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Roger Clarke (Principal, Xamax Consultancy Pty Ltd, Canberra and Visiting Fellow, Department of Computer Science, Australian National University)
Peter L. Higgs (Principal, IPR Systems Pty Limited, Sydney)
& Gillian Dempsey (Senior Lecturer, TC Beirne School of Law, University of Queensland)
Version of 30 January 2000
© Xamax Consultancy Pty Ltd, 1999, 2000
This paper was prepared for presentation at the 13th International EC Conference, in Bled, Slovenia, 19-21 June 2000
This document is at http://www.rogerclarke.com/EC/Bled2K.html
Intellectual property rights are actively traded. Because rights such as copyright and trademarks can be so readily expressed in digital form, markets for them can in principle be well-supported by electronic tools. An examination of the design considerations for such marketspaces identifies many challenges, and vital public policy issues. Great care is needed in the design of I.P. rights markets. Modularity, open architectures and open standards are vital. Close attention must be paid to the needs of key participants and other stakeholders, and to commercial and cultural aspects of existing marketplaces.
In the trading of physical goods and services, electronic commerce technologies can assist with many phases, but the actual delivery of goods or the performance of services has to be undertaken in the real world. With digital goods and services, on the other hand, the entire process can be effected over networks. Online gambling and pornographic images are primary examples of industry segments in which electronic commerce is booming. Many other industry sectors that deal in digital goods are not growing as quickly, because their offerings are less compelling, and the many impediments to consumer confidence are seriously retarding adoption (Clarke 1999b).
A potentially very large segment of digital business is for-profit electronic publishing, by which term the authors mean to encompass all forms of digital goods and services that are intended for consumption by the human senses (Clarke 1997a). The range of materials is very broad, including page-format publications (combinations of text and image), sound, animation, video and multi-media, and perhaps even software. The content is also highly varied, including news, weather, sport, musical performances, cartoons, films, video-clips, and entertainment, infotainment, edutainment and education.
Progress in for-profit electronic publishing has been slow. One reason is the impediments to consumer confidence. There are also major factors on the supply side, however. Existing industry value chains and marketplaces are highly specialised. In each of the many segments, there are many conflicting interests, and some of them are very powerful institutions. There is a great deal of nervousness on the part of conventional publishers about the impact of digitisation and the Internet on conventional business models and the existing distribution of market power. Digital versions of publications are much more subject to appropriation than were previous forms such as books, vinyl records and celluloid film. As a result, publishers, and to a lesser extent originators of such materials, are circumspect about making them available over the net.
The basis of all of these forms of electronic publishing, copyright law, is a particular form of intellectual property. Electronic markets in copyrights have comparable requirements to some other markets, such as trademarks and patents. They also share some similarities with other kinds of rights trading, such as shares (whose primary features are the rights to receive dividends, to participate in issues of bonuses and options, and to sell) and derivatives such as options (the right to buy or sell at a nominated price).
Markets for the trading of intellectual property rights of all kinds have design requirements. The purposes of this paper are to discuss key requirements in the specific area of copyright trading, and to identify important issues that need to be addressed in the implementation of such markets.
The paper commences by providing background to copyright, and to the technologies underlying digital objects. It then provides an overview of trading mechanisms, and culminates in the identification of design issues that need to be resolved in order to deliver satisfactory marketspaces. Some suggestions are made as to how to fail in this endeavour, and how to succeed, and implications are drawn for research and practice.
This section introduces key concepts vital to an effective understanding of marketspaces for copyrights. The first of these is intellectual property law generally, and copyright law in particular, which sets the legal framework within which publishers of all kinds work, and on which they depend as a means of protecting the property in which they deal. The rendition of legal concepts reflects the Australian context. It differs a little in comparison with other jurisdictions in which British common law approaches dominate, rather more in comparison with code law countries, and yet more in relation to other legal systems.
Property rights are most commonly thought of in the contexts of land and of goods. Acquiring freehold provides a person with a set of rights in relation to a particular area of land, which is referred to as 'realty'. Almost everything that is not land or attached to land is referred to as 'personal property' or 'personalty'. This is further divided into 'choses in possession' (tangible property such as a watch or a car) and 'choses in action' (intangible property such as shares and intellectual property rights). A further cluster of rights applies to leases, which are referred to as 'chattels real'.
