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February 28, 2005

Digital Technology and Copyright:
Need to Redesign the Present Analog-based Law System

Koichiro HAYASHI (Vice President and Professor, Graduate School of Information Security)

With the advent of IT technology, information that used to be an indivisible part of its medium has come to be traded and consumed independently. But this is making it increasingly difficult to protect copyrights. The extent to which the current intellectual rights system can cope with such a trend is limited, and thus the necessity to redesign the system of law to accommodate the digital age has become evident.

Trading of information alien to traditional market practices

When we were young we used to sense a certain level of guilt in browsing information in bookstores, often feeling sorry for the shop owners. But it seems that young people recently have no sense of wrongdoing in taking a sneak photo with a mobile phone of a page of a book in a bookstore. Ordinary people tend to think that such behavior would constitute theft as defined in article 235 of Japan's penal code. But "property" as referred to in the article is understood to mean only tangible goods. Also, the existence of article 245, in which stealing of electricity is separately stipulated--along with the historical background of this article in the code--could lead only to the interpretation that information cannot be a subject of theft. In short, "digital shoplifting" does not exist in the current legal framework.

Would such behavior be a breach of copyright? If the data obtained as described above were to be used only by that individual, it would be considered "private use", which is allowed under article 30 of the copyright law, and would not constitute a crime. In short, stealing a book is a crime, but recording the contents electronically and taking it away is not a crime.

Now consider the differences in transactions of a book itself (the tangible) and the information it contains (the intangible). In the case of a book, when someone is reading it nobody else can (rivalry), and it is technically and economically possible to provide the purchaser with dominion and exclusion of interference from others (excludability). This rivalry and excludability provides the basis for the rights of ownership, which serve to maintain order for transactions under the conventions of capitalism. For example, a sales contract would transfer the rights of ownership from the seller to the purchaser, thus providing the purchaser the freedom to use, lend, or sell. On the other hand, the seller loses all rights upon the sold item.

In the case of information, however, it is possible for another person to have the same information at the same time (non-rivalry), and it is almost impossible to maintain exclusive possession of such information because the cost would become prohibitively high (non-excludability). In economics, goods with such characteristics are labeled "public goods", which means that they are unsuited for conventional market transactions. This is because information could be left with the seller when sold, and this makes it difficult to establish distinct rights such as ownership on the information.

Even so, it is clearly unjust to allow free use of the creations of others, as it would result in inhibiting people to make a living through creative activities. The system of intellectual property was thus established to provide incentives for the production of socially valuable information.

Information and media are separated through digital technology

There are three points to be noted here. First, intellectual property rights are different from ownership rights. Second, intellectual property rights tend to conflict with the economic characteristics of intangible goods. In other words, a cost is required to protect the rights, and they would deteriorate if left unattended. Third and most important, an incentive for the creator is in effect a disincentive for challengers who endeavor to overcome the original creation. This factor is seldom recognized among the public, but the law tries to balance the value of creation and that of usage by limiting rights to be effective for "a certain period of time", as opposed to rights of ownership which last indefinitely.

The intellectual property system was intended, unlike other laws, to deal with intangible goods from the outset, which places it in a unique position among the current system of law. Incidentally, the civil code--the basic law to control transactions among private citizens-stipulates in article 85 that "within this law, the term 'goods' is used to mean tangible goods", explicitly declaring that the code would not handle matters of intangible goods.

Until the advent of digital technology, creations--or created information to be precise--were always circulated in a form embodied and fixed in some sort of medium such as books, music on phonograph discs and CDs, movies on films, and T V programs on videotapes. In such cases it was possible to control intellectual rights by controlling the media in which they are embodied. Cracking down on illicit copy making would be sufficient by seizing the medium, such as the CDs.

In the analog age, it was expensive to create copies, and quality would deteriorate through the process. These are the drawbacks of analog technology, but it provided for the difference in quality between the original and the copy. Thus it enabled the intellectual property system, with the right of reproduction being its core, to function effectively. But digital technology has overcome the drawbacks of analog technology by making it very easy to make copies at a negligible cost, and with quality exactly the same as the original. Such data can be transmitted over networks and consumed in the form of digital information, without resorting to any tangible medium.

This has exposed the characteristics of information as goods in a bare form. While in the days of analog technology the rights over intangible goods were traded along with the tangible media in which it was imbedded, the separation of the two through digital technology has revealed the immaturity of the legal system in handling the rights of intangible goods. Frequent occurrence of conflicts over copyrights on the Internet needs be regarded in this context. Adding to the confusion is the fact that once illegal reproductions are circulated, it is practically impossible to withdraw them.

Difficult to provide complete protection for intangible goods

Efforts are being made within the framework of the intellectual property system to cope with the current confusion. The copyright law has been revised almost every year. Some new rules included in the law cover such areas as transmission of material via websites (automated public transmission), posting material on websites and making it transmittable (article 23 of the copyright law), a ban on the disguise and alteration of information regarding copyright control (article 113 of the copyright law), and prohibition of disabling software functions regulating access to copyrighted material (article 2 of the unfair competition prevention law).

Nevertheless, it is necessary to recognize that to establish legal rights on information as intangible goods, and then to protect these rights thoroughly, is an impossible demand. Strengthening protection makes it more difficult to use the information. For example, digital rights management (DRM) is a technology aimed at regulating accessibility in general and from a broad perspective. It would be possible by utilizing this technology to limit the usage of information for whatever purpose in whatever manner. It could protect copyrights, but it would make it significantly cumbersome to use the information itself.

It is certainly worthwhile to attempt to deal with the issues within the framework of the copyright system, but there are limitations. Digitized information is produced, circulated, and consumed--all the while retaining intangible form. Accordingly, the whole system of law, not just the section related to intellectual rights, needs to be redesigned to cope with the digital era.

However, the system developed to cover copyrights could function as a pilot model in redesigning the new framework. The copyright system has dealt with information in a legal perspective since the age of analog technology. And whereas the patent system handles only the ideas side of technical information, the copyright system has attended to a wide range of types of expression, including not only the property aspect but also the mental aspect--moral rights.

Providing solutions to settle conflicts over copyrights is not enough. Formulation of an "information law" that transcends current copyright frameworks has become necessary.

Consider the difficulty to withdraw mentioned above. A person whose rights are infringed upon would want to have the infringement stopped, the original state restored, and damages compensated. If the process of withdrawal is ineffective or meaningless due to the intangible nature of the goods, then other procedures need to be devised. These include setting up a public notice system for infringement whereby Internet search engines would pick up the information, which could effectively sanction individuals who continue to offend.

After more than a century since it was established, the modern copyright system is suffering to find a new framework to cope with digitized information as a property. Japan's copyright law is apparently slated to undergo a major overhaul during the next few years. The process should take into account a wide range of ideas.

(The original Japanese article appeared in the February 15, 2005 issue of Nihon Keizai Shimbun.)

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