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12. marraskuuta 2005

A short treatise on copyright and contracts

Contract-based copyright


This is a legal study intended to clarify some well known phenomena traditionally handled by lawyers and judges. However, the usual and reasonable boundaries of the legal paradigm – jurisprudence – are not respected here, because they are felt to be mostly useless. This seems to be true concerning many kinds of boundaries and frontiers to-day, not least those of sovereign states and commercial circuits. Frontier, front, was for a very long time the defining attribute of domains. Transfer to digital domains seems to crumble this tradition.

For a person writing of copyright and more generally Intellectual Property Rights it is normal and reasonable to characterize these rights as useful and necessary incentives for the authors (inventors) and business-companies using IP-rights. The creators should pick their brain and the moneyed men should feel free to invest.

We contest here the economic, social and consequently the legal incentive-effect and claim that mostly this argument is being repeated as a kind of liturgical argument in order to promote a set of whimsical legal norms and institutions. Although positive evidence exists for the effect of spurring people and enterprises to spend in research and development by granting them monopolies, this evidence is not convincing. As a matter of fact we are still, after more than one hundred years of copyright and patents, rather ill informed about the workings of IP-rights, at least regarding quantifiable effects. We also contest the often quoted idea of “just reward” for authors and inventors. The idea for a just reward for employees is weird. The idea of a just price for goods or services is simply outlandish. Why then should this biblical idea prevail in law?

There is a lot of anecdotal evidence about copyright-millionaires and crucial inventions implemented and protected by patents. Simple arithmetic exercises on copyright income seem to corroborate the intuitive feeling. Less than 1 % of authors in any given time get more than 99 % of the royalties. Six authors’ new books 2002. A good guess is that more than 90 % of patents granted never turn into products in market. Very possibly 99 % might be a closer approximation. However, it may be possible to proove that this is impossible to proove. Using a valid patent for an existing product seems to be a problem for patent attorneys, and their opinions are very seldom tested in law-courts. Negative answer will often turn up immediately after reading the patent-claims. Positive answer will typically demand several hours’ work and quite a lot of documents, like referred publications. And this was about comparing two patent-writs. Comparing a patent with a product is for obvious reasons much more time-consuming.

Getting reward for one’s toils seems to be more a religious or spiritual goal than a quantifiable economic phenomenon. Empiric, quantifiable evidence about just reward for creative individuals seems to be impossible to find. Mostly the is no “reward”, albeit a just one.

The great traditional sociologists – Weber, Tönnies, Parsons – and before them The Philosophers identified peer recognition or peer acceptance as a typical yearning of human beings. This recognition assuredly is not translated into money. It is trivial to notice that best-selling lists in literature, art, music, entertainment or useful industrial inventions has nothing to do with the value of works (inventions) as defined by the cultural conventions and proved by accumulating experience.

A very typical example of non-monetary system of rewards is science, liberal arts included. We have famous commercial research laboratories like Bell Labs, and Nobel-prizes – but getting rich or even getting moneyed is never mentioned as a motive for scientific endeavor. Getting famous or recognized is very often mentioned and in a way rankings of universities and research institutes convey this set of “rewards”.

The visible works and inventions, always mentioned as arguments for a strong copyright and still stronger patents, seldom are as sustainable and as durable as Gillette razors, which were patented before the Great War and did change the face of the world and famous men – almost all of them clean shaven from 1920ies after more than hundred hairy years.

This means neither saying that people who sire the great creative ideas are doomed into poverty and oblivion, which is a piece of romantic fiction, nor claiming that the economic yield of works and invention goes necessarily to the deep pockets of middlemen. We contend ourselves to note that there do not seem to be working formulas or equations for defining or identifying “intellectual goods” or “information goods”. Accordingly the now very popular catch-words “social capital” and “intellectual capital” are funny but misleading. If economic growth comes from work, land and capital (quantified as money owned or borrowed), information may well be added to the list as the fourth factor of production besides work and entrepreneurship as human resources. But even that is vague, because “information” is the very thing needed for bringing a clever combination of the three factors of production to market in order to create cash-flow. Foothold in business means combining land, work and labor skillfully. Arguing that information is the fourth factor of production does not mean that it would be a form of capital.

Using traditional reading of the word “capital”, physical capital is the stock of products set aside to support future production and consumption. In the national income and product accounts, private capital consists of business inventories, producers' durable equipment, and residential and nonresidential structures. Financial capital is funds raised by governments, individuals, or businesses by incurring liabilities such as bonds, mortgages, or stock certificates.

By comparison human capital could be the education, training, work experience, tacit knowledge and other attributes that are demanded of people as labor force, when they produce goods and services for business enterprises and ultimately to consumers, their likes. Bank capital is the sum advanced and put at risk by the owners of a bank; it represents the first "cushion" in the event of loss, thereby decreasing the willingness of the owners to take risks in lending.

Therefore it is by no means cynical to say that Intellectual Property is commonly described in a way that does not bear any striking correspondence with reality, and defended using arguments that are neither true nor sincere. Because we live in a possible world, we have the duty to accept “facts” as they are, and we have the moral obligation to protest flagrant cases of misinterpretation. This is why we say that IP-laws are facts and as such part of the fabric of business and other dealing. Their goals and justifications are not true. Possibly this disparity is not at all serious.

However, it calls forth an observation that was probably first used in theatre and which sometimes is referred to in legal theory. It is the idea of double standards. In stage plays, says Stanislavski, you always have the text and the sub-text. People say something and actually mean something else. In Chekhov the important feelings, ideals, ideas and true facts are never even mentioned. The audience will understand that talking about a cherry-orchard or selling everything and moving over to Finland has very much to do with malcontent and fear and loathing of the prevailing conditions. In law it has been demonstrated that a very tight group, like a platoon in war, actually has a set of very clear rules or “laws” and means of enforcing them – in flagrant contradiction with the military rules and official criminal code. Deserting might be a major crime in military tribunal. Deserting one’s chums by leaving the machine-gun and running seems to be the ultimate offence – except when the gunner is considered to be out of his mind or too tired.

As a matter of fact the phenomenon “Soft Law” that we are going to discuss later on in this paper means acceptance of these two or several sets of “laws”. Even major enterprises are very often very willing to renegotiate according to the guidelines established on the branch, instead of falling back to the difficult, slow and expensive means used by the Sale of Goods Act.

It is possible that we actually have two sets of Intellectual Property Laws – the official ones and then a second set consisting of definitions and rules as they are actually used.

It is here not question of commercial usages that could be printed in invoices, like conditions of transport. It is question of “commercial culture” that could be observed and assessed using same methods as the ethnologist do observing mating rituals of gorillas or inheritance patterns in Polynesian cultures.

There is a very important hypothesis, which might explain the existence and extent of these sets of “no-right” or as we would prefer calling them “quasi-laws”. Mostly laws are written and interpreted as something about well-defined entities, meaning people, companies and other legally recognized organizations. Between individuals and established organizations there seems to exist something that nowadays is called virtual groups or peer groups. These groups are ephemeral like thousand fans of Arsenal on their way to see the game. Mostly these people do not know each other, the majority of them do not wear insignia, scarves or caps of Arsenal, but however they behave in a statistically very easily described way. You may take some other weekend and other people – and the statistically observed “laws” are still valid. Without knowing a single person by name we and the people on their way to the game or returning we know exactly, what is happening and what will happen. We even know the amount of beer consumed and the income for selling refreshments – beforehand, before anything happened.

We adopt here the term “peer group” from digital networks, mostly because this social phenomenon is so interesting. People elect themselves as members of the peer group. Normally no fees exist and no membership cards are signed. You join just by walking in. The difference of Arsenal fans is rather large, when we compare them with people walking from Trafalgar Square any Monday between 8 and 9 o’clock. The latter would not be called a group. It is a crowd. It is an open system and therefore haphazard, the former is a closed system. Here we use terms of systems theory. A system may be closed although elements constantly escape and are drawn in. The dynamics is the important thing. A crowd is constantly monitored using basically methods derived from the equations concerning the flow of liquids; this is what happens in underground railway passages and platforms. Peer groups often are anonymous so that their members true identity is irrelevant. Anyhow, these groups develop or use sometimes utterly sophisticated rules, as they do playing computer games in networks. Matter-of-fact peer groups, like the one writing and editing an encyclopedia for the Internet, has moderators and rules and defenses against malevolent intruders, and sometimes the members vote for inclusion or exclusion of contributions.

In copyright and patents the problem of groups is now really difficult. Protected works are created and bought by ill-defined groups, like novels and non-fiction works for “general readers” sometimes by tens of participants, even if somebody is “the author”. As far as is known some of the household names publishing blockbusting bestsellers of crime, mystery and romance, are actually “manufactured” by large groups. The same would be true concerning people, who succeed in bringing to market one thousand pages of modern times, another large work on the birth of modern times and a third one of the history of American people followed by a history of the Jews – all this in less than ten years.

Patents are typically products of team-work. Solitary inventors nowadays mostly confine themselves in novelties. To take only two examples, pharmaceutical products and electronics and computer programs are rarely “invented” but very often “developed” in a very businesslike way and then eventually patented.

In both laws the association of authors or inventors is left undefined, except that everybody’s consent is necessary for all legally relevant dealing with the work (invention). This is, to say the least, very awkward.

It is a fact that Copyright Law and Patent Law are very potent factors in world trade today. It also is a fact that these very complicated sets of rules exist and therefore we have to find ways of living with them. It is a third fact that many highly visible anti-copyright movements like “copyleft” are based on the very ideas of copyright. You have to have an exclusionary property right to relinquish it.

Being well aware of the corpus of Intellectual Property Law we suggest to relinquish for a moment some of its basic tenets. So we are able to study our experience regarding the consequences of using what is called

For the sake of clarity we mostly talk of copyright meaning that the points of view presented should be used mutatis mutandis in Patent Law.

An analysis

We are presenting here an analysis on copyright based on its transfer. Both the argument and the conclusions differ, as far as we know, from the established legal thinking of copyright. Our thesis is that copyright seen through transfers, meaning contracts, acquisitions of companies holding copyrights, market-operations made by collecting societies etc., are easily divided in two very different groups. Transfer of copyright proper means granting specific rights to publishing, exhibiting or performing protected works. The rules are incorporated in national Copyright Acts – or they ought to be, though in practice this important and economically valuable part of copyright is left to very vague and sometimes obsolete rules mostly referring to established conventional practices. [3]

2. Transfer of goods containing works in copyright is just sale of goods, ruled by ordinary law.[4]

In addition, rendering services often includes transferring copyright. An example might be contracting for planning and constructing a cell-phone network, which typically means using or writing some software like middleware. Middleware is software that facilitates interoperability by mediating between layers, like an application program and a network, thus masking differences or incompatibilities in network transport protocols, hardware architecture, operating systems, database systems, remote procedure calls, etc.

Erroneously transfers including something protected as such by copyright or a patent are sometimes interpreted as being necessarily even governed by the rules of copyright.[5] This is not so. A copy of a newspaper costing one euro most obviously is a work protected by copyright. Buying or subscribing to a newspaper has nothing to do with copyright. Using old newspapers as wall-paper, as it was once customary to do, or wrapping mackerels in them, has nothing to do with copyright.

This is the pragmatic vision. In everyday life we do not have use for the eventual copyright aspects of old newspapers. Cutting and pasting clippings is still only use of printing paper we got buying the newspaper. Duplicating the item is a copyright matter, and rather new as such. That is “making copies of a protected work” and here we start using rules of the Copyright Act. Our practice may be fair, because we are taking photocopies or scanning the newspaper for “private use”, or our use might be in the domain of copyright-holder so that we need some kind of license. This is true for a business-enterprise sending copies of a newspaper-article to its customers as well as a government agency informing officials. The same is true regarding a business-organization collecting clippings of news-items in order to refer to them in its business-activities.

In this analysis even the term “exhaustion of rights” turns out to be almost superfluous. Nobody talks of “exhaustion of property right”, which would happen, when an item is sold and passed to another person’s possession. Exhaustion of rights, now meticulously and in a very complicated way specified in Copyright Act, is made to look like something very central for the system of copyright. It is, but trivially so.

