3, INTELLECTUAL PROPERTY POLICY FOR INTERNET PLATFORMS Yang Cao" ABSTRACT ‘The internat as a platform isa key driver of the current internet economy. presents difficulties for the application of current intellectual property regimes which are traditionally ‘founded upon and applied in the conventional one-sided economic ecosystem. Accordingly the question ofhow to reconcile intellectual property rights and the two-sided nature of internet platforms has become @ pivotal point of consideration forall internet governance discussions; ew the good and sound evelopment of internet platforms. This paper aims to solve such incompatibility by suggesting ‘measures. For one, it argues that since internet platform operators are the major controllers of such platforms, they are best placed to control infringing activities on ‘those platforms. Hence, platform operators ought to be considered a5 indirectly infringing on a third party's intellectual property rights where platform users directly infringe on such rights. Technology neutrality is alzo a key principle for internet policy. Importantly, intellectual property rules should net favour or discriminate against specific platform technologies. content, the transformative use principle may be useful ‘001 for balancing intellectual property protection and online content creation. Cross-border operation of online platforms should also be categorised as E-commerce. ‘Accordingly, the international society should establish a Uniform framework for the imposition of liability on Internet platforms under the E-commerce treaties while Ite multhsided nature however rules are needed for For online created “rang cao (China) Associate Professor, shanghsi University of Political sciance and Law, shanghai hing; "Master's Degree of Law from Zheng University, and Doctor's degree of ternational Law frm Fudan Unverty. Post Doctoral Research Fallow in intellectual Property from ‘Zhongnan university of economics and Law. Dr cao was 3 sting scholar at Brkman Klin Center for Internet & Society at Harvard Universty inthe academic year of 2012-2038. Heit the author of three books: Cross-border M&A and Patent Protection Intemational intelectual Property Regime, and Food Security issues from interatonal Law Perspective. Hes also ‘the Deputy Director ofthe intellectual Property center of ‘Shanghai Universit of Political science and Law and the Executive Director ofthe China Technology Law Aesoitio, expert Group on Taxation of the Digtial Economy, Working Paper: ogtl Economy - Fats & Figures’ (European Ccommisesion, 13 March 208)¢ htps://ec europa eu/taxaton_customs/sts/taxaton/fles/res cources/documents/taation/gen_jnfo/good_goverance_matte ‘sfcgtal/2014-03-13 fat figures pfo(accessed July 2018). a allowing for 9 degree of flexibility to cater to varying ‘development levels of the internet economy. Keywords: Internet platform, two-sided market, intelectual property rules, balance of interest, ond technology neutrality IwtRobuction ‘The disruptive power of internet platforms is radically ‘changing businesses, the economy, and society at large Companies such as Amazon, Alibaba, Facebook, Google, ‘and Uber are creating online structures that enable 2 wide range of human activities, consequently paving the ‘way for radical changes in how we work, socialize, create value in the economy, and compete for the resulting profits. While economic growth asa wholeisslow in most ‘of the G-20 countries, the internet economy is predicted to grow at an annual rate of 8 per cent, far outpacing. growth in more ‘traditional’ sectors* The internet is set to contribute $6.6 trilion a year, or 7.196 ofthe total GOP in the G20 countries. Platforms have hence become an important economic force with a total market value of $43 trillion and an employment base of at least $1.3 million direct employees and millions of others indirectly ‘employed: Platforms have proven to be the drivers of innovation inthe digital economy and can be expacted to be important drivers towards the further development of the sharing economy! One study shows that 18 important platforms accounted for about 25% of all internet traffic by the end of 2015. This study also shows that these platforms represent indeed a large and growing part of total web-bazed activity.” The platform ‘g¢ is upon us because of the development of powerful information and communication technologies that have lowered the cost and increazed the reach of connecting platform sides § 2 athry Brown, ‘Securing Our Digital Economy intemet Socity, 7 April 2087) “ bern Martens, ‘An Economic Policy Perspective on Online Platforms’ institute for Prospective Technological studies Digial working Paper 2016/05, 1Rc103501 - (accessed 6 Oct 2027). ® Mark, Lemley, ‘The Economics of Improvement in Intellectual Property