The Internet- is it just a medium? Will it wipe out most brick and mortar business? Or will new synergies emerge (that is to say, will traditionally business and the dotcoms collaborate, merge or morph into or with one another?) As more of the real world moves on to replicate itself in cyberspace, what will the space of business be? And what would happen to the legal framework of business?
In a book named The death of distance, Frances Cairncross of The Economist outlines the 30 major effects of the internet revolution. Of the greatest interest to the Indian business would be her forecast that “developing countries will increasingly perform on-line service- monitoring security screens, running help-lines and call centre, writing software, and so on- and sell them to the rich industrial countries that generally produce such services domestically.”
IPR issues- 80 percent of corporate intellectual property is now held in digital form. The internet will bring several new IPR issues to the fore. These will include copyright protection on the internet-the world’s largest copying machine; trademark and domain name issues (with the latter emerging as key business identifiers); trade secret and confidential information on an inherently open and unpoliced global network and service marks in an internet world where service will dominate.
Also, the value of design in the frenzied rush for attracting “eyeballs”. And the growing numbers of business model patents, which threaten to confer monopolies in new and crucial areas.
What is E-commerce?
Electric commerce
Commerce is the exchange of goods and services for money. In olden days, there was a form of commerce called the barter system in which goods were exchanged in lieu of other goods or services. By the time paper money was introduced, its use revolutionized the way the commerce was conducted. In recent years, commerce is also being conducted via electronic medium like the internet. This commerce is called e-commerce.
Electronic commerce (e-commerce) is an integration of communication services, data management and security mechanism that allows organization to exchange information about the sale of goods and services, where:
Communication Services support the transfer of information from the buyer to the seller electronically.
Data management is the exchange and storing of data in a uniform format to facilitate easy exchange of information.
Security Mechanism authenticate the source of information and gurantee the integrity and privacy of information.
In other words, e-commerce involves marketing, retailing, customer services, banking, billing, corporate sector purchasing, secure distribution of data, and other value-added services over the internet.
Types of Electronic Commerce
Electronic commerce can be categorized into four categories:
- Business-to-Consumer
- Business-to-Business
- Consumer-to- Consumer
- Consumer-to-Business
Currently, the first two categories are the most popular model of e-commerce.
Business-to-Consumer model
In this model, commerce is conducted between a consumer such as a home user on a PC and a business. As an example, to buy books or CDs, the consumer accesses the business’ internet site and makes purchase.
For Example one can purchase music cassettes and CDs from different web sites. In the above you select the cassettes from a wide range that is available and then eventually pay online. This is a very convenient exercise, which will help save time and provide variety.
Business-to-Business model
In this model, commerce is conducted between two businesses. It include trading goods like business subscriptions, professional services, and wholesale dealing. Sometimes, business may exists between virtual companies neither of which may have any physical existence.
Consumer-to-Consumer model
In this model commerce is conducted between two consumers. This can be seen in auction bidding house. In this example, commerce is conducted between a consumer who is auctioning and the consumers who are bidding for it. The consumer who is auctioning decides the price of the product. The consumer who are bidding analyses the product and decide how much they value it.
Consumer-to Business model
In this model commerce is conducted between a consumer and a business. This model is still in its evolving stage. This may come up as a model in which the goods
are produced and the price of the product would be dictated by the consumer rather than the supplier. This may revolutionize the way businesses are conducted over the web, or even otherwise.
Intellectual Property Rights or IPR is a compendious term that covers among other things patent, trade secrets, copyrights, trademarks, and services marks and designs. Each of these IPR elements is knowledge based. For Example, a patent is granted for a product or a process that is novel, inventive and capable of industrial application. Quite evidently a patent is granted for an innovation that springs from a knowledge worker or a team of knowledge workers. Patented inventions are, therefore, the result of application of knowledge to create a new process or the product that the law protects in certain ways.
Copyright, on the other hand vests immediately upon its creation with the author of the work, including literary creation. This term including drawings, blueprints and documents embodying processes, methodologies, techniques and practices. Most, if not all, explicit knowledge would qualify for copyright protection.
Trade Secrets protect information that confers a competitive advantage to those who posses such information, provided such information is not readily available with or discernible by competitors. Examples of trade secrets include customer lists, technical data, internal processes, methodologies, processes, techniques and formulae. Here again, we see the role that knowledge acquisition and application play in the generation of trade secrets. Consequently, trade secrets ply n important role in knowledge development and application.
