Lecture-26

Intellectual property Rights and Information Technologies

Introduction;

People talk a lot in the information technology business about "intellectual property
rights." But what are they? How do they apply to software technology? Why should you
protect them? How do you protect them?

Intellectual property rights are at the foundation of the software industry. The term
refers to a range of intangible rights of ownership in an asset such as a software program.
Each intellectual property "right" is itself an asset, a slice of the overall ownership pie. The
law provides different methods for protecting these rights of ownership based on their type.

There are essentially four types of intellectual property rights relevant to software:
patents, copyrights, trade secrets and trademarks. Each affords a different type of legal
protection. Patents, copyrights and trade secrets can be used to protect the technology itself.
Trademarks do not protect technology, but the names or symbols used to distinguish a
product in the marketplace.

The application of information technology has been expanded and extended to every
society in the world. It has a strong connection and association with many areas such as
business, engineering, science, healthcare, arts and public administration. Particularly,
students from all ages are exposed to the Internet and to online information at different levels
from K-12 to higher education. A part of their daily life relies on social networking and cloud
computing services for connecting with friends and taking advantage of online services for
learning. With mobile technology becoming more common and accessible, the population of
and activity in the cyber world will continue to grow tremendously.

With the growth of the cyber world, the level of cybercrime will continue to increase
and poses a serious threat to online users now and in the future. The limitations of the current
law systems which vary between countries create a real challenge in formulating any solution
to combat the cybercrime. In addition, the protection of intellectual property rights such as
raised privacy and copyright and freedom of expression issues are critical issues in the cyber
 world. The future challenge of how to protect intellectual property from violation both in the
real world and cyber world requires further efforts in research.

Computer Software

Computer software is expensive to develop but relatively easy to copy, conditions that
make it highly vulnerable to infringement of intellectual property rights. The issue of how to
protect computer software was first

The Office of Technology Assessment (OTA, 1986) has done a major study of
the implications of information-related technologies for intellectual property rights.
Intellectual property issues surrounding the new biotechnology have been the subject of a
study done for the Organization for Economic Cooperation and Development (Beier et al.,
1985) and were covered in an OTA (1984) assessment and a subsequent OTA (1989)
report.

Acted on in the United States, where protracted debate and many studies considered such
alternatives as patents, copyrights, and sui generis intellectual property rights. Proponents of
copyright protection for computer software argue that it is simply another form of writing
brought about by technical change, as were sound recordings and motion pictures.
Proponents of patent protection argue that the mental and financial effort required to produce
software and the functional uses of software more closely resemble inventive activity rather
than artistic creation, and thus patents are the more appropriate analogy. Still others argue for
a third approach, some form of sui generis protection (i.e., a unique form of protection for
IPRs in computer programs), which might possibly have characteristics of both copyright and
patent law.

In the United States, the debate resulted in the decision to protect computer software
primarily under the copyright laws. In 1980, the Copyright Act of 1976 was amended
explicitly to grant copyright protection for software. The United States also has been
encouraging other nations to protect computer software under copyright laws. Important
questions remain, however, about the adequacy of copyright protection because of the
fundamental limitations of copyright, which protects the form of expression of an idea
but not the idea itself. Perhaps for this reason, as pointed out in Chapter 12 by Pamela
Samuelson, the precise nature of protection for computer programs is still not certain in some
countries, even though it may be covered under their copyright laws. Moreover, to
complicate matters even further, the U.S. Patent and Trademark Office has been granting a
growing number of patents for computer programs.

Patents

A patent is a twenty year exclusive monopoly on the right to make, use and sell a
qualifying invention. This legal monopoly is considered a reward for the time and effort
expended in creating the invention. In return, the invention must be described in detail to the
Patent Office, which publishes the information, thus increasing the amount of technological
knowledge available to the public.

To obtain a U.S. patent, an inventor must apply to the Patent Office and demonstrate
that the invention is new (as compared to prior technology), useful, and "non obvious." An
invention is non obvious if it is more than a trivial, obvious next step in the advance of the
technology.

Software patents can be extremely powerful economic tools. They can protect
features of a program that cannot be protected under copyright or trade secret law. For
example, patents can be obtained for ideas, systems, methods, algorithms, and functions
embodied in a software product: editing functions, user-interface features, compiling
techniques, operating system techniques, program algorithms, menu arrangements, display
presentations or arrangements, and program language translation methods.

Since patent rights are exclusive, anyone making, using or selling the patented
invention without the patent owner's authorization is guilty of infringement. Penalties are stiff
and include triple damages. Once a patent for an invention is granted, subsequent
"independent" (i.e., without access to the patented technology) development of the invention
by another inventor is still considered infringement.

Copyrights

While a patent can protect the novel ideas embodied in a software program, a
copyright cannot. Copyright protection extends to the particular form in which an idea is
expressed. In the case of software, copyright law would protect the source and object code, as
well as certain unique original elements of the user interface.

The owner of a copyrighted software program has certain exclusive rights (with some
exceptions): the right to copy the software, create derivative or modified versions of it, and
distribute copies to the public by license, sale or otherwise. Anyone exercising any of these
exclusive rights without permission of the copyright owner is an infringer and subject to
liability for damages or statutory fines.

