Copyright, Internet-Induced Constraints on Freedoms: The Implications for Innovation Roger Clarke, Xamax Consultancy, Canberra Visiting Fellow, Dept of Computer Science, ANU National Office for the Information Economy Canberra, 9 July 2002

Copyright, Internet-Induced Constraints on Freedoms: The Implications for Innovation Agenda The Digital Era Its Impacts Freedom of Access to Information The New Dark Ages The Process of Innovation Constraints on Innovation Access to Information Copyright Patent

Copyright, Information Objects Then (early 1990s) Tangible things (books, journal issues, photos, vinyl LPs, audio-tapes, microfilm, video-tapes, cassettes, diskettes, CD-ROMs, games-cartridges) A person bought, rented, borrowed or visited a tangible thing, or gained admission to a location where it was reproduced, performed or played The person had no need for a copyright licence Replication was expensive, required infrastructure Copies were accessible by one person at a time

Copyright, Information Objects in the Digital Era convenient and inexpensive Creation desktop publishing packages, PC-based graphic design tools, animation, digital music generators Conversion of existing materials scanners, OCR, digital cameras, digital audio-recording near-costless Replication disk-to-disk copying, screen-grabbers, CD-burners as a consumer appliance

Copyright, Information Objects in the Digital Era very rapid Transmission, unmeasurably low costs modem-to-modem transmission, CD-ROMs in the mail, ed attachments, FTP-download, web-download inexpensive and widespread Access PCs, PDAs, mobile phones, public kiosks, web-enabled TV in the workplace, the home, public kiosks, Internet cafes computer-based Analysis of data data-matching, profiling, data-mining, pattern-recognition software convenient Manipulation of data-objects word-processors, sound and image processing tools

Copyright, Defining Aphorisms of Cyberspace The New Yorker 5 July 1993

Copyright, Defining Aphorisms of Cyberspace On the net, nobody knows you're a dog There's no 'there' there The Net treats censorship as damage and routes around it National borders are just roadbumps on the information superhighway National borders are not even roadbumps on the information superhighway The street finds its own uses for things

Copyright, Defining Aphorisms of Cyberspace Information Wants To Be Free Information Wants To Be Free To Go Anywhere Information wants to be free because it has become so cheap to distribute, copy, and recombine Information wants to be expensive because it can be immeasurably valuable to the recipient That tension will not go away

Copyright, Cyberculture Ethos Inter-Personal Communications Internationalism Egalitarianness Openness Participation Mutual Service Community Freedoms Gratis Services

Copyright, Cyberculture Economics 'barn-raising' - Rheingold as distinct from 'horse-trading' a 'cooking pot' - Ghosh "keeps boiling because people keep putting in things as they themselves, and others, take things out" a honey-pot - Clarke a culture of appropriation plagiarism as good not evil A culture of mutuality needs an economics of indirect and/or deferred exchange

Copyright, Alternative Economics of Scarcity and of Abundance Conventional, Neo-Classical Economics The basis of value is Relative Scarcity More Supply = More Competition = Lower Prices OR Information Economics, Economics of Networks The basis of value is Critical Mass The more there are, the greater the value of each Iron Ore cf. Fax Machines Vinyl carrying Analogue Music cf. Digital Music

Copyright, The Open Source Movement Shareware (1983-) Free Software Foundation (1985- ) CopyLeft Gnu Public Licence (GPL) Open Source Institute (1998-) Unix BSD Unix Gnu Linux SSLeay OpenPGP Mozilla Apache Open Office Mailman

Copyright, The Open Content Movement Xanadu Transclusion (1965) quote w/- copying, & with µpayments Ted Nelsons Transcopyright (1997) have a statutory right to re-publish by pointing, and pay (cents) for it Open Content Project Gutenberg Open Directory Project - opencontent.org Public Licences

Copyright, Peer-to-Peer (P2P) e-Sharing / e-Trading MP3 Napster Gnutella, KaZaA, et al. CD-quality digital sound in files sized 1 MB/minute a central catalogue of a distributed database, to facilitate sharing of MP3 files a distributed catalogue of a distributed database, to facilitate sharing of (MP3?) files