Areas of land possess qualities that are not readily replicable, making each parcel of land scarce. Goods are not readily replicable, and even if a near-duplicate can be produced, the process is generally difficult and expensive, and it may be easy to identify. Hence theories of economics and law based on scarcity are conventional in relation to both land and goods.
During recent centuries, information has become increasingly recognised as being of value. Information, in its various forms, is very easily, cheaply and convincingly replicable, and hence baskets of rights have come to be associated with it that are very different from realty and property in choses in possession.
Intellectual Property (IP) rights, as recognised by contemporary, English-based legal systems, largely arose from an innovation race between the English and the remainder of Europe. Letters Patent have existed since the time of Richard the Lionheart, although initially they were limited to gifts akin to the royal warrant on a soap product or the commission held by a Queen's Counsel. The incentive that such awards provided was recognised (at least tacitly) as a means of inspiring innovation for the benefit of the Crown. The promise of Letters Patent was used to entice skilled masters from Europe to England. Related systems of patronage were created in other jursidctions, such as that which the De Medici family bestowed upon Michaelangelo. Britain formalised its patent law with the Statute of Monopolies in 1609, and gained a significant advantage when Queen Anne enacted the first copyright statute in 1707, enabling the country to establish a firm foothold in the area of printing.
Letters patent of the old form still exist, as do some other IP rights developed by the common law; and statute-based rights have steadily increased in number and sophistication. The categories of intellectual property recognised currently in Australia are:
Property rights provide a basis for wealth-acquisition. Powerful interests have advanced the argument that information, in its various forms, is very easily, cheaply and convincingly replicable; and hence existing monopoly rights should be given increasing duration and breadth, and new rights should be created. These interests have successfully deflected legislators' attention from the fact that a government-gifted monopoly is still a monopoly, with all the disadvantages that a monopoly entails. Where once intellectual property laws existed under English law to ensure that the country was not disadvantaged by way of being deprived of innovations, the effect is now increasingly to deprive a country's people of the opportunity to innovate.
Copyright is a particularly important form of intellectual property. It vests it in the originator of what is referred to in this paper as a 'copyright object'. It applies to works of a literary, dramatic, musical or artistic nature, plus, in some countries, multi-media works; and to what lawyers refer to as 'subject matters other than works': films, broadcasts, sound recordings and typographic layouts. In most countries, computer programs are treated as literary works.
The origins of this form of intellectual property are a British statute of the early 18th century. It is the subject of international harmonisation through conventions. Generally speaking, the law is expressed in each country by a special statute (e.g. in Australia, the Copyright Act 1968). This paper is oriented towards common law traditions, especially those of Australia. However, because most countries comply with international copyright conventions, much of the analysis should hold in other countries as well.
Copyright law confers on the owner certain exclusive rights. In Australia, they are to reproduce the work, to publish it, to perform it in public, to broadcast it, to 'submit it to a diffusion service', and to adapt it. Ownership may be 'assigned' (i.e. gifted, bartered or sold) to someone else. The owner may provide others with a licence to do specific things with the work. In particular, a licensee may be authorised (gratis, or for a fee) to make a designated number of copies, perhaps for a designated purpose, or to translate it into another nominated language, or to re-publish it in a collection. Ownership may also be intentionally or accidentally forfeited, which places the object 'in the public domain'.
A further aspect of copyright is that many copyright works contain objects that are themselves subject to copyright; for example, a publication on paper, which is a copyright object, may contain multiple segments of text, photographs and diagrams which were originated by different people, and each of which is a separate copyright object. Some of those objects might themselves contain other copyright objects. Hence there is a need to detect and account for multiple owner-interests.
Copyright infringement occurs when a 'substantial part' of a work is 'appropriated' in some manner, in the absence of a licence to do so. In particular, it may be, without authority, reproduced (copied), published (made available to others) or adapted (into a new form, including through translation). Such infringements are actionable in civil jurisdictions.
