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Intellectual Property and Software Piracy

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Some definitions

Intellectual property: property that results from original creative thought, as patents, copyright material, and trademarks

Piracy: the unauthorized reproduction or use of a copyrighted book, recording, television program, patented invention, trademarked product, etc.

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Some definitions (Cont.)

Patent: the exclusive right granted by a government to an inventor to manufacture, use, or sell an invention for a certain number of yearsCopyright: the exclusive right to make copies, license, and otherwise exploit a literary, musical, or artistic work, whether printed, audio, video, etc.: works granted such right by law on or after January 1, 1978 are protected for the lifetime of the author or creator and for a period of 50 years after his or her death

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Some definitions (Cont.)

Trademark: any name, symbol, figure, letter, word, or mark adopted and used by a manufacturer or merchant in order to designate his or her goods and to distinguish them from those manufactured or sold by others Numbers like 286, 386, 486 cannot be registered as

trademarks, so now the next generation became pentiums

(Webster’s New Unabridged Dictionary)

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Property vs. Intellectual property

If I steal your television, you’re out a television, but if I copy your program, book or musical score, you still have it

However, I may have robbed you of some of the economic benefit that your work may have provided

In some cases, the work may be seen as an extension of its creator, and the violation not so much economic as personal

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Purpose

The purpose of protecting intellectual property is to ensure that people will find it beneficial to invest time and effort into creating new intellectual works

Will musicians spend a year in the studio producing a CD that sells a few copies and then is posted on Napster for all to download for free?

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Legal Authority/Precedence

Article I, Section 8 of the Constitution instructs Congress to “secur[e] for limited Times to Authors and Inventors the exclusive Right to their Respective Writings and Discoveries”

In 1790, George Washington asked Congress to enact copyright legislation

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Patent or Copyright

There is some question about whether software should be patented or copyrightedThe nature of software (it is information) and its medium of delivery (paper, tape, CD) is more like things that are traditionally copyrighted (books, music) etc. The function of software (especially in corporations) is more like things that are traditionally patented (manufacturing devices and techniques)

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Patent or Copyright (Cont.)

Typically software is copyrighted, but some patents are awarded (especially if software is only part of a device)A patent is tougher to get but provides more stringent protection; for instance, patents do not allow for “independent invention” If two musicians come up with similar scores

independently, both can be copyrighted; but if two inventors come up with similar devices, only one will get patented (even if the ideas were developed independently)

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Patent or Copyright (Cont.)

The Supreme Court ruling in Gottschalk vs. Benson said “an algorithm, or mathematical formula, is like a law of nature, which cannot be the subject of a patent”

However a specific implementation in hardware that is sufficiently useful, novel and non-obvious can receive a patent

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Patent or Copyright (Cont.)

Copyright comes automatically when the work is first “fixed” (written down, recorded etc.) RAM copy is “fixed”

Copyright lasts a long time (lifetime of the author plus), patents are for much shorter period of time

One can register with Copyright Office to ensure better protection under the law

Publication not required

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What is covered?

It is the realization or expression of an idea that is covered and not the idea itself

If two programmers or sets of programmers produce code that handles the identical problem, there is no copyright violation provided there is no evidence of copying – that is, independent development is allowed (not the same for patents)

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The more fanciful, the more coverage

Following the trend in literature, the law generally grants greater legal rights to games like Myst or Mario Brothers than to a word processor packageIt is believed that the function in the latter case more narrowly focuses the code so that similarities are likely to occur during independent development Copyright in a word processor might involve very similar user interfaces or menus, nearly identical code in non-essential sequences

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Violation Categories

Publisher Patent and Copyright infringement: when one producer copies from another, it may not be a direct copying of code, an example was the case of Lotus versus Borland, Borland’s Quattro spreadsheet package use Lotus 1-2-3’s commands and menus

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Violation Categories (Cont.)

Industrial Piracy: the large scale copying and selling of another manufacturer’s software for profit, an example would be the groups who sell a package normally priced at several hundred or thousand dollars by the developer for significantly less (often associated with vendors in developing countries such as China or Eastern Europe)

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Violation Categories (Cont.)

Corporate Piracy: an example would be if a company had a license for up to thirty users (a site license) to use a package simultaneously but did not monitor usage allowing many users to access it at once

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Violation Categories (Cont.)