Copyright, The Digital Revolution Impacts on Publishing Increased Appropriation Reduction in Payment Morality Disintermediation Collapse of Publishing New Business Models Re-Intermediation

Copyright, Disruptions in e-Publishing Publisher-to-Consumer Sale and Distribution (dis-intermediation of wholesalers and retailers) Originator-to-Consumer Sale and Distribution (dis-intermediation of publishers as well) Consumer-to-Consumer Sale and Distribution (reduction in revenue flow to originators)

Copyright, Encyclopædia Britannica in 1991, EB sold 400,000 printed $1,500 each in 1993, CD-ROM competitors emerged esp. MS Encarta (Funk & Wagnalls) in 1997, EB sold 10,000 printed copies since late 1997, EB has tried: mailed optical $200, then $100 a web-site supported by advertising a subscription-based web-site, with different terms for the B2C and B2B markets

Copyright, Alternative E-Publishing Business Models ( Who pays what to whom, and why? ) revenue from the content-accessor / 'user-pays': subscription fee for access for a period of time fee for access ('pay-per-view') shareware revenue from a third party: advertisers sponsors revenue from the copyright owner: fee for publication ('vanity press') fee for storage or access revenue from a complementary activity

Copyright, Information Protectionism censorship, esp. extreme pornography, incitement to violence, instruction in violence, neo-Nazi organisation, holocaust denial, racial vilification, sedition, activism library intrusions, esp. compulsory filtering, access to borrowing records reduction in FoI, esp. post-12 September defamation, reputation-friendly and hostile to freedom of access to information, dramatically more threatening since the Internet

Copyright, Defamation on the Web Mining magnate / football club owner / religio- cultural-philanthropy identity Footprints in Melbourne, NY, Tel Aviv Article prepared in Manhattan NY, published in Barrons Digest (Dow Jones / WSJ), and made available on a web-server in NJ Defamation suit in Victoria Where did publication occur? Everywhere?! Dont criticise Mahathir or Goh Chok Tong, because their reach has been extended...

Copyright, Invention The conception of a new idea Expression of a new idea in a prototype apparatus Innovation The application of knowledge to the manufacture and deployment a new kind of artefact The articulation of an invention The adoption of a new product or process

Copyright, Tacit Knowledge informal and intangible exists only in the mind of a particular person knowing that cf. knowing how to not readily communicated to others Codified Knowledge expressed and recorded, in a more or less formal language (text, formulae, blueprints, procedure descriptions) disembodied from individuals communicable information

Copyright, Codified Knowledge An omelette recipe A combination of structured and unstructured text Tacit Knowledge The expertise to interpret the recipe, to apply known techniques and tools to the activity, to recognise omissions and exceptions, to deliver a superb omelette every time, to sense which variants will work and which won't, and to deliver with style

Copyright, Technology A combination of: codified knowledge about artefacts, artefact manufacture, and artefact usage tacit knowledge of many individuals business processes within multiple organisations, into which are integrated codified and tacit knowledge artefacts designed, manufactured and used by means of that codified and tacit knowledge educational materials relating to artefacts, artefact design, production, use, maintenance

Copyright, Info Flows Within the Innovative Organisation

Copyright, Info Flows Within the Innovative Sector

Copyright, Big-Bang Innovation cf. Cumulative Innovation Genuine breakthroughs do occur But most Innovation is progressive: Dependent on Interaction with others, and often on Contributions of others, including Users, Suppliers and Competitors Process Innovation is often needed, in order to support Product Innovation Step-wise Refinement results in Incremental Emergence or Conversion

Copyright, Alternative Economics of Innovation Conventional Economics Information is an Output Info is highly appropriable Imitators contribute little, and are free riders There are few natural protections for innovators Innovators need a monopoly Imitators must be punished Information Economics Information is also an Input In many circumstances, not so Many imitators add value, and hence contribute to cumulative innovation There are many natural protections for innovators Monopoly hinders innovation Mere imitators must be punished, but investigation, enhancement and extension must be encouraged