The rights of a copyright owner are subject to a number of qualifications. A copy only infringes if the amount copied is a substantial part of the work. Whether the copied part is judged to be substantial or not depends on qualitative factors as well as the size and the proportion of the work that is copied. Another qualification is the 'fair use' or 'fair dealing' provision, whereby quotations or excerpts can be copied and re-published for the purpose of research, study or comment. A further qualification relates to reproduction and adaptation for the purposes of the physically and intellectually impaired. Copyright laws generally provide for compulsory licences whereby libraries, archives, museums, galleries and educational institutions are permitted to reproduce copyright material, subject to equitable payment.
A copyright-object may be the subject of a covenant, which is a limitation with respect to the owner's rights. A concept of increasing importance is the 'the moral rights of the author', which are effectively an implied covenant.
Two particular aspects of the underlying philosophy of copyright are that it is intended to protect the expression of an idea, not the idea itself, and that the purpose of copyright is not to reward origination, but to create the possibility of revenue flows which will encourage publication, and hence public availability. These aspects of copyright law, like many others, are subject to widely varying interpretations.
Guidance in relation to copyright and the Internet is at Dempsey (1996). More detailed examinations are in AVCC (1995) and Clarke & Dempsey (1999). The copyright notice relating to this paper embodies application of several of the concepts outlined in this sub-section.
It has been argued by some that the changes being wrought by information technology during the last decades of the twentieth century make a re-assessment of copyright law inevitable and urgent (e.g. Barlow 1994, Dyson 1995, Kelly 1996, Samuelson 1996, Nelson 1997).
Ideas are conceived as words, numbers, symbols, shapes, pictures and sounds. Until recently, they could only be expressed in what we now refer to (rather disparagingly) as physical or analogue forms. Most of these forms were not capable of being manipulated, and were clumsy to reproduce or even to transport. In some cases, inflexible, specialist equipment was needed to convert the storage forms back into a human-appreciable stream of impulses.
Suddenly, during the last few decades, digital representations have become the mainstream. A great deal of copyrightable material has leapt from the physical to the electronic, or, as Negroponte (1995) preferred to put it, has migrated from atoms to bits. Convenient digital storage formats exist that can be used to store information intended for most of the human senses (taste and smell being the primary exceptions, to date). Digital forms can be readily translated into impulses that entirely satisfy the human eye, ear, and mind, and even the tactile and proprioceptive senses. In the cases of audio, image, and moving image / video, the quality of digital formats quickly overtook that of predecessor technologies.
The digital revolution has been multi-facetted, enabling:
An important effect of the various digital technologies has been to make copyright objects much more amenable to reproduction, adaptation and publication, with or without appropriate respect to intellectual property rights.
The rapidity and degree of change in all forms of publishing can be gauged by recent developments in what might be called the 'page-format printing' market segment. The industry value-chains and marketplaces spawned by Gutenberg and Caxton have been fairly stable for generations, even though printing technologies improved greatly during the last 50 years of the 20th century. During the last couple of decades, however, electronic publishing has gone through successive revolutions, commencing with 'desktop publishing', via electronic delivery, and cross-media production, to the interactive forms that are evident on the web, and that are inherently appropriative, and disrespectful of copyrights (Clarke 1999a). There has been both speculation about and evidence of disintermediation, as the existing roles of retailers, and even of publishing houses, are undermined, and direct marketing by an upstream intermediary, or even by the originator, becomes feasible.
Perhaps the most graphic example to date has been the collapse of the market for one of the world's icons of the 19th and 20th centuries, Encyclopaedia Britannica (EB). In 1991, the company sold about 400,000 printed sets, and in 1997 about 10,000. The collapse was triggered by the success of Microsoft Encarta and other CD-ROM versions of lower-quality but approximately equivalent collections sold in a convenient and inexpensive form. Since then, web-based information services have mushroomed. Despite EB's brand reputation, and the apparent quality and presumed value of the content the company owned, and even after scrambling to survive by belatedly launching a CD-ROM version, and then in October 1999 launching on the web, EB's revenue has halved during the decade, losses have accumulated, the company has changed hands several times, and survival remains uncertain (Rayport & Gerace 1997, Evans & Wurster 1997, Melcher 1997, Downes & Mui 1998, p.51, Shapiro & Varian 1999, pp. 19-21, 26).
The publishing industry is mature, and, as is common in mature industries, is characterised by large organisations dominating particular market segments. The reaction of such organisations to the impact of digital technology has been to resist them, and especially to resist their tendency to undermine existing market power and enable re-structuring of value chains.
