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Published by Enhelion, 2019-11-23 04:23:59




We are living in an exciting time with regard to intellectual property. The Internet has
emerged as an industrial revolution of sorts, on both the technology and policy-making front
at the same time. Paradoxically, the Internet was created as a communication tool for
government and industry, in response to policy, but has emerged as a global medium which
now drives global economic development and policy-making. On one hand, the Internet has
spawned new and emerging industries related to conducting business on an international
scale, having extended the reach and depth of technology and business data acquisition.
Yet, at the same time, it has created opportunities and counter-balancing liabilities related
to the disciplines of intellectual property development, enforcement and commercialization.

Business method patents relating to the Internet have become a new business frontier, and
they have caused reactionary policymaking around the world. Yet it is the Internet itself
that has been the genesis of so many business method patents. So too has the Internet
introduced new trademark and branding opportunities for conducting business globally, yet
it simultaneously created a new front of trademark and domain name infringement and
enforcement that routinely traverses territorial boundaries. Companies that only intended
to conduct business on a regional basis are thrown unsuspectingly into an international
intellectual property game the minute they launch their small company website.


The excitement generated by the Internet reflects the immense power of this latest step in
network development. The Internet was conceived and developed with the same spirit of
collaboration and cooperation that it now fosters. This network of networks stands in stark
contrast to the public telecommunication networks that had slowly developed under central
control and to private telecommunication networks that served limited groups of users. The
Internet as it has emerged is fundamentally decentralized and open. It offers a
communications medium to people allover the globe, from all walks of life, using all kinds of
devices, uniform only in its enabling protocols.

As the technologies underlying the Internet evolve, the possibilities continue to expand.
Anyone with Internet access can now obtain more information than was available to the
most powerful potentate of the past. Anyone with Internet access can invent a new
application and make that innovation available to all 400 million users within moments,
without notifying or seeking permission from a controlling authority. Anyone with Internet
access can create a work of art and immediately have the world as a potential audience.

Even with the incredible advances of the past few years, we continue to be surprised on an
almost daily basis by new applications and functionality. And there is no reason to believe
that the Internet’s ability to evolve is nearing its limit. On the contrary, the rapid rate at
which technology continues to advance—feeding a process of relentless innovation—
increases the likelihood that we are only at the beginning stages of the process.


The Internet, because of its open architecture, digital format and unifying protocols, has
emerged as the platform to support increased connectivity and interaction among disparate
networks.1 Since its inception, it has been a platform upon which users could develop and
share innovative applications as long as the applications used the basic Internet protocols. In
its openness and digital foundation, and in the capabilities that it offered to users at the
network’s edge, it was a radical departure from previous communications networks.
Nobody controlled it, in the sense of a central authority determining how the bandwidth
was allocated, who could connect to it, the kinds of devices that could be attached to it or
the applications that could run on it.

The concept that developed into the Internet was proposed in 1962 as a project of the U.S.
Defense Advanced Research Projects Agency (DARPA) to develop an interconnected
network of computers. Work began in 1966 on the network that became known as
ARPANET. One goal of the original project was a network that was resilient to the
breakdown or destruction of portions of the network. The architecture developed to meet
this challenge was based upon packet switching. Data were divided into small, individually
addressed “packets” and routed separately through the network (and around problems) to
be reassembled at the specified destination.2

By 1969, computers at the Los Angeles and Santa Barbara campuses of the University of
California, Stanford Research Institute and the University of Utah were connected to one
another via ARPANET. Additional computers (hosts) were connected to the network over
the next few years until the ARPANET went global with the addition of European hosts.

By the early 1970s, the advantages of being able to interconnect other networks with the
ARPANET became evident. In 1972, while working at DARPA, Bob Kahn established the four
ground rules that still define the open-architecture networking environment of the Internet:

1 Computers and computer storage use digital formats, and the networks in which they operate are
digital networks. This is an important distinction between present and past technologies, as well as an
underlying reason for the seemingly sudden interoperability of formerly distinct technologies. Because
images, sound, text and video can all be digitized, boundaries between formerly distinct networks are
fading and opportunities for interoperability are increasing. Telephone, cable and broadcast radio and
television networks were created to transmit specific types of information, but as these networks
migrate to digital formats, there are fewer technological reasons for differing public policy treatment of
the networks based solely upon the type of media—text, Images, video or voice—transmitted over
them. Digital networks—whether the underlying medium is twisted-pair copper wire, coaxial cable,
optical fiber strands, terrestrial wireless (mobile or fixed), satellite or some combination—make no a
priori distinction about whether the bits and bytes of data traveling over them are text, voice or
images. To a digital network, a bit is a bit.
2 An added benefit is that packet switching is much more efficient for transmitting data than circuit

• Each distinct network would have to stand on its own and no internal changes could
be required to connect it to the Internet.

• Communications would be on a best-effort basis without any guarantee of
completion. If a packet did not make it to the final destination, it would shortly be
retransmitted from the source.

• Black boxes would be used to connect the networks. There would be no information
retained by the gateways about the individual flows of packet passing through them,
thereby keeping them simple and avoiding complicated adaptation and recovery
from various failure modes.

• There would be no global control at the operations level.3

The following year, Bob Kahn and Vint Cerf developed a communications protocol based
upon these ground rules, which would support the needs of open-architecture
networking—the Transmission Control Protocol/Internet Protocol (TCP/IP).4 The ARPANET
adopted this protocol, as did many new networks. It was this voluntary adoption of a
common communications protocol that allowed various computer networks to connect with
each other, leading to the “creation” of the Internet.5 The creation process was formalized
when the National Science Foundation (NSF) created NSFNET to serve as a nationwide
backbone for the Internet in 1986.

As the number of hosts connected to the Internet rose, it became necessary to devise an
addressing system. In the early days of ARPANET, when the number of hosts was still small,
names were assigned to each host so that users did not need to remember the underlying
numeric addresses. When maintaining a single list of assigned host names became too
unwieldy, a hierarchical system—the Domain Name System (DNS)-was created to link host
names to their underlying numerical Internet addresses.6

When it established NSFNET, NSF limited use to noncommercial activity. In 1991, NSF lifted
these restrictions, and an association of commercial Internet providers was formed to help
organize the flow of traffic on the network. By 1995, when NSFNET ended its sponsorship of
the Internet backbone, commercial backbone networks were extensive enough to enable
network users to route online traffic from one commercial site to another.7

Applications developed by the early users were quickly disseminated over the Internet. Two
of these in particular, the World Wide Web and web browsers, had a profound impact on
the development of the Internet and played key roles in expanding its reach beyond its
initial user base of academics and government researchers.

3 Barry M. Leiner et al., A Brief History of the Internet, Version 3.31 (revised Apr. 14, 2000)
4 Id.
5 Although we often speak of “the Internet” as if it were a single network, it is not. It is a network of
networks that have been “internetworked”—thus the name, “Internet.”
6 The Domain Name System was created by Paul Mockapetris. See Leiner et al., supra note 3.
7 In 1979, CompuServe began offering the first dial-up access to the Internet, and in the early 1980s,
commercial and educational entities developed other networks such as BITNET and CSNET to
provide networking services to those researchers and scientists without access to ARPANET. In
1985, Quantum Computer Services (which became America Online) introduced its first dial-up
service, Q-Link, for Commodore Business Machines.

The Web—released in 1991 by Tim Berners-Lee, a researcher at the Center for European
Nuclear Research (Centre Europen le Recherche Nucleaire, CERN) in Geneva, Switzerland-
facilitated access to information over a TCP/IP network using hypertext, a database system
that enables objects such as text, graphics and programs to be linked to one another. In
creating the Web, Berners-Lee developed the Hypertext Markup Language (HTML), which is
still the primary authoring language used to create documents for the Web. The creation of
the Web gave the Internet vast new capabilities as a medium for publishing and retrieving
information and reduced the cost of developing client-server software for these purposes.

In 1993, the National Center for Supercomputing Applications (NCSA) introduced a web
browser—Mosaic—that provided a graphical front-end for the World Wide Web. By
enabling users to navigate through the network by clicking on graphics and “links,” rather
than typing complex text commands to move between web pages, Mosaic made the
Internet far easier for nontechnical people to use.

Complementing these technological advances was the increase in the number of firms
offering local-dial Internet access. Competition among these firms led to reduced costs and
spurred the availability of flat-rate pricing schemes.8

The number of home and business Internet users began to grow rapidly as the Internet
became easier to access and cheaper to use. This growth accelerated increases in the value
that accrued to Internet users from network effects—the increase in the value of the
network to all its users, which occurs as the number of network participants increases.9
Having the ability to send e-mail is not of much use if those you wish to contact are not
reachable on the network. On the other hand, the more people you can reach, the more
valuable the network becomes.

In addition to these network effects, the growing Internet offered a second advantage. As
David Reed has noted,

Group forming is...the technical feature that most distinguishes the Internet’s
capabilities from all other communications media before it. Beyond either the hub-
and-spokes broadcast networks of print, television, and radio, or the peer
transactional networks of telegraph, telephone, and online financial transactions, the
Internet’s architecture also supports group-forming networks whose members can
assemble and maintain persistent communicating groups.10

8 These users relied heavily upon telephone-based dial-up connections where state-of-the-art
connection speed was 14.4 kilobytes per second (kb/sec). Even today, the vast majority of users
connect to the Internet with dial-up modems limited to 56 kb/sec.
9 The growth of value of the network as related to the growth in its number of users is known as
Metcalfe’s Law. Metcalfe’s Law suggests that the value of the network increases roughly with the
square of the number of participants (at the rate of n2-n, when n is the number of participants). CARL
ECONOMY 183-84 (1998).
10 Reed’s Law—An Interview, J. OF HYPERLINKED ORGANIZATIONS, (Jan. 19, 2001),

This allows a dramatic increase in communities of interest. Networks provide a space and
means, according to John Seely Brown, for “the cross-fertilization of people in different
types of research centers, universities, companies, factory floors—anywhere things are
getting discovered,” allowing them to aggregate into communities of Interest and

The growth of the Internet is the best evidence of the value it offers its users. On a
worldwide basis, the estimated number of users increased from fewer than 400 million as of
November 2000.12 As of January 2001, there were almost 110 million hosts on the Internet,
up from 56 million in July 199913 (and up from the original four in 1969). Inktomi, a software
applications company, estimates that the number of unique web pages had surpassed 1
billion in early 2000; other analysts claim that the Web is much larger and is growing at a
rate of 2 to 7 million web pages per day.14

Until recently, much of the growth took place in North America, which has low Internet
access costs compared with most of the rest of the world. Not only does this make it
possible for more individuals and organizations in the United States to have Internet access,
but it also encourages others to locate servers and hosting facilities here. Although the flow
of traffic over the Internet does not matter to most users (users are usually unaware of the
paths their communications travel), it has raised issues surrounding the commercial
arrangements that are made for carrying Internet traffic.

The Web is becoming more global. The United States no longer accounts for the majority of
individuals online. Similarly, although English remains the predominant language of the
Web, there has been a dramatic increase in the use of other languages.


The development of the Internet did not occur in a vacuum. As it was emerging, the
technologies underlying it—technologies for data processing, storage and transport—were
undergoing cycles of rapid improvement. These advances continue and will offer users a
range of new technology-enabled capabilities in the future.


11 Michael Schrage, John Seely Brown, WIRED, Aug. 2000, at 204
12 NUA Internet Surveys, cited in U.S. DEP’T OF COMMERCE, THE EMERGING DIGITAL
ECONOMY 2 n.4 (Apr. 1998) <>; NUA, How Many Online? (November 2000)
13 Internet Software Consortium, Internet Domain Survey (July 1999) <
14 Inktomi, Inktomi WebMap (Jan. 2000) (press release) <>; David
Lake, The Web: Growing by 2 Million Pages a Day, THE INDUSTRY STANDARD, Feb. 28, 2000,
<,2799,12329,00.html>. In a July 2000 study,
Cyveillance estimated there were 2 billion web pages, and that same month BrightPlanet released a
report stating there were 550 billion web pages. See Cyveillance, Internet Exceeds 2 Billion Pages
(July 10, 2000) (press release) <>;
BrightPlanet, The Deep Web: Surfacing Hidden Value (July 2000)

As the U.S. telecommunications market has become more competitive, and the demand for
faster connections to the Internet has grown, the cost of data transport has fallen and the
availability of broadband communications has risen. Deployed bandwidth has tripled every
year since 1995, and industry experts estimate that this pace will continue until 2020.15

The deployment of fiber optics further into the network and, over the longer term, the
deployment of a broadband wireless infrastructure, are likely to provide dramatic increases
in end-to-end bandwidth. The carrying capacity, for example, of fiber-optic cable—which
was first employed in high-volume long-distance transport links—is doubling every twelve
months, reducing the cost per bit of throughput.16 Optical networks have become more
efficient and, rather than carrying a single wavelength, are able to carry multiple
wavelengths, at thereby greatly increasing capacity.