Copyright, Who Does Digital Media Threaten? To those who do well under the old regime: very few originators (authors, musicians) mainly the major publishing houses (of books, journals, music, films) Control Mechanisms wielded by publishers: re I.P., ownership of vast catalogues of it re originators, through terms of contract, and promotional budgets re infringers, through nastygrams, lawsuits

Copyright, Manoeuvres by the Major Publishing Houses Technological Protections for Digital Objects Expansion of Copyright Scope, de facto Embedment in Marketspace Mechanisms of Existing, Expanded and Imagined Rights Lobbying for, and Enactment of, Laws: Expansion of Copyright Scope, de juré Criminalisation of hitherto civil law breaches Enlistment of Law Enforcement Agencies Transfer of Enforcement Costs to the public

Copyright, Technological Protections for I.P. Objects Passive Technologies – 1 of 2 object-protection, at various stages: under the owner's control in transit under the licensees control by means of: encryption device-specific encoding / crippling e.g. DVDs are region-specific, and film- publishers have state-enabled means of controlling sales of media and media-players

Copyright, Technological Protections for I.P. Objects Passive Technologies – 2 of 2 means of tracing rogue copies: 'watermarking' technology (to uniquely identify the publication) 'fingerprinting' technology (to uniquely identify the particular copy)

Copyright, Technological Protections for I.P. Objects Active Technologies – 1 of 2 notification to the licensee of their rights at the time that the object is accessed licensee: identification identity authentication disablement / destruction of the data object: in the event of licence expiry or breach if played on a non-approved device

Copyright, Technological Protections for I.P. Objects Active Technologies – 2 of 2 enforcement mechanisms, client-side prevention, e.g. preclude actions that breach permissions for rendering recording of: actions that exercise permissions (attempts to) breach the licence, e.g. making copies beyond the permitted limit reporting of (attempts to) breach the licence

Copyright, Technological Protections for I.P. Objects Information Infrastructure siphoning off of Internet bandwidth for VPNs enhanced server controls over clients enhanced identification of: devices individuals a new protocol suite, controlled by governments and large corporations

Copyright, Copyright Expansion Accidental Need for a Consumer to Have a Licence Shift From Copyright to Contract Threats to Fair Use, e.g. for research and study Threats to Statutory Licensing Threats to Equitable Public Access Threats to Anonymous and Pseudonymous Access

Copyright, Copyright Expansionism What Major Publishing Houses Are Seeking Existing Exclusive Rights of a Copyright-Owner: to reproduce/copy, to re-publish, to adapt The Broader Rights being sought include: control of use through rendering, incl. display, print, play, read/render as speech control of transport, incl. transfer, lend control of derivative rights, incl. extract, embed control of time-shifting and even backup

Copyright, Embedment in Marketspace Mechanisms Electronic Copyright Management Systems (ECMS) Digital Rights Management Languages (DRML) Proprietary (Xerox et al.) Industry-Standard Owner-Oriented Corporate-Consumer-Oriented Balanced Standards (ODRL) Originator Owner Corporate Consumer Individual Consumer

Copyright, Civil Liberties Abuses in the Service of Publishing Houses criminalisation of many mainstream activities (DMCA) lawyers nastygrams threatening prosecution (Felten) gaoling for lengthy periods, without bail, with delayed charges, and with charges withdrawn once the chilling effect has been achieved (Skylarov, Johansen) additional proposals (in an Aust Parltry report!!): reversal of the onus of proof increased civil seizure powers withdrawal of self-incrimination privileges

Copyright, Patent Issues von Clausewitz Revisited: I.P. as a Weapon of National Strategy Patentability of Business Methods Greatly Lowered Threshhold of Novelty Collaborative Standards undermined by Patent-Based, Proprietary Monopolies Anti-Innovation Uses of Patents

Copyright, Patent Law as a Weapon of U.S. National Strategy US Government Policy since Carter Dictated by the interests of very large corporations that acquire and use patents as part of their business model US Government Pressure through WIPO Craven Weakness of some Governments Naiveté of yet more Governments, which have failed to recognise and participate in the game of international strategy