Possibly the complexity of certain copyright issues is caused by the confusion of two separate sets of rules – copyright and sales. Even the vexing problem of protection of good faith in copyright might indeed be solved in some cases. Purchaser who buys something per se protected by copyright might be – against the traditional basic rule –in certain situations protected against the copyright-holders claims based on alleged infringement of copyright. His position might be comparable with that of the purchaser of tangible goods, who can keep her goods, although somebody bought it before but neglected to secure it in her possession.

The question is, should a transfer be seen as either transfer of rights (copyright) or transfer of goods (sale) or one of the two, exactly as the alleged copyright holder wishes, or both simultaneously? There are four possibilities, the last being none of the three mentioned, but instead a hybrid “contractus mixtus” that might contain elements from many types of agreements and possibly something deeply original to boot. We believe that these questions belie a slightly old-fashioned way of dissecting a legal problem. Legal problems in the realm of digital goods and services really cannot be skinned, dissected and spread out for inspection like a dead frog. We have to see our topic consisting of dynamic systems. Options, choices, disturbances and interventions in the system very probably give different outcomes. It is not at all sure that we will get one acceptable answer in a reasonable question. There may be several answers. In best case we may be able to get something that might be called “derivative”, as in mathematics, meaning rate of change, like a set of readings for different premises.

Now, sometimes the answer is very probably binary: either - or. In our example of a person buying the daily newspaper the case is sale of tangible goods, except when the purchaser starts copying the newspaper and eventually giving these copies to others. Sometimes the answer is certainly transfer of rights, like when a person sends a short story for publication in a newspaper and the text is in due course published. Here nothing tangible changed possession between the person and representative of the newspaper. The text was sent to the editor as an e-mail attachment. The act was legally granting a simple license – right to publish the work once in the newspaper. If the manuscript was sent in paper (“hard-copy”), even that is considered as a mirror-image of the “work” and in practice either returned to the sender or destroyed as superfluous. This is a pure case of licensing. We talk here of “transfer of rights” instead of licensing. Transfer is normally based on contract, but it means here both inclusive and exclusive licenses and assignment of copyright. Even inheritance and testament, mergers and acquisitions of companies sometimes include copyrights. A “license” of course is just a subset of contracts. In Intellectual Property Law this very well established term is problematic, because besides voluntary agreements, called licenses, we have in Northern Europe something actually called contract-licenses, and then obligatory licenses. Linguistically a “license” means only a permission. In Continental usage the word “license” still has and previously had a wide use in connection of concessions called import or export licenses: you had to have a licenses to import a motor-car from Basically this technique of presenting the question is an outcome of the fundamental idea of examining phenomena in movement – as parts of processes. These processes naturally are very often deals struck in business. The fertile idea of Michael Porter seeing business processes as “value-chains” (Competitive Advantage) has obvious interest even for a lawyer, although we regret the word “chain” that once again confers to something stationary. Even in economics Sometimes business-enterprises selling software applications to the public insist in putting “license agreements” in the package. Law-courts often think that it is still only question of sale – and possibly add the argument that “dissemination right was exhausted, because the copy was distributed with the right-holder’s consent”. This really is a bit complicated, because technically the purchaser actually will copy the work. To use software you have to install it in your computer and installing it means making a copy of it – actually several partial copies that are structurally different depending of the machine and the environment defined by other applications, like operating system and possibly peripheral devices.

Our suggestion is to regard even this situation as just sale, as long as the item is used for its intended purposes. The complication of exhaustion is needed only sometimes, but then we use both / and as interpretation. The thing the person did was plain sale, but because she was later declared to state of bankruptcy and her computers including the software were sold or seized, we now have to take up to copyright-angle and explain that there are no restrictions against voluntary or involuntary resale of a computer program.

The contract is sometimes labeled as “hybrid” meaning “of mixed form”. This is basically a good way to avoid complications, but putting contradictory rules together and calling them “hybrid” is no solution. In sale the purchaser may sell the good further, but in licensing he cannot do this. Both / and is a dead-end. Either – or is the interpreter’s task. In very dubious cases the interpreter has to weigh the contract to discern its balance and rule accordingly. It is by no means surprising that an agreement is used in contradiction of its title.

In business we have many very important sets of contracts where there is no legislation. Leasing with all its variations is such institution. Franchising is another.

In franchising the idea is usually transferring the right to use a business-concept together with everything belonging to it – like copyrights, patents and trade-marks. The classical examples of franchising is service stations (Shell, BP etc.) and fast-food chains (MacDonald’s). There is a core product (gasoline – hamburger) with a family of trade names and trade coats. Often both the products and the services are meticulously standardized. The franchise-taker is legally an independent enterpriser. The difference between franchise-takers, enterprises belonging to a chain and shops or offices of a large enterprise is huge. Mostly it is question of financing and bearing the business risk. An enterpriser has the risk of commercial failure even if she has very little say on the assorted goods and their prices. There are chains of supermarkets, where the enterpriser is actually rather free to make choices. There are co-operative enterprises, where the foremen of individual shops are by definition employees of the co-operative (S-chain in Finland, KO in Sweden). There are enterprises dealing with material in copyright like the railway-bookshops (R-kioski), where some people are independent and others are franchise-takers. The Finnish R-chain is the market-leader in hiring and selling feature films in VHS and DVD. Who is responsible if a kiosk starts selling what it is only entitled to hire? What happens if in a kiosk photocopying printed material in sale is encouraged? What is the solution, if copying music or video is arranged by the kiosk?

The examples are not strange at all. The R-group has quite many “information products” in sale besides papers, magazines and video. They handle the chip-cards for communal buses. They sell parking-time for cars used by cell-phones. They render services acting as agents of the hugely popular national betting and lottery agency (Veikkaus Oyj), nowadays completely networked and acting in real time.

In dealership of gasoline or cars the importers and even manufacturers bear responsibility for product damage. There is no legal responsibility for the negligence of the dealer. If the dealer, who breaks the customer’s windshield when cleaning it, happens to be an employee, the employer is responsible. If he is “independent”, claims must be directed to him. There actually is an established practice on damages of forgetting the cap of oil refill tube with consequent damage to the motor; the insurance companies seem to cover this typical case.

For infringement of IPR there is no experience of dividing responsibility in a chain.

This is radical. Certainly it goes against acquired wisdom in our area. But things happen. Even hard physical scientific facts sometimes turn out to be mere sets of beliefs. Legal doctrines, even the best of them, are exactly that, sets of beliefs. He we are not talking of legal rules included in a law or a precedent, but instead rules of interpretation or tests developed mostly by legal scholars. Some doctrines are just rephrasing familiar ideas or adding insult to injury.[7]


Before going further we present a sweeping generalization. Everything in law, legal scholarship and jurisprudence is built on the idea of a sovereign state as lawgiver and upholder of a regime of enforcing laws and upholding all decisions of law-courts. Law as a profession and academic discipline is very obviously historically related with the ups and downs of national states. We might skip Rome, which considered itself as all known world worth mentioning and therefore not a state, but an empire, and also because its legal system was something rather different from the Roman Law still sometimes taught at our European Law Schools. The version some among us are familiar with is mostly a German reading of ancient, very particular legal aphorisms. The Germans had reason to claim ancient law as a valid part of modern law, because they got their true legislative institutions promulgated by the sovereign state, The German Empire, as late as 1871. The Napoleonic Codes of France also should be seen as an organic part of the then unheard-of renaissance of administrative thinking. General courts were supposed to handle secondary and trivial disputes and misdemeanors of citizens as a part of administration, without own volition, acting as “mouth of law” (la bouche de la loi). A “citizen” was the new propagandistic name for human beings as used by the French revolution. Aux armes, les citoyens! Formerly people were called subjects, which means literally “thrown under somebody”, subjected. The laws had been presumably eternal and based in divine ordinance. The sovereign had the task to clarify these laws. The early “parliaments” outside England were popular meetings needed for administrative, not legislative, purposes. The most important task was the question of crown incomes, meaning taxes and duties. There had been an ancient German tradition of tribal legislation, but the age of absolutism, mainly 17th century, ended this development. [8]

Law in a national state is stationary and static and should be so, because it is ballast in the winds of times, which are a-changing.

We agree that recently something strange happened to national states. Europe and Russia are no more what they used to be during the previous thousand years. China, actually a civilization pretending to be a nation, is trying to make one great leap more. Large parts of world are once again defined by religion and nationalistic emotions, not economy. Economy, meaning before everything else industrial production of goods and services, transport, banking and high finance, naturally was the true ground of “modern” legislation so that lawyers even in Scandinavia used to usher in “interests of economic exchange” as an argument for further rules, when they deemed it necessary. And this made the vigilant Marxists of 70ies suspicious in their ardent search for an international collusion of capital for exploitation of the wretched of the earth. This was a chasm. The traditionalist lawyers used descriptions of economic circumstances to derive from them necessary maxims for intricate economic problems, when the more radical wing both in Western Europe and North-America understandably saw the legal institutions as tools for the prevailing, deplorable condition. Although the people, who once participated in this confrontation without any hope for mutual understanding, are still active, the sting is now blunt and the idea of either braking or advancing progress by government-given laws on economic activity feels ill-advised and stale.[9]

If the nation-state has changed profoundly, the conclusion is that legislation and legal interpretation also have changed, though we might necessarily not have noticed it. Nations have changed from monolithic, static entities that defined themselves to suit their diverse needs into dynamic systems of networked units, like the European Union. It is an error to believe that any constitution of the EU could be something comparable with the constitutions of European countries. This is the reason, why it is a bad idea to read the EU directives that proliferate in the traditional area of IPR, as something akin to Copyright Acts of its member-states. They are not. They cannot be. They are on another level. This is partly trivial, because the directives do not contain clear executable norms against violators, but oblige members of EU to arrange these things in their national legislation. This is not at all trivial, because the directives contain definitions that must be used in national litigations, like that of “data-base”.

Conceptually, the analysis of copyright issues rests on the definition of “protected work”. So it should be, because without doubt the structure of copyright differs from other exclusionary rights in private law. Though “intellectual property” and “propriété intellectuelle” are the correct names of legal disciplines and in the same way, if to a lesser extent, “industrial property” and “propriété industrielle”, practically everybody agrees that here it is not question of property at all, not even in disguise.

Since the very lively discussion during 1940ies, best remembered of the distinguished Alf Ross’s still often cited contributions, copyright has been described in Scandinavia using Svante Bergström’s formulation as “exclusionary right to dispose of a work” (uteslutande rätt att förfoga över verket).[10] The idea of copyright as a negative right to prohibit, not to mention as a servitute, are forgotten, and rightly so.

Mogens Koktvedgaard developed the theory of copyright in his great study Konkurranceprægede Immaterialretspositioner (1965). Obviously he did not think returning to the basic concepts necessary, because in his later work he mostly built on the foundations laid in this early book. As the book’s title indicates, intellectual property rights (IPR) were subsumed under the then still rather new figure of thought “retsposition”, legal position. In law of obligations we actually have not budged out of this blockhouse, although many scholars have given the concept “legal position” some new twists.

We suggest to discard this sound and solid foundation. It starts from essences – what is a “work” and what is copyright as right to this “work”. This foundation is seen as something static. It can be studied in a context. It brings forth a two-dimensioned picture of pieces on a chess-board or groups of military units on map: my position, our positions regarding the enemy. Enemies are then subdivided to general and particular third parties both in progressing and digressing direction on time-line. This is very practical but leads in practice inevitably to very complicated questions in situations, where a great amount of protected works have to be sorted out. This is the situation in many archives to-day, when copyright-lawyers try to fathom the scope and duration of all too formal or all too carelessly drawn contracts, and when there often are further acquisitions, exclusive imports, development of works sublet to separate legal entities, transfers, mergers of right-holders, testaments and inheritance.

These questions must be answered, because they are the daily bread of copyright-disputes. Nevertheless we ask, would the idea of legal positions defined by other actual or eventual legal positions possibly be by now obsolete.