Although fiber is already used throughout the long-distance infrastructure, it has not yet
been used extensively for the “last-mile” connection to homes, due to its relatively high
installation and component costs. But even with its high cost, fiber deployment continues its
expansion from the backbone toward the edges of the network. It is being implemented in
wide-area networks in many metropolitan areas. In some cases (mostly new installations),
providers deliver residential broadband services directly into the home via fiber. In other
cases, known as fiber-to-the-curb, service is provided to a neighborhood connection point or
node by fiber optics; homes are then connected to the node with copper wire or coaxial
cable. Because of the now-shortened distance between the residence and the point of
interconnection, copper and coaxial cable can deliver high-speed data. In addition, in
response to greater competition, and to satisfy growing demand for faster Internet access,
some providers are upgrading their existing ‘infrastructures, such as copper-wire telephone
networks and cable television networks, to deliver interactive broadband service.

Increasing broadband connectivity is only one way that the capabilities of the
communications infrastructure are expanding. Important new technologies, such as optical
switches, are currently under development. Optical switches, when deployed, will enable
optical networks to achieve increased network throughput because they can handle
thousands of wavelengths, eliminate optical-electric connections and automate the process
of configuring the wavelengths on the network.17


Rapid advances in processing power and data storage are also driving the Internet’s
expansion. The ability to process digital information has grown at an astounding rate and
processor performance continues to double approximately every eighteen months,

15 Jim Gray & Prashant Shenoy, Rules of Thumb in Data Engineering, Microsoft Research Technical
Report (Dec. 1999. revised Mar. 2000) <http:/>.
16 David Clark, senior research scientist at MIT’s Laboratory for Computer Science, cited in Jeff Hecht,
Wavelength Division Multiplexing, TECH. REV., Mar./Apr. 1999, at 72
17 Peter Heywood, Optical Networking in Five Easy Pieces, Bus. COMM. REV., May 2000, at 54

following Moore’s Law.18 This extraordinary advance in processing power has come at even
lower costs. Prices have fallen at an average annual rate of twenty-four percent in the
computer industry and twenty-nine percent in the semiconductor industry.19

Less widely known is that the ability to store information has more than kept pace with the
ability to process it. “Today disk capacities are doubling every nine months, fast outpacing
advances in computer chips....”20 These advances have also come at decreasing costs. “[T]he
average price per megabyte for hard-disk drives fell from $11.54 in 1988 to $0.04 in 1998,
and an estimated $0.02 in 1999. Industry analysts forecast that it will be as low as $0.003
per megabyte by 2003.”21

Even as processing power and storage density continue to increase dramatically amid
steeply falling costs, there are physical limits to the present technology. The rising cost of
the continued scaling down of microelectronics and the skyrocketing cost of fabrication
facilities may limit the additional amount of processing power that can be cost effectively
squeezed onto today’s silicon chip.22 Similar difficulties are expected to occur in the current
storage technologies such as magnetic hard-disk storage technology.

But we are likely to continue to make progress in all these areas through the accumulation
of many small improvements in current technologies. We are also likely to see the
substitution of new technologies that may outpace even the extraordinary advances we
have seen so far. Nanotechnology, the field of research focusing on building structures at a
molecular level, is anticipated to enable the fabrication of a new generation of computer
hardware that is cleaner, stronger, lighter and more precise.23 For example, it may soon be
possible to store the contents of a digital videodisc in a space smaller than a conventional
semiconductor chip.24 With circuits built on a molecular scale, nanotechnology holds the
potential to decrease the size of devices dramatically—allowing what some call smart

18 Gordon Moore, The Continuing Silicon Technology Evolution inside the PC Platform, 2 PLATFORM
SOLUTIONS (Oct. 15, 1997) <>.
19 U.S. DEP’T OF COMMERCE, DIGITAL ECONOMY 2000 25 (June 2000)
20 Jon William Toigo, Avoiding a Data Crunch, SCI. AM., May 2000, at 58
21 Id.
22 Intel estimates that the company will reach the physical limitations of Wafer fabrication technology
in 2017. See Moore, supra note 18. As more transistors are packed onto a chip, phenomena such as
stray Research Technical signals, the need to dissipate the heat and the difficulty of creating the
devices in the first place will halt or severely slow progress. Experts predict that around 2015, a
fabrication facility will cost nearly $200 billion, which will put an end to the advances in the processing
power of computer chips based upon current technologies. See Mark A. Reed & James M. Tour,
Computing with Molecules, SCI. AM., June 2000, at 86
23 Ralph C. Merkle, Nanotechnology Web Site (visited Mar. 23, 2000) <>.
24 John Markoff, Computer Scientists Are Poised for Revolution on a Tiny Scale, N.Y. TIMES, Nov. 1,
1999, at C1 <>.
25 Nanotechnology was envisioned decades ago and thought to have the potential for commercial
applications later in the twenty-first century, but recently—far outpacing the most optimistic
forecasts—the research has progressed to where there is potential for near-term commercial
developments. Two separate teams of researchers have announced the successful development of
rudimentary molecular logic gates—the fundamental component of an electronic device. Mark Reed


Software is playing an important role in employing the enhanced capabilities of processing,
storage and communications technologies. A new environment is emerging that will
increase interactivity among various computing devices and applications. DISTRIBUTED COMPUTING

Software development has made possible massively distributed computing, sometimes
known as community computing. In distributed computing, computers are linked together
to work on shared projects when they are not engaged in local tasks. This approach provides
a cost-effective way to tackle large processing projects because it allows many computers—
networked via the Internet—to work simultaneously on different parts of a single processing

Community-computing projects have rapidly solved computation problems that some
observers estimated would take years. In 1997, for example, RSA Security, a leading
encryption software vendor, issued an open challenge to test its state-of-the-art 56-bit
encryption technology. In March 1997, a group established and began
recruiting volunteers to begin testing the 72,057,594,037,927,936 possible keys. By October,
the key had been found by the community, which had grown to 4,000 active
teams of volunteers using a “combined computing power equivalent to more than 26,000
high-end personal computers.”26 It may not be long before commercial projects are
developed to take advantage of the 70% of the typical workstation’s capacity that presently
sits idle.27 In fact a coalition including the National Foundation for Cancer Research and
Oxford University has begun recruiting volunteer machines to compare molecules to
targeted proteins, searching for possible anti-cancer drugs.

and James Tour, writing for Scientific American, put the scale of potential nanotechnology computer
hardware into perspective by noting that, if the conventional transistor were scaled up so that it
occupied a page of Scientific American, a molecular device would be the period at the end of a
sentence. They predict that “[e]ven in a dozen years when industry projections suggest that silicon
transistors will have shrunk to about 120 nanometers in length, they will still be more than 60,000
times larger in area than molecular electronic devices.” See Leander Kahney, Quantum Leap in
Computing, WIRED NEWS, Mar. 23, 2000
<,1282,35121,00.html>; Markoff, supra note 24; Reed &
Tour, supra note 22.
26, Press Kit (Nov. 26, 1999) <>;, Secure Encryption Challenged by Internet-Linked Computers (Oct. 22, 1997) (press
release and background sheet) <>. Another example
of distributed computing is the [email protected] project, an offshoot of the Search for Extraterrestrial
Intelligence (SETI). It is the largest cooperative computing effort underway today. It links about 2
million computers worldwide in an effort to analyze the 50 gigabytes of data collected by SETI’s radio
telescopes each day. Each computer in the [email protected] project is given part of the intercepted radio
signals to analyze when it is not otherwise occupied. See Howard Rheingold, You Got the Power,
WIRED, Aug. 2000, at 176 <>.
27 Patrick P. Gelsinger, Peer to Peer—The Next Computing Frontier, Keynote Address at the Intel
Developer Forum (Aug. 24, 2000) at 176

The potential to link computers and take advantage of improved processing, storage and
transport can also be seen in recent developments in peer-to-peer (P2P) networking, which
extends and develops one of the earliest Internet applications—data file transfer.28 These
programs are different from client-server-based web sites that provide for downloading of
digital files (a many-to-one model), in that the files are not stored centrally on servers;
instead the files of interest are located on the hard drives of the individual computers that
are participating in the network (a many-to-many model). The content available to the
network participants depends upon which participant computers are logged on the

Some have speculated that peer-to-peer computing will be the next Internet revolution.29
The most prominent of the programs that enable peer-to-peer networking is Napster (which
is distributed by a company of the same name).

Napster was developed to enable users to contribute to, and retrieve from, a centralized
directory of available MP3 files (a compressed-file format popular for storing digital music).
However, after being sued by intellectual property rights holders, Napster has been forced
to change its free online service.

Napster, however, was not a “pure” peer-to-peer networking program, as it relied upon a
central registry of available song titles. Other types of music-swapping software, such as
Gnutella and Freenet, have no centralized directories and have no directly associated
companies to distribute the software. The Freenet software even provides complete
anonymity for those posting and transferring files.30 Peer-to-peer systems are not limited to
exchanging MP3 music files; they allow for the transfer of other types of data files, including
text and video. Because peer-to-peer networking requires the ability to search other
computers on a network remotely, it has sparked privacy and security concerns in addition
to the well-publicized intellectual property rights issues.

Although peer-to-peer technology is most commonly used for trading music files, it could
potentially challenge search engines, portals and other technologies that are aimed at
helping Internet users find information. The technology also enables project participants to
create a network for a specific project and rapidly dissolve it when the project ends. This
type of networking also could have important businesses uses allowing enterprises to share
information, processing cycles and storage, particularly within an organization’s private,

28 Professor Lawrence Lessig, Expert Report Pursuant to Federal Rule of Civil Procedure 26(a)(2)(B),
at 7-8, in A&M Records, Inc. v. Napster Inc., Jerry Leiber v. Napster, Inc., Nos. C 99-5183 MHP
(ADR), C 00-0074 MHP (ADR) (June 2000).
29 For example, officials at Intel’s Fall 2000 Developers’ Forum described peer-to-peer networking as
length, they will revolutionary, with important implications for business use. Intel, Peer-to-Peer
Technology: Backgrounder (Aug. 2000) (Intel Developers’ Forum virtual press kit)
<>. See also John Borland
et al., The P2P Myth (Oct. 26, 2000) <>.
30 Freenet was created by Ian Clark, a strong advocate for freedom of expression, who developed the
software to allow for dissemination of material without government censorship. See Adam Cohen &
Chris Taylor, The Infoanarchist, TIME, June 26, 2000, at 46.

firewall-protected network. Numerous issues—including access to bandwidth, developing
common protocols, interoperability, scalability, security, privacy and ease of use—must be

Industry analysts estimate that the number of mobile-phone customers will reach 500
million worldwide by 2003 and that 75% of those phones will be Internet-enabled.31 Some
suggest that by 2004 more people will access the Internet from a wireless device than from
a wired one32 and that by 2005, 50% of wireless traffic will be data rather than voice
traffic.33 Increasingly, therefore, PCs will share the Internet with web-enabled mobile
phones, handheld computers, personal digital assistants and cars that have IP addresses and
wireless access to the Internet. The increased use of mobile Internet devices is likely to
change the way we use the Internet in ways that are not easily foreseen in today’s PC-
centric networking environment.

Today’s mobile Internet is most advanced in Europe and Japan where telecommunications
companies are developing and deploying wireless Internet based upon two different
models—the Wireless Application Protocol (WAP) model in Europe and the Japanese i-mode
model. WAP is a protocol developed by a consortium of companies (which includes most of
the leading firms in the global communications technology sector) to enable mobile Internet
applications developers, carriers and content providers to have a uniform programming
model and language (wireless markup language or WML) for the development of mobile
Internet applications.34 I-mode is a service offered by NTT DoCoMo, the wireless subsidiary
of NTT, Japan’s dominant and partially government-owned telecommunications company. I-
mode is a proprietary product based upon HTML, the present language of today’s web

Mobile Internet may converge upon a single protocol, or develop via multiple
noncompatible networks to be bridged by multimode devices—a trade-off between
reaching agreement on a standard and allowing technology to achieve the same practical
result. Although some make strong arguments for the development of a single technical
standard, there are many instances in which multiple technical standards coexist and
compete.35 Multimode phones, for example, although more expensive than single-mode

31 WAP Forum, Momentum for Wireless Application Protocol Continues to Surge (Feb. 2000) (press
release) <>.
DATA 6 (Apr, 4, 2000).
6 (Apr. 4, 2000).
34 WAP Forum, supra note 31.
35 Many believe the development of a single protocol will speed the deployment of wireless Internet
access by reducing the risks and cost for manufacturers and service providers. But achieving a
cooperative standard—as can be seen in the development of second-generation wireless systems
around the world—is difficult process because of the large financial stakes and the aggressive
competition among players with differing approaches. Some analysts believe that the absence of a
standard slowed the development of wireless networks in the United States. Others believe that
choice in wireless technology led to the development of a better technological standard—Code
Division Multiple Access (CDMA).

phones, provide a bridge between the differing second-generation standards. Companies
even now are developing multimode phones compatible with the underlying technologies of
both WAP and i-mode.36

Early WAP and i-mode users made heavy use of entertainment-oriented applications, such
as peer-to-peer short-message services (a wireless application similar to PC-based instant
messaging) widely used by teenagers to communicate with each other. The growth of
mobile Internet access and “always-on” connections, however, is encouraging developers to
focus on new applications, such as location-based services. Now that entire Global
Positioning System (GPS) systems are available on a single chip, they will likely become
ubiquitous in mobile devices. Services that combine mobility and location (enabling a user
to find the nearest location of a store or enabling a store to deliver promotions to nearby
wireless users) are forecasted to be popular, but they also raise substantial privacy
concerns, as a user’s location can always be determined.