Copyright, U.S. Software Patents, and Business Methods Patents with Some Blind Followers Explosion from c USPTOs extraordinarily liberal approvals, following a change in US Government policy designed to advantage US corporations 2000 filings in the US in 1999, of which 1350 re Internet, and 500 re e-commerce 1500 filings in Australia in 2001

Copyright, Instances of Ridiculous Patents Multimedia (Compton) One-Click Shopping (Amazon) Affiliate Program Linking (Amazon) Reverse Auction (Priceline) Display of Text and Images (Pangea) Automated Credit-Checking (Pangea) Consumer Payment for Clicking (CyberGold) Method of Swinging on a Swing US Patent 6,387,227 issued 9 April 2002

Copyright, Web-Linking – British Telecom, 4,873,662 of 1989 Vannevar Bush, Atlantic Monthly, 1945 Ted Nelsons Xanadu, Engelbart, 1968 – innovations demonstrated that day [included] hypertext, object addressing and dynamic file linking But there are even more patents!! IBM – 6,195,707 Lockheed Martin – 6,154,752 IBM – 5,924,104

Copyright, Method of Swinging on a Swing US Patent 6,387,227 issued 9 April 2002 Steven Olsen, St Paul MN The method comprises the steps of: (a)positioning a user on the seat; and (b)having the user pull alternately on one chain to induce movement of the user and the swing toward one side, and then on the other chain to induce movement of the user and the swing toward the other side, to create side-to-side motion.

Copyright, Miniature Patents Petty Patent Australian 'Innovation Patent nominally: to lower costs for SMEs in practice: to make SMEs a more attractive takeover target, by offering the purchaser cheap I.P.

Copyright, The Uses of Patents Revenue Licensing Fees Extortion (Settlement << Legal Costs) Window of Opportunity for Super-Profits Too-High Licence Fees Prolonged Negotiations on Terms Denial of Licences Threats of Litigation Defence of Litigation through Threat of Counter-Suit Based on Own Patents

Copyright, The Views of the NASDAQ-listed Australian company Catuity Inc. When sued, $1 million needed, just to play Utter uncertainty about the ratio decidendi 3/3 legal opinions negated by the court The judge imputed counter-intuitive, non- standard meanings to receipt and coupon Eventually the parties called it quits anyway Patents are a worthless must-have

Copyright, Origins of the Problem Aggressive U.S. Strategy, Naive Multilateral Adoption Patent Examination a coarse sieve, not a fine filter Reflects Prior Art Base, but not Domain Expertise Patent Contesting Process Abject Failure Patent Cases before the Courts Very low threshholds of originality, inventiveness Absence of technical expertise, assistance or advice Plenty of excuses to ignore expert evidence

Copyright, The (Information) Economics Assessment Progress depends on Cumulative Innovation People stand on the shoulders of lots of busy elves Evolution is rapid, and years is eternity Many breakthroughs involve low investment In the eBusiness Context, Barriers to Innovation? The Absence of Patent Protection is seldom The Presence of Patent Protection is

Copyright, Conclusion: TheNew Dark Ages The Internet promised information accessibility, but may lead to a decrease in information accessibility: by citizens, which undermines democracy by originators, which undermines creativity by consumers, which undermines consumer choice, but also denies cumulative creativity by knowledge workers within corporations, which undermines innovation

Copyright,

Copyright, References Generally Electronic Commerce:EC/index.html EC/AnnBibl.html Information Infrastructure:II/index.html II/AnnBibl.html Dataveillance:DV/index.html DV/AnnBibl.html Waltzing Matilda:WM/index.html

Copyright, References – The Internet Clarke R. (1994) 'Information Infrastructure for The Networked Nation' November 1994, at.../II/NetNation.html (100 pp.) Clarke R. (1998) The Internet as a Postal Service: A Fairy Story, February 1998 at,.../II/InternetPS.html Clarke R., Dempsey G., Ooi C.N. & O'Connor R.F. (1998) A Primer on Internet Technology', February 1998, at.../II/IPrimer.html Clarke R. ( ) 'A Brief History of the Internet in Australia', at.../II/OzIHist.html Clarke R. (1998) 'Information Privacy On the Internet: Cyberspace Invades Personal Space' Telecomms J Aust (May/Jun 1998), at.../DV/IPrivacy.html