Law (1997) Texas Law Review Vel. 75, 2 To understand how the intellectual property system balances diferent competing interests in greater etal 288 Robin 2 to balance the competing interests of different participants * For example, the US Copyright Act strives to attain a difficult balance between the interests of ‘authors and inventors in the control and exploitation of their writings and discoveries on the one hand, and society's competing interest in the free flow of ideas, information, and commerce on the other hand! Similarly, patent law aims to strike 2 delicate balance between two prongs of social desire: the desire to ‘encourage initial invention, and the desire to ensure the ‘availabilty ofthat invention both for its initially intended. use and for its use as 2 basis for further invention Likewise, trademark law is crafted with the goal of balancing the interests of trademark holders agsinst the interests of expressive users.” 8. INTELLECTUAL PROPERTY RULES ARE INAPPROPRIATE FOR GOVERNING THE INTERNET PLATFORMS ECOSYSTEM With the emergence of the internet as 2 means of communication, creativity, innovation, and ideas, and with the growing accessibility to information, traditional concepts of intellectual property appear increasingly ‘antiquated and inapplicable in pace where information is democratised, people are increasingly ‘empowered to create, exchange, and distribute content, creativity proliferate Such incompatibility is due to two reasons: ‘and innovation and Ficst, the economic rationales of both systems differ Intellectual property rules are based on classic economic theories that emphasise laws of market supply and demand of the one-sided market, That is to say that current intellectual property rules are formulated to operate in a traditional linear market. However, 35 ‘explained above, the internet platform economy sa non: linear multi-sided market. The internet platform ic 2 complex system comprised of numerous interacting subsystems. complex system isa system composed of many components that may interact with each other Accordingly, the behavior of @ complex system ie Unpredictable. As a nonlinear system, the change of the Mancall and W. Edward steinmuele, intellectual property rights: competing interests onthe internet (1998) ‘communications and strategies, 302): 173-297. sony Corp. v. Universal City stulos, in, 468 US. 617,428 (1988) 2 John M. Golden, ‘Biotechnology, Technology Policy, and Patentbiity: Natural Products and invention inthe American ‘system’ (2001) 50 mary Law Journal 101,104, 2 Pierre. Leval, Trademark: Champion of ree speech’ (2008) 27 Colum L. 8 Arte 387. > Konstantinos Komal, internet Society lsues Paper on Intellectual Property onthe Interat internet Socity 2012) - (accessed 42 october 2017). inthe case of hic Labs, ev. Linkedin, Corp, 2047 WL 31473663 N.D. Cal. Aug. 14, 2017, the courtheldthat Mia. Labs, Inchad the ight to access, copy, or use publi information _avalableon Linkecn’s website, Conversely, a Chinese caze of Sina inc, ¥. Mima NG 73 MIN ZHONG S88 (2056), the Beng Court held that a matchmaking website could not ‘extract the publicly avaiable personal information of WelboWiPO-WTO Colloquium Popers, 2017 activities are no different from the traditional offine property rights infeingement. What is controversial here is who is lable for these infringing ‘materials made available to the public by the end users. ‘Arelated query for determination is whether technology neutrality can then be used to exempt, if found lable, platform operators from liability ‘Another issue concerning UCC is the question of who Is responsible where UCC infringes on a third party's Intellectual property rights To aforementioned question, we have to determine who benefits from these infringing activities and out of those who benefit, which party benefits the most. As the major controller ofthe internet platform, the operator isin the best placed position to prevent the participants’ from conducting infinging activities. However, the kinds of Guties imposed on platform and APP operators to prevent UCC from infringing on third party rights are currently uncertain. Ae of now, various courts adopt 2 wide range of approaches: some courts press the operator to take active measures to monitor the infringing activities while other courts only require Initiatives preventing further infringement. tt should also be noted that not all platform operators share the same business models; some platforms directly provide ‘their owned or licensed content to end-users while some platforms are tools for only information aggregation, sharing, and integration. Accordingly, the type and extent of liability has to be tallored to the specific business ‘model ofthe platform in question. anewer the ‘The differences in intellectual