The defendants disagreed. From their perspective, the work-alikes are not imitations but innovations, providing all that Lotus offers and more and at a lower price. Indeed, what the defendants have done is not so different from what Lotus did some five years ago when it built upon the first computerized spreadsheet, Visicalc, to create a technically superior product.

Ironically, three months after Lotus filed its suit, the company itself became the defendant in another copyright-infringement case, this time brought by the parent company of the firm that created Visicalc. The claim was that Lotus had borrowed the look and feel of the original spreadsheet.

T

he desire of individuals—and corporations to profit from their own intellectual creativity has often clashed with the public's wish for relatively free access to ideas and innovations. Over the centuries, many different legal mechanisms have been invented to strike a balance between the two. However, what suited the age of print and mechanical inventions is proving inadequate to that of the computer program, expert system, and distributed database. The attempt to force these new technologies into outmoded categories can create absurd and contradictory situations that threaten to undermine public confidence in the principle of intellectual property rights itself.

Software is a good example. Copyright is designed to protect literary expression. But what makes a computer program a literary work? Is it the code written to make the program function? Or is it, as Lotus argues, the look of the screen and feel of its commands?

To make matters even more confusing, software manufacturers simultaneously employ other legal protections to safeguard their intellectual property rights, because they are doubtful that any one will prove effective. The principle of trade secrets underlies the "shrink-wrap license" to which every software user supposedly agrees upon opening the package of a new program.

ANNE W. BRANSCOMB, an attorney specializing in communications, computer, and copyright law, is adjunct professor of international law at the Fletcher School of Law and Diplomacy and a research associate of the Harvard University Program on Information Resources Policy.

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Some computer programs are also eligible for: patents, most notably software embedded in computer hardware. And while operating systems that are not built into hardware have traditionally been excluded from patent protection, the U.S. Patent Office has recently been considerably more lenient toward such applications.

As the forms of protection increase, the gap between legal precedent and everyday behavior grows wider. The new technologies make copying intellectual property easier and legal protections much more difficult to enforce. Some degree of unauthorized copying has become accepted social practice-despite the legal prohibitions against it: journal articles are photocopied at universities, recorded music is taped onto blank cassettes, and computer software is commonly reproduced.

Although disputes about technology and intellectual property are usually cast in narrow legal terms, they are intimately related to public attitudes. Realistic legal rules depend upon a social consensus about what kind of behavior is acceptable and what is not.

"To Promote Science and the Useful Arts"

The idea of intellectual property rights has been around since the late Middle Ages, but the roots of U.S. intellectual property law go back to the Constitution: "The Congress shall have Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writing and Discoveries."

As this language suggests, the fundamental goal of intellectual property rights is not to benefit the creators of works but to further the public good. Authors and inventors are given a limited right to their work as an incentive to create and disseminate ideas and information. Thus, intellectual property law makes protection conditional on public disclo

sure.

For example, copyright law covers original "works of authorship" as long as they are "fixed" in a “tangible medium" such as a book. Copyright protects the literary expression of an idea, rather than the idea itself, from unauthorized copying for the life of the creator plus 50 years (or, for corporations, for a total of 75 to 100 years). Other authors can make "fair use" of a copyrighted work-for

example, quoting a passage in an article or reviewwithout asking the original author's permission. More extensive use requires permission and often the payment of a royalty.

Patent law protects inventions or discoveries that are registered with the U.S. Patent Office. Unlike copyright, a patent protects not only the expression but the actual useful features of a product or process for 17 years. A design receives protection for 14 years. Patent rights grant a monopoly, good against those who independently discover the same design or product. But rights can be licensed to other users.

However, a patent is much harder to get than copyright. To be eligible for patent protection, a work must have distinguishing features that are innovative, useful, and not obvious. And the application process often takes two years or more.

Not all forms of intellectual property protection require public disclosure. The oldest and probably most common form of protection is secrecy. Trade secrets are protected by contracts designed to ensure confidentiality on the part of licensed users. To be enforceable in court, the information considered a trade secret must be used commercially and relevant to a firm's competitive advantage. Also, the firm must have evidence that it has actively attempted to keep the information secret.

The Intellectual Property System Breaks Down

These traditional mechanisms for balancing public and private claims worked relatively well during the industrial era. As long as the publication of books and journals depended on a relatively small number of commercial printers, it was easy to identify copyright violations. As long as most industrial innovations had a relatively long life, the patent process successfully protected their economic value. And as long as most violations took place either within a single nation or between nations with relatively compatible legal systems, effective sanctions could be easily enforced.

Recently, however, three interrelated factors have eroded the effectiveness of traditional protection mechanisms: the development of new information and communications technologies, the globalization of the marketplace, and the privatization of information providers.