Reseller Piracy: an example would be when one buys a computer, it comes with some software already loaded, if this software is pirated

Home Piracy: individuals copying software from friends, relative or certain websites for their own personal use

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Scope of the problem

“…software makers …estimate that 35% of the software in use in this country was pirated, or copied illegally …. Piracy accounts for about 66% (or more) of f the software used in such countries as Belgium, Finland, France and Hong Kong. The rate exceeds 80% in Mexico, Japan, Israel, Ireland, Spain, Chile and the Czech Republic. In Russia, China, Pakistan, Peru and Kuwait, the rate is in the high 90’s.” (Combating)Not entirely accounted for by the poverty of the country involved

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Economic Impact

“The International Trade Commission has estimated these losses at $60 billion a year with the most innovative, fastest-growing industries such as software, pharmaceuticals, and entertainment hit hardest.” (Correlates)

“Monetarily, the Business Software Alliance estimates that software piracy cost publishes $2.4 billion domestically, and $12.8 billion worldwide in 1993.” (Combating)

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Fair use

The law does allow copying without permission or compensation under certain circumstances, called “fair use” Personal scholarship Educational Parody In the case of software, is a backup copy “fair

use”?

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Public Domain Software

“Programs that are uncopyrighted because their authors intended to share them with everyone else are in the public domain.” “The UNIX community has developed a number of such programs over the years. Programs in the public domain can be used without restriction as components of other programs. When reusing such code, it is good to understand its history so that you can be sure it really is in the public domain.” (Whatis.com)

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Shareware

“Shareware is software that is distributed free on a trial basis with the understanding that the user may need or want to pay for it later. Some software developers offer a shareware version of their program with a built-in expiration date (after 30 days, the user can no longer get access to the program). Other shareware (sometimes called liteware) is offered with certain capabilities disabled as an enticement to buy the complete version of the program.” (Whatis.com)

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Freeware

“freeware is programming that is offered at no cost. However, it is copyrighted so that you can't incorporate its programming into anything you may be developing.” (Whatis.com)

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Rationalization

Some feel the exorbitant prices charged for some packages makes copying legitimate It is difficult to determine whether software is fairly pricedMore so than most conventional products, the cost is in development, with almost no cost in productionSo a fair price is determined by how much is sold, the lifetime of the product and so on

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Pharmaceuticals Analogous Situation

One finds the analogous issues discussed by the media concerning the pharmaceuticals industry

The drug companies feel justified in charging high prices for new drugs to offset the high price of research and development, a large investment with no guarantees

The stakes are not as high in software but the issues are similar

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Chicken and Egg:

The high price rationalization becomes a chicken and egg problem, one of the reasons for the high prices is that the manufacturers pass on losses or estimated losses to the paying consumers

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Remedies

Trade sanctions are the main approach to deal with software piracy outside the U.S. The associated law is referred to as “Special 301” it

puts other countries into categories depending on whether or not they have enacted and enforced intellectual property protection laws

There are trade sanction against those in the worst category, provided we don’t have to appease them for other reasons

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Remedies (Cont.)

Legal action is the main approach to deal with violations within the US; this may include: Civil action, for instance with one corporation

accusing another of copyright, patent or trademark infringement

Criminal action, such as arresting and convicting those responsible for large-scale copying and selling of CDs at trade shows

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Remedies

“A violation is a felony if 10 or more copies are involved, if they are values at $2500 or more and if the copying was done within six months. If the infringement falls short of these measurements, then the instance is considered a misdemeanor.” (Combating)

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Prevention

Industry watchdogs: Software Publishers Association and Business Software Alliance focus on corporate and industrial piracy (often reported by disgruntled employees) Copy protection: make disks and CD’s that cannot be copied Was original approach but fell into disfavor,

users considered making a backup copy “fair use”

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Prevention

Require registration for users to receive updates, patches, service packs, etc.

One can have distinct packages for running on network versus running on PC, preventing users from copying the network version they have access to for home use

Network packages can count the number of concurrent users, reporting or disallowing excess users

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Prevention

A dongle is “A device that attaches to a computer to control access to a particular application. Dongles provide the most effective means of copy protection. Typically, the dongle attaches to a PC's parallel port. On Macintoshes, the dongle sometimes attaches to the ADB port. The dongle passes through all data coming through the port so it does not prevent the port from being used for other purposes. In fact, it's possible to attach several dongles to the same port. (www.webopedia.com)

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Prevention

Pay-by-use: instead of buying a copy of the package (actually one leases a copy of the software), a new paradigm would have one pay by use, especially if the program is run on a distributor's machine with only the results downloadedEducation: it is believed that if users are taught to value innovation and made aware of the moral and legal implications then occurrences of piracy may decline

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References

Correlates of intellectual property violation, Multinational Business review; Detroit; Spring 2001; Ilkka A Ronkainen, Jose-Luis Guerrero-Cusumano

Combating Software Piracy, <http://members.aol.com/ptroost/piracy.htm> , accessed 6/7/2001

Intellectual Property Issues in Software, National Research Council, National Academy Press (1991).

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References (Cont.)

Who Will Own Your Next Good Idea?, Charles Mann, The Atlantic (1998)Copyright Tutorial, Pam Samuelson, http://www.sims.berkeley.edu/%7Epam/coptutor/, accessed 6/1/2001http://www.whatis.com accessed 6/11/2001http://www.webopedia.com accessed 6/11/2001