Copyright, References – CyberCulture Clarke R. (1995) Netethiquette: Mini Case Studies of Dysfunctional Human Behaviour on the Net, April 1995, at.../II/Netethiquettecases.html Clarke R. (1997), The Neighbourhood, March 1997, at.../II/Neighbourhood.html Clarke R. (1997) 'Encouraging Cyberculture', Proc. CAUSE in Australasia '97, Melbourne, March 1997, at.../II/EncoCyberCulture.html Clarke R. (1997) 'Public Interests on the Electronic Frontier', Proc. IT Security '97, August 1997, at.../II/IIRSecy97.html

Copyright, References – The Internet and Ethics Clarke R. (1988) 'Economic, Legal and Social Implications of Information Technology' MIS Qtly 12,4 (December 1988) 517-9, at.../DV/ELSIC.html Clarke R. (1993) 'Asimov's Laws of Robotics: Implications for Information Technology' IEEE Computer 26,12 (December 1993) pp and 27,1 (January 1994), pp.57-66, at.../SOS/Asimov.html Clarke R. (1999) Ethics and the Internet: The Cyberspace Behaviour of People, Communities and Organisations' Bus. & Prof'l Ethics J. 18, 3&4 (1999) , at.../II/IEthics99.html

Copyright, References – FoI / The New Dark Ages 1 of 2 Clarke R. (1994) 'The Information Age As Threat' National Scholarly Communications Forum, Canberra, 13 Oct 1994, at.../II/PaperNSCF.html Clarke R. (1999) 'Internet Issues', at.../II/Issues99.html Clarke R. (1999) Information Wants to be Free, August 1999, at.../II/IWtbF.html

Copyright, References – FoI / The New Dark Ages 2 of 2 Clarke R. (1999) Freedom of Information? The Internet as Harbinger of the New Dark Ages, First Monday 4, 11 (November 1999), at.../II/DarkAges.html Clarke R. (2001) 'Paradise Gained, Paradise Re-lost: How the Internet is being Changed from a Means of Liberation to a Tool of Authoritarianism', Mots Pluriel,.../II/PGPR01.html Clarke R. (2001) Defamation on the Web March 2001, at.../II/DefWeb01.html Clarke R. (2002) Defamation on the Web: Gutnick v. Dow Jones June 2002, at.../II/Gutnick.html

Copyright, References Identification, Anonymity, Pseudonymity Clarke R. (1994) 'Human Identification in Information Systems: Management Challenges and Public Policy Issues' Info. Technology & People 7,4 (December 1994), at.../DV/HumanID.html Clarke R. (1999) 'Anonymous, Pseudonymous and Identified Transactions: The Spectrum of Choice', Proc. IFIP User Identification & Privacy Protection Conference, Stockholm, June 1999, at.../DV/UIPP99.html

Copyright, References – Dataveillance and Privacy Information Technology and Dataveillance, Commun. ACM 31,5 (May 1988) , at.../DV/CACM88.html 'Information Privacy On the Internet: Cyberspace Invades Personal Space' Telecommunication Journal of Australia 48, 2 (May/June 1998), at.../DV/IPrivacy.html Privacy and Dataveillance, and Organisational Strategy, Proc. EDPAC'96, May 1996, at.../DV/PStrat.html Privacy Impact Assessments, February 1998, at.../DV/PIA.html Internet Privacy Concerns Confirm the Case for Intervention, Commun. ACM 42, 2 (February 1999) 60-67, at.../DV/CACM99.html

Copyright, References – Biometrics Clarke R. (1994) 'Human Identification in Information Systems: Management Challenges and Public Policy Issues' Information Technology & People 7, 4 (December 1994), at.../DV/HumanID.html Clarke R. (1999, 2001) 'Person-Location and Person- Tracking: Technologies, Risks and Policy Implications' Information Technology & People 14, 2 (Summer 2001) , at.../DV/PLT.html Clarke R. (2002) 'Biometrics Inadequacies & Threats & Privacy-Protective Architecture', at.../DV/NotesCFP02.html#BiomRC and BiomHKU.ppt