Static concepts are very important in constitutional law, criminal law and law of procedure, because there concepts are jurisprudential artifacts. Everyone must be able to trust his or her reading of the concepts and definitions. In customary parlance this is seen as one element of Rule of Law. Naturally we do not know, what ultimately might be “Rule of Law”, because it is defined ex post facto, as sound and transparent legal practices, or more generally (Dworkin, Rawls) as criteria for “justice” implemented in legal practice. What then is “justice” is wisely left open.

The alternative is a dynamic reading of the focal tenets of copyright. “Dynamic” means here “changing” and it refers to a system that may be open or closed. Change is not random, but it is change inside a given system. So we are trying to use here a mathematical simile instead of a basically philosophical metaphor. We know very well that conceptually copyright is an unhappy bonding of some Platonic and some Aristotelian traditions. We have the Platonic “idea”, which is not protected per se, but turns into a legal concept redefined as an embodiment of an idea or “a work”. We have the Aristotelian topology of different, mostly physical objects. The empty concept “work” is the name of several sets of objects. This kind of topology or taxonomy is naturally a traditional means of conceiving a rational catalogue of minerals, plants, animals or figures of speech or meters in poetry. Ultimately it is willful and artificial, like the Linnaeus taxonomy of plants. Taking certain organs of plants as basis of the catalogue is immensely helpful, but it does not actually tell us much about the relationship of the plants in terms of biological proximity. In civil law in general and copyright in particular the taxonomy of “works” is a sign of need to get certain things included. A house is protected as architecture, because architects are respected artists. As far as we know, “works of architecture” have interested lawyers only in connection of some monumental buildings and even then either facades or minor details. Nobody ever wonders, what is the origin of a clapboard frame-house or a Nissen hut, and would somebody possible have the sole right to build this kind of buildings. The author may need protection against copying, which is rare in architecture or sculpture. Because of the humanistic origins of copyright, many phenomena are included, because they are considered as artworks. Some things are excluded or then cause continuously difficulties, because they were traditionally regarded as outcome of humble handicrafts – industrial design. Some things are excluded, because people generally feel tha copyright might be too restrictive. Therefore anecdotes and jokes are traditionally regarded to be in public domain, although they may be very valuable in films, television and night-clubs. Then again some things are included, because they are new discoveries and seem to be close to traditional art and vulnerable to copying, like cinema or comic strips.

Catalogues of “works” in copyright manuals and the revisions of the Berne Convention are interesting lists of technological innovations starting with photography – protected in France before Copyright Act from mid-19th century, sound-recording, broadcasting and so on until 1990ies. At present nobody actually knows, who should be counted as “creative” collaborators of a feature film or a computer application, and which professional people working in studios and laboratories are just craftsmen in menial tasks and who are the “creative” people.[11] Advertising that never seems to need copyright or other protection, is said to demand immensely creative people as writers and picture-makers.

The story-line of a novel presented in 20 lines as an abstract is not protected. Examples can be found in any manual of literature -short descriptions of the subject-matter of novels and short stories. It is easily seen that the plot is as secondary for a novel as the “subject-matter” of a poem – or resemblances in figurative painting.

Partly the concept “work” is best understood using plain sense. Partly it is like many other legal categories a spring of inspiration and income for lawyers. The quip sometimes used in Law Schools seems to be really profound: a work is something you are able to sell as a protected work. Again: economy defines the concept. Such delicate issues as moral rights (fair use) are actually of very limited interest.

The protected work is first seen as the original author’s manuscript. The printed books are exemplars or copies of the work. So are translations into other languages or transpositions or adaptations to other areas of culture, as plays, movies and operas.[12] A work is nothing that could be directly perceived. It is inferred from manuscripts, plans and their like. This is Plato – not pure Plato, but the from time to time very popular vulgar version of Platonic thinking. There is no need here to add to the edifice the well known difference of Kant and Hegel - the confused and philosophically naïf tradition of explaining, what is copyright and what do we talk of, when we talk of copyright.

Digital works turning the house of copyright upside down

The traditional tool-kit of analytic legal concepts does not fit at all, when we are dealing with computer-programs and certain other phenomena now often met in the digital environment, as SMS (short messages sent using cell-phones) seldom or never considered as protected works, and multimedia messages, now slowly realized s very potential sources of trouble. [13]

To put it bluntly, now we are advised to eat soup using a monkey-wrench instead of a spoon. “Eating with a knife” in old Western style did not look nice, but could be done. Now we have to handle things that are not corporeal and besides cannot be exactly described in time and place. [14]

Using the traditional analysis we either end up claiming that the object of copyright in a computer program is the source-code, which is obviously wrong, or claiming that empirical tests would give us satisfactory evidence of the “work” compared with other “works”, i. e. computer-programs, which is technologically plain false.

Pointing out the source-code may be a good idea, when we deal with first elements of copyright in information technology. But new entanglements rise very soon. There is no telling, whether the source-code is the work or a copy (an exemplar) of the work. It is perfectly possible to describe and define an original computer program using natural language and drawing arrows and boxes. Then the source-code may be an implementation of the work in very much same sense as writing down the melody or even the complete score listening to the composer humming or playing – a matter of routine in ethnomusicology. [15] Admittedly there are many ways of writing the needed code, some of them better than others. This is what is being done in universities practicing uses of programming languages from difficult Lisp to easy Visual Basic. But nobody believes that that this coding process, mostly handled by very junior students, would be creative.

Here we are tempted to state that defining computer-programs as literary works was a mistake. Copyright Act could very well survive some systematical errors and non-sequiturs more, like species of works fundamentally differing from other protected works. The Act has been a patchwork already a long time – actually resembling a quilt sewn by a maniac. It deals with performing arts, broadcasting signals and other basically disparate stuff. Therefore the anomaly would not be an ultimate proof of shortcomings of the traditional set of analytic tools and concepts. In civil law we have rather dismal experience of the quest of concise concepts and systems derived from the German and then Scandinavian “Begriffsjurisprudenz” or jurisprudence of concepts, which was obliterated because of its neglect of real economic, political, organizational, social and cultural needs, all of which ultimately united in the crushing blow of the first World War and hyperinflation. The tentative, awkward steps out of this world of “clean concepts” was taken by “Interessenjurisprudenz”, jurisprudence of advantages, which actually never penetrated the already solidified patent law and the exotic and unimportant copyright.

This argument for make-shift copyright does not hold. In legal practice we already see that only assuredly trivial computer-programs have been handled by law-courts and there found to be lacking in originality. The first really important precedent concerning databases (EUJ 2004, Fixtures Ltd. et. al.) also led to the conclusion that the collections of data were not databases as defined by EU-directives. This is poignant, thinking of the exceptionally confused and technically bad wording of the new law.

Because computer-programs are written using mostly previous works or common, non-proprietary expertise, the differing thing between two programs, one possibly protected and other maybe infringing its copyright, is said to be the “architecture”, meaning the skill of writing effective, fluent and reasonable program. This brings us to the question of quality as defining attribute of protected works.

The interpretation of law should not leave the virtuous narrow path. Opening disputes and litigation to qualitative estimations is something we know of experience in the field of patens to be unwieldy and counterproductive. In addition experts in copyright have denied the last 140 years vehemently the relevance of quality in estimating the protection of works. It is often repeated that drawings of retarded children are in exactly same position as drawings of Picasso and Matisse.

We shall not go into the details of this argumentation. Reichman et. al. published the pioneering essay on the subject (A Manifesto Concerning the Legal Protection of Computer Programs, Col. Law Review Vol. 94 December 1994 no. 8). Their basic view is shared by many others, like the eminent authors of Laddie - Prescott – Vittoria et. al . (The Modern Law of Copyright and Design I-III, 2000).

Here, the pivotal metaphor is “engine”. A computer-program is an engine implemented in soft-ware consisting of instructions that in principle cause some behavior (functioning) of another engine, called a computer. Although natural language is full of performatives and imperatives, language itself does not change our environment. Yelling “fire!” creates response in humans, who understand the word and its implications, and possibly a dog that would get the idea of the pitch and tenor of the man shouting. The fire will not be extinguished by words but by people hosing water. Source-code or a printed manual of programming will not affect a computer. The thing called “computer program” changed into machine-readable form will do a thing. Something happens in the machine. The program is the engine that drives an engine. We may forget the second attribute of an engine, because energy will be available as electricity. [16]

In a computer program certain parts of the program like its kernel “discuss” with certain parts of the computer, its central processing unit. The kernel is something that brings into mind a croupier in a casino dealing cards and calling bets – giving instructions. Sometimes the kernel is able to turn off the lights and call the police. It is an engine with very exactly defined functions.

Because copyright is a creation of legislation and precedent without empirical counterparts, we have to restrict our analysis in the legal domain, even if we are trying a new reading of the text. However, by “legal” we do not mean only law and precedent, but even the observable regularities of practice. This part was once called “customs” or “usages”. But we advance one more step: what is claimed to be “common usage in the branch” is not necessarily so. It is probable that human activities sometimes follow several separate sets of rules, some of which are at odds with each other. [17]

Therefore it is possible that beside Copyright there is Copyright (Soft Law), meaning things really done under the banners of Copyright.


The exclusive or exclusionary rights of an author consist of right to disseminate the work to the public, by making copies of it, by exhibiting it and by performing it. In German and French tradition the meaning of “publishing” a work differs somewhat. The right of making copies – copyright – extends to all forms and derivations. Making copies, meaning exemplars, of a work also happens when a work is transferred to a device that can be used to reproduce it. Dissemination happens by distributing the work to the public by selling, lending or hiring. The public means anybody – but more than a couple people.

When a work has been sold or distributed with the consent of the author, these copies may be “distributed further”. This is “exhaustion”, the moment when the right of dissemination is “extinguished” (Erschöpfung; konsumtion).

The obvious idea is that distribution-right is a one-time treat. The nice term means that the right has been used up. What remains?

The exclusive rights of the author do not include selling an exemplar to a single purchaser. Because we are here not talking of the author’s moral rights, we claim that even selling the first and unique copy of a work is not an infringement of copyright. We have a precedent of such situation, about transferring the source-code of a computer-program to a competitor. Such an act might constitute one or several crimes against the Criminal Code, but this is not a case of copyright. The argument is simple. Selling a copy to one single person is not dissemination that always means a somewhat larger pick of people. (KKO 1996:43) [18] In Scandinavian laws “public” is mentioned. Dissemination means transferring a copy to anybody, no matter whom.

The exemplars remain. The basic idea is that people and enterprises must be free to use products containing works in copyright as normal commercial goods. When such a product is first disseminated, it turns into trivial commercial inventory. The author and certain organizations probably have secured the right to get a royalty, meaning a payment as a percentage from retail price, gross or net income of the distributor, or by some other means. The author participates in the commercial enterprise of the distributor as effectively as a share-holder getting a portion of the turnover of the company but not a power to dictate the terms of sale.

This does not change the interpretation. Regarding these disseminated exemplars copyright is effectively over. Business is being done according to general rules of business – transfer of possession and ownership of goods, sometimes hiring or lending. No frills, just plain vanilla.

Here the authors’ attitude is sometimes strange. They are in a sense sleeping partners, not employees. The copyright they still control after dissemination, they may use for some other purposes.

In this situation dealing with products in copyright is legally merely dealing with merchandise. Selling sound recordings or DVD-records does not actually differ from selling nuts and bolts, bread or garments. Booksellers generally have nothing to do with copyright. This should be clear, but is not.

This interpretation means in practice that the possessors of goods in copyright are most often not plaintiffs in litigation concerning copyright infringement. For decades law-courts have been undecided, whether copyright-holders should be summoned to express their eventual demands in criminal cases, like simple burglaries, when recordings were stolen together with change, cigarettes and bier. The answer is: no. The party offended here is the possessor and the things stolen were plastic and metal, nothing immaterial. If the possessor, e.g. franchise-taker, is accountable to a copyright-holder, that is his problem but will not be taken up in the criminal case against the burglar. [19]

The issue of goods protected by copyright in bankruptcy and other forms of execution and seizure has lately caused worried questions. When no-one has the right to disseminate a work without the consent of the author, like not exhibited paintings in an artist’s atelier, the canvases are clearly protected even against creditors. So is the possibly massive work done towards a commercial soft-ware application. [20]If it was not disseminated, it does not belong to the bankruptcy’s estate of the copyright-holder. It may not be taken into account in proceedings because of divorce. It cannot be assigned to an inheritor separated from copyright: the inheritor getting copyright from the estate will even get the works that were not disseminated. In a merger the legal status of the receiving company does not change vis-à-vis copyright or patents.

