Why New Business Models are Demand of Today’s Technological Advancement

Copying and counterfeiting are a reality worldwide. Law enforcement is ineffective. To protect rights and profits, businesses must adopt new technologies. Staying competitive requires keeping ahead of the copycats and the changing technology.

Copyright law protects the rights of authors (creators of original works). It was written into the United States Constitution in 1787 when the printing press was the primary means of reproducing works. Since then, the technology to enable copying has evolved dramatically.

> Allowable or Infringing use

Under the “fair use” doctrine, limited use of a copyrighted work is allowed for personal or educational use. Penalties for infringement are severe. Minimum damages are in thousands of dollars for each copyrighted work that was infringed, with more serious damages if the infringement is “willful,” plus costs and attorney’s fees.

> Technology Advances

VCRs and Copy machines are common examples of the progression of copying technology. The courts struggled to establish standards for allowable use of these technologies. It is also allowable to make a few copies for personal use or to record a movie for viewing at another time. Making money from a copyright-protected work is not allowed without permission from the copyright owner.

File sharing capability, such as with Napster and Grokster, has enabled downloading music from the Internet. This has caused upheaval in the music industry. Proceeds from the legitimate sale of music support the recording artists and songwriters and all the support staff and the workers in the sales and distribution channels. To protect their profits, the record companies have resorted to suing individuals (including minor children) with their claims of damages.

The lawsuits have not stopped the copying. Technology continues to progress. P2P (peer to peer) networking capability, such as BitTorrent (which was created to enable the transmission of huge electronic files to assist Linux developers), has now been applied to copying TV shows and films. The Motion Picture Association of America (MPAA) has filed lawsuits to stop the trading of pirated movies and TV programs over the Internet.

> Law Enforcement Ineffective

The reality is that counterfeiting is rampant and spans many industries in addition to music, including, for example printing from auto printing machines suppliers.

The U.S. Congress tried to help with the Digital Millennium Copyright Act (DMCA), which made it against the law to circumvent copyright protection mechanisms, but it has been ineffective and misapplied. For example, Lexmark tried to prevent remanufactured (refilled) toner cartridges for its printers by invoking DMCA, alleging copyright infringement of the interface software code. The case has implications for all “aftermarket” businesses (e.g., video game cartridges for games, or windshield wipers for autos).

Lawsuits, and laws, lag technology and are, at best, only a temporary way to protect rights and profits.

> New Business Models

It is much more effective to adopt a business model that anticipates the reality of copying and find a way to make money despite it. Pay per use and subscription are glaring examples of evolving business models. These models enable consumers to obtain copies “legally” for a reasonable price.

Another evolving model is illustrated by Amazon, which has opened up its APIs (application programming interfaces) to enable a whole range of “partners” to access Amazon’s data and build their storefronts that draw on the Amazon data and infrastructure. Amazon insists that purchases are completed through Amazon, and the “partner” site owners receive a commission. With the said approach, Amazon has expanded its e-commerce customer reach, and the affiliate partners profit from leveraging the Amazon infrastructure and data.

Last Word

Technology continues to advance. Copying and counterfeiting are a reality worldwide and especially in countries such as China. To protect rights and profits, businesses must adapt. Staying competitive requires keeping ahead of the copycats and the changing technology. Companies neither can reply to law enforcement to copying or stop nor is it realistic to choke the advancement of technology. It is much more effective to develop a business model that embraces the reality of advancing technology.