Mobile commerce will likely dramatically expand and increase in importance. But the types
of Internet transactions that can readily be accomplished; using mobile devices are
constrained by the limitations of the devices and the characteristics of the mobile
environment. Mobile Internet access devices are currently subject to technical constraints
such as limited battery life, relatively small visual displays, low data rates and the
accompanying need for simplicity a (mobile users are unlikely to tolerate complex menus
and multiple clicks to get to needed information) and problems with maintaining
connectivity in a mobile environment (which is technically more challenging than in a fixed
or hard-wired environment).37

At present, wireless Internet access, both mobile and fixed, is constrained by the bandwidth
limitations of existing wireless networks. This constraint is likely to ease significantly in
coming years as wireless broadband—also called third-generation wireless (3G) and
Universal Mobile Telecommunications Systems (UMTS)—is developed and deployed. Most
existing mobile networks have slow data download speeds of only 9.6 to 14.4 kilobits per
second, which translates into the ability to download only a few lines of text per second. The
broadband wireless networks under development may enable data rates of 384 kilobits per
second or more, essentially enabling the delivery of video to a wireless device in real time
with an always-on connection.38

The governments of various countries have begun distributing licenses for the 2-gigahertz
band radio frequency spectrum used to deliver broadband wireless service, even as
companies have begun experimenting with broadband wireless in unlicensed bands. The
prices paid for these licenses greatly outstripped projections.39 There has been debate

36 David Pringle, NTT’s i-mode Mobile Web a Hit in Japan, Will Take on Rival WAP in Europe, WALL
ST. J., June 5, 2000, at A13.
37 WAP Forum, WAP White Paper: Wireless Application Protocol, Wireless Internet Today (Oct. 1999)
38 David Pringle, Cheaper Mobile Technologies May Hurt UMTS Revenues, (June 18, 2000)
39 In April 2000, five applicants bid a total of $35.4 billion for United Kingdom licenses, seven times the
amount the government predicted. In August 2000, bidders for German licenses paid over $46 billion.

about whether the high cost of the licenses will delay the rollout (as companies rethink their
business plans to accommodate the greater-than-anticipated license costs) or accelerate it
(as companies come under enormous pressure to obtain quick returns on their 3G license
investments), but it is clear that major players have been prepared to invest billions of
dollars to obtain the licenses and are facing even more billions to deploy the requisite
networks. These investments are premised upon the economics of as-yet-to-be-defined
services—services that obviously will have to be superior to today’s income-generating
services that do not require broadband. In the meanwhile, much cheaper transitional
technologies (termed 2.5G) are being developed and deployed. Critical issues associated
with the availability and cost of spectrum for 3G globally, including whether similar bands
will be designated around the world, now rest with government policymakers. PERVASIVE COMPUTING

Although much attention has been focused on mobile Internet access, the potential of
wireless is far broader. It may well be that in the future almost every device that connects to
the Internet will have the capability of making that connection wirelessly, even if the device
itself is not designed for mobility. And the 4 billion Internet addresses now available are
unlikely to be sufficient for all these devices. This will require a migration to IPv6, a new
version of the Internet addressing system which vastly expands the number of unique
addresses available (3.4 x 1038 under IPv6 versus 4 billion using the current IPv4).40

Wireless access already encompasses connecting machines to one another and letting them
interact in new ways. A group of prominent companies is developing a standard for short-
range wireless connections (Bluetooth), which will enable short-range wireless
communications among a variety of electronic devices—from laptops and cell phones to
microwaves and blenders.41 Bluetooth will allow devices to transmit information to each
other seamlessly—enabling a phone to ring when a computer receives an e-mail or when a
meal in the oven is ready. Bluetooth is not the only option in this space. For example,
802.11b is a competing protocol that is becoming more popular.42

Wireless connectivity can also be seen as part of a larger and more important trend—the
trend toward a world of pervasive computing. Pervasive computing envisions the
integration of computer processors and networking capabilities in devices found throughout
our business and personal environments. This is a world where “smart” devices are
everywhere—in our pockets, in the walls of our homes, in our furniture and appliances and
in our vehicles. These devices will be seamlessly linked using both wireline and wireless
networks. In the future all electric devices are likely to contain installed network software,

Jonathan Miller, Europe Packs a Wireless Wallop: Will the Quaint Continent Leave the U.S. in the
Digital Dust? (MSNBC television broadcast, May 5, 2000).
40 John Shantz, Addressing the Shortage, WIRELESS REVIEW, Mar. 15, 2001, at 50-56.
41 These companies include, for example, Telefon AB L.M. Ericsson, 3Com Corp., International
Business Machines Corp., Motorola and Toshiba Corp. Nicole Harris, Motorola to Release Products
That Use Bluetooth Technology, WALL ST. J., June 12, 2000, at B20.
42 Bluetooth and 802.11b coexist in the same unlicensed spectrum and there have been reports of
interference between them, raising issues of how they will develop in the future.

allowing easy connections to other electrical devices and the Internet.43 Before pervasive
computing becomes a reality, however, software that allows for seamless interactions
among devices—a world that every PC user knows is not yet in existence—must be

Pervasive computing will create a far different networking environment than we have today.
Devices may be capable of detecting, recognizing and using the components of networks
other than the ones to which they were originally linked. A cell phone might automatically
detect and make use of the speakers in a car, so the driver can carryon a phone
conversation while keeping her hands on the wheel.45 Similarly, calls could be routed to
whichever device is in use—the desktop, the palm-top or the web-enabled phone—based
upon linked addresses and previously agreed-upon protocols. Users will be able to
communicate whenever and wherever they are to whatever devices are their intended
recipients rather than encountering the incompatibility of present-day devices.

One implication of advances in pervasive computing will be even more rapid growth in the
amount of data being transmitted over networks. Perhaps the only thing that can match the
probable growth of pervasive computing is the associated growth in concerns about privacy,
interoperability, security and reliability. THE SEMANTIC WEB

The full development of machine-to-machine Internet communications requires that devices
recognize and use data that are generated by other machines. This capability is associated
with the Semantic Web, a term coined by Tim Berners-Lee, which describes a “Web of data
with meaning in the sense that a computer program can learn enough about the data to
process it.”46

To understand this concept, it is necessary to understand the limitations of the languages
currently used on the Web, specifically HTML, and what.could be done if web pages were
Written in a language that had broader capabilities. HTML tells a browser how it should
display text and images.47 Information encoded in HTML cannot automatically be used in
context by another computer. For instance, although a doctor may access a web page that
lists a patient’s drug allergies, she could not automatically import these data into the
hospital database because HTML does not enable programmers to distinguish the data
elements from the other elements (such as graphics) on the page. If data elements could be

43 Bill Joy, Design for the Digital Revolution, FORTUNE, Mar. 6, 2000, at 10
44 Software languages such Jini (Sun Microsystems), Universal Plug and Play (Microsoft) and Home
Linking Technology are currently under development. Jini, for example, is designed to be a lingua
franca among devices that will “provide an overarching, universal platform—a distributed operating
system, in effect, on which devices of every description can meet.” See Jura Knocius & Maryann
Haggerty, That’s No Refrigerator, It’s a Command Center; Alliances Speed Appliance Net links,
WASH. POST, Jan. 18,2000, at A1.
45 Joy, supra note 43.
47 Jon Bosak & Tim Bray, XML and the Second-Generation Web, SCI. AM., May 1999, at 89

given standardized labels that indicated they were specific types of information, such as
“patient’s name,” “price” or “stock number,” then PCs and other web-enabled devices could
process those data.

The software language Extensible Markup Language (XML) will likely bring many of these
capabilities to computer networking. XML is a metalanguage—that is, a language used to
standardize software-to-software data exchanges by were originally: defining elements of
other Internet languages.48 Use of XML depends upon the development of tags that have
common meanings. These can be either global (recognized by machines across the Internet)
or local (recognized by members of a limited group, such as members of the medical
profession who develop a “local” markup language for encoding medical records).49

The development of a Semantic Web has broad implications for increasing the cross-
language communications and search capabilities of the Internet. XML relies upon Unicode,
a character-encoding system that supports intermingling of text in all the worlds’ major
languages.50 This has the potential to help automate the translation of communications in
the various languages of the world. XML tags may also provide common-language search
engines, enabling more targeted searching.

Tagging may also speed the development of intelligent agents—software programs that are
designed to act on behalf of a user. The functions of intelligent-agent software range from
shopping (for example, a more advanced form of the “bot” that can accumulate
comparative price data and negotiate purchases on a user’s behalf) to managing
information flows. An intelligent-agent might act as an executive secretary—managing the
flow of voice, mail, e-mail, appointment requests and Internet information.51 Statistical
probability and decision theory techniques embedded in the program enable the software
to “learn” a user s preferences based upon his past actions.

As these technologies have developed, futurists envision a return to a time of a barter
economy given the potential for constant auctions and automated price negotiations across
all goods in the economy. As a thirsty shopper walks through a mall, her intelligent agent
will be able to scan nearby soda prices and negotiate with vendors’ programs to get the best
deal, given her preset conditions of brand, size or maximum price per ounce.52 These agents
may also foster larger more sophisticated barter-based markets because today’s

48 Bob Metcalfe, Web Father Berners-Lee Shares Next-Generation Vision of the Semantic Web,
INFOWORLD, May 24, 1999, at 110 <
49 Bosak & Bray, supra note 47. Other related languages build on XML, promising even broader
capabilities. The extensible style language (XSL) will offer users control over how their computers
display XML files—letting the user determine font, text size and line spacing, SOAP, an XML
standard, promises to ease computer-to-computer communications, enabling, for example, a web
page (such as a news story) to update itself continuously based upon changing data from other
Internet sources (economic statistics or sports scores, for example). VoiceXML has the potential for
better voice recognition by computers. See Bill Barnes, The XML Men: Saving the World from Evil
Mutant Data!, SLATE, Aug, 23, 2000 <>.
50 Bosak & Bray, supra note 47.
51 John Markoff, Microsoft Sees Software “Agent” as Way to Avoid Distractions, N.Y. TIMES, July 17,
2000, at C1.
52 David Brooks, The Mall: Where Every Price Is Negotiable, N.Y, TIMES MAG., June 11, 2000, at 66.

technologies can keep track of all the complex information needed to conduct trade in such
a market.53 But in a world where people rely upon agents, the rules of liability will need to
encompass the actions of millions of cyber-servants.

Tagging information may also provide a vehicle for improving the efficiency of transmission.
Different types of traffic have different transmission requirements. A “bit is a bit” to the
network, which is indifferent to whether the bit represents part of a video image or a
balance sheet, but specific services have differing transmission and delivery requirements.
Streaming video, for example, requires a large amount of bandwidth for the duration of the
transmission; otherwise, the motion of the images appears jerky. Online banking
transactions may have fewer bits and require less bandwidth than streaming video, but they
require absolute accuracy; there can be no information lost due to dropped data packets.
And some users want their communications to have the highest priority—something not
obtainable on the current “best-effort” Internet—and are willing to pay extra to ensure it.

In the past, in a largely analog world, we created dedicated networks with specific
capabilities optimized for particular services-voice telephony and home video delivery are
obvious examples. We are now learning how to accommodate differences in service
requirements (creating different quality of service, or QOS) by providing either more
bandwidth or more intelligence within the network. But providing different levels of QOS
across networks is still a considerable challenge.54


In all of the planning, there was no notion of what the network would really be used for
except to improve e-mail that was then unreliable and taking many hours to transmit. The
supercomputer users wanted to transfer large files. None of us foresaw the Web. It was
pure serendipity, coming from increased bandwidth that decreased response time that
made interactive computing across the Net possible….—Gordon Bell55

The capabilities inherent in the Internet are enabling change throughout the economy. In
the relatively few years since the Internet became widely accessible, the uses that people
and businesses have found for it have evolved and expanded. Old things are being done in
new ways and completely innovative activities are emerging. Many of these new activities
are pushing at the boundaries of our social, economic and legal norms. The changes revolve
around enabling better communications among individuals and among other economic
factors, such as businesses and governments. And, because the Internet is a global network,
individuals and businesses from across the world have the potential to join in these online
communications and to conduct online transactions.

53 Chip Bayers, Capitalist E-Construction, WIRED, Mar, 2000, at 210
54 For an interesting vision of a network that can respond to the needs of the data. see David
Isenberg, The Rise of the Stupid Network. COMPUTER TELEPHONY, Aug. 1997, at 16
55 Gordon Bell, The Next Killer App: An Extended Conversation with Gordon Bell, IMP MAG.. June
2000 <>


E-mail remains the single most common reason people go online, with over eighty-five
percent of Internet users sending and receiving e-mail.56 U.S. web users sent 132 billion e-
mail messages in 1999, according to one estimate.57 These communications capabilities at
first were tied to the desktop, but communicating as well as accessing online information no
longer requires a personal computer. E-mail, web surfing and other Internet activities can be
done via a widening variety of devices, from personal digital assistants (PDAs) and cell
phones to systems embedded in automobiles themselves.

Online communications are not limited to interaction between people who are specifically
trying to contact each other. Computer networking allows for the creation of online spaces
or chat rooms where strangers can meet and participate in real-time, or near real-time,
discussions on topics of interest, covering everything from gardening tips to stock tips, from
parenting advice to alternative medical remedies. Individuals and groups also use online
spaces to play games.

