al v. iCraveTV.com, a case brought by United States and Canadian motion picture and broadcasting companies, the Court issued a permanent injunction to prevent iCraveTV.com, a Canadian website, from converting copyrighted television material from 17 North American television stations into digital Web broadcasts and streaming them over the Internet. [129] The unauthorized re-transmission was found to be an infringement of the plaintiffs’ exclusive right to perform and display their works in the United States. Although iCraveTV’s transmissions may have been legal under Canadian copyright law, they were not in accordance with United States law, and it was then impossible to prevent United States users from gaining Internet access to the service. iCraveTV has since relaunched its online service, broadcasting network and cable television programs, this time using copyright protection systems to prevent users in the United States from gaining access. [130]

(ii) Digital film and television

90. In the audiovisual industries, the Internet offers an unprecedented channel for global distribution of film and television works. However, until recently, major audiovisual companies have hesitated to engage wholeheartedly in the digital environment. The slow increase in bandwidth, which has restricted the speed at which large files can be transferred, had recently protected the industry from rampant piracy. However movie studios’ fears have now been raised by the availability, before their official release, of pirated versions of most mainstream movies. For example, ‘Star Wars Episode II: Attack of the Clones’ was available online over the file-swapping service, Internet Relay Chat, a week before its official premiere. Research has shown that between 400,000 and 600,000 films a day are being downloaded over such file sharing networks and pirate video-on-demand sites. [131] Changes in film release-business structures, such as ‘day-and-date’ releases, that open films simultaneously in various regions, help to stem piracy but do not solve the problem. A further concern is with the so-called ‘analog hole’, referring to the gap in protection created when digital signals are transformed into analog upon entry into a television set, at which point any copy protection mechanisms that have been incorporated in the digital file are removed. The unprotected analog film can then be uploaded to the Internet and pirated without restriction. Another development closely watched by the film industry has been the proliferation of ‘fan films’, digital films that feature the characters and mise en scène of a film, a popular example being Star Wars, without the authorization of the copyright holder. [132] In one case, an animator distributed a Superman fan film online, prompting the rightsholders, DC Comics, to send a cease-and-desist letter. [133]

91. New developments are also taking place in the field of digital interactive television (iTV), involving the use of:
- personal or digital video recorders (such as TiVo, ReplayTV and UltimateTV) that allow viewers to digitally record shows by genre or actor, and pause and rewind live TV;
- video-on-demand (VOD), allowing viewers to choose which program to watch either by pay-per-view or by subscription; and
- two-way programming, that enables viewers to interact with other viewers. [134]

These developments have, however, been delayed by the current lack of copy protection that would secure the rightsholders’ property in digital broadcasts. One such technology, put forward by the motion-picture and consumer electronics industry-based Broadcast Protection Discussion Group, and approved by the Federal Communications Commission, is the ‘broadcast flag’, a marker embedded in digital-TV broadcasts that controls how consumer electronic devices can play and record the broadcasts, and designates those which cannot be copied. [135] Another initiative, the Hollywood-based Copy Protection Technical Working Group has been established to develop protection for digital television and video distribution. [136]

92. Broadcasting organizations have traditionally enjoyed protection in many countries for their broadcasts under either copyright or related rights, and their rights are protected under both the TRIPS Agreement and the Rome Convention. However, in this field, as with performers’ rights, an updating of existing international norms is needed. Existing treaties may not adequately ensure that broadcasters (and providers of valuable programming not necessarily covered by copyright and related rights, such as certain sports transmissions) are able to safeguard and exploit their efforts and investments over the Internet. A new treaty could protect against digital piracy and manipulation of broadcast signals, furthering the use of the Internet as a medium for broadcasting activities, as described above.

93. Discussions are ongoing at WIPO concerning the potential for a treaty dealing with the rights of broadcasting organizations, and treaty language proposals have been received by WIPO from the European Community and a number of Member States. [137] The WIPO Secretariat prepared a technical background paper on the protection of broadcasts aimed to illuminate the issues involved during further consideration of this matter by the Standing Committee on Copyright and Related Rights. [138]

(e) Linking of Copyright Information Online

94. Liability for linking and deep-linking online content. The software that underlies the operation of the Internet allows information to be ‘hyperlinked’ or ‘hypertext reference linked’ within and between sites. [139] Such linking typically occurs when the creator of one website provides a reference to another website, usually indicated in colored text or icons, using software that allows the user to click on the reference and view the content on the linked website. While enabling users to surf fluidly from one website to another, this pr

	Table of Contents
		Introduction
		I. The Internet and the Development of the Digital Society
		II. The Migration of Intellectual Property to the Internet
		III. The Impact of the Internet on Intellectual Property Law (A) Copyright and Related Rights (B) Trademarks and Other Rights in Distinctive Signs (C) Domain Names (D) Patents
		IV. The Role of Private International Law and Alternative Dispute Resolution
		V. Issues for Developing Countries in the Digital Environment
		VI. Digital Delivery of Intellectual Property Services
		VII. The WIPO Digital Agenda

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Global Internet Statistics by Language
Language	Speakers (millions)
English	230.6
Total non-English including:	403.5
Chinese	68.4
Japanese	61.4
Spanish	47.2
German	42.0
Korean	28.3
Italian	24.0
French	22.0
Portuguese	19.0
Dutch	12.4
Malay	8.0
Swedish	6.8
Arabic	5.5
Turkish	4.6
Danish	3.5
Czech	3.1
Thai	2.4
Romanian	2.3
Farsi	2.2
Greek	2.0
Hebrew	2.0
Total Online Population	619