Download - Going Digital seminar, Hobart, Tasmania, 27 June 2014 - Dr Anne Fitzgerald: "Challenges and Opportunities in the Digital Economy"

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Challenges and Opportunities in the

Digital EconomyDr Anne Fitzgerald

“Going Digital – Law for the Digital Economy”Hobart, 27 June 2014

"Challenges and Opportunities in the Digital Economy" by Dr Anne Fitzgerald is licensed under a Creative Commons Attribution 3.0 Australia Licence. To view a copy of this license, visit http://creativecommons.org/licenses/by/3.0/au/

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The Digital Economy“The digital economy is the global network of economic and social activities that are enabled by information and communications technologies, such as the internet, computers, the cloud, search engines and smart devices.”Australian Law Reform Commission “Copyright and the Digital Economy”, November 2013 - http://www.alrc.gov.au/sites/default/files/pdfs/publications/summary_report_alrc_122.pdf

The digital economy has been a major driver of growth in the past two decades – in 2013 the European Commission stated that the digital economy is expected to grow 7 times faster than overall GDP in coming years


http://www.alrc.gov.au/sites/default/files/pdfs/publications/summary_report_alrc_122.pdf

http://www.alrc.gov.au/sites/default/files/pdfs/publications/summary_report_alrc_122.pdf

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Law for the Digital Economy: Law as Infrastructure• Inter-relationship of creativity/innovation and law• Not just a matter of new technology → changes in law in response (e.g.

copyright in the digital era)• Changes in law → new practices, business models and technologies (e.g.

introduction of personal privacy protection laws)• Essential to grasp that in the creative/innovative sectors the ability to control the

use of the creative/innovative work is largely conferred by law • Intellectual property laws occupy a central space (copyright, patents, designs,

trade marks)• But in the digital online environment, many other laws and regulations come

into play: privacy, security, contracts"Challenges and Opportunities in the Digital Economy" by Dr Anne Fitzgerald is licensed under a Creative Commons Attribution 3.0 Australia Licence. To view a

copy of this license, visit http://creativecommons.org/licenses/by/3.0/au/

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Disruptive technologies• Digital technology• Mass market computer software• Personal computers• The Internet (world wide web)• Mobile devices (smartphones, i* devices)• 3D printing• Cloud computing• Big Data


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In the digital environment, content is king….“But it is content which is absolutely critical: it is what we put onto the [information] highway that really matters. ….Content is at the heart of the internet economy.”

Cutler and Buckeridge “Commerce in Content: Building Australia’s International Future in Interactive Multimedia Markets, Report for the Department of Industry, Science and Technology, CSIRO and the Broadband Services Expert Group (1994)

• Content is presented in a variety of formats: video clips, music recordings, text, movies, visual images (photographs), games, multimedia works, podcasts ….

• The essential quality of digital content is that it can be readily copied, altered, combined, disseminated and used on a wide range of equipment.

“What makes digitised content different is that the core products are infinitely renewable and reusable, making the roles of producer and user interchangeable.” Cutler and Buckeridge (1994)

• Digital technologies continue to revolutionise the way in which content is created, distributed, used and reused → new ways of providing, creating and distributing content, and new ways to generate value

• The emergence of new business models that use the internet to deliver content represents both challenges and opportunities for the creative industries, authors and artists


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Copyright and digital content• Discussion and reviews focus on the respective positions of

• Copyright owners (creators)• Copyright users• Intermediaries (eg Internet Service Providers)

• Early acceptance that copyright applies to material distributed freely online – Trumpet Winsock case (Trumpet Software Pty Ltd v OzEmail Pty Ltd, Heerey J, Federal Court, 1996) • Digital Agenda amendments to Copyright Act 1968 – response to the digital

environment was a been a broadening and strengthening of copyright – covers a greater range of works (eg computer programs); owners have extended rights; expanded civil and criminal remedies for infringement• For Australia, copyright protection was further strengthened in the bilateral trade

deal with the United States in the Australia – United States Free Trade Agreement (2004) → extensive amendments to Copyright Act in 2006


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Copyright and digital content• ALRC review “Copyright and the Digital Economy” (2011 – November 2013)

• “Copyright is an essential aspect of innovation in the digital environment. This includes new ways of developing creative material and new ways of legally accessing, distributing, storing and consuming copyright material. At present, copyright law gets in the way of much innovative activity which could enhance Australia’s economy and consumer welfare. Reform of copyright law could promote greater opportunities for innovation and economic development.”