The online environment can offer anonymity (or the perception of anonymity), allowing for
greater freedom of expression to those engaging in online conversation (chat rooms or
discussion lists), playing online games or organizing political activities. This same anonymity,
however, facilitates a variety of deceptions and abuses that range from predatory criminals
trolling Internet spaces for victims to online businesses engaging in tax evasion.

Although a variety of technologies can make electronic communications anonymous (for
example, re-mailers or services like Anonymizer), many e-mail or online conversations are
neither anonymous nor as ephemeral as they seem. Electronic communications typically
have a higher degree of permanence than do voice conversations. E-mail can be recovered
even after the recipient thinks it has been deleted and, depending upon how a chat room is
set up, online conversations may be posted and stored in newsgroups. Electronic comments
made to a friend years ago (in anger, jest, frustration or drunken rage) can be retrieved and
published to the world at large. For example, in February 2001, Google (an online search
service) bought from “the failed information site an archive of more than 650
million messages posted on electronic bulletin boards, known as Usenet newsgroups, that
dates to 1995.”58

Although some protection from unauthorized viewing and publishing can be obtained
through encryption, in general, people must operate under the assumption that “e-mail is
forever.”59 Courts are already wrestling with balancing claims for anonymity with competing

56 ACNielsen, ACNielsen Survey Finds Nearly Two-Thirds of U.S. Population Age 12 or Older Are
Online (May 8, 2000) (ACNielsen news release)
57 Jupiter Communications, cited in David Lake, Message in a Packet, The Industry Standard Metrics
Report (July 2000) <>.
58 Susan Stellin, New Economy: Privacy Concerns for Google Archive, N.Y. TIMES, May 7, 2001, at
59 Even with the higher degree of permanence of information posted on the Internet, electronic media
can also be less durable or reliable than previous formats. Links that exist one day are gone the next.
Hard drives can be damaged and the information they contained may be prohibitively expensive to

claims from victims of alleged libel and harassment. Some corporations have turned to the
courts in an attempt to stifle anonymous criticism, leading some observers to fear a chilling
effect on open information exchange.

Authentication and security concerns can be addressed through a number of technologies,
including encryption. The use of strong encryption, however, produces a different set of
issues that pit the privacy and security concerns of users against the needs of law
enforcement and intelligence officials. In the Internet environment, it is difficult. to ensure
that individuals and businesses can conduct their lawful activities in a confidential manner
without also affording the same degree of protection to criminal or antisocial activities. And
the downside of increased connectivity, exemplified in pervasive computing, are increased
privacy and security concerns.


Many employers use intranets, extra nets and the Internet extensively for the publication of
organizational information.60 In many organizations, employees can obtain daily valuations
of their 401(k) plans, change beneficiaries, evaluate their health plan options during open
season and file expense reports online. These activities raise questions about the
organization’s right to—and responsibilities for—monitoring those communications. These
questions affect virtually all areas of employment law, including, for example, what
constitutes adequate notification about a change in a retirement plan, what an employee’s
expectation of privacy should be, what constitutes adequate accommodation under the
Americans with Disabilities Act, what constitutes a hostile work environment and what
records must be retained under the Electronic Signatures in Global and National Commerce

The fact that anyone can establish a web site makes it difficult for web users to determine
the “bona fides” of the publisher of any specific site, complicating efforts to find accurate,
reliable information on the Internet. In addition, many web sites have similar-sounding
names but very different content. For example, is an information
technology-oriented portal for women and girls, whereas is a
pornographic web site.

Even with the difficulties of sorting through so much information, some of which is of
questionable quality, there is no doubt that the availability of information online is changing
personal and business behavior. For example, physicians face patients who arrive at their
offices armed with treatment information, and some car dealerships refer to the Internet-
informed potential buyers who appear at their showrooms as the “armed unfriendlies.”

retrieve or permanently lost. The fact that some information may be stored in a way that makes it
device-or software-specific may also limit the ability to retrieve it in the future. For example, digital art
is impermanent and nonarchival because it can be viewed only with a certain generation of software.
60 Many companies use Internet protocols to create Internet-like networks for company-only use
(intranets) or for use by the company and its business partners (extranets). Intranets and extranets
that are connected to the public Internet are typically protected from unauthorized access by security
programs known as firewalls.

Because anyone can establish a web site, the Internet also makes it easy for anyone to
publish or broadcast creative efforts, ranging from creative writing or reporting to digital
movies. The cost structure of making creative content has also been fundamentally altered
with the availability of low-cost devices such as digital cameras and editing software.61


Although it was conceived as a communications and information-sharing network, the
Internet has become firmly entrenched as a commercial medium. It is having the kind
of.transforming effect on commerce that one might equate with the effect of reliable roads
or the construction of railway systems. The Internet provides a new way for organizations to
engage in existing activities and enables the creation of new products and services. CUSTOMIZATION AND WEB USER INFORMATION

Internet technologies allow businesses to know more about their customers, which enables
them to target products and prices with a specificity that would not be possible without the
Internet. In some cases, consumers knowingly provide detailed information about
themselves. At, for example, customers are invited to rate their online
shopping experiences and that information is aggregated and made available to other
shoppers. also sells aggregate information back to the online shopkeepers.

In other cases, however, people may provide information about themselves without even
realizing it, as “cookies” track their online browsing behavior. These tracking systems can
provide an immense amount of data that, combined with personal information gathered
from other sources, creates a vivid picture of a web surfer. Although allowing sellers to tailor
their offerings to individual shoppers, these capabilities create a tension between the
benefits of obtaining a customized product and the privacy of an individual’s online

There is little doubt that the existence of online sales channels is having an impact on “real-
world” pricing policies, despite online retail sales accounting for less than one percent of
total retail trade. Even if users choose not to make purchases online, the Internet makes it
easier for consumers to comparison shop. Potential buyers (or their digital agents) can
check the price and availability of products from a variety of sites in far less time than it
would take to conduct store-to-store comparisons in the world of bricks and mortar. In
addition to obtaining price information, online shoppers can avail themselves of third-party

61 For example, with a digital video camera, digital videocassettes and editing software, anyone can
create a digital movie and post it to the Web for only about $10,000. According to one estimate, this
onetime investment that could be used to create an unlimited number of movies is about $30,000 less
than it would cost for equipment and editing to make a single twenty-minute short on celluloid. See
Rob Kenner, My HollyWood! So You Wanna Be in Pictures? Pick up Your Tools and Shoot, WIRED,
Oct. 1999, at 214 <>

reviews and ratings to assist them in buying decisions, whether or not the sale itself occurs

Internet technology is also permitting the development of various dynamic pricing
mechanisms. In the brick-and-mortar economy, a single-price model holds for most
consumer goods and services. Most offline sellers do not have sufficient information to vary
their prices from customer to customer, and physically changing the price of individually
tagged items is expensive. In the online world, not only is it inexpensive and easy to change
prices, it is possible to sift through data about a particular customer, discern her price
sensitivity and offer customized pricing. With individual-level price discrimination now a
reality, questions arise about how the law will respond.62 ELECTRONIC MONEY

The ability to make purchases online has generated interest in the development of new
electronic payment mechanisms. Though credit cards may be suitable for many purchases,
they are not suitable for all purchases. Credit card payments are not convenient for
consumer-to-consumer transactions (such as in online auctions), for sales by very small
companies and for very small-value transactions, when the price of the good or service (say
reproduction rights priced at a penny a page) can be less than the cost of the credit card
transaction. Although escrow-type systems can be arranged, they raise costs and may raise
regulatory issues based upon regulations applied to escrow services in the physical world.

If new forms of electronic payment gain broad acceptance in the marketplace, they will
raise new questions. How will these payment mechanisms relate to existing financial
instruments? Will companies that offer digital money be subject to the same regulatory
standards imposed upon firms in the financial-services sector? In addition, the potential for
anonymity online raises questions about the impact of electronic payment mechanisms on
illegal activities, such as money laundering. DIGITAL DELIVERY

One can order, pay for and arrange delivery of almost any physical good or service over the
Internet. Some products and services, such as professional services, software, music or
video, can be digitized and delivered directly over the Internet. Digital delivery can have
many benefits to a firm—packaging, shipping and handling costs, as well as delivery time,
can be dramatically reduced. Digital delivery, however, can present businesses with
considerable challenges because once an image, sound or video is digitized, an Infinite
number of copies can be made and distributed at virtually no cost and with virtually no
degradation in quality. Industries whose business models depend upon being able to control
the distribution of copyrighted digitized information (such as the publishing, television,
radio, music and motion picture industries) potentially lose their ability to control
duplication of their material.

62 In September 2000, experimented with dynamic pricing of digital videodiscs. See
David Streitfeld, On the Web, Price Tags Blur; What You Pay Could Depend on Who You Are, WASH.
POST, Sept. 27, 2000, at A1.

Copyright and intellectual property rights are not the only concerns. The electronic delivery
of digital products and services also raises new tariff and taxation issues, such as
determining whether the digitally delivered items are products or services, how a digital
transaction should be characterized and where (in geographic terms) a digital transaction
occurs. Determining the responsible parties in a transaction will be made even more
complex with the potential development of intelligent agents capable of engaging in online
transactions on behalf of individuals, firms or other entities. CHANGING THE STRUCTURES OF ORGANIZATIONS AND INDUSTRIES

Across the economy, organizations and firms are rethinking how to provide value to their
customers as business processes-including transactions like product delivery—move online.
Some find. that their old business models do not work anymore. For example, travel agents
are seeing strong competition from web-based services (such as Expedia and Travelocity).63

The Internet also allows for goods and services that, until now, have been offered in
bundled form, to be provided separately. Philip Evans and Thomas Wurster in Blown to Bits
illustrate how information technologies are dsmantling and reformulating current business
structures.64 One example is the newspaper: in the past, economies of scale in printing
made it more efficient to bundle news, classifieds, stock quotes and cartoons, even though
every reader was not interested in every feature. Technologies like the Internet, however,
make that model of cross-subsidization unravel because the individual products (such as
articles or cartoons) can be provided over the Internet to people who want them.

Businesses that do not understand these new technologies will be at a competitive
disadvantage. This holds true across large, medium and small firms. Larger firms may
outsource noncore functions and concentrate on those areas in which they have a
sustainable competitive advantage and that directly affect their success. This would expand
opportunities for smaller niche players, provided they had the ability to interact digitally
with their larger customers. Smaller firms may also find it easier to compete for business
from geographically distant potential customers. Conversely, smaller players lacking the
ability to digitally connect or failing to meet the entry standards set for a given online
marketplace may find that their opportunities are rapidly shrinking. As Andy Grove,
chairman of Intel, put it in May 1999, as “much as we talk about Internet companies today,
in five years’ time there won’t be any Internet companies. All companies will be Internet
companies or they will be dead.”65


63 For example, since 1997, the number of travel agencies selling airline tickets has fallen by more
than.2,500, or 8%. See Mark Albright, Slashed Commissions, Internet Spark Travel Business
Revolution; Fewer Agencies Book Flights as Relationship Grows Adversarial with Airlines, COM.
APPEAL, June 18, 2000, at F6.
65 Andrew S. Grove, Address at the Los Angeles Times Third Annual Investment Strategies
Conference (May 22, 1999) (transcript available at

The Internet has driven many changes in the intellectual property community. As a data
and resource access tool, the Internet has expanded the reach of every user from localized,
regional resources, to true global information access.

A short list of the benefits the Internet has substantially or single-handedly brought to the
intellectual property community is impressive:

• increased Affordable Access to intellectual property resources, globally;
• challenged the world to increase standards of ‘Patent Quality’. The ability to find

invalidating prior art via the Internet retroactively calls into focus the quality or
validity of previously issued patents (conversely, the respected Mr. Joseph N.
Hosteny of Niro, Scavone in an article “Fourth, Don’t File a Patent” has suggested
that property holders consider trade secrets as opposed to patents for intellectual
property protection as more patents are surfacing as invalid or unenforceable66);
• increased business, political and society awareness of the growing importance of all
types of intellectual property;
• shortened data access time: days or weeks have been shortened to minutes or
• geometric increase in the amount of accessible data and collections relative to IP;
• provided access to an expanding number of Web-based software and IP
management tools;
• reducing reliance on third party data providers (reducing cost, increasing access
• provided path for developing countries to catch up to world developments with
regard to IP data access, management and data access;
• increased ability of government agencies to deliver resources to a larger number of
their citizens;
• spawned new industries and technology segments (online IP management tools,
monitoring software, technology exchanges, new patent classifications and
increased business for legal sector, accelerated time to market for new products and


Notwithstanding the positive impact the Internet has had on the intellectual property
community, it has simultaneously created an alarming list of shortcomings. Although we
can accept the benefits with complacency, we cannot allow the detrimental impacts to
continue un-checked. The first step to problem resolution is problem identification. This list
of Internet-related shortcomings or detrimental impacts does not follow any priority
schedule; the priorities will differ based on country, objectives, operations, budget and
available resources:

66 Intellectual Property Today: Volume 8, No. 5, May 2001 [].

• increased demands to become Internet proficient/Internet literate, or lose
competitive positioning (to varying degrees, this ‘self-improvement’ dictum impacts
inventors, IP practitioners, corporate managers, and government agencies);

• increased complexity of distilling relevant content from the billions of available web
pages. The amount of available data has outpaced our ability to efficiently extract
meaningful citations;

• increased cost associated with obtaining highly relevant data of information.67 The
economic efficiencies of obtaining relevant data are declining since data volume is
increasing faster than search technology;

• promotes a higher standard of practice with regard to prior art searching by
practitioners. Although seemingly a benefit, the impact is an increase in the cost of
client legal services attributable to the increased time practitioners must research
the expanding universe of prior art data;

• exacerbated the “poor patent quality”; provides means to discover invalidating art.
This negatively impacts shareholder / stakeholder value, intellectual property value,
and overall economy;

• increased demands on Patent Office Examiners to expand prior art search. Examiners
must search not only the “field in which the invention is classified, but also
analogous arts.”68 This impact (a) increases pendency, (b) decreases time available to
prosecute any particular patent, and (c) decreases overall citation quality and
intellectual property validity. These are global phenomenon that affect every patent

• has spawned new intellectual property problems, infringement possibilities and
enforcement challenges (Napster, Cybersquatting / cyber-slandering, trademark

• created an ancillary industry in data analysis tools that are still primitive; the tools
can deliver a false sense of confidence in their ability to search through, and parse
applicable or relevant data and prior art citations;

• increased costs and accelerated implementation of next-generation patent database
and IT infrastructure. The unexpected increase in users, combined with the need to
automate Web-based systems have escalated costs and accelerated timetables.
Reactive solutions are proving to be short-lived, and will need to be scrapped when
appropriate systems are developed;

• increase in the amount of lost prior art. Many fledgling companies have filed
software or business method patents, but many businesses have not, or will not
survive the pendency of their applications. Many thousands of otherwise valuable
prior art citations will go abandoned, ultimately being lost. This opens the door for
subsequent, less deserving ‘inventors’ to obtain patents on previously filed
inventions. Correspondingly, the validity of such issued patents can later be
challenged by the earlier inventors who present non-patent citations used in the
original, but abandoned patents;

• increased demands on database and content providers to serve expanding market.
This forces expensive hardware / software infrastructure expansion.

