DIGITAL RIGHTS MANAGEMENT

IVAN HOFFMAN, B.A., J.D.


        If you are a visionary owner of rights in content, then part of that vision means that you see that the future use of that content is about creating the widest form of exploitation.   Today’s convergent, interactive, Internet, hand held device world simply mandates that the new business model for rights owners is spreading, not restricting, the dissemination of that content.  (Read “The Need for Vision” and “What Business Are You In?”)

        In the old business world (defined as the business world more than 2 weeks ago), money was made by content rights owners holding on to content and making the consuming public buy it only from the owner.  So, for example, if you were a book publisher, you spent the money to create, publish and market the book hoping that stores and ultimately consumers would buy your book from you.  There was some limited form of licensing such as if you made a foreign or a first serial deal or, in the best case, some media deal such as licensing motion picture or television rights.  But that was essentially it.  Content was static in that it was fixed in a medium of the printed word and was generally thought of only in the context of a book, for example.  Being analog and typeset limited its uses.

        In the new business world, because content is or should be fully digitized, the potential exploitation of that content is boundless and limitless.  Today, text is or should be fully digitized.  Movie libraries are quickly becoming computerized.  Music certainly already is.  All content in the future will be.

        I have often said that the mantra for today’s world is “Own Everything!”  And that remains true if to a larger degree than ever before.  But if “Own Everything!” is one mantra, surely a second mantra must be “Exploit Everything!”  The very purpose of the “Own Everything!” mantra is so that you can “Exploit Everything!” for, as I have said and as is manifestly true, the exploitation of rights is what the new business world is all about.  The two fit inexorably together.

        If such be the case, what then must be the legal concerns of the content owner if exploitation becomes the mantra?

Acquisition Issues

        Clearly of course the content owner’s first concern is that they in fact own everything.  In other words, it is legally impossible to exploit, via licensing or otherwise, anything if you do not own rights to that anything.  In truth, in over 26 years of practicing intellectual property law I have found that in many instances “owners” of rights actually do not own the rights they believe they do.  If the rights owner is not also the content creator, then some form of written and signed acquisition agreement is generally required (leaving aside the intricacies of bona fide employees).  In order for a non-content creator to acquire exclusive rights to the copyrightable work of the content creator, there must be a written transfer agreement signed by the creator or his or her agent.  I have simply lost count of the number of instances where a “rights owner” has failed to obtain such a written instrument, believing that simply because they paid money for the work that they therefor own rights.  Simply not so.  I have written extensively about these issues and you can read about them on the links “Articles for Writers and Publishers,” “Articles for Web Designers and Site Owners” and other links.

        The next issue is that often it is not clear what rights the content owner has acquired.  The best and most relevant example of this is in the area of so-called “Electronic Rights.”  A few years ago, this term, standing alone, may have had some meaning but today, with the plethora of “electronic” uses, that term alone seems fairly meaningless.  Thus, a content owner should review its acquisition agreements to see what rights, especially what electronic rights, it has or has not acquired.  (Read “Electronic Issues in Publishing Contracts”)

        Additionally, since the possibilities for exploitation are cross-territorial, the acquisition agreements must speak to rights to translate the content.  Moreover, since we are no longer bound by the original format in which the content appeared, issues arise about so-called “compilation rights” in that content, i.e. which party has the right to make or license the making of compilations of the content.  (Read “Compilation Rights in Book Contracts”)

        Finally, before going out there and exploiting the hell out of some content, it is the wise and visionary owner that has made certain it has registered its copyrights and trademarks so as to afford the content as much protection as those bodies of law will allow.  (Read “Do I Need To Register My Copyrights?” and “Trademark Law: An Overview”)

        There may be other acquisition issues as well such as rights to sublicense, territorial issues, out of print issues and so on as well as issues relating to revenue sharing with the content creator for all forms of exploitation.  In sum, it is the visionary content owner that carefully examines its agreements to make certain that they own what they are purporting to exploit.

Usage and Licensing Issues

        The primary concern of content owners is protecting that content against unauthorized, unlicensed and therefor unpaid uses.  There are a large number of encryption schemes that have been developed and technologically these are beyond the scope of this article.  Suffice it to say, however, that a content owner has to be concerned about restricting access to copies because, at least in part and if only potentially, the content owner has an obligation to the royalty participants to protect that content.  This means that a publisher may owe a duty to the author, for example, to make certain or at least to exert best efforts, to protect that content and thus maximize revenue.

        Needless to say, these concerns are equally those shared by the licensee.

        What is important here is that the content owner seek out relationships with digital rights managers to encrypt the content.  Additionally, these DRM companies should also be set up to assist the owner in the marketing of that content by way of finding licensees for it and advising the content owners of appropriate licensing fees, markets, territories and other terms that go along with the DRM issues.

        The license must be negotiated in such a way as to protect the content owner and allow that owner the flexibility to negotiate other licenses for the content.  Thus the issues to be faced are exclusivity or non-exclusivity in the licensees rights to the content and if exclusive, for what term, territory, format, media, language and so on.  The reality here is often a zero-sum game for if the owner retains rights, it means the licensee gains less rights.  But this is often misleading since even a grant of rights to a licensee can often be accompanied by a corresponding set of payment provisions to that owner.

        Furthermore, one of the issues often overlooked is whether the licensee shall have the right to further sublicense the content.  This is very important because if the licensee has this right, there is the potential loss of significant income and flexibility on the part of the content owner.  Even if the content owner participates in the revenue derived from this sublicensing, the content owner has a partner in that stream and that may simply be unacceptable.  The content owner can license it to the other markets directly.

        Additionally there is the obvious issue of fees for the license.  Is the licensee a subscription model, a pay per view model, an advertising driven model or some hybrid?  Depending on how the licensee is structured, that determines how the revenue is derived and in turn shared.  On the other hand, is the licensee to pay a flat license fee for the right to display the content on its site, for example and if so, for how long, in what languages etc.?

        The content owner should be further aware of the issues relating to “owned and controlled” businesses and how the revenue sharing model is affected by this convergence of ownership.  (Read “Owned and Controlled Licenses”)

        And since content today can be reconstituted and repurposed in virtually an infinite number of ways and combinations, the license must deal with the issue of compilation rights on the part of the licensee and what that possibility does to the payment structure.

        As with all deals, there are many other points that should be negotiated as well.

Conclusion

        Wide and diverse exploitation of content is already here.  The only thing that seems to be lagging is the sense that many owners of content seem to be holding onto the old “we own it, we’ll publish it” ideas that marked the old business model.

        It is the visionary that sees the future.

© 2000 Ivan Hoffman

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This article is not intended as a substitute for legal advice.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  You should consult with an attorney familiar with the issues and the laws.
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No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.

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