Intellectual Property/Copyright Law and the Internet

Intellectual property is the law of private monopolies affecting industry in its widest sense. The expansion of these monopolies needs to be justified by proper legal and economic research. The development of new technologies has always posed exciting challenges for intellectual property law. Copyright occurs automatically when both of two conditions are satisfied: the creation of an original work and “fixation of that work in any tangible medium of expression.” 17 USC Ã?§Ã?§ 101, 102(a), 302(a). Copyright, in particular, has managed to expand to provide protection for such media as films, television, sound recordings and computer software while at the same time maintaining a balance between the interests of the creators and users (Rose, 1993).

The Internet is the latest development, drawing to itself applications of copyright and trademark law and no doubt other, as yet unforeseen branches of this discipline. The Internet is challenging the justifications for intellectual property protection, and these are shifting. The concern is that the checks and balances between right-holders and users are being altered in a manner without consideration of the effects on the overall structure of this branch of law (Besen, & Raskind, 1991).

A reproduction, which will infringe copyright laws includes reproducing a work in any material form, and storing a work electronically. Copying includes the making of copies, which are transient to some other use of the work. This is generally taken to mean that merely surfing the Internet is an infringement of copyright laws if done without authorization. However, a full reproduction right is not universally accepted, because it is seen as upsetting the balance between users and creators (Gardner, 1997).

The function of trademark protection is quite different from that of copyright. Whereas copyright exists to allow authors to exploit the fruits of their labor, or a moral right to control that work, the rationale for trademarks lies in the consumer society. The application of trade mark law to Internet activities has the same ingredients as the disputes discussed above in relation to copyright: the extent to which commercial interests are shaping, through litigation, the development of the Internet; and questions of regulation of the Internet when trade mark disputes arise. A domain name is part of the address of a computer on the Internet (Gardner, 1997). There are a number of generic top level domains, including “.com” used by commercial entities, and ”.org” used by international organizations. These are registered in the United States and are viewed by those who use them as “international” domain names. There are also a number of country top-level domains: for example “.uk” for the United Kingdom, and “.de” for Germany (Besen, & Raskind, 1991).

Registered trade mark rights are granted by national authorities under domestic legislation that may be shaped by international obligations such as the obligations imposed on signatory states under the Paris Convention for the Protection of Industrial Property 1883, the Madrid Agreement concerning the International Registration of Marks 1891; the Protocol relating to the Madrid Agreement concerning the International Registration of Marks 1989, and the TRIPs Agreement 1994. A domain name is registered by one of the bodies set up around the world to administer the handling of these addresses, such as Network Solutions Inc (NSI) in the USA. The Internet Assigned Numbers Authority (IANA) acts under authority from the US Government and the Internet Society (ISOC) and is funded by the National Science Foundation (NSF). IANA allocates blocks of numeric IP addresses to NSI, which has overall authority for IP addresses, domain names and other Internet parameters. The function of allocating domain names in the US is in the hands of InterNic, an offshoot of NSI. In the UK, the body responsible for registering addresses under the .uk top level domain is Nominet (Rose, 1993).

The difficulty over the interaction between trademark law and domain names in the context of the Internet is that one domain name is for world-wide use, and no two domain names can be identical. There may be a number of people or entities who consider themselves to be “entitled” to a particular domain name. The balance between territorial rights, classes of goods and services for which trade marks are registered, and requirements of confusion for infringement purposes, all of which provide a check on the monopoly power granted to owners of registered trademarks, is being upset (Besen, & Raskind, 1991).

A regulatory body has been set up by a group of participants on the Internet, the International Ad Hoc Committee (IAHC). Membership includes the Internet Society (ISOC), the Internet Assigned Numbers authority (IANA), the Internet Architecture Board (IAB), the Federal Networking Council (FNC), the International Trademark Association (INTA) and the World Intellectual Property Organization (WIPO). The IAHC has made a number of suggestions, including proposals to increase the number of generic top-level domains to seven, including “.firm” for businesses and “.store” for those offering to sell goods. The intention is that the most popular existing top-level domains, in particular the “.com” domain, will cease to attract so many disputes. A number of arguments suggest that this unlikely to work. First, a number of businesses argue that they may lose associated goodwill if they are not able to use the ”.com” domain, such is the current fixation on that example. Second, there are already over 230 top-level domains, but this has not alleviated the problem. Third, there is no reason to suppose that some business will not register under all the top-level domains (Rose, 1993).