property policy and legal systems across various jurisdictions also make the regulation of transnational platforms extremely dtficult. Specifically, some countries require a platform to follow Its domestic intellectual property rules, even if that platform has no physical existence in that country, because the end users can access that platform's services. In contrast, some countries only regulate ‘those platforms that have physical operations in those countries The inconsistent application of domestic intellectual property rules highlights @ pressing need to harmonise the regulation of platform related intellectual * wito,"P and Busines: Pin the Brave New Word of Usr- Created Computer Games (2007) [accesed 21 May 2027) ° andrew F. christ, rivate International Law lsves in Online Intellectual Property infringement Disputes with Cross-Border a1 property rights polices in order to ensure the sound ‘operation of these international platforms '5, RECONCILING INTELLECTUAL PROPERTY RULES WITH ‘THE INTERNET PLATFORM ECOSYSTEM ‘Over the recent years, the question of how to reconcile intellectual property rights and the internet technologies ‘and. platforms has Pivotal point for consideration in all internet governance discussions.” ‘The ultimate art in shaping intellectual property policies lies in securing outcomes that are proportionate to the {im of the protection of human achievement. With ‘almost all giant internet companies possessing some kind of internet platform, the online platform economy is the main driving powerhouse of economic development today. One study challenges the conventional wisdom that olde that strong property rights Uundergied innovation. The author in that study points out that American judges and legislators altered the law at the turn ofthe Millennium to promote the development of internet enterprise. Europe and Asia, by contrast, imposed strict intermediary liability regimes, inflexible intellectual property rules, and strong privacy Constraints, impeding local internet entrepreneurs. Innovations that might be celebrated in the United States could lead to imprisonment in Japan% Accordingly, Felaxing intelectual property liability rules for internet platforms isthe best option forthe Internet economy. become a Generally, platform stakeholders such as controllers, managers, and APP developers may possibly infringe third party’ intellectual property. These kinds of infringements are no different from traditional ones. What is unique here however, are the end-users! infringing activities, which is type of negative externality arising from the use of Internet platforms. The difficulty of eliminating such negative externality lies in the sheer number of end users; itis economically infeasible to hold inividual responsible. Accordingly, the intellectual property right holder generally holds the platform and app developers responsible for their users. However, the kind and extent of lability which should be imposed on such developers requires further consideration. Too strict a lability will have 2 chilling ‘effect on such developers and may in turn, stifle the fend users ements (2015}< htp:wwr ipo int/edocs/pubdocs/en/wipo_rep_rfip_2015_ ‘pdt (acessed 8 une 2017), > Yulia. Timofeava, Worldwide PreccriptveJurisiction in Internet content controversies: A Comparative Analysis [2005] ‘20Conn, J. Int L198, 204. » Komal 2). = willam Cornish and David tlewely, intellectual Property Potents, Copyright, Trade Marks and Aled Rights (Sth edn, ‘weet & maxwell 2007) 3. anupam Chander, ‘How Law Made silicon Vala’ (2016) 63 Emory taw soural 639,Yong Cao, Intellectual Property Policy for Internet Platforms platform ecosystem. Consequently, the interests of different stakeholders must be carefully balanced; all rules and policy should promote disruptive innovation while protecting intellectual property rights ‘A. COMPETING & COMPLEMENTARY INTERESTS. In digtal platform, the interests of internal participants are generally not competitive; all intellectual property creators in a platform hope to increase the value unity of ‘the platform and contribute all the intellectual properties ‘to make that happen. Value unity is crucial for platform participants. Each participant creates and uses some values in the online platform, which are the binders bringing all participants together. Different value units represent different interests of different intellectual property holders. The Interests of internal intellectual property right holders of a platform are thus always complementary ‘The main competing Intellectual property holders and platform participants ‘the intellectual property ecosystem's main concern is protecting third parties’ intellectual property interests. During the platform operations, it is mostly the end user who makes the