67 Using the Internet for non-patent prior art searches Derwent IP Matters, July 2000.

68 Manual of Patent Examining Procedure §904.01(c).

What the Internet has NOT done with regard to intellectual property development:

• has failed to live up to a expectations as a technology transfer marketplace;
• has failed to bridge the chasm between industry and intellectual property creators:

has not significantly increased the adoption of IP by companies (has not streamlined
the process of IP commercialization)


Recognizing the limitations and shortcomings of the Internet’s role with respect to
intellectual property, one can begin to craft an Internet-reliant IP management program
that maximizes the beneficial attributes while circumventing the now obvious limitations.

The number of patent applications continues to increase worldwide, with 12%/yr (USPTO),
and EPO running at a rate of increase of 24%/yr. Trademark applications are increasing in
like manner. Correspondingly, use of the Internet is increasing, with users expecting access
to the growing amount of data available via the Internet.

Suffice to say, the growth of Internet resources and users is growing at an accelerating rate,
and there is no reason to assume that this trend will not continue, especially as emerging
countries become fully Internet enabled. Websites must respond with appropriate content
to serve these rising demands now, and into the future.

Increasing the level of quality of patents remains one of the highest goals of patent offices
from every country. Efforts towards Internet-based universal filing, search and prior art
citation access systems continue. But, even with harmonization of 75% of the World’s
patent offices, there will continue to be a substantial amount of relevant prior art data that
will remain unincorporated into any standardized system for quite some time. Therefore,
harmonization efforts will not obviate the requirement for sophisticated tools, policies and
rights of access needed to evaluate the millions of non-patent art citations remaining
outside of any standardized data management system.

It is my assertion that within the next few years, the ‘Intellectual Property Internet’ will
evolve into an International Trade Network built upon a global intellectual property
backbone, with an increased emphasis put on trade rather than intellectual property,
following the time-proven axiom that intellectual property protection is only valuable if it is
responsive to market and commercialization opportunities. Intellectual property, and IP
protection means are themselves of little value without first claiming market opportunity or
commercial value. Typically, IP does not create new markets, but remains responsive to

Government patent and trademark offices have an even more costly and time-consuming
task. That is, not only is there a growing requirement to construct meaningful information
resources for its citizens, it must begin to automate the application filing, prosecution and
publication of patents and trademarks by creating the e-commerce interface that will serve
the growing customer demands.

More importantly, we are already seeing the negative impact on increased Internet-related
traffic and sophistication and explosive growth of patent applications in various technology
sectors on internal patent and trademark operations. The growth rate of intellectual
property creation and applications filed, coupled with the piecemeal approach to e-
commerce and customer service automation systems has caused a significant overload on
Work Flow Processes within the world patent offices. Increased demands to use the
Internet to search for prior art have out-paced the ability to efficiently and confidently
search the world or prior art.


Website categories for IP information, web-based tools and database access:

• Databases:
• Patent Databases (Government & Commercial)
• Trademarks (Government & Commercial)
• Non-Patent Art (Government, Educational & Commercial Research)
• Scientific / Research
• Chemical
• Technology/Materials
• Bio & Life Sciences
• University Thesis & Research Studies
• Technology Disclosure Publications
• Domain Registries: TLDs/ccTLDs (240 ccTLDs, com, net, gov, edu, org)

• Information and Directory Resources (includes IP development, law, protection,
enforcement, commercialization references, information, services and products)
• Patent Resources
• Trademark Sites
• Copyright Sites
• Management Tools
• Specialized Search Engines
• Patent & Trademark Search Tools
• Technology Transfer (University, Non-Profit, Exchanges, Auctions)


The Internet is a new medium that demands planning, attention and integration.


The corporate community must embrace the Internet as a means to compete in a global
marketplace, and must develop an awareness of the potential benefits and impacts on a

global basis regardless of its regional strategy, operations and decisions. The increased
commercial and IP protection opportunities must be balanced with an inadvertent increase
in exposure to infringement claims, increased requirements and costs to assert IP ownership
globally, and the higher standard of practice in prior art citation, and prior art clearance.

It is incumbent upon every growing company to develop an economic and business strategy
associated with patents, trademarks and branding, copyrights, and defensive and offensive
intellectual property. Typically, this calls for the creation of an intellectual property
manager or specialist whose job it is to become educated with regard to the fast-moving
landscape of IP on the Internet.

Plan on a continually increasing rise in the number of patent and trademark applications,
and understand the financial and operational impact of accelerating intellectual property

Without implementing the next generation information technology (IT) infrastructure, in a
few short years most patent offices will be faced with an almost impossible task of
managing an out-of-control traditional paper-based system. It’s imperative that a long
range plan be developed, and that a budget commitment be obtained to ensure the vitality
of their patent systems, and to maintain the requisite quality standards in light of the
burgeoning volumes of prior art data.

Without implementing a 3-5 year budget plan to develop automated intellectual property
database, search, analysis and work flow management systems, patent offices will be unable
to catch up to the demands without an extraordinary allocation of personnel and money.

It’s also important to provide for a staff position that is dedicated to the harmonization of
your patent systems with emerging standards, insofar as it is practical, possible, and within
long range budgets.

It is recommended that the majority of budget and effort be put on exclusive content. Since
there are many websites which continually monitor the Internet for IP related resources,
and keep their hypertext links current and active, it is a poor use of budget dollars to
develop one’s own directory of Internet resources. Without frequent updating, this section
will become dated, even out of date, and will likely contain broken links when linked
Websites change their Web address.


In a fundamental respect, the international character of electronic commerce raises
questions for the nature of traditional legal systems in general, and intellectual property law
in particular. Both are based on notions of sovereignty and territoriality. The Internet, in
contrast, like the movement of weather within the global climate, largely ignores

distinctions based on territorial borders. Instead, infrastructure, code and language have
thus far had a greater bearing on the reach of its currents.


The protection of copyright and related rights covers a wide array of human creativity.
Much of the creative content that fuels electronic commerce is subject to such protection.
Under the most important international copyright convention, the Berne Convention,69
copyright protection covers all “literary and artistic works.” This term encompasses diverse
forms of creativity, such as writings, both fiction and non-fiction, including scientific and
technical texts and computer programs; databases that are original due to the selection or
arrangement of their contents; musical works; audio-visual works; works of fine art,
including drawings and paintings; and photographs. Related rights protect the contributions
of others that add value in the presentation of literary and artistic works to the public:
performing artists, such as actors, dancers, singers and musicians; the producers of
phonograms, including CDs; and broadcasting organisations.

Given the capabilities and characteristics of digital network technologies, electronic
commerce can have a tremendous impact on the system of copyright and related rights, and
the scope of copyright and related rights in turn can have an effect on how electronic
commerce will evolve. If legal rules are not set and applied appropriately, digital technology
has the potential to undermine the basic tenets of copyright and related rights. The
Internet has been described as “the world’s biggest copy machine.”70 The older
technologies of photocopying and taping allow mechanical copying by individual consumers,
but in limited quantities, requiring considerable time, and of a lower quality than the
original. Moreover, the copies are physically located in the same place as the person
making the copy. On the Internet, in contrast, one can make an unlimited number of copies,
virtually instantaneously, without perceptible degradation in quality.71 And these copies can
be transmitted to locations around the world in a matter of minutes. The result could be
the disruption of traditional markets for the sale of copies of programs, music, art, books
and movies.72

69 The Berne Convention for the Protection of Literary and Artistic Works (1886), and the Paris
Act of the Berne Convention (1971), at
70 See “It’s the World’s Biggest Copy Machine,” PC Week (January 27, 1997), at
71 Indeed, in the earliest discussions concerning the Internet and its implications for copyright,
some commentators argued that content subject to such rights could not be controlled on the Internet,
and authors would have to find new ways to make money in cyberspace. See L. Lessig, “The Law of
the Horse: What Cyberlaw Might Teach,” Harv. L. Rev. (1999); C. Mann, “Who Will Own Your Next
Good Idea,”, The Atlantic Monthly (September 1998); see also “Digital Rights and Wrongs,”
Economist, at p.95 (July 17, 1999). As the WIPO Internet Treaties of 1996 demonstrate, however,
copyright continues to play an essential role in this new environment.
72 Even without the effects that can result from copyright infringement, these markets will face
considerable pressures generated by new business models and disintermediation in the networked
environment. See “The Economic and Social Impacts of Electronic Commerce: Preliminary Findings
and Research Agenda,” OECD, at ch.4 (1999) (URL) (in particular, the OECD highlights the effects of

It is therefore critical to adjust the legal system to respond to the new technological
environment in an effective and appropriate way, and to do so quickly, because
technologies and markets evolve increasingly rapidly. This will ensure the continued
furtherance of the fundamental guiding principles of copyright and related rights, which
remain constant whatever may be the technology of the day: giving incentives to creators to
produce and disseminate new creative materials; recognising the importance of their
contributions, by giving them reasonable control over the exploitation of those materials
and allowing them to profit from them; providing appropriate balance for the public
interest, particularly education, research and access to information; and thereby ultimately
benefiting society, by promoting the development of culture, science, and the economy.


The most fundamental issue raised for the fields of copyright and related rights is the
determination of the scope of protection in the digital environment: how rights are defined,
and what exceptions and limitations are permitted. Other important issues include how
rights are enforced and administered in this environment; who in the chain of dissemination
of infringing material can be held legally responsible for the infringement; and questions of
jurisdiction and applicable law.

The definition of rights is the key issue, as intellectual property is no more or less than the
sum of the rights granted by law. Under existing treaties and national legislation, the
owners of copyright and related rights are granted a range of different rights to control or
be remunerated for various types of uses of their property. For both groups of rights
holders, these rights include rights of reproduction and of certain acts of communication to
the public, such as public performance and broadcasting. The development of digital
technologies, permitting transmission of works over networks, has raised questions about
how these rights apply in the new environment. In particular, when multiple copies are
made as works traverse the networks, is the reproduction right implicated by each copy? Is
there a communication to the public when a work is not broadcast, but simply made
available to individual members of the public if and when they wish to see or hear it? Does
a public performance take place when a work is viewed at different times by different
individuals on the monitors of their personal computers or other digital devices?

Similar questions are raised about exceptions and limitations to rights. Are existing
exceptions and limitations, written in language conceived for other circumstances, too
broad or too narrow? Some exceptions, if applied literally in the digital environment, could
eliminate large sectors of existing markets. Others may implement valid public policy goals,
but be written too restrictively to apply to network transmissions.

Issues of enforcement and licensing are not new, but take on added dimensions and
urgency when works are exploited on digital networks. As noted above, the technologies
pose substantial practical challenges. In order for legal protection to remain meaningful,
rights holders must be able to detect and stop the dissemination of unauthorized digital
copies, accomplished at levels of speed, accuracy, volume and distance that in the past were
unimaginable. And for electronic commerce to develop to its full potential, workable

systems of online licensing must evolve, in which consumers can have confidence. The
answer to these challenges to a great extent will lie in the technology itself.