Bankruptcy and execution are situations, where the original author should be given possibility the get back her exemplars – unless they were disseminated. In the latter case the executors do not seem to have any obligations to the author. [21]And it naturally is the custom: when several Finnish banks failed ten years ago, nobody mentioned copyright, when the art-collections were put under hammer in auctions and they included many canvases and statues never seen outside the private offices and therefore probably not disseminated. [22]

This is as it should be. Goods in copyright may have great monetary value as Christie’s and Sotheby know. It would indeed be odd, if the copyright-holder could intrude in a sale, auction or other transfer.

The lawyer should realize that although contracts on publishing and other contracts of transfer of rights mostly are terminated or cancelled because of bankruptcy, remaindering books or other goods in copyright is normal and most probably valid.

Conflict of laws

The author is in a peculiar situation, being seemingly able both to sue her contracting partner on basis of contract law and simultaneously start a criminal case and demand punishment and remunerations on basis of Criminal Code, viz. copyright crime. The legal tradition does not see lis pendens here, because the grounds of the cases are different. Intuition says that this cannot be so, because consequently it would be possible for the author first to loose a case based on breach of contract on making copies of a work, and after that start a second heat claiming infringement of right of dissemination leaning on exactly same set of facts but different legal norms. Actually this has been done in courts both in copyright and patent cases.

Using the above analysis this discrepancy might possibly be helped. If the dispute arises from commercial use of the goods in copyright, only claim based on negligence in fulfilling the contract is acceptable. If the question is using or abusing rights derived from copyright, the case is a copyright case, with or without demand of penalty. The court would have right to demand that the plaintiff develops her claims specifying the grounds. We are of the opinion on basis of the facts brought forth free choice is not possible here. This is rather complicated on basis of the Act of Civil Procedure, not to forget the Act of Criminal Procedure. The idea should be analyzed analyzing these laws – but this is a preponderantly national dilemma. In an exposé like this, presenting very general ideas on copyright and contracts, it does not seem to be a good idea to go to details, especially on the promised land of tricks and traps – principles, exceptions and other rules on litigation. Therefore we are contended to say that in a dispute between to parties free choice between a contractual breach of contract –approach and a criminal charge and eventual prosecution on fraud would be very surprising. Basically, after the demands have been presented to the court on contractual basis, it is an anomaly to discuss about a criminal fraud and the conditions of an agreement in the same time. Cheating somebody to sign a contract or buy something naturally is a basic form of fraud. Cheating in fulfilling the contract is the same question: never intending to fulfill. Therefore fraud may be an actual question in making a contract (in contrahendo), but not so in contract (in contractu).[23]

The distinction is important, because the damages awarded because of a criminal offence are different from compensations for a breach of contract both in extent and quantity.

These questions are difficult, when both a business-enterprise and its executive officer are respondents in a copyright-case. In criminal law and law of torts the company is responsible for its officers’ and employees’ offences – except when the crime was made with full intent, nolens volens. The law does not mention crimes made for the express benefit of the employer. In Sale of Goods Act individuals acting for companies do not in principle have any role in the eventual litigation. Copyright Act has specific rules on damages, but the question of auxiliary or contributory liability is not mentioned, as far as we know, not even in the preparatory works for the law. This is cumbersome. It often happens that a business-enterprise is ruled to be liable to pay damages for a crime that was never prosecuted and only sketchily identified.

In a case decided by the Supreme Court but not published as a precedent the question was the publisher’s destroying the remaining copies of a printing after it had proved impossible to sell them in any price. The plaintiff claimed in a somewhat diffuse way that he as the author should have been able at least to buy the copies. There are some never used rules about remaindering in Copyright Act and in contract forms that actually were introduced on late 1930ies, the situation is handled. Regarding our problem this is no copyright-case. The copies were “out of copyright-domain” (exhausted). Therefore the question was that of contracting parties’ duties with a tint of moral rights. Here we, however, think that at least outside painting and sculpture destroying copies of a work does not have any legal relevance. It is like breaking a window. As long as it is yours, it is your business.[24]

The suggested division between sale and copyright might be viable even in questions of insurance and taxation. At least in one known Finnish case the remuneration awarded by a law-court payable by the company and its officer together was taxed as income of the latter, after the company had paid all the compensation. The officer was editor-in-chief and the company the enterprise publishing the newspaper. In insurance it naturally is a crucial question, whether the damage was caused by the company or its negligent representative or employee.

Good faith

According to Sale of Goods Act the person, who got the goods on grounds of a later agreement but it in good faith, may keep it and the earlier acquirer looses it. This of course is an exception to the rule of priority in time. The phenomenon, called in Scandinavia “extinction”, resembles exhaustion. The purchaser has a claim to get the goods, but because she does not have it in her possession, she looses it. The same rule is applied to negotiable bonds and shares.

In IPR there is no possession in the Roman tradition. There cannot be, because possession means having a tangible object on grounds of a recognized transaction, purchase, gift or something else. Passing over possession is of course traditio. The basic idea serving still very well practical needs is presumption of ownership created by possession and connected to it the possibility of getting immediate help from authorities to regain lost possession.

Reading the now numerous scholarly studies on information-goods and electronic environment one always meets the same basic points and the two main attitudes. All the things digital have obviously changed matters a lot, but either things can still be managed by developing copyright and Patent Law and stretching and twisting the concepts a bit or then this is not probable and some fundamental rethinking ought to be done. [25]

We have repeatedly pointed out that the growth of IPR as an insulated area inside civil law has had a lot of unsuspected effects. The close connection with sales and in German-Scandinavian tradition with the general doctrine of legally binding handling (Rechtshandel) has been forgotten. The tradition and its basically very parallel development in English, French and German legal cultures is best described by Reinhard Zimmermann. [26] In a very obvious way old and sometimes even consciously “falsified” sets of norms have been many times adapted to serve major economic and cultural changes. Accordingly the considerate and mildly conservative attitude in front of the obvious challenge to the IPR-system is reasonably further adaptation. Then again there are examples of upheavals that have compelled legislators and interpreters to discard old norms and their even older names. One such upheaval was the German inflation on 1920ies. Another has been the thorough change of labor relationships from agriculture and early industrial work onwards: labor split off civilian law and has been now a long time a separate body, sometimes presented under the heading “social law”.

Now we understand that “social” thought has directed pressure to civilian law and changed it a lot, sometimes under banners of some brand of Marxism, sometimes just welfare-state.

The possibility cannot be dispelled that our “digital change” is one of these real chasms. If it is so, then working for details is labor lost and means that the necessary changes will be of unheard of magnitude.

To-day we have “minimalists” and “maximalists” in copyright. In Scandinavia Jens Schovsbo has recently argued in a very convincing way for fundamental changes. [27] On the international arena the voice of California is well known: Lawrence Lessig, Pam Samuelson, Mark Lemley, Peter Menell. In an interesting way the more conservative opinion seems to prevail on the American east-coast – Jane Ginzburg, William Fisher, just to name some.

It might be a good idea not to label lawyers using a thermometer on minimums and maximums measuring the intensity of pro-copyright pinions, because those people obviously are not anti-society, although their counterpart prefers to bring up the reasonable public interest in protected works and inventions. Everybody agrees that this is a very complicated and complex act of balancing.

Let us call the two groups the linear and the complex thinkers. In science linear change is for instance acceleration. Complex phenomena – we are referring to mathematics – contain iterative feed-back-loops. This sounds complicated but really means that change changes change. In many cases even random choices – called bifurcations – may set the put the changing phenomenon on a new path so that instead of calculating its place and velocity we have to be contended with probabilities. The best-known example is quantum electronic dynamics, as a matter of fact the basis of physics.

Nobody needs that kind of analysis in daily life. This is because of scale. Almost all of us do fine without even bothering to think below the molecular scale, where particles of atoms buzz from quantum levels to other levels. This level that is below all hope of miniaturization is now actual in computing. We already have quantum-computers.

This is just rhetorics: as long as the change of technology has been linear, which means sometimes very steep, sometimes moderate, descriptions of change have been linear, too. Jurisprudence is one of those descriptions. If the change turns out to be complex – emergent – the descriptions must follow.

Information economy is now vastly superior in volume compared with that of manufactured products. Entertainment is superior to petrochemical industry, counted in dollars. This is often mentioned. But now we are discussing just quantitative change. What is the eventual qualitative change?

It is the opinion of this writer that not Internet nor satellites, but real-time monetary transfers meant a dramatic qualitative change in world-systems and economies. In Finland this change happened some 10 years ago, in USA it is happening now. The USSR probably crumbled because of the economic system’s inability to use the advantages of real-time money. Some people say that banking is one of the most important adaptations of computer science. This is true, because money is for a commercial or investment bank nothing else than counting-units. The outcome of iterative (repeating – continuing) computations is translated into economic success or ruin.

Luckily there is no copyright in money and it is not possible to get patent in dollars or euros. Then again the conspicuous interest in patenting computer programs and even business-concepts seems to mean in practice almost exclusively some minor tricks in handling payments or investments. So we are back in merchant banking.

Copyright may affect even this basic tenets of national economies. The scary thing is data-base protection. The arranged collections of information mentioned by EU-directive and European Copyright laws might very well be central to the medium of economic activity – money. The directive probably was written thinking products, information goods.

We end this discussion here by mentioning the immense military importance of real-time information that, by the way, might very well be in copyright (maps). Wars are waged using precision-weapons and precise knowledge of the battle-field, nowadays always collected, stored and transmitted electronically. In this work patents are important. There is no information about the real investments of the military in research and developed. At least in electronics and computer software it seems to be very high and reflects to licensing policies and even open-source codes.

Pieces of information have always been important and sometimes crucial: where exactly is the enemy approaching our ships behind the horizon? What will be the place and time of the Allied invasion in France? This kind of information was often called “intelligence”. Now we have very much “intelligence” about ongoing affairs. This “intelligence” or real-time information may be protected by copyright and sometimes it is used by devices protected by patents. Quite often the user is supposed to pay for it. That kind of intelligence was never before thought as protected by copyright. Works in copyright – even news on battles and discoveries, were available only after a considerable delay. As a matter of cats we still have in our legislation a curious relic, 24 hours protection for news-items, to protect news-agencies. [28] The age of intelligence determines its price. The good and very good data-bases on stock-exchange and relevant business news are too expensive for researchers. The good data-bases consisting solely or mostly of works in public domain are very expensive for faculties of university: WestLaw, Lexis-Nexis.[29] Then again in Scandinavia and most of Europe this kind of public, governmental and administrative information is in the Internet free.

This is one of the main reasons for great powers and vast enterprises to change time-honored copyright and patents into pawns in trade relationships (TRIPS). They are means to establish and keep lead-time, possibly the most important asset in competition. The means to this end is a camouflage of trade monopolies, in this case copyright and patents. The outcome is a new pattern of agreements of free trade peppered with many very important exceptions. In a world hostile to the word “monopoly” monopolistic regulation is easier to usher in when disguised in authors’ and inventors’ cloak.

Soft Law

The new tension between business interests and legal regulation is one more reason to reanalyze the basics of IPR. It is sad that calculating the economic value and turn-over of copyright and patents seems to be impossible. All the studies done – and there are many – seem to be too general or then too narrow. We get some idea of IPR-protection in national economies and international trade, but even taking the amount of patents as an indicator is problematic. We know very well that patents are used for other purposes besides securing investment in information-intensive products and services, like blocking the competitor’s patents and symbolizing the value of the enterprise to investors, share-holders and public. In addition the relationship of a patent (or copyright) and a product (service) is more often than not a problem. [30]

Therefore we really do not know, what is the true value and meaning of IPR. It is said to be immense and this we readily believe knowing that just to take one example computer-games and merchandising products have in many cases tripled the turnover of a feature-film. Knowing that everything sent in television and the signal itself are protected by copyright and practically all music we hear means transfers of rights and money we accept the idea that “information-goods” very well might equal steel industries or petrochemical industries or both put together in annual turnover.