A further development is the proposal that has surfaced from the IAHC to the effect that the second domain name in the generic top-level domains will only be allocated to those parties who have “demonstrable intellectual property rights” in that name. But these two principles probably would not have resulted in the width of current copyright legislation were it not for the third principle, namely the principle of reward. When it is suggested that any monopoly, whether it be patent, copyright or registered design, harms the public interest in free and open competition, the answer given usually includes the argument that the rewards furnished by the existence of a temporary monopoly are for the public good since they encourage the investment of time and money in research and development, and allow authors, musicians and the like to support themselves by their creative efforts. The result is that more artistic or inventive creations are made available to the public and the author or creator is encouraged to commercialize his output rather than keep it to himself as a secret (Jacob, 1997).

The economic purpose of copyright is to combat market failure from free-riding, thus providing incentives to producers, authors, the primary creators of ideas, and publishers, the disseminators of ideas (Cornish, 1996). Changes to copyright law have been driven by technological innovation resulting in new products, mechanical recording, television, cable and satellite broadcasting, computers, etc., which have enabled authors and publishers to reach huge markets, and in new means of copying, photocopiers, laser printing, home-taping of sound and video recording, which have vastly reduced the cost of making copies and at the same time raised the cost of enforcing copyright. Copyright has become diverse rights reflecting product and process innovation as the law accommodates technical changes in what is inevitably a non-stop race. Extensions of the law also embrace changing cultural values and social attitudes to the role of artists, for example, performers (MacQueen & Peacock 1995).

The international trade in copyright material has expanded, multiplying both royalty earnings and the cost of effective enforcement. The market response was the setting up of collecting societies, non-profit membership organizations, to monitor the use of copyright material, collect and distribute royalties and engage in protective measures. From the outset, national societies collaborated through (private) reciprocal agreement to act for foreign authors. At the governmental level, reciprocity has been formalized via international conventions, the Berne and Rome Conventions These culminated in the TRIPS Convention of the Uruguay Round of GATT, whose worldwide coverage has significantly increased copyright protection (Cornish, 1996).

Despite the economic importance of copyright, it is a relatively neglected area as far as economists are concerned. While there has been significant work, both theoretical and empirical, on the economics of patents and R&D, copyright has not received so much attention. Yet it is an area for the application of law and economics and of modern theories of industrial organization. In addition, the public choice implications of copyright abound. Better protection for authors is a motive for changing copyright law worldwide, though publishers benefit more and in the past it was they who pressed for the changes. Those who represent creative and performing artists, their trade unions and professional societies, arts councils and international organizations, such as UNESCO, lobby for the use of copyright law to strengthen the status of artists and their financial bargaining position. Pressure for these changes has come from organizations representing performers, who see copyright law as an instrument for improving their bargaining position (Jacob, 1997). They believe that any extension of copyright is bound to result in higher remuneration and fail to understand that markets discount any future claims to revenues.

A number of approaches, both short- and long-term, could be taken to ensure either that development of the Internet is not hampered either by over-regulation, or that it does not implode under the weight of litigation:


Besen, S., and Raskind, L., (1991). An introduction to the law and economics of intellectual property, Journal of Economic Perspectives, 5,1; 3-27.

Cornish, W. R., (1996). Intellectual property: Patents, copyright, trade narks and allied rights. 3rd edn. London: Sweet & Maxwell.

Gardner, N., (1997). The Harrods case: protecting your name on the Internet. Computers and Law, 8, 23-26.

Jacob, R., (1997). Industrial property-industry’s enemy? Intellectual Property Quarterly, 1, 3-15.

MacQueen, H.L., and Peacock, A.T., (1995). Implementing performance rights, Journal of Cultural Economics, 19,2; 147-175.

Rose, M., (1993). Authors and owners: The invention of copyright. Harvard University Press.

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