intellectual property resources avaliable cnline and uses third parties’ intellectual property resources. It hence appears that only the end users ‘generally use third parties property resources. Nevertheless, platform operators and app developers can somehow control or manage the flow of Intellectual property information. Further, given that platform and APP operators profit through end-users’ illegal infringement, iti reazonable to impose some kind of liability on such operators. It is however worth noting ‘that the controlling capacity of diferent platforms varies. ‘As such, the various controlling models under different internet platforms must be considered in determining the lability, and extent, if any, of platform participants interest is that of external , ONLINE CREATED CONTENT ‘The present online platform governance focuses on the protection of outsiders’ intellectual property rights, with “© Though there are no clear lawson thelial of online platform and app operators, most countries have stipulated laws on 1's liality, eg. the 1998 Digital Millenium Copyright Act (OMICA) nthe United states of Americ, the 2000 European Union £-commerce Directive 2000/31/£C andthe 2006 Regulation onthe Protection ofthe Rent of ‘Communication through information Networks in China. For 3 detailed explanation ofsP liability in different countries, see ‘Song, Seagull Hiya, ‘A comparative Copyright Analysis of SP Labilty in China versus the United States an Europe’ (2010) ‘The Computer & internet Lawyer 27(7), htps://sr.com/abstract=2116963(accessed29 June 2017). * information can only be protected ater they meet some Lunds of thresholds, eg. only orignal expressions can be protected by copyright aw. 2 most legislative and judicial practices elaborating on ‘what measures platform and APP operators should take to protect third parties’ intellectual property if those platform and APP operators qualify as internet service providers (ISPs) © ‘Apart from the protection of outsiders! intellectual Property, the next pressing concern for most Internet platform participants is the protection of online created content. The online created value is crucial to the sound ‘and good operations of platform. However, notall online created content can be protected by intellectual property rules For that online created content that is indeed protected, there remains the conundrum of whe owns it, ‘and how to best protect it. Generally, most content created by end-usersisbased on ‘existing materials, eg. remixes, samples, mashups, etc. ‘The first question is whether this UCC is legitimate, it ‘appears that there ie no blanket answer to this question; instead, the legitimacy of such content should be decided fon a cate-by-caze basis. The second question is then ‘whether there is any applicable principle for determining the legality ofthis UCC. Thus far, there appears to be no {air dealing exception for mashups or remixes which are highly transformative, non-commercial derivatives that do not compete with the primary market ofthe copyright In this respect, principle may be 2 useful tool for ensuring intellectual property protection while encouraging the creation of online content. UCC that is highly transformative, non- ‘commercial derivatives that does not compete with the primary market of the copyright owner should be deemed as fair use, and legitimate while that UCC which ic detrimental to the original copyright holders and can be 2 substitute for the original works should be considered illegitimate, owner the transformative use"? From a legal perspective, creators of online content are the owners of those content related intellectual property rights while the platform and App operators themselves have broad rights to exploit such UCC commercially through their contract with platform users. While the “Damien 'arien and arian Fitzgerald, ‘Mashups, Remixes and ‘copyright Law (2006) internet Law Bulletin 9(2}: 17-9. ‘Transformative use’ generally refers to uses of pre-existing works forthe creation of something new, that isnot merely a substitute forthe pre-eisting work. Transformative use isa relatively naw adtion to fir se lav, having been first raced ina Supreme Court decision n 1984 (Campbell. uf Aase ‘Music 510 US. 569 (1993). derivative work is transformative ifituses a source work in completely new or unexpected ways. Importanty, a work may be transformative, and thus 2firuse, ‘even when al four ofthe statutory factors offi use would ‘traditionally weigh aginst fair use! See University of Minnesota, ‘Copyright Services — Understanding Fair Use - (accessed 19 october 2017). proposal submitted by Brat tothe World Trade organization entitled electronic Commerce and Copyright (woe /cc/:13, .08/1P/18} in December 2016, United Nations Commision on Intarnational Trade