This is to amplify one of our basic theses. The Law School –adage that copyright and patents are neutral regarding quality so that the really bad gets equal protection with masterworks, so that doodles drawn by insane people are protected as artworks together with the greatest names of modern art – is misleading.

Copyright and patents are all about quality. We may take taxonomic or transformational approach thinking either classifying things in conventional cultural pigeonholes or creating something out of nothing. Copyright and patents are there for “utility”, “advancement of arts” or other plausible goals. A work may be beautiful and an invention may be useful. Both are qualities. Then again business, in any case economies and world-systems as “capitalism” are something purely quantitative. That is the definition of “economy” and “economics”. When we forget about foreign currencies, money is never better or worse, beautiful or ugly, useful or useless.

Historically it took a very long time to separate the idea from its execution – to advance from mystery to secret. “Greek fire” was a secret on the area of later Patent Law. It was burning liquid thrown or shot on other peoples’ ships, consisting of resins, oils and phosphor. Back-loading cannons were not a secret. They were simply very difficult to manufacture until Krupp found out the methods and changed naval warfare and soon warfare in general. The germinal invention, screw, was no secret. As a matter of fact it was known and used by the ancients. Applying the idea to clocks, mills, cannons, microscopes, telescopes, propellers and rifling of guns was a tremendous sea-change of technology.

It has been argued of innovations in a very interesting way that the most important asset is the enterprise itself, not the outcome of its research. Furthermore, possibly the spillover of an innovation is more important to the advancement of technology and economy than the economic profit gained using it. A conclusion is that piracy – understood here mildly as outflanking patents and copyright by legal means or relying on the right-holder’s broadmindedness or carelessness – is more beneficial than IPR-protection. Spillover means the free surplus knowledge and increase of tacit knowledge caused by innovations.[31]

It even has been argued that business cultures with solid proprietary principles, like those allegedly common around the Boston technology corridor, have obviously lost the race for new technologies against the very open and non-proprietary culture preferred in the Silicone Valley. Copyright, patents and even non-disclosure agreements are there seen as rather unimportant things in a network based on common education and set of beliefs, mutual trust and fast circulation of both scientific experts and investors. [32] People believe that the Open Source –movement in information technology was invented by Linus Torvalds. This is not the case. The very important and immensely popular typesetting program TeX used practically by all mathematicians and computer-scientists in world has been free for all interested parties for 20 years. The same has been mostly true of Unix. Sun Inc. started its career using and producing non-proprietary hard-ware. Examples abound. [33]

This article is a contribution to the discussion of linear or complex IPR and a convinced commitment for the last mentioned. We are living in a world that keeps changing in a qualitative way. As lawyers and experts of Intellectual Property Right we are supposed to make some conclusions. Our conclusion is that taken as a whole IPR is no more a remote equivalent of property in real-estate and corporeal things. It is now a part of means for various, very important and large-scale economic activities.

Property law is basically discreet, to use once more a concept of mathematics. It is basically the same for one real-estate, one hundred real-estates and a million lots. The same is true of goods. The same is not true of the so-called objects of IPR. The once so felicitous fiction of “incorporeal things” or their like does not fit phenomena that cannot be defined for legal analysis. They are not discreet.

Therefore it would be very surprising, if our rules that were once created for very stationary works and inventions in a very stationary world would be usable in our prevalent environment, which even sociologists (Castells) describe as “space of flows”. Advanced services, including finance, insurance, real-estate, consulting, legal services, advertising, design, marketing, public relations, security, gathering information and management of information systems, and also R&D (research and development in business-enterprises or research institutes) and scientific innovations, are at the core of all economic processes, be it manufacturing, agriculture, energy, or services of different kinds. They all can be reduced to knowledge generation and information flows”[34] This has nothing to do with the “hype” on “Information Society” with its far-flung telecommuting and other miraculous things and promises, of which we already know that they never happened. Then again, thinking of traditional space, economic activities now simultaneously expand and contract. The core-activities are found in some traditional city-quarters and their “satellites” all around the world. Among these new “nodes” of information Helsinki might be the most unexpected.

The new spatial organization already has its equivalent in the domain of regulation. Hard-core optimists in Brussels and Washington D.C. are planning a new system of agencies and courts for community-patents. In practice the acerbated cross-border issues have already given rise to non-official and non-enforceable rules used subtly by the players of information and communication technologies. This system will be called in this context Soft Law. Some people talk of Quasi-Regulation.

Soft Law is not law for individuals, individual enterprises or well-defined communities like nations or states. It is law created and applied by groups. There is no special need to talk here of virtual groups or peer-groups, except when clarity demands it. We are not referring to group as a basic concept of sociology. The new groups are more ephemeral because of their possibility to connect digitally. Digital connecting means the option to overcome geographic distance.

In traditional parlance it is strange to talk of unknown members of groups. Belonging to a group means identification or identity given by the group. In digitally determined groups the absence of identity is sometimes the basic idea. People use pseudonyms or even false identity mostly in chat but very often in serious blogs . No matter – if the idea bringing people together is playing chess or computer-games, changing experiences of paranormal phenomena, collecting stamps or upholding the cult for a pop-singer, the true personality of members is not interesting. The user-experience from eBay proves that membership in a paying group may be smooth and easy even when true identity of the buyers and sellers is not revealed. It is not interesting.

From the point of view of research the binding forces needed for the formation of this kind of groups are interesting and basically as yet unknown. We might call one of this dynamics “trust” without defining it. Traditionally trust is formed by kinship, common experience (war-buddies), shared tribal, ethnic, linguistic or cultural background, education (Harvard men), or even mental or physical skills or deficiencies (Sunday-painters, paralytic athletes).

Building infra-structure for groups is both a very challenging task and very urgent. The ways to intertwine visible groups (retired people living in a suburb; parents with children playing football in the a team) with these fuzzy groups is hard. This we know: tempting, coercing or fooling people to form groups or even associations will not carry long. There must be a common interest or ideal or a sore need. The fuzzy groups are so to say sovereign. Therefore it is only natural that they legislate themselves by setting down preferred routines and punishing offenders mostly by excluding them.

The examples were are of humble people. We believe that mostly the same observations are true of business-enterprises, even very large enterprises. Banks, insurance-companies and manufacturing institutions form gangs just like juvenile delinquents. Some of these gangs are formal and certified, like Rotarians and Free Masons. Some are not.

We have to understand the workings of what was formerly covered by IPR, namely Soft Law.


In this situation we ought to think once more, is it really impossible to define objects of IPR so that possession would be possible even in this field. Patent Law has actually solved this problem, because when observable possession is not possible, we have the option to use registers. Registered patent is for the applicant as good as something in her possession. This does seem to hint to some kind of return to registering of all Intellectual Property rights. Then at least transferring goods and transferring rights could be kept separate. Naturally examining works for eventual copyright is impossible in practice. Registration just claims for copyright as is done for applications for patents might anyhow get some legal relevance in a situation of dispute. Accordingly most of works would certainly be left in peace. Those ones that turn up to be interesting and important in economic activities could be taken up for further examination. This could be done using some very much cheaper and lighter procedure than litigation in a law-court. ADR might be one possibility.

The seldom contested rule is that when an information-product is sold, all parties in the value-chain may be liable to pay remuneration to the infringed copyright-holder. The situation is sometimes intolerable. At least in soft-ware business it is practically impossible to know, whether there are infringing elements in a finished product. A Nokia cell-phone uses according to the information given by the corporation itself something like 12 000 patents. A modern feature-film or TV-show consists of contributions of hundreds of individuals, whose standing as eventual copyright-holders is unclear in Europe, where the producer does not necessarily have all the rights needed for distribution. Both film-companies and broadcasting enterprises know very well that trying to find the copyright-holders for an old and somewhat obsolete movie is almost impossible. This is the experience of publisher wanting to use specimens of, say, war-time reportage and footage.

This means that all diligence is not enough to protect a business enterprise from rude surprises in form of seizures and injunctions caused by claimed infringement of copyright or patent. Accordingly vast amounts of potentially important works are permanently in ice. The national scientific libraries do not have the nerve to scan and digitize their collection of magazines, because that might be constructed as a copyright infringement. [35]

Here we see an example of the distinction between transfer of rights and sale. Basically when right is transferred and the transferring party had not the right to dispose of the object, the receiver gets nothing. This is in itself natural. In IPR, however, using a work or invention without the consent of the originator, may be construed as a violation with multiple sanctions. In some cases this is fair, in some cases not.

The above mentioned means that a protected work that is distributed is not protected by copyright when dealt with as such. Naturally copyright enters the picture, if the distributor produces new, derivative copies without consent. If the alleged violation is contractual, the sanctions are contractual. This was the situation in a case where a video-enterprise had bound itself not to sell videos. It, however, did exactly this in economic duress. The decision of court: no infringement of copyright.

It seems not very plausible to regard an information-product as either a protected work or manufactured goods. Mixed forms abound. We do not think that the originator has all the options to claim infringement. The decisive point is the goods as it is perceived in market. A cell-phone contains at least some works possibly in copyright: ringing tone that perhaps is part of a composition; background pictures that may be artistic works. These components are trivial compared with the cell-phone’s value and its use. A person, who sells such a phone-set, seems not to be liable for infringement. The same should be true of a bona-fide purchaser of software application. Because it is impossible to know, what exactly is the “work”, the purchaser may trust his partner and seems to be immune to claims by the copyright-holder.

Let us stress upon this. A shop-holder selling a phone-set containing as it will turn out an infringing ring tone, could trust the manufacturer, be it Nokia, Sony, or Siemens. She had no possibilities to examine the legal status of the tone. [36] The copyright-holder claims that the work was not disseminated with her consent and therefore an infringement has taken place. Here we do not see any sense in such a literal interpretation that the shop-holder should be responsible for the eventual offence. In Patent Law selling a car that contains a knob or switch violating a patent is strictly and naturally something the manufacturer and importer shall settle with the supposedly offended party.

This is why we suggest reading in “disseminating a work without the author’s consent” either intent or active participation in producing the appliance.

This interpretation has deep-going effects. The following logical step is to claim that a private citizen should be let alone even when she brings to country dozens of illegal copies of music or computer programs, as people actually now do. As long as there is no doubt of their putting these copies to circulation and making money, copyright-issues should be put on hold.

The argument for this recommendation is practice. It is impossible to get police running for such petty offences. In addition it is unnecessary. The claimed losses of right-holders are not very convincing. In a judge’s way of arguing buying something not very expensive for entertainment is no proof for avoiding the cost of the same purchase paying for it the market-price. Obviously the realistic alternative is buying nothing at all or then some rather small percentage – possibly using the same amount of money and consequently getting far less.

The real argument is based on human rights. The citizen has right to be left alone among other things in matters concerning information. The right to be informed is on of the pillars of basic rights. Right to education is one of the pillars of social rights. Information as public good is the traditional and possibly now a little neglected counterpart of the author’s right to compensation and incentive for further creation. This is often mentioned in connection of legislation and this is clearly seen in the exceptions made for libraries, public collections and education.

Entertainment has nothing to do with this high values. It might be so, but is it really possible to distinguish between frivolous entertainment and socially desirable self-education? If it is possible in some cases, how much would it cost to analyze even a small amount of, say, CD-records to make a division between trash and art? The few experts in branch are not able to distinguish between computer-games as time-consuming entertainment and the same games as a very cunning way of adding users’ understanding and abilities in connection of graphic interfaces.

We are not claiming that buying bootleg disks is a human right. We claim that human rights as right in privacy, meaning right to resist obviously petty intrusions in a person’s private sphere, and right in information, are major issues that should be kept in mind when discussing the scope of an author’s rights. There is far more in copyright than the possibility to get hold of a fast buck.