In doing so, these organisations have sought to take advantage of an accidental increase in the scope of copyright, which has arisen as a consequence of computing and communications technologies. This has arisen in the following fashion. Uses that do not fall within the specific exclusive rights granted by copyright law in respect of the particular category of object do not require a licence. As argued in Clarke & Dempsey (1999), however, the act of accessing a digital copyright object in a great many cases involves the making of a succession of copies, in particular in the workstation's RAM and/or VRAM, and on the screen, and in cache and proxy-servers along the path between server and client. If those copies are deemed by the courts to be copies under copyright law, then the copier would require a licence. No licence has ever been needed in order to acquire a book (as distinct from publishing one). Hence copyright owners are in a position to argue, for the first time, that a reader requires a copyright licence.
Large corporations are using this accident of technology as a justification for substantial enhancements to I.P. rights. Electronic Copyright Management Systems (ECMS) are being developed and deployed that are predicated on the assumption that these corporations can exercise complete control over works in which they hold copyright. They are seeking to preclude the use of music compression formats such as MP3, which they perceive as inviting abuse of their materials. They have lobbied (with considerable success) for a flotilla of new forms of protection to be imposed by governments and especially the highly business-friendly U.S. government, and to be promulgated by international organisations, in particular through the World Intellectual Property Organisation - WIPO, but also the European Union - EU.
These measures to bolster the monopoly features of copyright, and undermine its public interest aspects, represent an enormous threat to the freedom of access to information. Its implications are considered later in this paper, and more fully in Clarke (1999c).
This section describes the nature of markets, firstly in the general case, and then in the specific sense of marketspaces for trading in intellectual property rights and copyright objects.
Any form of economic system depends on the transfer of goods and services from those who produce them to those that consume them or use them as factors of production for further goods and services. There is a variety of ways in which the transfer may occur.
A transfer mechanism that tends to be ignored by economists is what they refer to disparagingly as a 'gift economy': the provider makes the goods or services available without compensation. Examples include alms given to beggars, donations made to charitable institutions, welfare payments made by governments and by charitable institutions to the needy, and funds to assist the victims of natural disaster. Other important, although non-monetary instances are contributions of time to amateur theatres and sporting associations, extra-curricular activities associated with schools, sand-bagging in anticipation of a flood, voluntary fire-fighting, rescue and counselling, and, in the information technology world, 'free-ware'. These transactions are gifts, in that the transferor's motivation is 'charity' or 'altruism'. No recompense is needed from the transferee, because the act of giving generates psychic payback in the mind of the giver.
Many similar transactions are, on the other hand, not gifts, but involve indirect or deferred reciprocity. A common example of this is 'barn-raising', whereby a community clubs together and assists a member of that community, in the expectation that each member will on key occasions be a recipient, sometime during their life (Rheingold 1992). Alternative metaphors are the 'cooking pot' (Ghosh 1998) and the 'honey-pot' (Clarke 1999a). Concrete examples are provided by mutual organisations and co-operatives, such as (in, respectively, the British, U.S. and Germanic traditions) credit unions, savings and loans institutions, and Sparkassen. A further example is sponsorship. In some cases, such as local, amateur sporting teams, this may be a mix of gift and indirect exchange; while in others it may be an entirely exchange-based transaction, but one in which the benefits to the sponsor will be indirect and relatively long-term. In the information technology arena, 'shareware' (Stallman 1992) and 'open source software' (Open Source 1997) are exchanges in anticipation of indirect or deferred recompense.
A further mechanism for the transfer of goods and services involves direct and immediate reciprocal exchange of value. Such activities, commonly referred to as 'trading', involve consideration passing in both directions, such that each party involved is a buyer of one set of goods or services and a seller of another. The term 'barter' is used to describe trades in which neither set of goods or services involved is money.
There are many circumstances in which parties that are interested in trading one set of goods or services cannot readily find a second set that each is interested in exchanging for them. The likelihood of negotiating an exchange (and hence the 'market depth') can be enhanced, if the buyer of the goods or services can offer an asset that is readily exchangeable (or 'fungible'). Such an asset is referred to as 'money' (Davies 1996). In well-developed economies, a large proportion of the trading that takes place involves the exchange of goods and services in return for money.