Design Rights protect the ornamental, non-functional external configuration of products. These are also the outcome of knowledge efforts. Trademarks and services marks re used to distinguish the product or services of one producer or supplier from those of others in the marketplace. In a world where several million products and services vie for attention, the creation and leveraging of memorable trademarks and services marks has gained critical importance.
Trademarks, in the form of concocted words, logos, sounds, shapes and the like, are again the result of creative efforts by knowledge workers. Until adopted and used trademarks are kept as closely guarded secrets.
What all IP Assets are relevant to E-Commerce?
An important early step for any e-commerce business is to make an inventory of IP assets. They may include
Any patent, patent application or innovation that one has made that one think could be patentable inventions.
Anything, which is copyrighted. This would include software, design, documentation or technical writing, software scripts, user interface materials, schematics, artwork, web sites design, music, photos etc. Copyright protection is automatic in most countries and does not require registration (though registration in the copyright depository, wherever available, is generally advisable.)
Distinctive signs or names the company in using, whether registered or not. Such signs
Enjoy protection as trade and services marks upon registration or, where the law so long as the name is not just a description of the product (e.g. salt, tissue, good software, fast computers) as well as logos and business names.
Any trade secret-this is information that is commercial valuable to someone, that is not generally known and that a reasonable person could not figure out. This includes things like product formulas, customer lists, business strategies, plans for technique enhancement to products etc.
Any contract that one thinks might affect the IP assets one have listed (e.g. a consulting contract with the design firm that made your web site, a development agreement with a university, a release from your former employer, non-disclosure agreements, employee agreement.)
Issues regarding Piracy and Copyright
The media & Entertainment Industry particularly the music industry is facing the menace of piracy on a large scale. According to the International Intellectual Property Alliance 2002 Special 301 Report, in 2001 the levels of piracy in Motion Pictures and Sound Recording/Musical Composition stood at 55% and 40% respectively. The copyright industry faces various hurdles in enforcing their rights effectively. While small-scale pirates are raided quite commonly, the large scale prints often go untouched. The conviction continues to remain on lower side and infringers are rarely fined. Even when fined, the fine remains a paltry sum, in spite of successful raids and seizure of infringing material.
The Indian Copyright Act provides for both civil remedy and criminal remedy. Chapter XI of the Copyright Act 1957 relates to infringement of copyright where under Section 51 sets outs circumstance in which a copyright is considered infringed. Section 52 sets out certain acts that are not infringement of copyright. Civil redress where infringement is
Found to have occurred is provided for in Chapter XII (Section 54-62). Remedies for infringement provided by section 55(1) entitle the owner of copyright relief by way of injunction, damages, and accounts and otherwise as are or may be conferred by law for the infringement of a right unless an exception have been provided in the Act itself. In case of innocent infringement remedy is available by way of injunction and a decree for the whole or part of the profits made by the defendant by the sale of infringing copies but not damages.
Chapter XIII (Section 63-70) relates to offences and section 63 provides for criminal action against an infringement of a protected work or any other right conferred by the Act (barring one exception-section 53A). The infringer is punishable with imprisonment for a term of between 6 months to 3 years and with fine of between Rs.50, 000 to Rs. Lakhs. Where the infringement is not for gain in the course of trade lesser sentence and fine is permitted. For second and subsequent conviction Section 63A provides for minimum fine of Rs.1 lakh and a minimum sentence of 1 year.
IP issues when you Design and build your Web site
One of the basic element of e-commerce business is the design and function of the company eb site. In designing and building a web site, the company must be aware of whether it owns the web site presentation and content and every aspect of IP in it. If it is using a consultant or company to design its web site, then it must check out the provisions in the agreement concerning ownership and IP rights?
If a company uses a database, e-commerce system or search engine or other technical internet tools licensed by another company, it should check the terms in the licenses agreement to see who owns the system. The company should make sure that it has a written agreement, and it is checked over by a lawyer before it signs it and before any design, custom work or installation of the site begins.
A company needs written permission ( also referred to as a license, a consent, or an agreement) to use any photos, videos, music, voices, art work, or software etc. that belong to someone else. Just because they get material on the internet does not mean that it is in the public domain. They may have to pay for permission to use those materials. In many countries it is needed to communicate with a collecting society or association of artist in order to get permission.
The company needs to make sure that if the law that applies to the business requires it, it should have permission to show trademarks owned by other companies that is referred to on the web site.
The company must be careful in linking to other web sites. Links are a great e-commerce tool, and a useful service to its consumers, but in many countries there is no clear law on when and how you can use such links. The most careful practice is to seek and obtain permission from the other web site before putting the link.