And there is one more tier in this particular discussion: the inequality of countries. Some people talk of globalization. Strict copyright and Patent Law often mean stiff prices, which means that the best in science, technology, education, literature and many other things is kept permanently unavailable for majority of people. This, again, is not only a moral issue. Poverty is a main cause of unrest. Science and education are main roads out of poverty. They should not be strangled.[37]

We now return to the domain of copyright disputes. There is a recent Finnish precedent concerning a photo of a car in advertisement. In background a sculpture can be seen. The sculptress sued. The advertising company was liable. It had the possibility and duty to examine the photo before using it. The photo-office was not responsible, because it had only sold the photo and simple publishing right of the photograph, meaning rights as far as they belonged to the photographer. As a matter of fact the purchaser was advised to clear eventual other rights. The decision is interesting. Our reading is that any photo in possession of a photo agency is “public”, because it is available to everybody. The dissemination rights are exhausted. Therefore this kind of dispute is acute between the advertising agency and the photographer, but most of the customers are free. (KKO 1994:99)

This reading is very much contrary to the notorious Napster-case, where auxiliary and contributory infringement was found to have happened. In European legal tradition the gunsmith, who repaired the gun, which was used in homicide, has no part in the crime. The smith who makes containers obviously for making some moonshine-whisky is no contributor. The enterprise that sells a full set of instruments, vials and vessels for preparing amphetamine to never before met buyer would be a contributor to preparing drugs. We see here a large difference. If we take the slippery road of auxiliary and contributory infringement, we are soon dealing with people, who just give applause to the daredevils, who facilitate for violating copyright.

Knowing the enormous importance of information-products it is truly necessary to think over this problem. In Patent Law it is solved in an elegant way. Patent-holder’s exclusive right only concerns economic activities, as a matter of fact business activities. Therefore no-one ever blames a motorist for something awry in patents used in manufacturing her car. In copyright the opposite is true. Although the idea seems strange, instead of competitors and rent-seeking speculators private people or small-time hucksters are conspicuously often responding to charges of big business. Sometimes the Supreme Court of Justice has to handle a case of world-wide corporations and various collecting societies against somebody, who has besides selling liquor without a license on shadowy alley given his customers self-made videotapes of well-known films.

The ideal of information business is something like buying the daily paper. A newspaper is legally a very complicated thing, a real network of contracts and agreements, quotations and adaptations of other works. The customer pays his euro and is scot-free in everything concerning copyright in the material bought. If she uses the newspaper to wrap a mackerel in it, this is no case of copyright. If she discusses about the news-items and gossip printed in the paper, she is completely free to do this. If she happens to be a professional and collects a broadcast review on daily papers for radio, that is correct. If she is a competitor clipping and pasting a manuscript for editorial “Other papers”, this is permitted.

Probably the very obvious shortcomings of legislation are a potent factor skyrocketing transaction costs of information products. This may be partly caused by the old tradition to write the law and most of IPR-literature thinking only the originator of the work with all her need of incentive and justified yearning for remuneration of her efforts, sweat, blood, toil and tears. In practice the relationship between the originator of a work and the first buyer is almost always very straightforward and simple. The reason copyright is so important is big business and the competitive advantages of enterprises. The important copyright disputes happen between enterprises, and the poor but hones originator has got her meager compensation sometimes much earlier and is no more a party in the matter.

It is slightly ironical that e.g. the rule of favoring the weaker part (author) against the stronger part (customer) in interpreting contracts in copyright nowadays means favoring Microsoft or Disney against groups of children. The “weaker” parties are the industrial giants, the “stronger” the children drawing Disney-characters to hang them up on the wall, as happened in a recent American case. The “pirate” sued by Microsoft is somebody’s old aunt trying somebody else’s Windows of MS Office just for the hell of it, or then an interested teenage hacker, to whom the producer should actually send all their new products for free, because these hackers probably are the core of to-morrow’s paying customers.


At present primary and secondary production are in this country are 2/3 of GNP, shen industry and primary production are only 1/3. Business activities, real estate activities and financial intermediation bring more income than industry. If you add healt and social work and education, the difference is overwhelming.

In copyright and patents goods and services are mixed together, although from the point of view of legislation they can hardly be regulated using same sets of rules. There is no possession in services, as observed.

Creating protected works and making patentable inventions are services. Making copies of works and disseminating them and “using” patented inventions in business is mostly part of manufacturing goods. This is true even of method patents, because no method disconnected from “industrial use” is patentable.

The nature of a transaction should be weighed to see, whether it is question of goods or services or both. This partly illusory border is very important, because we have legislation on Sale of Goods but almost none on services. European and international conventions on trade related services are coming and their effects are very difficult to guess.[38]

In a private hospital a surgeon, who puts a screw in her patient’s bone is actually not selling the screw, but writing an invoice of services – surgical operation. The hardware, meaning here lancets and screws, may be mentioned, but their cost is trivial compared with the cost of the operation.

The division of goods and services was well recognized in the early days of industrialism. Producing goods was the big thing. Producing services was very limited activity of professional people like engineers, geologists, architects and some craftsmen.

In general social services were very often delegated to public institutions and manufacturing goods never. The central services – army, police, hospitals, schools, libraries, churches and transport – are in European tradition handled by government agencies or strictly supervised by them. This is natural partly because using public resources for common weal e.g. keeping the price of a metro-ticket low is easy compared with trying to fix the price of bread. Actually the example is dramatic. Animal husbandry and cultivating corn and other victuals changed during last century from an urgent necessity into a major problem of excess. In nation states the governments had to legislate in a major way on agricultural income, producers’ prices and customer prices. This was a salient point in Finnish politics from the strictly rationed war-time system until EU 1994. The farmers actually got a very substantial part of their income from tax revenues as various subsidies. In the same time the percentage of people getting their main sustenance from farming and occasional jobs in forest dropped from 55 to 3 percent of labor-force.

The ongoing discussion about “outsourcing” and “privatization” is a part of the issue between producing goods and producing services.

“Service” covers a wide range of activities including management consultancy, certification and testing, maintenance, facilities management and security, advertising services, recruitment services, services provided by commercial agents, legal or tax consultancy, property services, such as those provided by estate agencies, construction services, architectural services, distributive trades, organisation of trade fairs and exhibitions, car-hire, security services, tourist services, audiovisual services, sports centres and amusement parks, leisure services, health services and personal domestic services, such as assistance for old people.

The definition of "service" is based on the case-law of the Court of Justice, according to which "services" mean any self-employed economic activity normally performed for remuneration, which need not, however, be paid by those for whom the service is performed. The essential characteristic of remuneration lies in the fact that it constitutes consideration for the service in question, irrespective of how this consideration is financed. Consequently, a service is any activity through which a provider participates in the economy, irrespective of his legal status or aims, or the field of action concerned.

Works protected by copyright and inventions covered by patents are neither goods nor services. EU has explicitly pointed out that electric communications and telecommunication services have their own separate directives. [39]

Now downloading music from the Internet has surpassed in volume (money) sales of records. CD-records and downloaded bit-streams are commercially almost exact equivalents to the consumer. If the buyer feels any need to have her music on some movable platform, nothing is easier than burning them to a CD or DVD.

CD and DVD are goods and first sale will exhaust the dissemination right. If we call music sold over internet “goods”, we violate language and change concepts in a remarkable way. “Services” are not mentioned in Copyright Law, but very obviously we have deal here with something traditionally called performing or exhibiting works or, using other wording, copyright services. The distinction is no whim. because most of the practically important consequences in copyright are bound to dealing with the tangible platforms for works, called exemplars. Ten years ago it was already agreed that receiving bitstream from the Internet was not a question of getting hold of goods, but instead preparing copies in the memory devices of one’s computer. In the main distinction disseminating – making copies all network traffic was found out to belong to the latter category.

Very obviously this activity of selling right to download music, pioneered by Apple iTunes, is a “service” and should be compared to attending to a concert in order to enjoy a musical performance. A concert is a service just like getting a haircut or using a real-estate agent’s help or enjoying oneself in an amusement park is paying for services.

All copyright is conceptually found on the idea of a work that can be perceived as an exemplar (copy). We are here invited to forget about improvised speeches and their like. In principle a protected work and an invention have an identity that can be deduced or inferred from copies (devices etc.).

Thinking seriously of services we realize that the neighboring rights like performing arts are essentially services. A violinist does not manufacture or produce an interpretation of a composition. She performs the composition without creating anything for stock. This is very true on stage - theatre, opera, ballet.

Besides performing artists producers of records are protected against copying for 50 years. Radio- and television broadcasts have the same protection. The permissions and compensations are handled in Scandinavian law in a very complicated way, but the rationale of the law is not affected – these recordings and signals are not per se protected as works. If the opposite would be true, special legislation would not have been necessary. The performances, the industrial acts of manufacturing platforms that can be used for playing voice or pictures and the various methods of broadcasting signals for transmission of voice or pictures to the receivers’ devices have not very much to do with works.

Traditionally the existence of neighboring rights has been justified either by stressing the high artistic quality of performing arts or the danger of loss for creative artists caused by these once new “conserves” of performances; once upon the time people actually talked of “canned music”.

This is puzzling, because a recording of course is an exemplar of a composition and eventually its arrangement. Then it is not an exemplar of the performance and outcome of recording process.

Would it be consistent to regard performance as a work? Obviously yes, at least as a derivative work. A translator has copyright in her translation. Performance is even more original than a translation. It is well known that the world of music and stage abound “inimitable” interpretations beginning from Caruso an going on and on in Broadway, Old Vic, Comédie Francaise and on and on. The ordinary experience tells us that even a jaded song or hackney play may be turned into something unforgettable. And we have other things besides art to make comparisons. Every member of a large group writing code for a computer program, almost all the crew of 50 persons needed for shooting a scene for a film, writers who more or less skillfully combine information gathered from basic dictionaries into short captions for – say – a children’s encyclopedia, are creators of original works.

We are perfectly willing to state that the separation of performing arts and creative arts in Copyright Law is artificial and ill-reasoned from esthetic and general cultural point of view.

It is often said that “neighboring rights” were born because the need of protection of new technological innovations was felt and effectively lobbied for. Probably the strong associations for composers had something to do with this success. Changing the basic structure of international conventions – the Berne Convention – is very difficult. So the new forms of protection were attached to the building of copyright in a haphazard way, a bit like erecting new annexes to a building. It may be that a soaring cathedral got an ugly wing, but possibly the outcome was anyhow useful.

Very probably this is exactly what happened. It is the same story over and over. When computer programs were annexed in Copyright Law, some people realized that they are committing a grave error. The expert opinion just stated that it seems to be better to use the existing international framework than try to plan a new convention for the general protection of applications and other digital phenomena. It was a wrong guess, as was very soon seen. International Labor Organization changed into World Trade Organization and unbelievably got the TRIPS-agreement ready in a matter of some years. In effect it replaced WIPO and the Berne Convention and turned out to be exactly the agreement deemed to be so difficult. TRIPS exacerbated the divide between services offering and trading enterprises and people with their well-founded demand to be informed and take part in accumulating knowledge and information. [40]

The Berne Convention was romantically worded to suit the creative author’s needs – possibly the renowned 1800s “genius” himself. TRIPS is more than anything else an agreement tailored for the needs of trade and industry.

Trading is the keyword. Companies purchase materials and rights both in order to refine them for further sale on market and in order to resell them as they are in a lucrative way. Trading is an older means of economic expansion than manufacturing. Importing spices from the East meant trading, as well as skins from America and furs from Russia. Getting the trading rights for wool was one of the central political issues of Middle Ages and ultimately lead to enrichment of the British Isles and relative downfall of the Dutch fortunes. Now we trade “access” to long-distance telephone network and trade copyright and in patents. Patent pools were the origin of metallurgy and among many other things cinema. Putting ones patent in a pool means trading it. We have seen lots of IPOs consisting only of IP-rights without any specific or realistic ideas of production or distribution.

Copyright collecting-societies are one form of trading – on monopoly basis. In principle everybody willing to pay the fee is able to obtain the right to arrange (transform) musical works or perform them in public. Other societies handle rights to record compositions.