Most economists restrict their domain of study to only the last of these four categories of transfer. The existence of a common denominator for measurements of value clearly makes quantitative research into transactions much easier. But the failure of the economics discipline to rise to the challenge of studying all of the relevant transfers of goods and services has resulted in dangerous warping of the policy arena (see, for example, Jones 1982, pp.92-97).
A market is a place or, more generally, a space, in which goods or services are traded. A market comprises traded objects, sellers, buyers, processes that facilitate trading, and infrastructure that supports the entities and the processes. The benefits of having such a place or space is that buyers and sellers can more readily discover one another, discover what goods or services are on offer, develop sufficient confidence to be prepared to conduct the transaction, and negotiate an agreement. A market may also facilitate the delivery of the goods or performance of the services.
A market may support barter and/or exchange against money. It can also address indirect or deferred exchange, through an undertaking by the buyer to recompense the seller at a later stage (as is the case with a market for loans). A market can even be used as a means for bringing together and matching givers and recipients in a 'gift economy'. An example of such a market is a foundation that pools monies from donors and receives applications for grants.
Locations in which transactions take place are commonly termed 'marketplaces' or 'exchanges'. The concept of 'marketspace' was introduced to refer to the rather different kind of 'location' in which electronic commerce is conducted (Rayport & Sviokla 1994). A marketspace is a virtual context in which buyers and sellers discover one another, and transact business. It is the working environment that arises from a complex of telecommunications-based services and tools, operating over an underlying information infrastructure.
Marketplaces for physical goods and services continue to flourish; but there are many contexts in which electronic marketspaces are complementing and even replacing marketplaces for all but the logistics of delivery or performance. In the case of digital goods and services, all aspects of electronic commerce can be conducted using electronic tools and transmission channels.
Schmid (1993a, 1993b) provides an introduction to the concept of electronic markets. Lee & Clark (1996) discuss taxonomies of electronic markets, applying Garbade's (1982) analysis of securities markets into:
This paper is concerned with markets that facilitate the transfer of rights that are established and regulated by intellectual property laws. Several forms of intellectual property evidence fairly similar properties from the viewpoint of market design, especially patents, designs and trademarks; but this paper focuses primarily on copyright.
An electronic marketspace for copyrights needs to support:
Copyright licences need to be able to be expressed in space-limited and time-limited forms. An example of a space-limited licence is that granted to a distributor, which enables the licensee to copy and to publish to parties who are in a defined geographical area, subject to contractual conditions. An example of a time-limited licence is a subscription to a web-site, providing conditional rights to re-publish any of a set of copyright objects such as photographs, with express or implied conditions regulating what the subscriber can and cannot do with the copies.
Electronic marketspaces for I.P. rights generally need to support transfers in return for monetary payment, i.e. sale. There may be advantages, at least for some marketspace-operators, to also support various forms of barter. It may also be desirable to support transfers for indirect or deferred reward (e.g. sponsorships), and even uncompensated gifts (e.g. research grants).
The range of rights that exist under copyright law varies depending on the particular category of object (i.e. various kinds of works and 'subject-matter other than a work'). Roughly speaking, however, the exclusive rights that the owner has relate to copying, re-publishing, and adapting. Some references, reflecting what Greenleaf (1999) refers to as a 'copyright expansionist' perspective, are designing marketspaces to support a broader set of rights. For example, Stefik (1997) identifies the following, in terms appropriate to U.S. law:
Of these, only to 'copy', to 'render' for the purpose of publishing, to 'embed', and to 'modify' or 'adapt' are appropriate subjects for a copyright licence.
Underlying I.P. rights are physical and digital objects, and physical and digital representations of those objects. Physical objects, and physical representations of such objects, are 'personal property' (and, more specifically, 'choses in possession'). It is unclear at this stage in the development of the law what, if any, form of property applies to digital works and representations.
Markets for such objects are not the primary focus of this paper; but in many cases it may be appropriate for marketplaces in rights to also transact in digital objects as well. One reason is that this may be an adjunct service that the market participants value. For example, some market-operators may store and transmit copies of web-pages or digital photographs, whereas other market-operators will merely facilitate the transfer, by providing the web-address of the owner, from where the buyer can acquire the copy that their purchase provides them with rights to.