• Recommended replacing the current fair dealing provisions with a flexible fair use exception to copyright infringement (note that this was first proposed by the Copyright Law Review Committee (CLRC) in 1998 in the “Simplification of the Copyright Act” reference)

• The question “is it fair” would be assessed according to 4 non-exclusive “fairness factors”:• Purpose and character of the use (includes consideration of whether the use was transformative, for the

public interest or for a commercial purpose) • Nature of the copyright material (includes consideration of whether material has been published, is in

print and/or contains factual or entertainment content) • Amount and substantiality of the part used • Effect of the use upon the potential market or value (to help to ensure that the markets of the rights

holders are not substantially damaged by the exception) "Challenges and Opportunities in the Digital Economy" by Dr Anne Fitzgerald is licensed under a Creative Commons Attribution 3.0 Australia Licence. To view a copy of this license, visit http://creativecommons.org/licenses/by/3.0/au/

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Copyright and digital content• ALRC, “Copyright and the Digital Economy” (2013):

• “Of course, innovation depends on much more than copyright law, but fair use would make Australia a more attractive market for technology investment and innovation. …. An Australian copyright law review committee recommended the introduction of fair use in 1998. Would Australia have been better placed to participate in the growth of the nascent digital economy, had this recommendation been implemented at that time?

• Fair use also better aligns with reasonable consumer expectations. It will mean that ordinary Australians are not infringing copyright when they use copyright material in ways that do not damage—and may even benefit—rights holders’ markets.”

• Attorney-General stated in February 2014: “I remain to be persuaded that this is the best direction for Australian law, but nevertheless I will bring an open and inquiring mind to the debate.”

• Focus has now shifted to online piracy and how to deter illegal internet downloaders – massive downloading of Game of Thrones and Hollywood blockbusters – Australia is allegedly the worst offender in online piracy and the Federal Government has indicated that it intends to crack down on the practice – Attorney-General has indicated that he is considering “legal incentives” for ISPs to cooperate with copyright owners to prevent illegal sharing – expressed concern to Senate Estimates committee that “the legitimate rights and interests of rights holders and content creators are being compromised”


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Copyright and digital content• Emergence of open licensing• Based on the existence of copyright in a work• Uses copyright as the platform to structure openness (access + reuse) - facilitates

lawful reuse + remix and minimises (removes) transaction costs• Provide creators and users of copyright with the ability to engage, collaborate and

facilitate release, flow and use of copyright content in the digital environment• Open licences grant use permissions in advance • Examples include:

• For software: free and open source software (FOSS) licences, eg the GNU General Public Licence (Richard Stallman)

• For non-software content: open content licences, eg the Free Art Licence, GNU Free Documentation Licence and the Creative Commons licences


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Open content licensing – the CC licences• Creative Commons licences are the best-known and most widely used

open content licences• Creative Commons was formed as a direct response to shortcomings

of copyright laws and licensing practices• The founders of Creative Commons identified the need to address

obstacles to the free flow of copyright materials and information online• CC licences were developed with the intention of being used in the

interactive and distributed environment of the internet - they are shaped by the online environment, the plasticity of digital works and remix culture, but are also suitable for use on works in hard copy form


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Some measures of CC uptake• The number of CC-licensed items in circulation has steadily increased

– estimated to be > 500 million in 2013• A 2014 statistical study (based on an estimate of a total of 400 million

CC-licensed works) showed that photographs comprise the great majority of CC-licensed works (more than 75%), followed by text items (7.5%), videos (1.8%) and audio recordings (0.3%)• More than half of the CC-licensed works available online have been

provided under licences that permit the material to be modified and adapted.


