Blog Intellectual Property and Knowledge Management

Who owns the (digital) world?

March 3rd, 2015 by IPKM blog

Internet of Things

“The future is already here – it’s just not evenly distributed.”

William Gibson


Samuel Laurinkari is a Manager of Government Relations at Ebay inc, a company which aims at enabling global commerce. Mr. Laurinkari presented the concept and recent developments of The Internet of Things at the 16th EIPIN Congress (29 – 31 January 2015) as a keynote lecture in Maastricht.

What is the Internet of Things? The Internet of Things (IoT) provides an interactive service with a purchased physical good. It transforms a consumer product into a service avatar. This interconnection of wireless devices enables technology to make life easier for humans.

Imagine being a tourist in a big city and owning a pair of shoes which will always direct you in the right direction. The smart phone in your pocket containing a map app sends signals to the chip installed in your shoes. When at a junction, a vibration in either your left or right shoe indicates whether you should turn left or right. The consumer tourist no longer needs to feel hopelessly lost!

New electronic and wireless network technology has led to this revolution of the consumer market place. A prominent example of such a product is the Tesla car. This connectivity makes the products we rely upon dynamic and adaptive to the consumers’ needs. At the same time physical objects are now closely linked to the controlling service provider. It has wide implications on market control and power.



The transformation of a consumer product into a service avatar leads to an interesting question: How much of the product does the consumer now own?

The users’ expectations from a legal purchase of a product is to own the digital element of the good, in the meaning of ownership in traditional property law. After purchasing the product, the owner would expect to be able to own, use and dispose of the product, including the navigation app connected to it.

Service providers have an opposing view on the matter, namely that the licensing terms of the digital content should not be transferable. This will not, however, seem fair to the consumer. At the moment, the exhaustion principle entails that the producers’ right to control the product ends with its first lawful, unconditional sale.

In light of this mismatch regarding the conception of consumer ownership, it seems that the copyright exhaustion in digital goods should be reconsidered in order to balance both consumers’ and providers’ expectations. Issues such as the fact that digital products do not deteriorate over time, together with the ease of sharing them, should be part of the discussion.

Normally, our tourist would expect to be able to keep, wear, sell or throw away her/his shoes as s/he pleases, however with the connected navigation service this has become a far more complex situation. The owner of the shoes might not be able to just simply assign ownership of the licensing agreement to a new owner, despite an impression that the shoes s/he bought appear to belong to her/him.

Such a conflicting issue has already been partially discussed in the judgment C-128/11 UsedSoft v. Oracle (2012) by the Court of Justice of the European Union. It ruled that the owner of a software copyright cannot prevent a perpetual licensee, who has downloaded the software from the internet from reselling his ‘used’ licence. This decision basically enabled the creation of a secondary market for licensed software under certain conditions, and can have wide implications if applied consistently to other digital sales (although the ECJ has so far refused to do so – see, e.g., case C-355/12, Nintendo).

Therefore it would be possible to sell our navigation shoes to another person, and be able to include in this sale the licence for the app attached to the shoes. Not only would this be more in line with the tourists’ expectations, but would also increase the resale value of the shoes.

This is, however, just the beginning of a far wider discussion on the digital consumer market. The re-sale of digital content is specifically discussed by the EU Commission. The outcome of the copyright consultations remain crucial to both users and providers.


Power distribution

The IoT has given rise to embedded systems. Since the product platform relies on the power of network effects, the power to control the network standards should not be underestimated. Platforms enable more interactive services and products in an easy and cheap way, and most importantly consumers and producers can share data with goods and services. Consequently, they become more and more valuable both to the service providers and to users that make use of the services generated. The legal framework under which the platform and its owners operate will be of paramount importance.

WalkGood Inc., the manufacturers of the navigation shoes, would have a constant stream of useful data from the actions of its consumers. This would enable them to do many things, including improving the services linked with the shoes. Perhaps an analysis of this data would lead to the conclusion that tourists prefer walking through parks rather than along roads, and through an update, the app now directs our tourist through beautiful parks rather than along busy main roads

Furthermore, in a more business orientated view, it allows WalkGood Inc. to analyse the behaviour of its consumers to tailor its products to market needs. Noticing again that our tourist prefers frequenting the opera than going for a jog, WalkGood Inc. may decide that the next shoe in their range maybe a more fashionable brogue than a sturdy trainer.”

When goods themselves become ecosystems, the discussion on the control over these systems heats up. This fact urges the question as to whether the dominant players in the field should be controlled. The possible interplay of competition law and IP law could possibly enable third parties’ access when deemed necessary.

As the dominant player in the navigational shoe market, WalkGood Inc. could abuse their position to the consumer’s detriment. What if the navigation app ensures that the tourist always walks past a WalkGood retail store, no matter where they wish to go? Enabling our tourist to use another app if they desire would mean that WalkGood would be limited in their position to abuse the rights, in fear that a competitor might offer a more favourable app for the tourist.

In the era of The Internet of Things, the new possibilities will drive innovation across the European consumer market. The interconnected market will create a self-evolving product, where instantaneous consumer data will specialise the products offered to meet the needs of the consumer.

This era will also require fundamental changes to the notions of property. The traditional model of ownership rights will no longer protect the consumer as they used to, and a new legal framework should reflect the new power of these eco-systems.

By Klaudia Galka

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