A further consideration is the question of whether works and representations need to be made available for uses other than those that are exclusive rights conferred on the copyright owner. It is strongly desirable, from the viewpoint of both human rights and innovation, that the present position be sustained, and that the use of digital versions of books, articles, pictures, diagrams, and audio and video recordings continue to be free of any need for a licence. Especially where an I.P. marketspace-operator has possession of a work or representation, it may be very important to also support the transfer of I.P. objects to whoever requests it, possibly for a fee, and probably together with a warning about uses of the copy that would infringe copyright.
This section builds upon the preceding sections by identifying and briefly discussing a range of issues in the design of marketspaces for the trading of I.P. rights. See generally Clarke & Dempsey (1999) and Higgs (1999).
Market processes comprise many phases. A model of electronic commerce generally is in Clarke (1993a), and a model of electronic publishing processes is in Clarke (1997a). Phases of market processes for electronic trading in I.P. objects need to include:
A marketspace-operator that seeks to attract a critical mass of participants, and instil confidence in its services, will be well-advised to ensure that the design encompasses sufficient of these phases.
There are many and varied patterns and practices in markets. Some features can be regarded as technical requirements, and reflect the particularities of the objects, the participants and the exchange processes, and of the legal and institutional setting. Wrigley (1997) identifies design criteria for the design and implementation of electronic market servers, Schmidt (1997) and Lindemann & Schmidt (1999) discuss frameworks for the design of electronic markets, Kambil et al. (1999) assess multi-method markets, Reck (1997) examines trading-process characteristics of electronic auctions, and Klein & O'Keefe (1999) examine the impact of the web on auctions.
Some features of all markets are historical in origin, and incidental to the operation of the contemporary market. Examples of such cultural factors are identified in case studies of electronic markets designed to support trading in goods as diverse as cotton (Lindsey et al. 1990), securities (Clemons & Weber 1990), cattle (Clarke & Jenkins 1992), pigs (Neo 1992), electronic components (Clarke 1993b), commodity futures (Clarke 1994), cut flowers (Kambil & van Heck 1996, van Heck & Ribbers 1997) and agricultural markets generally (Fong et al. 1997). Cultural factors might appear to be incidental aspects of market design; but it is essential that key features be sustained or replicated at least in the short term, in order to gain the acceptance of the participants.
Many copyright works build upon other copyrighted materials. One simple approach to doing so is to incorporate in the new work a non-substantial part of the previous copyright materials, such that no copyright licence is required.
Another approach is to merely cite the work, and paraphrase it. The original conception of hypertext in 1965, Ted Nelson's Xanadu, included the idea of quoting without copying, which he called transclusion (Nelson 1995). "[Transclusion] was the heart of Xanadu's most innovative commercial feature - a royalty and copyright scheme. Whenever an author wished to quote, he or she would use transclusion to "virtually include" the passage in his or her own document" (Wolf 1995).
Nelson has recently extracted the copyright elements from Xanadu and refers to them as 'transcopyright' (Nelson 1997). This is a contractual rather than a technological approach to solving copyright problems: "Nelson argues that electronic publishers should allow anybody to republish their materials, provided that republication takes place by means of a pointer to the original document or fragment. Just as in Nelson's imaginary Xanadu franchises, publishers of transcopyrighted documents would receive a payment every time one of their bytes was accessed" (Wolf 1995).
A more comprehensive approach is to include a representation of a work as part of a new work. It might be merely incorporated without change, it might be applied to a new context or in a new way, value could be added to it, or it could be extended or adapted. Where any such usage is made of a substantial part of the original object, the nested materials need to be the subject of a licence from the copyright owner.
Particularly where a fee is involved, there is a need for such re-publication to be accounted for, as a basis for payments to the owner of the nested copyright. This accounting may be performed independently from the electronic marketspace. There is an advantage, however, if it can be facilitated by the design of the market, because this increases the confidence of originators and publishers that their commercial interests will be respected, and hence attracts more sellers into the marketspace.