The structure of this activity does not differ much from the traditional routines of trading corn or cotton. The interesting thing is the timeline. Buying and selling of futures contracts is known as trading. Trading is differentiated from investing by two factors. The first is the time frame involved, as trading is completed often in minutes, whereas investing is done for months or years, more of a long-term modest gain motivation. The second factor is the strategy used, which complements the fast timing of trading, as indicators are often used to help let a trader know when to get into or out of a particular position.

Both goods and services are used in trading – commodities like metals or crude oil, services as rights defined by contracts or customary agreements. Derivatives are papers containing the option to collect either cash or stock after the deadline, which often is far in the future. Futures are papers maturing at an agreed time. The price is agreed now, and the value turns out to be what it is after the time-interval is over.

Securities are bearers of rights. The holder has right to sell her stock at a price based on demand and quoted in stock-exchanges plus to receive an annual dividend. Trading Intellectual Property rights in public presupposes translating them into negotiable papers. This is not difficult. Many kinds of payments could be characterized as “trading money”. The investors agree about an object for financing and the time and rules of dividing the eventual profit. Investing in a hedge fund or blind trust is trading something as yet unknown – a portfolio of various securities and bonds, often balanced and circulated according to a well prepared program – computerized programs are used.

We have discussed trading as it is practiced in stock-exchanges. The same word, “trade”, is seen heralding the change of IPR during 90ies. WIPO governed intellectual property, but WTO, World Trade Association, got nations to sign TRIPS, “agreement on trade-related aspects of intellectual property rights”. The title does not say it in an explicit way, but it is question of incorporating Intellectual Property in world trade agreements and, as many say, adapting these traditional rights specially to American needs for protection and for leverage in world trade. Its detractors claim that losers are the developing countries. WIPO as an organization announced quite early as one of the losers. [41]

Contract-based copyright

Concern of original authors’ interests is quite often regarded as a pretext to drive home very simple business-plans. It is evident that this world of “information goods” needs a solid point for leverage. IP-laws serve as such points in a manner resembling property in estate. We have the market, which means an orderly way of presenting the offers of sellers to the eventual purchasers in spirit of competition. The opposite of market economy is command economy. The “market” means arrangements for demand and supply correcting the prices and in addition possibilities of getting information about goods or services. The term is felicitous, because the idea of an ancient market-place and a fair is good. The customary caveat is needed: market economy and capitalism are not synonyms. At least what is sometimes called “high finance” and consists among many other things of speculative investments and lending is not necessarily an example of market economy. The basic experience and ideas of a functioning market are enshrined in Europe in the Treaty of Rome 1958 – a common market aimed at facilitating the movement of goods, services, capital, and labor. This movement was pointed out by J. M. Keynes as one of the basic tenets of a sound economic system. The superstructure of taxing, social and medical aid, is built on the cash-flow coming from this movement.

Thinking of information goods some central aspects remain. The Copyright Act is exclusive. If something is not protected as a literary or artistic work, it has no legal protection. Others are able to use it as they like. Safety-nets do not exist. The things called “ideas” in copyright are free. Imitation is free and even encouraged as far as only “ideas” are imitated and the work is remade in a truly personal (original) way. A novel about a murder in a vicarage does not prevent other authors of trying their hand with exactly the same kind of sinister things happening in a place never associated with anything that might interest the police force.

In the thriving information industry a kind of “semi-copyright” has been born and grown during these last ten or fifteen years. Sporting events surely are not in copyright. The Olympic Games and Football World Championships contest surpass in annual turnover world’s largest business-companies, probably save two or three of the all largest. Broadcasting-time and advertising-space are licensed exactly as copyright. Advertising is the flipside of the coin. The author pays for publication of her work and is happy, if its distribution is large. Advertisements are composite works in copyright, possibly except some billboards consisting only of a brand-name or a simple slogan. In advertising and marketing the economic rationale is contrary to copyright business.

In television enormous sums are paid for something called “formats” or “concepts” of various programs, like quizzes, games, contests, true-television etc. Copyright in the basic ideas surely does not exist. A broadcasting enterprise an objection would possibly get murmur of approval from copyright scholars – and be immediately dropped from circulation, blackmailed and excluded . An enterprise making its own adaptation of the “concept” will very soon find that the offended party is unwilling to grant licenses, when they would be really needed by law. An enterprise refraining from paying for non-copyright concepts will not be able to strike deals on drama-series or other works typically protected by copyright.

The world of fashion, both low and high couture, food and recipes, wines, soft drinks and many kinds of useful products like motor-cars operates on the same domain as works protected by copyright but without legal protection, trade-marks and the internationally non-developed protection of industrial designs excluded. Who ever heard of “plagiarism” of car-bodies or smart electronic devices like cell-phones? [42] Cars look very much alike so that finding one’s own in a parking house may be a chore. Cell-phones, personal digital assistants (PDA) sell more because of their looks than their technical properties or ease of use.

We want to draw attention to this area of “contract-based copyright”. When companies sell and buy things as if they were in copyright, when media pays tremendous sums for life-stories that it writes using professional people, we should take heed.

It is too easy to discard these phenomena saying that they really are not interesting, because everything depends on contracts without any validity against third persons.

We never saw a study on this. Actually economic and sociological analysis of copyright and patents is surprisingly rare. Researchers, who anyhow have been doing that, know the reason. It is unbelievably difficult. Just to mention an example – much what is said about the economic value of patents is insufficient, because patentable inventions are so often held as trade secrets or military secrets, just like inventions used e.g. in aeronautics, space industry, telecommunication, information technology, chemistry and on and on.

Even the last mentioned are part of contract-based IPR. We could go still further. Huge industrial plants are planned and built using exquisite expertise and no legal protection against “piracy”. Everybody agrees that the organizational and technological ideas very much in demand when building from scratch a paper-mill in jungle are free for everybody.

The argument of contingent and allegedly not really important agreements between two parties should be examined closely. There is a possibility that the opposite is true. Large enterprises will not afford the luxury of advanced tailoring of agreements. Knowing the sheer amount of transactions, nothing but thoroughly standardized contracts will do. Still better is no contract at all- Typically enterprises like Amazon or eBay have a set of alternatives for their customers and ideally these sign deals (purchase goods) by clicking a button or ticking a box thus making a choice between different means of paying, distribution and even financing their purchase.

Probably there is a vast layer of business practices that should be studied under the titles Electronic Commerce and Entertainment Law. Some of the richest lawyers in California are specialists in media, games, betting, athletics and their like. Legislation does actually not exist. Legal literature is in the former is mostly trivial and the latter at best sparse. One well-known academic institution interested in Entertainment Law as a legal discipline seems to be UC Berkeley (prof. Peter Menell). University of Southern California has wide experience in the field (George Lucas Center). It should be noted that as far as known business enterprises like the two mentioned above fare well organizationally and at least eBay economically, too. It also should be noted that both companies work on a branch that is interesting and demanding thinking of IPR. They concentrate largely in items protected by copyright but free to distribute because of exhaustion of rights. Amazon seems to strike specific deals with authors and publishers obtaining permission to show at least the table of contents of books to would-be buyers and in many cases exhibits of the text. They also offer digital versions of printed material. e-books. The other company, eBay, participates among many other things in selling arts, books, sound and video recordings – probably including some legally dubious material, like paintings, sculpture, ceramics or their like actually never exhibited to the public and therefore not exhausted. So it is question both of transfer of copyright and sale of goods.

The crucial question is, whether it is really true that these contracts are only binding between the contracting parties. We are of course here touching the sore point of private law: is it possible to create “rights”, which everybody has to respect, without legislation, due authorities or precedent. All Law School students have learnt to answer in negative. We answer in confirmative.

Many contracts are actually binding although unenforceable by public officials. Some contracts are absolutely binding but in practice worthless because of the extremely high costs of litigation and enforcing and the ease of evading. At least on networked society an agreement made between enterprises A and B has factual impact on operations of C, D and E, although no formal joint venture exists.

In copyright there are basic contracts, normal contracts to be adhered to, something called contract based licenses, curious as the term is, and compulsory licenses. The meaning of the word “license” is unclear. It seems to be used for situations, where many parties are in principle able to buy a right to use a work and the conditions are standardized. Linguistically “license” means authorization, permission or consent. Sometimes it means freedom as in “poetic license”.

The principle of collecting societies is that they represent contractually parties even without a contract. They represent authors even without being appointed to representatives.

The practices vacillate between private and collective solutions. Joint authorship leads into a very difficult situation, all co-authors’ consent being necessary for disposing over the work. The domain is non-physical. Actual possession cannot exist. We deal with non-tangibles.

A general agreement (stipulatio) is historically rather late innovation. Specific, formal contracts were common in ancient times.

The question of the scope of protection cannot be always decided on the basis of traditional legal division – rights resembling property vs. rights based in contracts.

We remind here the reader of existence of bye-laws of an association. They are binding inside a group and sometimes irrelevant in dealings with outsiders. But obviously payment made for an association and addressed to one of its members is not necessarily valid, even if the association is not registered and does not have formally registered board.

In copyright we have a wealth of non-chartered associations, some of then ad hoc –peer groups. A compound work is something jointly created by several people. In Scandinavian law this group of authors can act only as far as it is unanimous. These groups are very common in school-books and even manuals made for university-students. There are two kinds: works created really jointly and works compiled of contributions of various authors. Even in the latter case – some German manuals of copyright law are an example, the “editor” might have by contract the last word in polishing the text.

In that kind of environment the division to binding and non-binding contracts does not make sense.

Basic traditional copyright does not make sense, either. Things are done using “soft-law”, voluntary sets of rules, principles and guidelines. The copyright is contract-based.

[1] The argumentation here is very largely based on personal research. In the ongoing dispute two sources must be sorted out as expressions of like-minded lawyers’ ideas, Drahos, Peter – Braithwaite, John: Information Feudalism. Who Owns the Knowledge Economy? (2002), and Schovsbo, Jens: Immaterialretlig status. NIR 2004 p. 309-322. See even Schovsbo, Jens: Grænsefladespørgsmål -mellem immaterialretten og konkurrenceretten”(1996); Schovsbo, Jens: “Immaterialretsaftaler - fra kontrakt til status i kontraktsretten (2001).

[2] The Roman Catholic Church seems to have taken it for faith that the higher pontificate must always be clean shaven. The Orthodox Church always considered beard mandatory exactly like the orthodox Jews. “The West” – from Renaissance on the years after Napoleonic wars seems to have associated removing hairs with progressive thought and modern mind.

[3] In Germany there is a new law on fortifying the contractual position of authors, Gesetz zur Stärkung der vertraglichen Stellung von Urhebern 22.3.2002. - Gesetz zur Regelung des Urheberrechts in der Informationsgesellschaft 3. Juli 2003

[4] Sale of Goods Act (Kauppalaki 147/1997 14.7.1997 )

[5] ”As such” or “per se” is naturally lifted from the ongoing discussion on patenting computer programs. Here the words are used, avowedly with some mischief, to distinguish between phenomena that might be or are protected by copyright in certain situations and phenomena that really are protected by copyright in the situation now discussed. This is a means taking distance to “essentialism”, unnecessary talk about the object of copyright protection. We are here not discussing, what is the essence of copyright, starting from literary works and ending with maps and computer programs, because this mostly culturally determined set of phenomena is coherent only in the context of copyright. Therefore this discussion seems to be an example of begging the question – circular argumentation.

This does by no means preclude the problem that seems to be very much alive, especially on the interfaces between data-bases and works. We just want to say that this exotic and pleasant topic is best handled in a concrete situation, not as a “first principle of copyright”.

[6] “Contract-license” means that after a collecting society has made arrangements with users, violating the copyright of somebody not represented by the collecting society cannot be construed as a copyright infringement. This system is used in all Scandinavia concerning performing rights, mechanization of music, photocopying, broadcasting and many other situations.