Copyright, References – Innovation Dempsey G.C. (1998) Knowledge and Innovation in Intellectual Property: The Case of Computer Program Copyright' PhD Thesis, Aust. Nat'l Uni., 1998, in particular Chapter 4 (pp.55-83) Dempsey G.C. (1999) Revisiting Intellectual Property Policy: Information Economics for the Information Age Prometheus 17, 1 (March 1999) 33-40, at.../II/DempseyProm.html Clarke R, (2002) eBusiness and eInnovation PowerPoint slide-set for European Patents Office, June 2002, at

Copyright, References – Copyright Clarke R. & Dempsey G. (1999) 'Electronic Trading in Copyright Objects and Its Implications for Universities', at.../EC/ETCU.html Clarke R. & Nees S. (1999) 'Technological Protections for Digital Copyright Objects', at.../II/TPDCO.html Clarke R., Higgs P.L. & Dempsey G. (2000) 'Key Design Issues in Marketspaces for Intellectual Property Rights', at.../EC/Bled2K.html Clarke R, (2000) File-Discovery and File-Sharing Technologies (aka Peer-to-Peer or P2P): MP3, Napster and Friends, at.../EC/FDST.html Clarke R, (2002) eBusiness and Copyright PowerPoint slide-set for European Patents Office, June 2002, at

Copyright, References – Patents Dempsey G.C. (1998) Knowledge and Innovation in Intellectual Property: The Case of Computer Program Copyright' PhD Thesis, Aust. Nat'l Uni., 1998, in particular Chapter 4 (pp.55-83) Dempsey G.C. (1999) Revisiting Intellectual Property Policy: Information Economics for the Information Age Prometheus 17, 1 (March 1999) 33-40, at.../II/DempseyProm.html Clarke R, (2002) eBusiness and Patents PowerPoint slide- set for European Patents Office, June 2002, at

Copyright, References – 1 of 4 Barlow J.P. (1994) 'The Economy of Ideas: A Framework for patents and copyrights in the Digital Age', Wired 2.03 (March 1994), at html Barlow J.P. (2000) 'The Next Economy Of Ideas: Will copyright survive the Napster bomb? Nope, but creativity will' Wired 8.10 (October 2000), at Benner J. (2002) 'Public money, private code' Salon Jan. 4, 2002, at urce/print.html

Copyright, References – 2 of 4 Dyson E. (1995) 'Intellectual Value' Wired 3.07 (July 1995), at Greenleaf G.W. (1998) 'An Endnote on Regulating Cyberspace: Architecture vs Law?' UN.S.W. L. J. 21, 2 (November 1998), at 1no2/greenleaf.html Greenleaf G.W. (1999) '"IP, phone home" - ECMS, ©-tech, and protecting privacy against surveillance by digital works' Proc. 21st Int'l Conf. Privacy and Personal Date Protection, September 1999, Hong Kong SAR, China. at

Copyright, References – 3 of 4 Kelly K. (1997) 'New Rules for the New Economy' Wired 5.09 (September 1997), at Lessig L. (1999) 'Code and Other Laws of Cyberspace' Basic Books, 1999 Lessig L. (2001) 'The Internet Under Siege' Foreign Policy (Nov-Dec 2001), at Lessig L. (2001) 'The Future of Ideas: The Fate of the Commons in a Connected World' Random House, 2001 Negroponte N. (1995) 'Being Digital' Hodder & Stoughton

Copyright, References – 4 of 4 Samuelson P. (1996) 'The Copyright Grab' Wired 4.01 (January 1996), at Samuelson P. (1999) 'Intellectual Property And The Digital Economy: Why The Anti-Circumvention Regulations Need To Be Revised' 14 Berkeley Tech. L. J. 519 (1999), at ig_eco_htm.htm Shapiro C. & Varian H.R. (1999) 'Information Rules: A Strategic Guide to the Network Economy' Harvard Business School Press, 1999