In Higgs (1999), it is argued that this may be a quite critical feature of new markets. Reliance on exceptions in copyright law is a clumsy and risky method, and the uncertainties can be overcome by a market architecture that reflects and supports the successive use of materials that underpins the cumulative nature of innovation. Moreover, popular I.P. is often exploited in a piecemeal fashion, with multiple licences issued permitting use in highly specific contexts, such as a printed book, a CD-ROM, course-materials, a digital publication, a cartoon and an animation video. Higgs uses a metaphor arising from an Australian classic 'The Magic Pudding' (Lindsay 1918), which could be sliced many times and in many ways, but was never used up. An architecture that can account for nested rights can also support multiple slices of this kind.
There is a substantial set of organisations that are participants in the marketspace. These include:
All parties' interests need to be addressed if the service is to succeed. This is because any and all of them may be able to contribute value, and because their withdrawal or abstinence could harm the market.
In some circumstances, consideration also needs to be given to parties whose work is closely aligned with the operations of the marketspace, such as news reporters, reviewers and commentators.
A variety of additional parties that do not participate in the marketspace have interests in the processes and outcomes.
The originator of a work has interests, whether or not they retain (and in some cases ever even had) ownership of the copyright. This is because of moral rights concerns, and any covenants that may have been placed on the rights when they were assigned. In the case of trading in rights in derivatives from a physical work, and representations of physical works, the owners of the underlying work, the derivatives and the representations all have interests to protect.
Other players in the industry value-chain between the originators and the ultimate consumers have interests that they too wish to protect. These include editors, translators, publishers, distributors, agents, and existing rights-holders.
Various regulatory agencies have responsibilities in relation to the protection of participants in marketspaces, and of the interests of non-participants. The nature of marketspaces creates creates considerable challenges for agencies, because of the difficulties of investigating offences (Clarke et al. 1998) and the scope for people to conduct their activities trans-, extra- and supra-jurisdictionally (e.g. Clarke 1997b).
The 'general public' has interests in the accessibility of works and representations. In economically advanced countries, great progress has been made during the last two centuries in achieving relatively equitable access to a large proportion of works published, irrespective of income, wealth and location. This has become common because of the emergence of public libraries, in which library-users can inspect, and in some circumstances from which they can borrow, copies of works.
Copyright law has facilitated that access, because there was no requirement for each individual to acquire a licence. However, as discussed in section 2.5 above and in Clarke (1999c), that freedom may be being undermined by an accident of technological change. A marketspace might be designed in such a manner that it facilitated the protection of published works to such a degree that 'fair use' was undermined.
A further very serious concern is that the privacy of reading may be destroyed by some kinds of marketspace designs (Greenleaf 1999). This is because copyright law, when applied to pre-electronic technologies, enabled a person to access works and representations without identifying themselves to any party, or at least without identifying themselves to the publisher or copyright-owner; whereas marketspaces can be designed so as to destroy that freedom, and impose identification requirements not only on providers of materials, but also on users of representations as factors of production, and even on consumers.
The public has a great interest in at least sustaining the degree of access to information, and the freedom of anonymous access, which they enjoyed prior to the explosion of the Internet. Freedom and equitability of access are vital for human rights and social reasons; but they are also critical enablers of free and informed democratic choices; and they are crucial to the processes of technological and economic innovation.
Many of the market segments that trade in I.P. rights are dominated by one or a small number of major players, some of whom have and exercise full or substantial monopoly powers. Such organisations are generally large, are well used to resisting change in order to sustain the benefits they enjoy under the status quo, and are slow to adapt to change in any case.
As discussed in section 2.4 above, many participants in existing industry value-chains are threatened by the changes being wrought by the digital era. These large organisations accordingly exercise their market power in order to hold off change. As discussed in section 2.5 above, existing copyright law has afforded them accidental advantages, and these organisations have lobbied successfully for extensions to national laws and international conventions (Clarke & Dempsey 1999).
A further mechanism available to these players is the implementation of technological protections for copyright objects (Stefik 1997, Nees 1999, Clarke & Nees 2000). Together, these legal and technical means are capable of severely hampering the operations of marketspaces for I.P. rights. This makes the balancing act that is necessary among the many interests much more difficult than it otherwise would be.
Needless to say, key principles of software engineering need to be applied. Marketspaces will inevitably evolve, and may do so rapidly. In order to achieve the necessary flexibility and adaptability, it is particularly important that modularity be designed in. A large number of segment-specific marketspaces need to be constructed, preferably using common architecture and components.