[7] Some obsolete doctrines of copyright are good examples of this peculiarity. The Finnish reader might take a look at the opening chapters of T.M. Kivimäki, Tekijänoikeus, first edition. Other readers are referred to the German von Gierke – Kohler –debate on Immaterigüterrecht – Immaterialpersönlichkeitsrecht. „The law of a creative spirit“ was still doing fine some 20 years ago, when Troller and Hubmann were quite often quoted as sources for practical issues in copyright – instead the already available Ulmer or Frank - Nordemann.

[8] Possibly the most law-based society ever seen was the Iceland of sagas, where people seem to have used all the time they could spare from warfare in litigations on pastures, sheep and inheritance. Some historians conclude that exactly that was the end of a unique and very sophisticated society. See e.g. Burnt-Njal’s saga, where you can read that a real warrior and chieftain was supposed to know all civil code by heart.

[9] Wilhelmsson, Thomas: Pieniä kertomuksia hyvinvointivaltion siviilioikeudesta. Porvoo (2000). After ”social private law” the respected author here has turned to ”small stories” of law seeing that the era of great code and big stories is over. So it is.

[10] It is in English ”dispose”, not ”use” or “give binding utterances of will”. The awkwardness of this characteristics gives a hint of its main weakness. Puzzled by Copyright Act a lawyer uses legal works to elucidate things he did not quite understand. Having gotten from the early German and Swedish writers an impression that the author has by and large the same power in his work as the owner in his property, he gets from Bergström and many followers the answer that this is my no means so, because the author has the right to dispose of the work. Asking further, what does this mean, the curious lawyer gets an answer that includes all Copyright Act and much more. So Bergström’s description, loyally repeated even to-day, means “copyright is copyright”.

[11] Architect Alvar Aalto often just gave general sketches to his assistants, who then figured out, how to include the nice line into a building. – Aalto’s case is exceptionally well documented. In information technology it is perfectly possible to “create” the big ideas and critical components as ideas, and then leave first the minute planning to juniors and after that the tedious and painstaking coding and the sometimes very difficult “debugging” the program for probably non-creative craftsmen. – A pulp-mill is “run up”, which means making the machines run so that the process as a whole is both technically and economically satisfactory. Making a computer-program really run and run even in different environments of hard-ware is sometimes very difficult. Therefore it is dubious, is it really reasonable to handle operating systems like Windows, applications like Word, instructions like macros making Word run, and interfaces like Windows desktop, platforms like Symbian, industrial standards like GSM legally as “computer programs”. They are examples of “software” but differ greatly even thinking the adherence to tradition and creativity needed.

[12] Examples of derivative works abound. In Finland some best-known novels are famous as films, plays and operas besides the many translations into foreign languages.

[13] Cell-phone photos are mostly understood as something worthless. However, besides the criminal-law issues recognized in clandestine photos of very dubious, albeit popular character we already meet with so-called scoops, meaning snapshots with very obvious news-value. Metadata-arrangements being still rather mundane it may be impossible even to identify the “photographer”. As known, using normal digital cameras metadata including identification of the camera-house and the lens are stored together with the content. Voice-messages are not that popular yet, but small recording devices costing no more than 100-200 euros store all the sound-information the microphone is able to gather. This makes bootlegging music from live performances in practice impossible to detect by the organizer, and the quality of sound may be fair or even good.

[14] The difference between the physical machine and the electric software is a matter of point of view. What is done using software can in principle be done using machinery (hardware), and the choice is often determined by practical and economical reasons. Software is not the storing device, like disk or diskette. The necessary flow of bits may be received by cable or wireless. In stationary devices, like a desk-top computer, it is difficult, artificial and unnecessary to define various parts as either hardware or software. A good example is the by now familiar USB-port and plug that look very much like coupling devices but actually are interfaces consisting even of software. Printing a sheet means translating and interpreting – coding and decoding - the visible text several times to get it out of the printer as visible text once more. Another example is writing text. As a matter of fact nothing corporeal happens except the fleeting electronic changes of current in the screen (monitor).

[15] There are stories of Mozart writing down the complete score of a great mass just by listening to it and Chopin and Liszt being able to repeat a new opera by piano after the premier. This means that being able to write down the notation may be a stupefying feat without being creative. After all, writing musical score, writing computer code and taking down in shorthand a speech are wonderful skills, although they do not even come near to creating original works or performing in the sense of copyright.

[16] It is nice to remind that a computer and a computer program are not necessarily electronic devices. A perfect computer can be built of sticks and strings and used by pedaling furiously. In the immensely interesting literature on computability and machines, starting from Alan Turing, Joseph von Neuman, Richard Feynman and Noam Chomsky (yes, the linguist) and discussing state-machines and universal machines it is now and then mentioned that automated computing could be done using electrons and quantum-mechanics or alternatively biological phenomena, like the information carried of base chemicals in nucleic acids. As a matter of fact quantum computers already exists. See Oxford Centre for Quantum Computation

[17] This is the sociological “platoon-theory” first presented in a Finnish dissertation on infantery platoons more than 50 years ago. The central finding was that below the very stringent and definite rules of an army at war there were many sets of social rules determining even attitudes to valor, duty, obeying, commands and other central things. The privates, non-coms and officers, who pretended obeying the military rules and laws of war actually had another, socially very binding set of rules on allegiance, loyalty, trust etc. – This comes close to the ideas about no-right (in French non-droit).

[18] Copyright Act is very complicated. In the “restrictions of copyright” (2. Chapter), right to prepare some exemplars of a published work for private use could and probably should be omitted from the law. It is unnecessary. The legislator’s violation of people’s privacy seems to be superfluous and of course it is insulting. The copyright-holder’s interests are fully covered by the clear norm preventing all dissemination of exemplars not prepared with consent of the author. This clearly means and has always been interpreted so that copies made as “fair use” may not at all be disseminated. – Why not accept the principle that people’s copying protected works in the privacy of home is nobody’s business? There have always been devout amateurs, who are keen of trying to copy famous paintings and others, who like copying poems in a notebook on longhand. The alleged reason of the legislator makes practicing music dubious, because it is performing a musical work – and possibly from a xerocopied score.

[19] This example is realistic. The prosecutors and often even judges are in doubt, whether at least Teosto, the national collecting-society, should be summoned or given possibility to be heard in the trial.

[20] Here the situation may be different, because the employee gets copyright in a computer program by law. Therefore a company in bankruptcy possible has copyright in computer programs and therefore this work belongs to the bankruptcy’s estate. If the employer was not a company, computer program created by employees belongs almost certainly in the estate and may be sold by the administrators of the estate. – The “contract-based copyright” is actual even here. In legal practice it is customary to sell after bankruptcy such things as “publishing rights” to a paper or magazine, although it is difficult to imagine, what exactly do these alleged “rights” consist of. Business-people tend to regard the “logo”, meaning the name of a magazine, as a piece of potentially valuable property, which it is not, legally speaking.

[21] Koulu, Risto: Immateriaalinen varallisuus konkurssissa, Porvoo, 2003. This new book is very old-fashioned. It only deals intangible assets – copyright in banktruptcy. The questions raised by disseminated or not disseminated goods is actually not raised in the more than 300 pages of this study.

[22] Droit de suite is only a painter’s or sculptor’s right to demand extra payment in certain situations.

[23] The reader is reminded here that the writer worked for decades in law-courts, last as a judge at Court of Appeal, Helsinki, very often in copyright cases. In addition there is in Finnish the analytical catalogue and text with notations of all Court of Appeals, Supreme Administrative Court and Supreme Court decisions of IPR-cases starting from 1926, Kemppinen, Immateriaalioikeudellisia oikeustapauksia (1981).

[24] This case was decided in court by the writer – deriving from old norms for the author a right to purchase the volumes. This decision was obviously false and a poor example of bad legal analysis. Supreme Court did not find evidence for the existence of such a norm.

[25] Bruun, Niklas: Ny immaterilrätt i den digitala ekonomin, Nir 2004 /2 s. 7-13

[26] Zimmermann, Reinhard, The Law of Obligations – Roman Foundation of the Civilian Tradition. 2, ed, Oxford 1996

[27] Schovsbo, Jens: Immaterialretslig status. NIR 2004/2 s. 309-322.

[28] Many other agencies besides Reuters are to-day really large business-enterprises.

[29] One of the good, free sites containing among many other things all U.S. Supreme Court decisions and those of Federal Circuit Courts is that of the Legal Information Institute at Cornell University. British cases are available, though not at all easy to find. German cases on copyright and other IPR are available, and finding them also need some experience -

[30] Granstrand, Ove: The Economics and Management of Intellectual Property, Cheltenham, 2000.

[31] Baumol. William J.: The Free-Market Innovation Machine. Analyzing the Growth Miracle of Capitalism, Princeton, 2002.

[32] Saxenian. Annalee; Regional Advantage. Culture and Competition in Silicon Valley and route 128, Cambridge, 9. ed., 2000. – Professor Saxenian is at present the Dean and so the follower of Hal Varian of the famous School of Information Management and Systems at UC Berkeley. Hal Varian is always cited for Varian – Shapiro, Information rules, that actually is already rather old. He should be recognized as one of the founders of Information Economics. See Intermediate Microeconomics, A Modern Approach, 7. ed., 2005.

[33] This insulting idea insinuates that tight IPR-protection might sometimes retard technology and consequently profits for business-enterprises should be seen in the connection of science. Science is a system, where remunerations mostly are not economic. One of its basics is public dissemination of new insights. On of its basic tenets is belief in aggregate growth of knowledge. Applying science for business-purposes is most welcome, but it is not science. Another example is literature understood as distinguished poetry and prose. Authors may accidentally get good income, but that really is not the purpose of all the toil needed. The gratification is “getting it straight” and recognition of peers is the measure. Many others besides the eminent professor Harold Bloom say that poetry is written of poetry and the basic material of literature is literature. Borrowing from predecessors is not an exception, but a rule. Bloom. Harold: The Anxiety of Influence. Chicago (1997). Bloom. Harold: The Western Canon: The Books and School of the Ages. Oxford, 1995.

[34] Castells, Manuel: The Information Age: Economy, Society and Culture I. The Rise of the Network Society. 2. ed. Oxford 2000, p. 409.

[35] The exception for public collections is made only for microfilming works. In Finland practically all printed material in public domain is already digitized and the newspapers up to 1900 are free for all in the Internet, exactly as they should be. There is a project of digitizing the leading legal review Lakimies from 1901 on. The project has halted – because of copyright problems, although the review never paid more than a formal fee. In the rare cases where studies originally published in this review are reprinted, this naturally demands revisions of the author or somebody other entitled to it. So, there is no copyright issue, but the right-holders of eminent lawyers would not understand this.

[36] Ring-tones are today often real music and now we are discussing a situation, where a composer claims that the ring-tone resembles too much her original composition. In practice the industry carefully avoids using known tunes as ring-tones, but the example is not imagined. It started in the time of beeping midi-sounds.

[37] A very eminent plea for this is Lord Sydney Templeman, Intellectual Property. Journal of International Economic Las. 1998 p. 603-606

[38] Draft of European Parliament and of the Council of services on the international market. Brussels, 5.3.2004 COM(2004) 2 final/3 2004/0001 (COD)

[39] “Telecom package”: Directives 2002/19/EC, 2002/20/EC, 2002/21/CE, 2002/22/EC and 2002/58/EC of the European Parliament and of the Council). – Financial services are also excluded, as well as naturally governmental services.

[40] Possibly the pharmaceutical company Pfizer was the first to start lobbying for “the market of ideas, meaning combining the advantages of trade and Intellectual Property. ACTN – Advisory Committee of Trade Negotiations was formed by industry. It appointed IPC, Intellectual Property Committee on 1986. IBM was very visible in this committee.

[41] Bogsch, Arpad: Brief History of the First 25 Years of World Intellectual Property Organization (1992). – Bogsch was the director general of WIPO.

[42] Patents really are not as necessary as business-people often believe. There are exceptions, like ABS-braking systems and some cruising systems maintaining steady speed in motor-cars. But innovative ideas, like various radar-systems for operating the car in a parking-lot, use technology that is well known and not patentable. The innovation is to put these devices in ordinary cars keeping the costs down. The same is true concerning navigation aids (GPS), anti-burglary devices and many others.