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Some further statistics on CC adoption • Applying CC licences and finding CC-licensed materials became much easier when:

• social media platforms such as Flickr and YouTube introduced CC licensing options into their upload functionalities, and

• search engines such as Google and Yahoo! made it possible to search for CC-licensed materials.

• Flickr is the largest single repository of CC-licensed works, numbering around 375 million (as of March 2014)

• Other platforms that have a large amount of CC-licensed content are Wikipedia (33 million pages), Wikimedia Commons (more than 21 million files in 116,000 media collections) and YouTube (more than 9 million videos).

• In the research sector CC licences are being widely used to enable open access to research publications and data:• The Open Access Scholarly Publishers Association (OASPA), whose members include publishers such as

BioMed Central, Hindawi and the Public Library of Science (PLoS), reported that by the end of 2012 over 250,000 journal articles had been published under the CC BY licence.

• Of almost 10,000 journals listed in the Directory of Open Access Journals (DOAJ), just under 40% use a CC licence. Further, the rate at which journal articles are being published under the CC BY licence has increased consistently and significantly each year.


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Copyright and computer-generated works• Much of the content we encounter on a daily basis is produced by computerised

processes and there is little or no human input into the completed work • Computer-generated materials include:

• animated images created by movie studios for cartoons and special effects;• computer software produced by generator software; • crosswords produced by a computer using a random generator; • weather maps generated with data obtained from weather balloons, satellites and monitoring

stations; • share price lists produced from automatic data transmissions from stock markets; • 3D landscapes and environments used for simulations; • synthesised music

• For these computer-generated materials, the programmed computer is not merely a tool used by the author to assist in producing the work but, rather, the work is created by the computer, without any significant expenditure of human skill or effort.


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Copyright and computer-generated works• When the first computer software enabling a computer to create works independently or

with minimal human contribution became available in the 1970s, the works produced were of little or no economic value.

• Computer music was the earliest form of computer-generated material, but it was of a much lower quality than the technically advanced electronic music now available. Likewise, the works produced by the generator computer programs that became available in the 1980s – fractal art pictures, anagrams and poems – were not regarded as being of economic value and were largely ignored.

• The breakthrough which saw computer-generated works become commercially significant was the movie ‘Toy Story’, produced by Pixar Animation Studios and released by Walt Disney Pictures in 1995, the first feature length computer-animated film. It was a huge success, grossing nearly $362 million worldwide, and was followed by two even more successful sequels, ‘Toy Story 2’ (1999) and ‘Toy Story 3’ (2010). Since ‘Toy Story’ was released, there have been many blockbuster films that contain or consist entirely of computer generated images, including, ‘Titanic’ (1997) and ‘Star Wars Episode I: The Phantom Menace’ (1999).


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Copyright and computer-generated works• In Telstra Corporation v Phone Directories Company (2010) the Federal Court of Australia

considered whether copyright existed in the White and Yellow pages telephone directories published by Telstra and its subsidiary, Sensis

• The court held that the directories, consisting of telephone subscriber listings produced by ‘an automated computerised process’, were not protected by copyright because they were computer-generated works lacking the requisite human authorship

• The reasoning in Telstra v Phone Directories would see such compilations and a much more extensive range of creative and informational content relegated outside the scope of copyright.

• During the last 20 years, as computer technologies have become increasingly sophisticated and widely used, so too has the economic significance of the materials produced with computers grown.

• The increasing prevalence and economic importance of computer-generated materials means that the question of how copyright applies to such materials and the appropriate scope of copyright are issues that need to be re-addressed in light of the realities of the forms and modes of production of content in the digital age.


