Intellectual Property in a Digital World

John M. Carson
John M. Carson

Mr. Carson, how do IP rights translate into virtual worlds?

Carson: The virtual world is mimicking the physical world. People can create their own inventions; say for instance a device that enables anti-gravity. That type of device doesn’t have a physical analog but it seems like it could be the subject of patent protection if it were couched properly as say a device that functions in a virtual world. The same is true for copyright: if somebody is creating a new animated character inside of the virtual world it seems like there can be copyrights there that belong in the physical world. And you can have carry-overs from the physical world back into the virtual world. For instance, an animated character which is copied over to the virtual world may be subject to some pre-existing copyright protection. This may also apply to well known brands. Now you can say there are fair use defenses to trademark rights that aren’t associated with commerce but in a virtual world you can actually have a retail store and in that store you can have crates with a Coca Cola brand on them. If in that virtual store, a virtual entity buys Coca Cola with virtual money – is that an illegal “use in commerce”? I think there are many interesting issues that need to be addressed.

The buying and selling of IP seems to be a concept that is growing. Are there any marketplaces for such activities?

Carson: The US marketplace for IP is generally handled through private transactions, or through an intermediary. However a company called Ocean Tomo has started holding live auctions for IP. Then there are internet sites that work more like eBay so that after a particular time the bidding is closed. While I was in Korea, I heard they had a system for companies to submit IP that they are interested in selling-off. It is sponsored by the government over there.

The new “General Public License” (GPL) was issued by the Free Software Foundation (FSF) in June 2007. How will this new open source license affect the protection of content, such as movies?

Carson: A big change relates to Digital Rights Management (DRM), which provides DVD movies as well as music CDs with technological protection to make it difficult to copy the CD or DVD using a normal machine. What the Free Software Foundation, which controls the GPL licenses, wants to do is block the content providers having the ability to protect their content. So part of the license is indicating that there cannot be any DRM associated with open source software that is licensed under 3.0. That will be a huge change.

What about the manufacturers of the DVD players – will they be affected by GPL 3.0, as well?

Carson: With an open source license, there is the ability for users to access the actual source code and make revisions and then go out and distribute that update on their own. However some licensees, such as DVD manufacturers, would not allow the operating systems on their machines to be changed. The appliances would just shut down if anyone attempted to tamper with the system. The FSF is making it clear that this is not going to be allowed under this new license.

Can’t people just ignore GPL 3.0 and stick with an earlier license?

Carson: The dilemma is that consumer electronics manufacturers want to use open source software in their machines. They don’t want to pay for a small operating system. The point now is if they are going to use GPL 3 code they are going to have to be careful with their business model so as not to harm some of their partners. There has been quite a lobby about that provision but nobody has been able to move the FSF.

What other effects will GPL 3.0 have?

Carson: If you take a look online at the latest missive from the FSF one of the things that are mentioned is that they would like to do away with software patents. In GPL 3.0, FSF has tried to ensure that downstream users of the license cannot be the subject of licensing efforts of patent owners who distribute software under GPL. Furthermore, they have attempted to avoid selective patent rights being granted as was done between Microsoft and Novell. Lastly, they are providing that patent owners may be subject to future versions of GPL, the terms of which may not be known at the time of software distribution. So, it is a situation where copyright licensing of software code is being used to limit patent rights. For many technology companies, copyright provides too weak a form of protection to be effective and they rely on the power of software patents to maintain their position in the marketplace based on the research & development money that was spent on their innovations.

Software patents are very controversial though, aren’t they?

Carson: Go back a year or so to the so called BlackBerry case (NTP v RIM). This was the case where NTP, a patent holding company, sued RIM, the BlackBerry provider, on its patents directed to e-mail distribution to handheld devices. NTP was able to reach a monetary settlement with RIM after the court enjoined RIM from selling its products. As your readers will recall, Congress was threatening to take action to prevent the injunction from applying to Congressional employees. People couldn’t understand how an entire business model, and an important one for modern American business, could be held hostage. Those patents were software patents. It was your prototypical software patent where the public perceived it as “patents out of control”.

NTP was perceived as a “patent troll”. What exactly are patent trolls?

Carson: Patents trolls are basically “patent holding companies” which do not have any commercial products associated with the patents. There is quite a business today of companies locating patents that are owned by inventors or maybe companies that have gone out of business or companies that have patents in their portfolios that they are not using. The trolls will then come in and buy up those patents. Then they will go out and assert those patents against businesses that have commercial products that may infringe on them. Patent trolling is a real interesting business model. It has grown up to the point where there is now a publicly traded company called Acacia Technologies whose business is first of all obtaining patents and then obtaining licensing revenues from those patents.

Why is this business model particularly prevalent in the IT industry?

Carson: The IT industry is a relatively open marketplace for ideas that many companies use. It’s much easier to collect nickels and dimes from a large constituency than to seek big payoffs from one or a few large companies that will tenaciously defend themselves against patent enforcement efforts. At the other extreme, you have big pharmaceutical companies that rely on very select patents that address specific compounds. When marketing a drug, you generally don’t have underlying technologies to be concerned about or a marketplace of patents for sale since the key patents support commercial products. So, IT may be considered the perfect market for companies to create this type of patent acquisition and licensing model.

In the US you can’t mention DRM without mentioning the Digital Millennium Copyright Act. What’s happening there?

Carson: The DMCA provides an extra level of protection for the content providers and also details the liability of the Internet service providers and those who are publishing materials. For instance, is it sufficient for YouTube to have some kind of filtering system for copyrighted material to shield them from copyright infringement liability? Or do they need to be doing other things? We don’t know the answer to that and it will be sorting itself out in the marketplace and in the courts for years.