The Yahoo case73 in India involved registration of the domain name ‘’ by the
defendant. Even content from the plaintiff’s web-site had been bodily lifted and put on its
own web-site by the defendant. The plaintiff pleaded overwhelming international
reputation in the trademark YAHOO, with registrations of YAHOO and its variants in nearly
69 countries It further relied on its consistent inclusion in the rankings of the Top 100 Web
Sites in the world to establish the popularity of its web-site. At the time of going to court,
the plaintiff’s web-site had recorded roughly 144 million daily page per views, and
approximately 114,034 a month were from users in India. Yahoo’s own domain name
registration for ‘’ which was prior in point of time to that of ‘’
was also an additional ground for urging that the defendant’s web-site would cause
confusion and deceive users into believing that ‘’ was the plaintiff’s India-
specific web-site as it would be natural for a user looking for information on India to believe
that ‘’ was Yahoo’s own site with the relevant content. The defendant set
up an assortment of defences, including the standard one of a disclaimer being put up at its
web-site, the sophistication of Internet users, the registration of its domain name with the
NSI being a complete defense, and the use of a mark for services on the Internet could not
be restrained considering that India does not have legislation for protection of service

The court held that trade mark law applies with equal force on the Internet as it did in the
physical world and in a matter where services are rendered on the Internet through a
domain name, a very alert vigil is necessary and a strict view is to be taken where there is
copying because of the easy access and reach by any one from any corner of the globe. The
court also held that simply because the defendants had put a disclaimer to the effect that
they did not have any connection with Yahoo! did not reduce the chances of confusion and
deception and that in the case of domain names, the distinction between Yahoo and
Yahooindia is of no consequence as Internet users would be confused and deceived that the
two belong to the same concern. The court relied upon the Jews for Jesus v Brodsky74 case
to hold that a sophisticated user of the Internet may be an unsophisticated consumer of
information and such a person may find his way to the defendant’s site which provides
similar type of information as that of the plaintiff.

This obviously meant that trademark concepts, namely (i) requirement of use, (ii) likelihood
of confusion, and (iii) the definition of infringement would not be affected by the fact that
the Internet was a new medium.

73 Yahoo!, Inc v Akash Arora & anr. [1999 PTC 201]
7446 USPQ 2d. 1652


Hyper-links or electronic pointers that connect web-sites may create trade mark problems
demonstrated by Alta Vista Corp. vs. Digital Equipment Corp.75 where the plaintiff, a literary
agent, sued the Internet search engine Alta Vista for having created a hyper-link with who were in the book selling business and having, therefore, come close to its
line of business. After going through the facts of the case, the court felt that Digital
Equipments’ hyper-link with could not be taken as an extension of their search
engine business and the injunction was declined. However, the case demonstrated that
hyper-links can be a major source of confusion on the Net.

In Tata Sons Limited vs Bodacious Tatas & ors.76, hyper-links to pornographic sites have
been objected to on the basis that they would tarnish the image of the plaintiff.

This brings us to the concept of ‘initial interest confusion’ referred to in the Brookfield case
as the invisible trademark violations. In this case, the defendant had used meta-tags or
software codes in the HTML program of its web-site to divert traffic intended for the
plaintiff to its own web-site. The court held that the use of the trade mark ‘moviebuff’ as a
meta-tag confused the search engines and although the consumers may have realized
where they had reached, an initial interest confusion had taken place which in itself is
actionable under the Lanham Act.

In Tata Sons Limited v Bodacious Tatas & ors., the Delhi High Court similarly restrained the
use of the famous trade mark TATA not only as a domain name or as a trade mark but also
as a meta-tag.

8.12.3 DEFENSE

One of the favourite arguments of defendants is that they have inserted disclaimers clearly
disclaiming any connection with the trade mark proprietor. Once again, this is an argument
which was rejected in the Yahoo case. Disclaimers may not necessarily appear on the home
page or front page of web sites but may be put in deeper and may not be viewed and
secondly, because the use of well known trade marks, even in a disclaimer, might confuse a
search engine and cause the defendant’s site to be shown as a hit which the surfer would
then visit.


A few applications have been filed for the registration of domain names as trade marks and
in all probability, the Registrar would follow the UK Guidelines for Examination, including:

75 3 ECLR (BNA) 1309
76 Unreported ex parte interim injunction order dated 8th September 1999 [Suit No. 1991/99 in the
Delhi High Court]

• Domain names may constitute trade marks subject to the usual criteria for the
registration of trade marks;

• The domain name must appear prominently on the web page offering goods and
services for sale to constitute trade mark use;

• The Registrar will disregard non-distinctive elements such as http://, www, @, etc.77


There have been two interesting cases involving SAP AG. SAP AG & Anr. v Manu Kosuri &
Anr.78 was the first Indian case where NSI acting under Clause 10B of the NSI Domain name
Dispute Policy, deposited the title papers of the infringing domain name ‘’ in
the High Court of Delhi. The defendant in this case had registered about 100 well known
trade marks as domain names.

In SAP AG & Anr. v Davinderpal Singh Bhatia & Anr.79 the defendant who had registered
‘’ and ‘’, offered to sell the two domain names to SAP America
for US$ 38,000. The defendants were immediately restrained by the Delhi High Court.

In Tata Sons Limited v. Ghassan Yacoub & Ors.80 ASAP Solutions of California, USA,
registered the domain name ‘’ with NSI and on receipt of a cease and desist
notice from the owner of the trademark TATA, transferred the same to Tatagroup located at
New York. The Plaintiff filed a suit for injunction restraining passing off and dilution of its
well know trademark TATA, against both ASAP Solution and Tatagroup. The High Court of
Delhi granted an ex parte interim injunction against the defendants restraining them from
using and transferring the infringing domain name TATAGROUP.COM. This is the first
domain name case where the court has accepted the contention put forth by the plaintiff
that in matters concerning internet communications, which have trans-national
ramifications, the effect of the impugned transactions in India is an important factor for
determining jurisdiction. The court also considered the principles of Private International
Law including the courts’ ability to enforce the injunction against the defendant.

In New Zealand, several interesting developments have taken place on the Internet front. In
Oggi Advertising Limited vs. McKenzie Baragwanath81 a mandatory interlocutory injunction
was granted by the High Court requiring that the registration of the domain name
‘’ be passed to the plaintiff. In another significant case in September 1996,
consent orders were granted against The Domain Name Company Limited, which had
registered approximately 50 of New Zealand’s most well known trademarks.

Hong Kong is another country where there has been a domain name litigation instituted by
Hong Kong Mass Transit Railway Corporation (MTRC) against a local company named

77 See notices/tmnet.html

78 Unreported ex parte interim injunction order; Suit no.160/99
79 Unreported ex parte interim injunction order; Suit No. 735/99
80 Unreported ex parte interim injunction order; Suit No. 1672/99
81 J CP 147/98 Auckland Registry

Beezweb Productions Ltd. which registered MTRC.COM82. The case was finally settled when
the proprietorship of the domain name was given to MTRC.

The Thailand Government seriously considered taking legal proceeding against a cyber
pirate, Mr. Cooney Carey. The Thai Government’s Amazing Thailand campaign had been
promoted heavily in mid-1996 to attract tourists.

An interesting Australian case revolving around trademarks/domain names and the Internet
had the Australian Competition and Consumer Commission (ACCC) taking action against
Internic Technology Pty. Limited and Peter Zmijewski for engaging in misleading and
deceptive conduct by using an almost identical domain name83. It was alleged by ACCC that
consumers looking for INTERNIC ended up at the defendant’s site by entering ‘Internic’ or
‘’ into their web browsers. In the meantime, the defendants had also applied
to register ‘’ as a trademark for a number of services.


As with any un-chartered territory, so also with Internet cases, the path that law takes is yet
to be evened out. Each case throws up new and hitherto un-dealt with problems. The
typical problems faced were:

• dealing with a multitude of registrations of a well-known trade mark like TATA with
some alpha-numeric variation thereby making detection, monitoring and elimination
an impossible task,

• the dilution of the well-known status of the mark due to the availability of a plethora
of deceptively similar marks,

• effecting service on the defendants as it was found that in most cases the address
given was fictitious,

• the possibility of the erring party transferring the domain name to a third party on
being served with a cease and desist notice,

• proceeding against the wrong person as the registrant was merely an agent and not
the real entity owning the website,

• the registrant's name continuing to be on the NSI listing in spite of it not paying up
the registration fees within the prescribed time period.


An important issue is that of the potential liability of online service and access providers for
infringements taking place through their services. As noted above, the following questions
are raised: Are service providers exercising the exclusive rights of the copyright owners
themselves, as they engage in acts that cause the material to be copied and transmitted?
Regardless of the answer to this question, can service providers be held legally responsible
for the unauthorized exercise of those rights by individuals using their services, where the

82 APAA News (Issue No.26, July 1999 at page 63)
83 ibid. at page 268

services make the transmission possible? Under the laws of many countries, the answer
could be yes, depending on the circumstances.84

The liability issue has significant international implications. Because the Internet is a
borderless medium and its markets are global, it is critical that compatible approaches to
this issue be adopted around the world. It is not necessary that the approaches be identical;
they may differ depending on the particular circumstances and legal traditions in any given
country. But they must be interoperable if global networks and electronic commerce are to
develop smoothly.


Trademarks are an important tool in commerce. A trademark enables consumers to identify
the source of a product, to link the product with its manufacturer in widely distributed
markets. The exclusive right to the use of the mark, which may be of indefinite duration,
enables the owner to build goodwill and reputation in the expression of its identity, and to
prevent others from misleading consumers into wrongly associating products with an
enterprise from which they do not originate.

Trademarks are of essential importance in electronic commerce. Indeed, it has become
clear that trademarks will assume at least as much significance on the Internet as they carry
in the off-line world. Enterprises need to build recognition and goodwill, and inspire
confidence in themselves and in their brands. Particularly when operating in virtual markets
in which face-to-face interactions are infrequent and there is little or no opportunity to
inspect goods or services before purchasing them, consumers are willing to reward trusted
sources offering competitive products.85 In these circumstances, a company’s mark or
brand becomes a vital means of identifying and distinguishing itself.86

84 Various countries’ copyright laws contain concepts of liability for contributing to the infringing
activities of another. Generally, the determination of liability will turn on the degree of participation
and knowledge of the party that is contributing to the infringement. For discussion of various
approaches to this issue, including the United States Digital Millennium Copyright Act and European
Union Ecommerce Directive, see presentations of T. Casey, Senior VP Technology Law Group, MCI
Worldcom, M. Fröhlinger, Head of Unit, Media, Commercial Communications and Unfair Competition,
DG XV, European Commission and S. Perlmutter, Consultant, WIPO, WIPO International Conference
on Electronic Commerce and Intellectual Property (September 1999), at
85 It may be noted that certain informational goods, such as software and data, are almost
inherently non-transparent, meaning the consumer cannot detect the quality of the goods up-front.
Consumers will be relying in large part on the reputation of the seller, and place value in the
relationship with that company and its ability to provide service (including future product upgrades).
See comments of Prof. B. De Long, Dept. of Economics, University of California at Berkeley,
“Analytical Summary and Report,” The Digital Economy in International Perspective: Common
Construction on Regional Rivalry, Conference of the University of California E-conomy Project (May
1999), at
86 Trademarks, and branding in general, have become extremely important in electronic
commerce to build consumer familiarity and trust. This is particularly the case in light of the huge
number of new web site offerings, and their potential to overwhelm consumers. The costs of
establishing and defending a brand through advertising and other marketing activities represents a
very significant expense and “is the main reason why many business-to-consumer e-commerce
merchants have yet to report a profit.” See “The Economic and Social Impacts of Electronic

There is a growing international consensus that trademark protection should extend to the
Internet, and that it should be neither less nor more extensive than that which subsists in
the physical world.87 The existing national or regional legal systems should apply, together
with the relevant international treaties,88 but these provisions are of a general nature,
applying on a territorial basis, and are not tailored for the borderless world of electronic
commerce. They therefore are placed under considerable strain when confronted by the
challenges of this new medium of commercial exchange. Moreover, these challenges are
not limited to trademarks; they exist with regard to all kinds of distinctive signs used in
electronic commerce, including trade names and geographical indications.


As soon as a trademark is used on the Internet, it is immediately visible to a potentially
global public and might be considered to have a global effect. This particular feature of the
Internet makes it extremely difficult for businesses to foresee in which countries their
business activities might become legally relevant. Even within the boundaries of a single
legal system, it is often difficult to fit the “use” of a trademark on the Internet into
traditional legal concepts. Due to the particularities of Internet technology, such use can
take forms that can hardly be assimilated to use of a trademark in the physical world.

When trademark protection depends on prior use in a particular country, the question
arises whether use on the Internet can satisfy such a use requirement and, if so, what kind
of use would qualify as “genuine use.” Use is important in order to maintain a trademark
registration since, in most countries; a trademark registration is subject to cancellation if the
trademark has not been used within a certain period of time.89 It seems that use of a
trademark on the Internet may qualify as “genuine use” for the purposes of use

Given the rapid and continuing development of electronic commerce, it is almost impossible
to give an exhaustive list of ways in which trademarks can be used on the Internet and to
project what new forms of use might raise questions in the future. For the present, some of
these practices, such as “hyper linking” or “metatagging” are currently indispensable for an
efficient use of the World Wide Web. Nevertheless, they pose potential threats to
trademark owners since they facilitate the creation of associations, thus increasing the

Commerce: Preliminary Findings and Research Agenda, at Ch.4, p.12, OECD (1999) (emphasis

added). See WIPO document “Use of Trademarks on the Internet: Issues Paper” (SCT/3/4),


para.6; see also, Report of WIPO Internet Domain Name Process, at para.34, (WIPO 1999), at

88 See Paris Convention for the Protection of Industrial Property (the Paris Convention),

to which 155 States are party: in particular, Articles 4, 5C and D, 6-7bis, 9-11; and the TRIPS

Agreement, by which 135 States are bound: articles 15-21 (for trade- and service marks), Articles 22-

24 (for geographical indications). Article 15.1 of the TRIPS Agreement for the first time provides a

definition of a trademark (see above). Article 16 of the TRIPS Agreement specifies the rights

conferred on the trademark owner.