As with patents, the exclusive rights afforded under copyright law are intended to
reward the creative and inventive efforts of the "author" of the copyrighted work. The
exclusive right to control duplication protects the owner of copyrighted software against the
competition that would result from verbatim copying of the program's code. Copyright law
also protects against indirect copying, such as unauthorized translation of the code into a
different programming language.

Copyright protection arises automatically upon the creation of an original work of

authorship. There is no need to "apply" for a copyright or register the copyrighted work in
order for protection to exist. Generally, the duration of a copyright is the author's life plus
fifty years. In the case of software created by an employee in the course of his or her
employment, the resulting "work made for hire" would be protected by copyright law for
seventy-five years from publication.

In contrast with patents, independent development of a copyrighted work is a defense

to an allegation of copyright infringement. Imagine, though, how unlikely it would be for the
same thousands of lines of code to be created independently by one not engaged in
unauthorized copying. Unlike patents, copyright law affords no protection to the ideas
underlying the program. Ideas and concepts are fair game for competitors to the extent they
are not protected by patents or trade secrets.

Trade Secrets

A trade secret is any formula, pattern, compound, device, process, tool, or mechanism
that is not generally known or discoverable by others, is maintained in secrecy by its owner,
and gives its owner a competitive advantage because it is kept secret. The classic example of
a trade secret is the formula to Coca-Cola.

A trade secret can theoretically last forever -- for as long as its owner uses reasonable
efforts to keep it secret and someone else doesn't independently create or "discover" it.

Many features of software, such as code and the ideas and concepts reflected in it, can
be protected as trade secrets. This protection lasts as long as the protected element retains its
trade secret status. Unlike patents, trade secret protection will not extend to elements of
software that are readily ascertainable by lawful means, such as reverse engineering or
independent development.

Trade secrets are not subject to being "infringed," as with patents and copyrights, but
are subject to theft. Their legal status as a protectable intellectual property right will be
upheld if the owner can prove the trade secret was not generally known and reasonable steps
were taken to preserve its secrecy.

Maximizing the economic value of a software asset critically depends on

understanding the nature of the intellectual property rights involved and how best to use the
available forms of legal protection to protect those rights.

The Role of Intellectual Property Rights in Information and Communication

Technologies

The last two decades of the twentieth century saw an intense debate on several
intellectual property rights (IPRs) in the international fora. While developing countries were
arguing for ‘lesser’ level of patent protection in the Diplomatic Conference on the Revision
of the Paris Convention (1975-86), the developed countries were successful in introducing a
move under multilateral trade negotiations of Uruguay Round, which would eventually
‘strengthen’ patent protection and other intellectual property rights (1986-94). This process
resulted in the Agreement on Trade Related Aspects of Intellectual Property Rights
(TRIPS) under World Trade Organization (WTO). Many developing countries are still in the
process of implementation of the TRIPS agreement, which required them among others, to
strengthen their patent systems as well as introduce new IPRs such as, geographical
indications and layout designs. Be that as it may, the last two decades of the twentieth
century also witnessed a remarkable communications revolution. The early 1980s witnessed
rapid changes in telecommunications as well as computer industries. While the birth of
personal computer started the computer revolution, rapid technological developments took
place in telecommunications. The mid 1990s witnessed the growth of the Internet. The
century closed with the mobile revolution as well as the bursting of the telecom and Internet
bubbles. How are intellectual property rights and information and communication
technologies related? What is the role of IPRs in the technological development of
information and communication technologies? This paper seeks to explore these questions.
The seven intellectual property rights covered under this agreement are Copyright and
Neighbouring Rights, Designs, Geographical Indications, Layout Designs, Patents, Plant Of
the seven IPRs covered under the TRIPS agreement, two viz., geographical indications and
plant variety protection are not relevant for information and communication technologies
(ICTs). Trademarks and designs are relevant in a general way, as in any other business.
Patents would be important to foster technological change. Copyright and neighbouring
rights are important for computer software and for the Internet. Layout designs are of
relevance to semiconductor industry. The ICT industries cover the following:
semiconductors, computer and telecommunications. The computer and telecommunications
sectors have two components: hardware and software. While most of technological
developments in hardware could be patent protected, technological developments in software
are not patentable in all countries. The rapid diffusion of Internet usage worldwide starting in
the mid 1990s, posed a particular challenge to traditional copyright and neighbouring rights.