Law (unciaat), oNcITRAL Model Low on Electronic Commerce 43996: with addtional artes bs ae adopted in 3098 (united Nation, 1998) ® United Nation Convention onthe Use of electronic ‘communication in international Contracts, New York, 23 November 2005, united Nations Trecty Series, vol. 2885, Doe. s/s identification and trust services for elactronic transactions in the internal market” Notwithstanding the above, there is no specific legal rule dealing with the protection of intellectual property and the liabilities of the online platform economy for infringements. Further, there is no international Consensus about the legal status of online platforms. Most online platforms provide some kinds of online information service, so the online platforms can be regarded as 3 kind of internet Service Provider (ISP) and thus, have the status of internet intermediary Unfortunately, there is no specific legal rule dealing with I5Ps from an international law perspective to date. Consequently, the varying domestic rules on liabilities inevitably provide loopholes for service providers to ‘escape liability The suggested solution to this problem is. 10 establish a uniform framework for the imposition of liability on internet platforms. Importantly, some degree of flexibility should be included ie. granting each country the right to adopt its own level of protection. Doing 20 will better accommodate the different levels of development of the online platform economy. 6, CONCLUSION ‘The online platform is the key driving force for the current online economy. Due to the traditional economic foundation of current intellectual property rules, such legal principles are however, incompatible with the unconventional digital Reconciling intellectual property rights with modern internet technologies and platforms has hence, become a pivotal point of consideration for all internet governance discussions. With regard to the novel issue of the infringement of third party intellectual property rights in the lgtal environment, this paper first suggests that since internet platform operators are the major controllers of such platforms, they are best placed to control infringing activities online. When assessing thelr lability, technology neutrality should be upheld. In other ‘words, the same intellectual property principles should apply to different platforms. Second, the fecus of platform regulations should be on platform controllers > Department of Economic and Social Affairs, United Nations “Guidelines for Consumer Protection [New York United Nation, 12003) Cound Directive 2000/32/£¢ ofthe European Pariament and ‘ofthe Council of @ une 2000 on certain legal arpects of information society services, n particular electronic commerce inthe internal market [2000] 011275/1. > coun Directive 2004/48/EC ofthe European Pariament and ‘ofthe council of 29 pri 2008 on the enforcement of intellectual property rights [2008] 01 1195/16. council Regulation 910/2018 of the European Parament and ‘ofthe Counc of 28 sly 2014 on electronic identification and ‘rust service for electronic transactions inthe internal market and repealing Directive 1999/93/eC [2014] 0) 1257/73WiPO-WTO Colloquium Popers, 2017 and APP developers. Any new regulations must also balance the competing interests of platform operators and external property holders. Third, countries should resort to the WTO arena to unify the rules governing platform operators’ liability. Last, the Indirect infringing rule is the best measure for regulating 2 platform's intellectual property liability from both the ‘technological and economic perspectives, being obliged to monitor ther services and responsibilty arising only after they have knowledge of infringing activities, platform operators should be tasked with properly managing their services. It is when this duty of management is unsatisfied that legal liability will then Instead of BIBLIOGRAPHY Statutes and international Treaties Council Directive 2000/31/EC of the European Parliament and ofthe Council of @ June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market [2000] 0! 1178/1 Council Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intllactual property rights [2004] 01 L195/16 Council Regulation $10/2014 ofthe European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for transactions in the internal market and repealing Directive 1999/93/EC [2014] 01 1257/73, Digital Millennium Copyright (MCA) (United States of America) Regulation on the of the Right of Communication through Information Networks (China) Protection United Nations Convention on the Use of Electronic Communications in International Contracts, New York, 23 November 2008, United Nations Treaty Series, vol. 2898, Doe. 4/60/55 cases Camptell v. 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