Framing is the practice that is more controversial than linking. This means including large parts of another web site in yours in a way that makes it look as though it is part of your web site. A written permission is required before doing this.
Important contracts and IP
In developing and protecting the IP of your e-commerce company, one has to be careful with the contracts. Contracts and IP go hand in hand. No contract that is signed by a company is unimportant and all must be reviewed to make sure that you are maximizing and not damaging IP assets. This is because through contracts, Ip rights may be sold or licensed or even given away. Bad contracts can result in litigation and unnecessary expense.
The risk areas are contracts with employees and contractors, development agreements, web design agreements, agreements to license your product or IP to another company (licenses-out), agreements to license a product or IP from another company (licenses-in), distribution agreement, domain name and trademark license agreement, and patent licenses, crosses licenses and pools. This is only a partial list.
Whenever you are using employees, contractors, consultants, or other companies to develop your IP (e.g. contractor writing software) it is essential that there be a contract with that person or entity before work is started. Even the earliest start of work can give rise to important rights, and the contractor may become the author or owner of its work, or possibly a joint owner. Contracts must specify who owns IP that is created and how the IP will be treated in the future.
The greatest economic value of IP comes from its use in licensing. This can be in the form of product licensing (e.g. licensing out a product that contains IP, such as software program, or course materials) or in the form of pure IP licenses, e.g. a license whereby another company is given the right to practice a patent. It is important to have contracts that clearly state what rights you have or have been given to others to use IP.
It is a good idea for an e-commerce business to archieve copies of all contracts that affect IP. This is an important record keeping discipline so you can look up matters that may become important at a latter date. One example is that contracts affecting Ip will be very important if your e-commerce business is involved in an acquisition, merger, sale of assets, or investment transaction.
IP concern about International transaction in E-Commerce
One of the most remarkable characteristics of e-commerce is that it occurs globally. IP may be used and licensed in many countries simultaneously. The global characteristic of e-commerce business affects IP in a number of ways. It makes it difficult to find the infringer and enforce IP rights that are violated on the internet. It is unclear what courts will have jurisdiction over disputes relating to e-commerce and IP. Also, laws affecting IP vary from country to country, so levels of protection may be different.
Lawsuits can be brought against an e-commerce business or conversely a business may seek redress in national courts, but various legal procedural issues will affect such cases. If the parties are in different countries, it will be difficult to determine which court can or should be used. The court may or may not take jurisdiction (legal control) over the case, depending on many factors but especially the connection between the parties and the country. As a practical matter, in order for a lawsuit to succeed, the defendant has to reside in the country in which the lawsuit is brought. Another difficult issue is what law to apply, especially if the laws of the countries of the parties involved are different. Finally even if the lawsuit succeeds, it could be difficult to enforce judgments in another country.
International arbitration is one way to deal with international e-commerce disputes, though generally participation is voluntary and cannot be enforced. Arbitration clauses may be agreed to in contracts, in which case the parties are later required to use arbitration.
Conclusion
This is the era of technology: we experience a new invention every day in the IT sector. The things, which were one’s considered sophisticated one now becomes outdated within a span of few months. This brings with it both positive and negative point. On the one side this technology is used to make our work simpler and faster, while on the other side it also enable us to encroach upon the rights of other. There are many types of software in the market, which enable one to hack some protected material or site on the internet. In such a situation it is very important that the owner of such product take ample amount of protection in putting his material on internet. There are some methods by which one can protect his material put on the internet. One should always clearly identify his content, either with a copyright notice or some other indication of ownership. He may wish ti simply tell users what they can and cannot do with his consent. One should never distribute or permit downloads of third party content that does not belong to his company and should put in place programs to make sure that his employees understand his company policies in this regard.
Whilst on the other side it is the duty of the legal machinery to see that the rights of the owner are protected and this act of encroachment be discouraged. In addition to this the legal authority should also provide for a proper dispute redressal mechanism and compensation for the owner. Despite the provision of law as they stand there are only a handful of cases in which conviction led to imprisonment and fine. It has been the experience of the owners that the offender/infringer often go scot-free without getting punished or fined for the offences and violations committed by them and they continue with their activities with impunity.
The owner in this entire exercise ends up spending a huge amount of money in investigation, surveillances, filing of complaints, prosecution etc, and also suffers losses on account of lost sales due to piracy. In addition the bad quality of the pirated products leads to loss of goodwill and reputation built over years of hard work and labour.
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