Intellectual Property Protection and Technological Development

Patent Protection
Patent protection has a history of more than five hundred years. While the patent system
developed and evolved when inventors were individuals, it had to adapt itself to the situation
of corporate inventors, who became prominent since the middle of the twentieth century. It
was only after the corporate inventor became prominent that a reasonably sound economic
theory of patents could be developed. Arrow [1962] reasoned that knowledge being a public
good, resources for its production will not be forthcoming and hence will have an adverse
effect on welfare. To attract investment into knowledge production the patent system, which
gives a temporary, legal monopoly to inventers, is necessary. It was contrary to the view of
Schumpeter (1971) who says that patents are not only unnecessary for encouraging
inventions but may also retard technological progress. In Schumpeter’s evolutionary model
firms struggle to keep their market position by continuous innovations. For a firm an
innovation will itself create a temporary monopoly. During this period of monopoly the
innovating firm will make extra-normal profits, but such profits will be eroded once other
firms catch up by copying the innovation. Hence a firm has to continuously innovate. The
evolution of the inventor from individual inventor to a corporate inventor is very important.
While for an individual inventor patents may be the only mechanism of appropriation; for the
corporate inventor there are many more avenues such as, being incumbent in the market,
being the first mover as well as having trademark recognition for his goods (Scherer [1970]).
There are inter-industry differences in the way they are dependent on the patent system for
technological appropriation. This was clearly brought out by Taylor and Silberston [1973]
while for some industries such as pharmaceutical and fine chemicals patent protection is very
important, for some other industries such as mechanical engineering industries it is not. The
reasons for the dependence of the pharmaceutical industry on the patent system are, the
technology of production of drugs was easy to copy through reverse engineering and there
are no entry barriers to the industry. The reasons for technological changes not being
dependent on the patent system in electronics (in which semiconductors, computers and
telecommunication sectors fall) are the following. The rapid pace of technological
development: except for some radical and fundamental inventions most of the inventions
have a life of a few years, much less than the full term of the patent. The minimum size of
break-even point is rising rapidly and making entry difficult in standardized products (it is
possible for entry in niche products). There are economies of scale in production of these
industries, which creates entry barriers. There are first mover advantages for the firm, which
brings the invention to the market. The other important factor is that the real prices of
products of these industries are falling over time because of the technological changes.

Copyright Protection

There are two areas in which copyright (and neighbouring rights) protection is crucial in ICT
industries. These are computer software (including telecommunications software) and
Internet. The very first reaction to protect software was through copyrights. Many countries
including India amended their copyright laws to include computer software under copyright
protection in 1984. One of the criticisms of copyright protection for software was that
copyright did not protect the idea itself by but only a particular expression of the idea. While
copyright protection for mass-market software seems to be quite effective, copyright
protection for customized software is not important. The growth of the Internet has put a lot
of pressure on copyright protection. Many countries have strengthened their copyright
protection in the digital “In the case of rapidly developing areas, patent protection may not be
useful because inventions quickly become outdated”. Age As a result the Internet is not the
same as it used to be in the earlier Days. Most useful information, which used to be freely
available in the earlier

Other Issues
Internet

The worldwide growth of the Internet since 1995 has put a lot of pressure on
intellectual property rights. Copyright and neighbouring rights saw an immediate impact of
the Internet on the rights they cover. Many areas of protection covered by copyrights viz.,
literary works, audio, video, etc came to be displayed and exchanged on the Internet causing
loss to the right holders. While the copying of literary works seem to have subsided, there
were some important cases involving distribution of musical works. The other area of
immediate concern is the conflict between trademarks and domain names. WIPO has evolved
a mechanism to resolve these disputes.
Computer software

Computer Software is protected by copyrights in almost all countries. Only the US

and Japan give patent protection. The experience in the US has been mixed. The main
problem seems to be the quality of patents issued in software. The other problem is non-
inclusion of non-patent prior art, which is very important in this field. Rapid change in
technology makes patent protection unimportant. On the other hand, copyright protection
seems to be inadequate. Indian companies are not active in seeking copyright protection in
India or patent or copyright protection in the US. Piracy of packaged software in developing
countries is because of high prices and discriminatory pricing not being possible because of
leakages.
Database protection
 While databases, which are original compilations, are protected under copyright laws,
the demand for a sui generis law to protect unoriginal databases is disturbing. The criteria
seem to dilute the contribution required for obtaining protection. Denmark, Finland, Iceland,
Mexico, Norway and Sweden have sui generis laws to protect unoriginal databases. While the
EU has a directive to protect databases since 1998, the US congress is considering a data base
protection bill. The WIPO started a process for database protection in 1996 and rejected a
draft treaty and does not have any active proposal at the present time.

Conclusion:

It is obvious that management of IT and IPR is a multidimensional task and calls for
many different actions and strategies which need to be aligned with national laws and
international treaties and practices. It is no longer driven purely by a national perspective. IP
and its associated rights are seriously influenced by the market needs, market response, cost
involved in translating IP into commercial venture and so on. In other words, trade and
commerce considerations are important in the management of IPR. Different forms of IPR
demand different treatment, handling, planning, and strategies and engagement of persons
with different domain knowledge such as science, engineering, medicines, law, finance,
marketing, and economics. Each industry should evolve its own IP policies, management
style, strategies, etc. depending on its area of specialty. Pharmaceutical industry currently has
an evolving IP strategy. Since there exists the increased possibility that some IPR are invalid,
antitrust law, therefore, needs to step in to ensure that invalid rights are not being unlawfully
asserted to establish and maintain illegitimate, albeit limited, monopolies within the
pharmaceutical industry. Still many remain to be resolved in this context.