The traditional categories of intellectual property law depend on a set of clearly defined "products"

or "processes"-literary works, inventions, designs, etc. But with the new technologies, boundaries between media are blurred and intellectual assets become increasingly abstract and intangible. The same work or even parts of a work can be stored and presented in a bewildering variety of forms-not only paper, but magnetic tape, floppy disc, or laser disc. The work can be made available to large numbers of people via broadcasting, computer networks, or telephone lines. Databases can be packaged and re-packaged. Pieces of music or video images can be electronically re-mixed, re-formatted, or otherwise altered. And easy-to-use technologies like video graphics and desk-top publishing allow more individuals and small businesses to enter the information marketplace than ever before, making enforcement of intellectual property rights nearly impossible.

The globalization of the world economy, caused partly by the new technologies, has also contributed to the breakdown of the old system. International conflicts over intellectual property have always been a problem, as developing countries, anxious for economic growth, have been unwilling to extend protection to foreign works. This was true of nineteenthcentury America, and it is true of much of the Third World today.

But the increasing integration of the world economy has multiplied both the incentives for international violations of intellectual property rights and the economic harm of such violations. Today, the products of newly industrialized countries such as Korea or Taiwan are sold all over the world. "Bor

TECHNOLOGY REVIEW 41

rowing" intellectual property allows these countries to successfully compete in markets for many advanced products without bearing the cost of research and development.

Finally, the growing trend toward using market mechanisms to gather and disseminate information has disrupted the traditional public infrastructure for sharing intellectual assets. For example, before the breakup of the regulated Bell Telephone system, Bell Labs was the equivalent of a national basic-research laboratory, supported by corporate cross-subsidies. Today, institutions like Bell Labs face growing pressures to pay their own way. The federal government has mandated that agencies such as the National Technical Information Service

become self-supporting through user fees. And even universities are turning to patent rights and copyright royalties to recoup their investment in faculty research and development.

The High Costs of Copying

Thus, at the very moment when information is becoming a valuable commodity, protecting the economic value of intellectual assets is proving more difficult. While the loss of income is difficult to ascertain, estimates range anywhere from $20 billion to $60 billion each year.

Most serious is the deliberate commercial pirating of both low- and high-tech products in foreign countries. For example, videotaped copies of Hollywood films are often illegally released in foreign markets before the U.S. release. The Motion Picture Association of America estimates the loss at about $6 billion annually. And illegal publishing of books and technical manuals abroad costs the American publishing industry about $1 billion every year. In Korea alone, nearly 1 million U.S. titles have been pirated.

Other violations of intellectual property rightsfor personal rather than commercial use-are more difficult to track. The rule of thumb in the software industry is that at least one unauthorized copy exists for every authorized sale of a software program. According to the Software Publishing Association, software manufacturers lost approximately $1 billion in sales to piracy (both for profit and for personal use) in 1986. Lotus claims that over half of its potential sales of 1-2-3 are lost-at a cost of about $160 million every year. And Wordstar estimates that in 1984 it lost $177 million in potential sales,

42 MAY JUNE 1920

compared with $67 million in revenues from actual sales of the program.

Such reports need to be taken with a grain of salt, as they assume that every user of an unauthorized copy would buy the program in question were the copies to disappear-an unlikely proposition. Still, the numbers suggest the scope of the problem.

Violations of intellectual property also have public costs. Widespread copying is one factor in high software prices, as firms try to recoup their investment in a program as quickly as possible. If unauthorized copying could be eliminated, it is likely that the costs of software could be greatly reduced—a net gain for society as a whole.

Owners of intellectual property have tried a variety of methods to combat unauthorized copying. In some cases, technology itself seems to offer a solution. To stop satellite-dish owners from capturing broadcast signals without subscribing to local cable services, programmers scramble their signals. Today, the most popular programs cannot be received by satellite unless viewers pay a monthly fee to gain access to the special code of each cable channel.

However, technical protections can spawn their own technical countermeasures or result in a consumer backlash. For example, the practice of "copy protection," once widespread in the software industry, has given birth to special programs whose sole purpose is to override copy-protection code. And consumer dissatisfaction with the inconvenience of using copy-protected software has led most software companies, Lotus included, to give up on copy protecting their programs altogether.

O

In the international front, the federal government has encouraged trading partners to enact intellectual property laws or expand coverage of laws that already exist. Under recent provisions in trade and foreign aid laws, countries whose copyright and patent practices do not conform to U.S. standards can be penalized, even to the point of restricting their imports to the U.S. market. The federal government is also promoting a multilateral agreement on intellectual property as part of the Geneva Agreement on Tariffs and Trade.

So far, such efforts have had only limited effect.