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Text and data mining (TDM)• Large amount of valuable information in databases of academic journal publications, patent

documents and research data Text and data mining (TDM) enables this information and data to be searched and analysed – facilitates new medical discoveries and maximizes the investment of public money in research and innovation

• Much of this content is protected by copyright (and in Europe, the sui generis database right) – made available on a subscription basis to academic and research organisations

• Reproducing the contents of the databases may infringe the rights of the owners of copyright and database rights

• TDM requires contractual agreements between users (eg research institutions) and rights holders (eg publishers of scientific journals) to establish access (technical and legal) to the relevant databases

• Legal (as well as technological and skills) barriers may prevent or hinder TDM • Need to understand and manage legal rights to enable data-driven discovery and innovation

• Where academic research articles and data are provided under standardized open content licences (eg Creative Commons) TDM is facilitated – now > 250,000 openly licensed articles


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Text and data mining (TDM)• Is there a need for an exception in the Copyright Act 1968?• ALRC, “Copyright and the Digital Economy” stated that the new flexible fair use

exception would be the appropriate tool for assessing whether TDM should be permitted without a licence• The UK has introduced a specific exception to exclude TDM from infringement • The Copyright and Rights in Performances (Research, Education, Libraries and

Archives) Regulations 2014 (effective 1 June 2014) introduce a new section 29A: Copies for text and data analysis for non-commercial research into the Copyright, Designs and Patents Act 1988 (UK)

(1) The making of a copy of a work by a person who has lawful access to the work does not infringe copyright in the work provided that—

(a) the copy is made in order that a person who has lawful access to the work may carry out a computational analysis of anything recorded in the work for the sole purpose of research for a non-commercial purpose, and(b) the copy is accompanied by a sufficient acknowledgement (unless this would be impossible for reasons of practicality or otherwise).


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3D Printing• 3D printing or additive manufacturing - involves making a 3 dimensional

(3D) object from a 3D model or an electronic data source by additive processes that lay down successive layers of material• 3D printers are computer-controlled industrial robots• Technology (equipment and materials) were developed in the 1980s –

expensive and required special handling• In 1984 Chuck Hall (of 3D Systems Corp) invented stereolithography, using

UV lasers to cure photopolymers – Hall also developed the STL file format widely used by 3D printing software, as well as the digital slicing and infill strategies used in many 3D processes today• First patent granted in 1986 • Has been granted 93 patents in the US and 20 in Europe


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3D Printing• Hall reportedly told his wife at the time he invented the 3D printer

that it would take 25-30 years before the technology would find its way into the home• Now, the possibilities are broad – from food to pharmaceuticals to

body parts• Most controversial use is to print guns


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3D PrintingIn January 2014, 3D Systems launched the Ekocycle Cube printer in a collaboration with the singer Will.i.am (chief creative officer) – priced at $1,200


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3D Printing


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3D Printing – disruptive innovation• Michael Spence (recipient of 2001 Nobel Prize for Economic Sciences, with George A Akerlof and Joseph E Stiglitz) for their work on the

dynamics of information flows and market development - “Labor’s Digital Displacement” , 22 May 2014, Project Syndicate at http://www.project-syndicate.org/commentary/michael-spence-describes-an-era-in-which-developing-countries-can-no-longer-rely-on-vast-numbers-of-cheap-workers

• "Now comes a ... powerful, wave of digital technology that is replacing labor in increasingly complex tasks. This process of labor substitution and disintermediation has been underway for some time in service sectors – think of ATMs, online banking, enterprise resource planning, customer relationship management, mobile payment systems, and much more. This revolution is spreading to the production of goods, where robots and 3D printing are displacing labor."

• Most of the cost of digital technologies comes at the start, in the design of hardware (e.g. 3D printers) and in creating the software that enables machines to carry out various tasks. "Once this is achieved, the marginal cost of the hardware is relatively low (and declines as scale rises), and the marginal cost of replicating the software is essentially zero. With a huge potential global market to amortize the upfront fixed costs of design and testing, the incentives to invest [in digital technologies] are compelling."