A further critical feature is the application of open standards and published interface specifications, in order to facilitate inter-operability among the large numbers of diverse participants. This is complicated by the choices available among many overlapping and even directly competing standards, and the rapidly shifting alliances that have characterised the information technology industry during recent decades.
This section identifies some specific instances of market architectures that have been proposed. They are of two kinds, the first group being largely driven by conventional, competitive innovation, and the second group more strongly oriented towards collaboration, with competition taking place within a standards-based framework.
Electronic schemes to support the trading of copyright objects may come into existence through conventional private sector energy and inventiveness. A number of technology companies have developed tools to assist in electronic markets for copyright objects, especially technological protections for content. A few have attempted to develop technological solutions for entire markets.
In addition to general-purpose electronic marketspace products, a primary example of a product explicitly designed for I.P. rights trading is that of Fuji Xerox, whose approach is described by a researcher at its Palo Alto Research Center (PARC) in Stefik (1996, 1997). Examples of web-based markets for intellectual property include Inventions For Sale, Knowledge Express Data Systems, PatentAuction.com, Yet2.com. A review of several business-to-business markets is in Segev et al. (1999).
Private sector energy and inventiveness results in vigour, but also in multiple, closed systems that are not inter-operable, and each of which struggles to achieve market depth because they compete for market share. An alternative approach is to work through an international standardisation process and thereby achieve a common framework and architecture within which competitive energies can be directed and coordinated.
One such open model proposed in the academic literature is the Framework for Interoperable Rights Management (FIRM - Röscheisen & Winograd 1997, Röscheisen 1997). This allows so-called communications pacts (or 'commpacts') to be established between buyers and sellers of I.P. rights. Meanwhile, a European initiative, Imprimatur, has produced a degree of consensus among participants (primarily from organisations within the publishing industry) as to the characteristics required of a rights trading framework (Imprimatur 1998).
An Australian project, Propagate, has developed a generally applicable model expressed in a formal modelling language. The model is now being applied under licence by IPR Systems. Its purpose is to stimulate an active electronic market in digital media, which reflects the interests of all participants, and of key non-participants whose interests are affected by I.P. rights trading. This implies a number of objectives, including:
The Propagate model abstracts marketspaces, media-types and types of rights trading into a Core Component Model and then utilises directories to store the definitions or classifications. A similar strategy is being adopted by an industry association, the Distributed Management Task Force (DMTF), in relation to networks. It abstracts into directories all of the terms describing network devices, processes and events that would normally be hard coded into the network control software, device tables and routing tables.
This section considers the implications of the above analysis for researchers and practitioners. There is a huge amount of new information required in order to understand how marketspaces are different from and similar to pre-existing marketplaces. Theoretical studies are needed, which examine specific issues far more thoroughly than has been possible in this survey paper.
Empirical studies are needed. Although observation of emergent examples is highly desirable, it is made very difficult by the competitive aspects of the marketplace, and by the rapid change that technologies, practices and industry structures are subject to. The alternatives therefore also need to be pursued, including prototypes and laboratory experiments, and surveys of opinions of market participants.
From the viewpoint of the practitioner, this paper identifies generic requirements of marketspaces for I.P. rights, and issues that need to be addressed in the architecture and features of technical and commercial infrastructure and processes. Designers should reflect on the applicability of these requirements and issues in the particular contexts that they seek to address.
To the extent practicable, the facilities that marketspace-providers construct need to leverage off common architectures and components, in order to take advantage of economies of scale and scope, and shorten the lead-time to implementation. They need to reflect the situation-specific needs of the particular market, including commercial, cultural and process conventions in existing marketplaces, the expectations of participants, especially dominant players, and the interests of affected parties, especially where they are represented forcefully by representatives of or advocates for those parties.
The design of marketspaces for I.P. rights is highly challenging, and a great many failures are to be expected. The analysis in this paper suggests that easy ways to fail include to ignore the interests of key participants, and to adopt closed, proprietary architectures and technologies.
Standards-based schemes offer a range of advantages, including consistency, critical mass, and reflection of the interests of all stakeholders rather than only the sponsors of the scheme. Successful implementation demands a level of collaborative effort within communities. Once a common architecture is in place, competition within specific markets can and will be virile.
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