89 Under Article 19 of the TRIPS Agreement, the trademark owner has to be given at least three years

before its registration will be cancelled.

90 See WIPO document SCT/2/9, paras.60-61.

danger of confusion, dilution or other forms of unfair exploitation of trademarks. On the
other hand, the growing familiarity of consumers with Internet technology will probably
influence the legal assessment of such practices. The general problem with such cases is
that each jurisdiction seems to draw the line between acceptable and infringing practices
differently.91 Such differences make it difficult for enterprises to formulate a coherent
marketing strategy for their activities in electronic commerce.

The following examples illustrate this concern: USE OF TRADEMARKS AS METATAGS92

A metatag is a keyword embedded in a web site’s HTML code as a means for Internet search
engines to categorize the contents of the web site. Metatags are not visible on the web site
itself (although they can be made visible together with the source code of the page);
however, a search engine seeking out all web sites containing a particular keyword will find
and list that particular site. The more often a keyword appears in the hidden code, the
higher a search engine will rank the site in its search results. In various jurisdictions,
trademark owners have challenged the unauthorized use of their trademark as a metatag.

One problem in such cases is that the trademark is not primarily used to distinguish
particular goods or services. In other contexts, the use of another’s trademark as a metatag
may be legitimate “fair use,” for example, if a retailer uses a trademark as a metatag to
indicate to prospective customers that it is offering the trademarked goods.93 “SALE” OF TRADEMARKS AS KEYWORDS

The web sites of Internet search engines are among the most frequented sites on the
Internet. As such, they are particularly attractive to advertisers. Some of these search
engines “sell” keywords to advertisers who want to target their products to a particular
group of Internet users. This results in the outcome that, whenever the keyword is entered
into the search engine, an advertisement appears along with any search results. ACCEPTABLE UNAUTHORIZED USE

Legal systems may provide exceptions for the “fair use” of a sign that is protected as a
trademark.94 Such exceptions often apply when a sign is used fairly and in good faith in a

91 This is evidenced by the replies to the WIPO Questionnaire “Hypothetical Cases Concerning the
Use of Trademarks on the Internet”, summarized in WIPO document SCT/3/2, paras.16-21.

92 See WIPO document SCT/2/9, paras.79-104. See also D. M. Cendali, C. E. Forssander &
R. J. Turiello Jr., “An Overview of Intellectual Property Issues Relating to the Internet,” 89 Trademark
Reporter at pp.529-532 (1999); S. Chong, “Internet Meta-tags and Trade Mark Issues,” E.I.P.R., at
pp.275-277 (1998); N. S. Greenfield & L. Cristal, “The Challenge to Trademark Rights by Web
Technologies: Linking Framing, Metatagging and Cyberstuffing,” Trademark Law and the Internet, at
pp.207-216 (1999); T. F. Presson & J. R. Barney, “Trademarks as Metatags: Infringement or Fair
Use?,” AIPLA Quarterly Journal, at pp.147-178 (1998).
93 For “fair use” of a trademark as a metatag see e.g., Playboy v. Enterprises Inc. v. Welles, 7 F.

Supp.2d 1098, 47 U.S.P.Q.2d 1186.

94 This is explicitly recognized by Article 17 of the TRIPS Agreement.

purely descriptive or informative manner. It is also often stipulated that such use should not
extend beyond that which is necessary to identify the person, entity or the goods or
services, and that nothing is done in connection with the sign which might suggest
endorsement or sponsorship by the trademark holder. Such exceptions may be equally
applicable when a sign is used on the Internet.95


Because of the heightened attention that fame attracts, well-known marks have for a long

time been considered to warrant special protection, over and above that accorded to other,
ordinary marks under intellectual property law.96 That special protection is well established
in the Paris Convention as well as in other regional or international agreements.97 While

there is an international obligation to accord protection to well-known marks, there exists

no established treaty definition of what constitutes such a mark. It is left to the
appreciation of the competent authority in the country where protection is asserted.98

Well-known marks have been the special target of a variety of abusive practices on the
Internet. Moreover, the international dimensions of electronic commerce are bringing
pressure on the current territorially based protection of well-known marks. WIPO through
the SCT has been working to develop provisions on the protection of well-known marks,
which were adopted as a Joint Recommendation by the WIPO General Assembly and the
Paris Union Assembly in September 1999.99 The provisions intend to clarify, consolidate and
supplement the existing international protection of well-known marks, as established by
Article 6bis of the Paris Convention and Articles 16.2 and 16.3 of the TRIPS Agreement. In
particular, the Joint Recommendations in Article 2 contain a list of factors that may be used

95 See WIPO document SCT/2/9, paras.98 to 101; see also D. M. Kelly & J. M. Gelchinsky,
“Trademarks on the Internet: How Does Fair Use Fare?,” 114 Trademark World, at pp.19-22 (1999).
96 See Report of the WIPO Internet Domain Name Process, at para.247 at
97 The protection of well-known marks in the Paris Convention is provided for in Article 6bis, section

(1) of which provides as follows:
“The countries of the Union undertake, ex officio if their legislation so permits, or at the request of an

interested party, to refuse or to cancel the registration, and to prohibit the use, of a trademark which

constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark

considered by the competent authority of the country of registration or use to be well known in that

country as being already the mark of a person entitled to the benefits of this Convention and used for

identical or similar goods. These provisions shall also apply when the essential part of the mark

constitutes a reproduction of any such well-known mark or an imitation liable to create confusion
98 While Article 6bis of the Paris Convention is silent on what constitutes a well-known mark, Article

16.2 of the TRIPS Agreement provides some guidance as to the criteria that such a competent

authority must take into account in forming its assessment:
“Article 6bis of the Paris Convention (1967) shall apply, mutatis mutandis, to services. In determining

whether a trademark is well-known, Members shall take account of the knowledge of the trademark in

the relevant sector of the public, including knowledge in the Member concerned which has been
obtained as a result of the promotion of the trademark.”

For discussion of international and national protection of well-known marks, see F. W. Mostert,
“Famous and Well-Known Marks,” (1997).
99 See “Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks,”

Standing Committee on the Law of Trademarks, Industrial Designs and Geographical Indications,

WIPO document SCT/3/8 (October 1999).

by a competent authority to determine whether a mark is well-known in its territory.100
While the Joint Recommendation does not have the force and effect of a treaty, Member
States may consider the use of any of these provisions as guidelines for the protection of
well-known marks.

Article 6 of the Joint Recommendation expressly addresses conflicts between well-known
marks and domain names. According to this provision, a domain name shall be deemed to
be in conflict with a well-known mark at least where that domain name, or an essential part
thereof, constitutes a reproduction, an imitation, a translation or a transliteration of the
well-known mark, and the domain name has been used or registered in “bad faith.” It is
understood that “bad faith” will include the cases that are currently known as
“cybersquatting,” that is, the registration of a well-known mark as a domain name, with the
intention of selling it to the trademark owner. In this regard, WIPO, in the
recommendations in the Report of the WIPO Internet Domain Name Process (discussed
below), developed a definition of an abusive, bad faith registration of a domain name.101


Commerce means competition, and where there is competition, acts of unfair competition
are liable to occur. Electronic commerce is no exception. This new channel of commerce
has, for some time, been regarded as a “wild west”, where almost anything can and does
happen. Electronic commerce will realize its potential, however, only if some scope of
protection and recourse against acts of unfair competition is provided. Protection against
unfair competition supplements the protection of intellectual property rights. Without such
protection, companies are likely to gauge the risks of damage to their reputations, loss of
customers and liability from engaging in electronic commerce, with the threatened
consequence that innovation and freedom of competition is stifled.

Whereas issues concerning trademarks and the Internet have been at the forefront of
discussions, questions relating to acts of unfair competition have attracted much less

100 See id., Article 2. (Determination of Whether a Mark is a Well-Known Mark in a Member State).
101 The Report of the WIPO Internet Domain Name Process provides that registration of a domain
name shall be considered to be abusive when all of the following conditions are met:
(i) the domain name is identical or misleadingly similar to a trade or service mark in which the
complainant has rights; and
(ii) the holder of the domain name has no rights or legitimate interests in respect of the domain name;
(iii) the domain name has been registered and is used in bad faith.
For the purposes of paragraph (iii), the following, in particular, may be evidence of the registration and
use of a domain name in bad faith:
(a)an offer to sell, rent or otherwise transfer the domain name to the owner of the trade or service
mark, or to a competitor of the owner of the trade or service mark, for valuable consideration; or
(b) an attempt to attract, for financial gain, Internet users to the domain name holder’s web site or
other on-line location, by creating confusion with the trade or service mark of the complainant; or
(c) the registration of the domain name in order to prevent the owner of the trade or service mark from
reflecting the mark in a corresponding domain name, provided that a pattern of such conduct has
been established on the part of the domain name holder; or

(d) the registration and use of the domain name in order to disrupt the business of a
Report of WIPO Internet Domain Name Process, at para.171 (1999), at

attention. Protection against unfair competition, however, covers an even broader scope of
issues relevant for electronic commerce. It provides a legal framework for all forms of
marketing, and it supplements the protection of intellectual property through statutory
rights. So far, electronic commerce has not been subject to specific regulations dealing with
matters of unfair competition. National or regional laws apply together with international
provisions contained in the Paris Convention102 and the TRIPS Agreement.103 The
application of these rules to electronic commerce, however, poses a number of problems.

As the most flexible part of industrial property law, unfair competition law may offer
solutions to of the new problems that have arisen in electronic commerce.104 Nevertheless,

problems may arise with regard to the following issues:

• Interactive marketing practices
• Transparency and privacy concerns
• National versus international standards of “unfair” marketing practices
• Trade Secrets


Domain names are a simple form of Internet address, designed to serve the function of
enabling users to locate sites on the Internet in an easy manner.105 Domain names may be
registered in spaces known as “generic top-level domains” (gTLDs), such as .com, .org or
.net, or in the “country code top-level domains” (ccTLDs), such as .ch (Switzerland), .fr
(France) or .za (South Africa).

Precisely because domain names are easy to remember and use, the domain name system
(DNS) – the central system for routing traffic on the Internet – has assumed a key role in
electronic commerce.

As commercial activities on the Internet have increased, domain names have acquired
increasing significance as business identifiers and, as such, have come into conflict with the

102 In particular, Article 10bis of the Paris Convention provides that States party to the Treaty must

provide effective protection against unfair competition. Any act of competition contrary to honest

practices in industrial or commercial matters constitutes an act of unfair competition, and in particular
“all acts of such a nature as to create confusion by any means whatever with the establishment, the
goods, or the industrial or commercial activities, of a competitor.”
103 Article 39 of the TRIPS Agreement relies on the obligation to provide protection against unfair
competition in Article 10bis of the Paris Convention as a basis for extending protection to “undisclosed
information,” also known under various national laws as trade secrets.
104 See the responses to the WIPO Questionnaire “Hypothetical Cases Concerning the
Use of Trademarks on the Internet”, summarized in WIPO document SCT/3/2, paras.16-21; a majority

of responses considered Internet-specific forms of trademark use, such as metatagging, sale of

keywords, as acts of unfair competition.
105 A domain name is the alphanumeric address of a computer, such as A domain

name allows a user to locate a computer site on the Internet without the need to resort to the unique

underlying numeric address, known as the Internet Protocol (IP) address (e.g.,

Distributed databases on the Internet contain the lists of domain names and their corresponding IP

addresses and perform the function of mapping the domain names to their IP addresses for the

purpose of directing requests to connect computers on the Internet. The DNS is structured in a

hierarchical manner that allows for the decentralized administration of this name-to-address mapping.

system of business identifiers that existed before the arrival of the Internet and that are
protected by intellectual property rights, namely, trademarks and other rights of business
identification, geographical indications and the developing field of personality rights. The
tension between domain names and intellectual property rights has led to numerous
problems that raise challenging policy questions.


The Web is a territory where caveat emptor is the rule and, as a result, consumers
increasingly rely upon strong brand awareness and brand performance for the confidence to
engage in e-commerce.106 While trademarks are of greater importance in this virtual
environment, they are also more vulnerable to infringement, dilution and anti-competitive
practices. Trademark owners expend vast resources, engaging automated ‘web crawling’
software and cyber-surveillance firms, to monitor the billions of Web pages and protect
their intellectual property rights. Because of the way in which people and search engines
operate, most businesses use their trademark or trade name as their domain name and this
has caused conflict with the advent of predatory practices, known as ‘cyber-squatting.’


In Yahoo, Inc. v. Akash Arora107 the defendant, who was running a business similar to the
plaintiff, was restrained from using the domain name ‘’ which had the format,
content and colour scheme identical to the plaintiff’s ‘’. Extending the benefit of
passing off action to cases where the business was rendering ‘services’ through internet domain
names, the Court while enjoining the defendant from using the disputed domain observed that
‘Yahoo’ has acquired distinctiveness with respect to the plaintiff’s business so the fact of its
being a dictionary word is inconsequential.