• Unlike prior digital technologies, which drove firms to deploy underutilized pools of valuable labor around the world, the motivating force in the current wave of digital technologies "is cost reduction via the replacement of labor." For example, as the cost of 3D printing technology declines, it is "easy to imagine" that production may become "extremely" local and customized. Moreover, production may occur in response to actual demand, not anticipated or forecast demand. Spence believes that labor, no matter how inexpensive, will become a less important asset for growth and employment expansion, with labor-intensive, process-oriented manufacturing becoming less effective, and that re-localization will appear in both developed and developing countries.

• Production will not disappear, but it will be less labor-intensive, and all countries will eventually need to rebuild their growth models around digital technologies and the human capital supporting their deployment and expansion

• “The world we are entering is one in which the most powerful global flows will be ideas and digital capital, not goods, services, and traditional capital. Adapting to this will require shifts in mindsets, policies, investments (especially in human capital), and quite possibly models of employment and distribution.“


http://www.project-syndicate.org/commentary/michael-spence-describes-an-era-in-which-developing-countries-can-no-longer-rely-on-vast-numbers-of-cheap-workers

http://www.project-syndicate.org/commentary/michael-spence-describes-an-era-in-which-developing-countries-can-no-longer-rely-on-vast-numbers-of-cheap-workers

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3D Printing• The legal dimensions

• 3D printing technology – equipment + software• Patents for:

• Equipment/ machines• Processes/ methods• Materials (compositions) used in manufacturing

• Copyright – plans, 3D models, computer programs• Items produced with 3D printers

• Patents• Registered designs• Trade marks• Copyright

• Little legal consideration has been given to these issues yet, in Australia or elsewhere• Obvious issue is the rights of owners of IP in items which can be manufactured using personal 3D printers• IP laws typically give owners the right to prohibit others from copying/making/using the work or distributing or selling

an item made without the IP owner’s permission• Raises similar challenges to those relating to copyright at the beginning of the digital, networked era• Issue of obtaining permissions from rights owners in order to be able to manufacture items (protected by IP) for

personal use


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Search Engines• Search engine companies, such as Google, sell search-related advertisements that are

displayed when internet users type in the plaintiff’s business name or trade mark• Sponsored links and key word advertising are extensively used:

• A sponsored link consists of 3elements: a headline which incorporates a link to a web page (in blue text); the address of the web page to which the headline links (in green text); and some brief advertising text (in black text).

• The AdWords program is Google’s program through which advertisers create, change and monitor the performance of sponsored links. An advertiser using the AdWords program to create a sponsored link will specify the headline, the address of the web page to which the headline links, and the advertising text, within certain limits (such as word limits) set by Google. The advertiser will also specify "keywords" which trigger the appearance of the sponsored link when entered as search terms by a user of the Google search engine. In some cases, the advertiser may specify that the headline to the sponsored link will consist of the search terms entered by the user of the Google search engine that correspond with the keywords selected by the advertiser – a facility referred to as "keyword insertion".

• Leads to questions about the legality of using another party’s registered trade mark as a keyword to retrieve advertisements paid for (sponsored) by their competitors


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Search engines• In 2007 the Australian Competition and Consumer Commission (the ACCC) filed an action in the

Federal Court against Trading Post Australia Pty Ltd (the Trading Post) and Google, alleging misleading and deceptive conduct (but not trade mark infringement) for use of the business names “Kloster Ford” and “Charlestown Toyota” as keywords, and in the titles of Google-sponsored links, hyperlinked to the Trading Post’s website. The Trading Post and its parent company, Sensis, settled with the ACCC.

