“Digital Content, Intellectual Property and Innovation”- A talk by Prof. David D. Friedman

The Indian Institute of Management Bangalore (IIMB) had organized a lecture by Prof. David D. Friedman and Dr. Parth J. Shah on June 24, 2015 for the Executive Post Graduate Programme (EPGP) students as a part of their Emerging Economy course.

Prof. David D. Friedman is a Professor at Santa Clara University’s Law School. He is an American economist, physicist, legal scholar, and libertarian theorist. He delivered a lecture on the topic “Digital Content, Intellectual Property and Innovation”. His lecture discusses one particular aspect of his book “Future Imperfect” which talks about the revolution in internet and technology and how the future is much more uncertain than most people assume it to be. He spoke about the question of how the development in computers and internet technology affects the world, and suggested some examples and ways through which people could make money by protecting their intellectual property in the present digital age. One of the aspects of this discussion was the death of copyrights. He said that if one wants to enforce copyright law, one has to make it difficult to violate it. In simpler words, the easier it is to copy things, the harder it will be to enforce copyright law. One cannot make piracy impossible, but one must make it hard to pirate. He cited an example of how around the 1900s, the United States was considered the great pirate nation of the world. United States did not have a Copyright Treaty with Britain, and at that time, British authors made more money from sales in the U.S. than sales in Britain. The reason for this was that around the 1900s, there was a sizeable first-mover advantage to publishing books. How it worked then was the author would get the text of the book soon enough that when the book came out in England, publishers in the U.S. had already printed copies to sell. And post piracy, the publisher in England would sell a low cost edition in England so that the pirate could never recover his costs. This was how they enforced copyrights without copyright law- and this benefitted the author ultimately. But today, with the ease of acquiring and distributing content online, it is more difficult to enforce copyright despite there being a copyright law. One of the methods to protecting your content online is technological protection. What technological protections means is that you put your form of intellectual property in some form of encrypted container, for example where one cannot just copy the content. This will make the user pay a small amount of money for the content viewed or played. However, there are still some problems with this method of protection. With the possibility of analog holes (or analog loopholes) any person can pay for the content embedded inside the software just once but can use devices such as tape recorders or video recorders to record the content and ultimately distribute it for free or for a much lesser and negligible cost. If the person is a more sophisticated pirate, he or she could redirect the signal away from the speakers of your computer, directly to your device to ensure more clarity in capturing the content. He even spoke about how the two leading legal information databases- Westlaw and Lexisnexis have technologically protected their databases by revealing little information at a time, and only when asked by customers. How they do this is that when a person sends a query to them, they give very specific answers and do not provide any extra information than required, thereby limiting the person’s free access to paid databases. Even if you want to give information to your friend, the answer which you get will not be the same which your friend would want, thereby limiting free circulation of legal information. Therefore one of the methods of protecting your copyrights is to give little and limited information at a time, and only when asked, and maintain a strong server for your database to prevent hackers from breaking into your system and accessing your information.

He then spoke about how piracy takes place in movies and suggested how a person can prevent piracy of the movie by making the content different every time one saw it- different camera in different places, for example. He also related this to an online game called World of Warcraft, and how movies can be made similar to games. The only exception is that in games, nobody wants to see others playing but want to play the game themselves, thereby doing away with the need for piracy. Another method of maintaining strong copyright protection over your work is via technological protection. In simpler terms it means extra protection for the already protected content (which however is very weak in the present digital age). To give you an illustration, it is like a lock for a password protected vault- it gives two or multiple layers of protection (the technological protection being the lock on the vault and the copyright protection being the password to open the vault)

Another aspect of making money from your copyright content despite piracy is to include advertisements inside the product. Take a movie as an example- the producer may show particular branded products in scenes of the movie for which he is paid by the product company being advertised. Now suppose people were to engage in piracy, then there will eventually be more people looking at these advertisements and increased brand product sales which will ultimately lead to increased payments to the producer.

Some other methods to make a living online without enforcing copyright laws include the “1000 true fan” theory. This theory states that if you can find 1000 true fans who really like and enjoy your online content, and would go to any extent to buy your work online, then each fan would be willing to spend (for example) $100 per year on your products which adds up to $100,000- a good enough amount to make a living without having to enforce copyright laws.

Towards the end of his lecture, he spoke about the concept and technology of public key encryption. Public key encryption is a mathematical technology where you generate a pair long numbers or keys- one called the public key which is shared with all, and the other called the private key, which must be kept only with you. The technology helps you in sending confidential and sensitive messages in an encrypted format to others without any chance of information going to the wrong hands. Even if information goes into the wrong hands, the information cannot be decrypted without the private key, which is with the rightful recipient. The problem with this technology is that it promotes anonymity, one of the major issues of concern in the cyber world. But, there is also a loophole in this technology caused by the system of digital signatures, which is a good thing. We live in a world where we enter into and enforce contracts, in the real as well as cyber world. Due to maintaining anonymity with the public key encryption, contracts cannot be enforced. What can be done to enforce contracts despite the anonymity issue is to engage in reputational enforcement as a substitute for physical enforcement. Reputational enforcement can bring the impression of third parties, who are potential customers, into the picture in order to enforce the contract- this puts the reputation of the seller at stake.  Let us say that A and B have a contract where A is the buyer and B is the seller, they both digitally sign (with their respective private keys) the contract to show that there is no malice in the contract. They agree that any disputes will be referred to an arbitrator who is commonly selected. There is a dispute and the arbitrator decides that B owes A $5,000 in damages. However, B does not pay the arbitral award. So you use your private key and decrypt the agreement and put it on social media to hamper the reputation of the seller due to non-compliance with the arbitral award. This is called reputational enforcement.

It was indeed a wonderful experience listening to Professor Friedman’s insights into technology law in the current age and how he combines law and economics to explain concepts unconventional interesting topics.

Contributed by Akash Srinivasan

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