In Rediff Communications Ltd. v. Cyberbooth108, the defendant had adopted the domain name
‘’ despite the existence of the plaintiff’s well-known web-site ‘’.
The Court granted interim injunction against the defendant and held that in cases where
malafide intent to cause deception is established, any further inquiry on likelihood of confusion
would be unnecessary. Court apparently relied upon the assumption that ‘Internet users may be
unsophisticated consumer of information’ formulated in the above-mentioned Yahoo case.

Indian Courts clarified their position with regard to generic domain names in Online India
Capital Co. Pvt. Ltd. & Another v. Dimension Corporate109 where the competing domain names

were ‘’ and ‘’ with a slight difference of

106 See Laura Rush, “Top E-Commerce Companies Analyzed,”, (July 30, 2002) at; and Robin D. Rusch “Apple Shines: 2001 Brand of the Year
Results,” (March 4, 2002) at
107 1999 PTC (19) 201. Decided on February 19, 1999 by Dr. M.K. Sharma, Judge at High Court of

Delhi, India. First Indian decision on Internet domain names.
108 2000 PTC 209.Decided on April 22 & 23, 1999 by A. P. Shah, Judge at High Court of Bombay,

109 2000 PTC 396. Decided in May, 2000 by K S. Gupta, Judge at High Court of Delhi, India.

a ‘s’. The Court while dismissing the plaintiff's claim held that attainment of a secondary
meaning by the generic domain name is a pre-condition for granting protection to it as no one
can claim monopoly over a generic word otherwise.

In Tata Sons Limited v. Manu Kosuri & Ors.110 plaintiff’s trademark TATA was registered by the
defendant in many variations e.g.,, etc. While
upholding the passing off action, the Court restrained defendant from using any domain name
relating to TATA and observed that domain names are entitled to equal protection as a
trademark as they are more than a mere internet address.

Similarly in Dr. Reddy’s Laboratories Limited v. Manu Kosuri111 the plaintiff, which was a
pharmaceutical MNC had a registered trademark/domain name ‘DR REDDYS’ after the personal
name of the founder and had acquired distinctiveness/secondary meaning. Holding the
defendant to be a cybersquatter the Court restrained him from using the domain name
‘’ as otherwise it could cause confusion and deception to the Internet users.


In Bennett Coleman & Co. Ltd v. Steven S. Lalwani112 and Bennett Coleman & Co. Ltd v. Long
Distance Telephone Company113 the respondent registered the domain names
‘’ & ‘’ respectively which were identical to plaintiff’s
domain names ‘’ & ‘’ used by him for electronic
publication of their leading newspapers ‘The Economic Times’ & ‘The Times of India’
respectively. The domain names in contention redirected Internet users to the respondent's
web-site ‘’ which provided India-related news. The WIPO panel confirmed
satisfaction of all elements contained in Para 4(a) of UDRP and ordered transfer of impugned
domain names to complainant.

In Tata Sons Ltd v. The Advanced Information Technology Association114 the complainant, an
Indian MNC owned the well-known trademark TATA (a rare surname) which was registered by
the Indian respondent as ‘’. The panel found that the respondent had kept the web-site
inactive and had not furnished explanation for adoption of the said word and therefore he
should transfer the domain to the complainant as all the three elements of claim under para
4(a) of UDRP are fulfilled.

In Microsoft Corporation v. Amit Mehrotra115 the WIPO panel found that the domain name
‘’ registered by respondent was identical and confusingly similar to the trademark
‘MICROSOFT’( in which the complainant had rights and respondent had no legitimate interest)
and that the respondent’s domain name had been registered and was being used in bad faith.

110 2001 PTC 432 (Del). Decided on March 9, 2001 by Mukul Mudgal, Judge at High Court of Delhi,

111 2001 PTC 859 (Del). Decided on February 28, 2001 by N.G.Nandi, Judge at High Court of Delhi,

112 Case No. D2000-0014, Adm. Panel Decision, WIPO Arb. and Med. Centre.
113 Case No. D2000-0015, Adm. Panel Decision, WIPO Arb. and Med. Centre.
114 2001 PTC 129 (WIPO). Adm. Panel Decision Case No. D2000-0049 decided on April 6, 2000.
115 Case No. D2000-0053, Adm. Panel Decision, WIPO Arb. and Med. Centre.

In Mahindra & Mahindra Limited v. Neoplanet Solutions116 the Complainant was a well-known
manufacturer and exporter of tractors and utility vehicles under the trademark 'Mahindra'
which, at least in relation to motor vehicles, was associated exclusively with the Complainant.
The Panelist concluded that the respondent’s domain name “” be transferred to
the complainant as it was identical to the trademark of the Complainant in which the
respondent had no legitimate interests and had been registered in bad faith.

In ITC limited v. Buy This Name117 the complainant, trading under the coined service mark ITC,
had registered several domain names in which ITC formed a leading and distinctive part, such
as; <> <> <> <> <> <>
<>. The respondent's domain name "itc threadneedle" was held to be
confusingly similar to the Complainant’s ITC Threadneedle trademark and a bad faith
registration and the respondent was thereby ordered to transfer it to the complainant.

In IIT Bombay, Powai, v Indsoft118 the Domain Name in dispute was <> registered
with the respondent which was confusingly identical to the complainant's distinctive service
mark IIT which had gained immense goodwill and reputation for its superb academic education.
The Panel decided that the Respondent should transfer the domain as he had no rights or
legitimate interests in respect of the said domain and because it had been registered and was
being used in bad faith.

Microsoft Corporation v. Deepak Chandwani & Anr., the defendant, a Delhi based Computer
and networking company, had without permission, registered the ‘famous’ trademark
‘MICROSOFT’ as a part of a domain name ‘’ and also used the same as a
trademark on its website. The Delhi HC restrained the defendant from using the domain name and also from transferring its rights to the third parties.


Inventions are characteristically protected by patents.119 The patent system provides a
framework for innovation and technological development by, on the one hand, granting an
exclusive right to the owner of a patent to exploit an invention for a limited period120 and,
on the other hand, balancing this right with a corresponding duty to disclose the
information concerning the patented invention to the public. This information, which is
classified and stored in the patent documentation, is available to anyone and, increasingly,

116 Case No. D2000–0248.

117 Case No. D2002-0007.
118 Case No. D2002-0078.
119 Virtually every country that accords legal protection to inventions – and there are more than 155
such countries – gives such protection through the patent system. In addition, inventions may also be
protected by other types of rights, such as utility models or trade secrets. The international protection
conferred by a patent is recognized in two multilateral treaties: the Paris Convention for the Protection
of Industrial Property (the Paris Convention), to which 156 States are party, and the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), by which 135 States are
120 The exclusive right to exploit an invention is generally granted for a period of 15 to 20 years from
the date of filing a patent application. See Article 33 of the TRIPS Agreement.

is accessible through online, Internet-based systems.121 The mandatory disclosure of the
invention thus enriches the available pool of technological knowledge, facilitates technology
transfer, and enhances the opportunities for creativity and innovation by others.122

The patent system has played a vital role in promoting the development of the underlying
technical infrastructure for electronic commerce. Electronic commerce relies in a critical
way on the various computer and network technologies, both hardware and software. The
market exclusivity established through effective patent protection has provided a reward for
investment and has justified the expenditures on research and development to achieve
further technological progress. However, the new technologies pose challenges to the
conventional legal scheme for the patent system. This section addresses several of the new
issues associated with digital media and electronic commerce in the context of patent


In order to be eligible for patent protection, an invention must fall within the scope of
patentable subject matter. Article 27.1 of the TRIPS Agreement provides that, subject to
certain exceptions or conditions under that Agreement, patents shall be available for any
inventions, whether products or processes, in all fields of technology, provided that they are
new, involve an inventive step and are capable of industrial application. While limited
exceptions are possible under the TRIPS Agreement – and provided for in some national
laws – the general rule is that patent protection for an invention will not be refused simply
because of its field of technology.

Patents have recently been granted to certain inventions concerning financial services,
electronic sales and advertising methods, business methods, including business methods
consisting of processes to be performed on the Internet, and telephone exchange and billing
methods.123 It is expected that the number of these eCommerce-type patents may increase
significantly, bearing in mind the significant potential of electronic commerce to individuals,
companies and national economies, as well as to the global economy. Such patents are
viewed as important for creating incentives and spurring investment in new technologies.

121 A number of offices provide patent information on Internet: for example, the United States Patents
and Trademarks Office (, Japanese Patent Office (,
European Patent Office (, Canadian Intellectual Property Office
( and Industrial Property Information Center in Thailand (
For a discussion of WIPO’s plans to make public international patent data available online, see
Chapter V (WIPONET). See also the list of national intellectual property offices (with corresponding
Internet addresses) in Annex III.
122 The patent system thus encourages the dissemination and transfer of technological knowledge by
granting a fixed-term, market exclusivity to an inventor in return for the clear and complete disclosure
of the invention. See TRIPS Agreement, Article 29.
123 A recent decision in the United States, for example, found a business method to be patentable
subject matter. State Street Bank & Trust v. Signature Financial Group, 47 USPQ 2d 1596 (CAFC
1998) (the decision upheld a patent for a particular business model for managing an investment
portfolio). See also AT&T Corp. v. Excel Communications, Inc., No. 98-1338, 1999, WL 216234, __
F.3d __ (Fed. Cir. Apr. 14, 1999) (“[the focus in determining whether an invention containing a
computer algorithm recites patentable subject matter is] not on whether there is a mathematical
algorithm at work, but on whether the algorithm-containing invention, as a whole, produces a tangible,
useful, result”).

On the other hand, this trend has been criticized by those who would stress that a number
of such patents concerning business practices and methods reflect familiar ways of doing
business which are not new or novel: the only aspect that is different is that they occur in
cyberspace.124 In Europe there is a view that the subject matter of a patentable “invention”
shall have a “technical character” or involve “technical teaching,” i.e., an instruction
addressed to a person skilled in the art as to how to solve a particular technical problem
using particular technical means.125

A similar discussion concerning patentable subject matter has occurred in respect of
software patents, as the significance of software itself extends well beyond the software
industry. The TRIPS Agreement does not allow the exclusion of software in general from
patentability.126 In a recent Communication from the European Commission, it was stated

that the law on patentability of computer programs in the United States of America has had
a positive impact on the development of the software industry there.127 In this context, the
Commission proposed a draft Directive to harmonize the conditions for the patentability of
inventions related to computer programs. Although some patent offices have established
examination guidelines for computer related inventions, including software related
inventions, very little international harmonization has been achieved in this area.128

124 See, e.g., “Are Patents Good or Bad for Business On-Line,” The New York Times, Technology Law
Journal (August 28, 1998). Because the phenomena of cyberspace and electronic commerce are so
new and still emerging, it is argued that gauging the novelty of a business model in this area and
whether it meets the requirements of patentability is not easy. It is also contended that competition
may be harmed in the digital market place if companies are able to obtain patents for basic business
methods that already exist in non-cyberspace. On the other hand, others indicate that patent
protection is merited given the technological innovation reflected in such new business models and
that this protection is needed in order to provide incentive for further investment in new on-line
businesses. A lawsuit filed in October 1999, in which, the Internet book seller, has sued
its rival,, illustrates the stakes involved., in September 1997,
started using a “one-click” technology to enable its online customers to make repeated purchases
from its web site without having to repeatedly fill out credit card and billing address information. It
received a patent for its one-click technology in September 1999 (United States Patent no.
5,960,411), and alleged that’s one-click checkout system, known as “Express
Lane,” infringes its patent. See “ faces suit by Amazon Over Patent,” New York
Times: Technology (October 23, 1999), at Recently, in what some
have considered to be a public relations move, Jeff Bezos, the Chairman of Amazon, has urged
reform in the patent system to reduce the term of patent protection. “Chairman of Amazon Urges
Reduction of Patent Terms,” New York Times Technology section (March 11, 2000). The United
States Patent and Trademark Office has developed an action plan to respond to the new issues
concern business method patents. See
125 See, e.g., Guidelines for Examination in the European Patent Office, Part C, Chapter IV, 1.
126 Article 27(1) of the TRIPS Agreement requires that patents be available “in all fields of technology,
provided that they are new, involve an inventive step and are capable of industrial application.” This
broad requirement of patentability has prompted a discussion on the subject of where to draw the line
between copyright and patent law protection for computer programs. See e.g., “The Relative Roles of
Patent and Copyright in the Protection of Computer Programs,” 17 J. Marshall J. Computer & Info. L.
41 (Fall 1998).
127 Communication of the European Commission to the European Council, the European Parliament
and the Economic and Social Committee, February 5, 1999 COM (1999) 42.
128 In 1996, the United States Patent and Trademark Office issued its Examination Guidelines for
Computer-Related Inventions, 61 Fed. Reg. 7478 (1996), which indicate that if the practical use of an
abstract idea is patentable, subject to the denial of protection for scientific principle, then its
disembodied instruction (expressed on a tangible media) is patentable, because patents provide

control over the making of an invention and functionally descriptive computer instruction serves that
purpose. The Japanese Patent Office published, in 1997, the Implementing Guidelines for Inventions
in Specific Fields, Chapter 1 of which contains examination guidelines for computer software related

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