• Google Inc v ACCC – High Court of Australia, February 2013: It was the advertisers – rather than Google personnel – who chose the relevant keywords and created, endorsed or adopted the sponsored links - Google did not itself engage in misleading or deceptive conduct, or endorse or adopt the representations which it displayed on behalf of advertisers

• Lift Shop v Living Home Elevators – Federal Court of Australia (Full Court), June 2014: Living Home Elevators modified its web site to enhance its rankings in search results by prospective customers - on advice of a search engine optimisation firm chose “lift shop” as one keyword to be used – added “Lift Shop” in the title of the website and “lift shop” as a keyword – any search including “lift shop” brought up both Lift Shop and Living Home Elevators in search results, in fairly close proximity


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Patents for software inventions and business processes• Patents are granted for new and non-obvious inventions that are useful and contribute to economic

advancement• The equipment that makes up the physical infrastructure of the internet – random access memory,

digital electronics technologies, data storage devices, and so on – has long been considered to be suitable subject matter for the patent system

• In 1996, CSIRO was granted a United States patent for wi-fi technology which enables devices to communicate over a wireless local area network (WLAN) by means of radio transmission. The technology covered by the patent, which includes wireless LANs, hubs and peer-to-peer networks, is a standard feature of hundreds of millions of electronic devices, from notebook computers, e-book readers and tablets (such as Apple’s iPad), to smartphones, digital cameras and hand-held game consoles.• The invention resulted from the long-standing work on radio astronomy carried out by a CSIRO team led by Dr John

O’sullivan, involving complex mathematics known as “Fast Fourier Transforms” and studies of the behaviour of radio waves in different environments

• The core elements of the WLAN invention were developed by the end of 1991 and a patent application was filed with the Australian Patent Office in November 1992; the US patent application was filed in November 1993 and the patent was granted in January 1996.

• The patented technology is essential for implementing WLANs that comply with standards 802.11a and 802.11g which were adopted by the Institute of Electrical and Electronics Engineers (IEEE) in 1999 and 2003381 respectively, as well as the more recent 802.11n standard


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Patents for software inventions and business processes• A more contentious issue has been whether computer-implemented inventions (such as

communications and business software applications and operating systems) and business methods used in e-commerce also fall within the intended scope of the patent system

• In many countries, including Australia and the United States, courts and patent offices have supported the granting of patents for inventions involving computer programs and e-commerce business methods

• For example:• electronic shopping carts: Open Market’s US patent (“Network sales system”) - a way of using an electronic

shopping cart to purchase goods on the internet – granted in 1998• one-click online shopping: Amazon.com’s “one-click” US patent (“A method and system for placing a

purchase order via a communications network”) – for a website “shopping basket” – granted in 1999 • social networking: Facebook’s social networking patent (“Dynamically providing a news feed about a user of

a social network”) - a way of displaying a news feed in a social network environment - granted in 2010• Banner advertisements: DoubleClick’s US patent (“Method of delivery, targeting, and measuring advertising

over networks, covering dynamic delivery of internet advertising by collecting information on web user behaviour and then using that information to target ads at particular consumers”) – granted in 1999


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Patents for software inventions and business processes• Alice Corp v CLS Bank (2014)

• Alice Corp was granted 4 patents on electronic methods and computer programs for financial-trading systems in which trades between two parties who are to exchange payment are settled by a third party in ways that reduce “counterparty” or “settlement” risk - that is, the risk that one party will perform while the other will not.

• A computer-implemented, electronic escrow service for facilitating financial transactions• Alice Corp’s patents are directed to “enabling the management of risk relating to specified, yet unknown, future events, including

electrical computers and data processing systems applied to financial matters and risk management.”• “In particular, the claims are designed to facilitate the exchange of financial obligations between two parties by using a computer

system as a third-party intermediary.”• The claims relate to the abstract idea of reducing settlement risk by effecting trades through a third-party intermediary

• CLS Bank International began to use a similar technology in 2002 – CLS sued Alice seeking a declaration that Alice’s patents were invalid and that CLS Bank had not infringed them – Alice countersued CLS Bank for infringement of the patents

• In June 2014, the US Supreme Court held that the invention was not patentable as the claims at issue related to the abstract idea of intermediated settlement - merely implementing those claims on a generic computer did not transform the idea into a patentable invention


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Further reading: “Internet and E-commerce Law, Business and Policy”, Fitzgerald et al, Thomson Reuters/Lawbook Co (2011)
