Intellectual Property and Online Strategy

I recently prepared these comments for a legal audience as a simple introduction to alternative approaches towards Intellectual Property online. I’d like to share them with you. Do post your comments below.

Major battles are being fought on the internet over intellectual property. The founders of the Pirate Bay now face a jail sentence, the recording industry recently won a $1.92 million verdict against an American woman for downloading 24 songs, and in Australia the internet service provider iiNet is being sued by movie studios for allowing illegal downloads.

Filing lawsuits against business partners and customers may sometimes be necessary, but isn’t always the best course of action. The case against the American woman led to a great deal of negative publicity across the world. It’s unclear that the recording industry will eventually recover much money as a result of any of these lawsuits. Meanwhile, illegal downloads continue unabated.

It is time for media firms to revisit their business models. Apple has demonstrated that it is possible to make money through legal downloads via its iTunes store and by selling iPhones and iPods to play those files. But other approaches may also be possible.

One strategy is to sell complementary products and services. For example, Google gives away its search results, while making billions of dollars selling advertisements alongside those searches. IBM develops and supports open source software, while earning profits by selling complementary hardware and consulting services.

A second approach is to use the internet for building reputation. Consider digital photography, a creative industry much like music, and in which the final output is easily transmitted online. Leading photographers are increasingly creating blogs and podcasts containing excellent tips and techniques (e.g.,, and These photographers use the internet to showcase technical talent and their ability to shoot amazing images, thereby attracting fee-paying clients.

A third approach is to give away a version of the product to build a network of developers or users that supporting it, and in the process increase the value of higher-end products and services. One example is MySQL, a database software that can be obtained for free or under a business license. The free version helps MySQL to build a large user base (it is currently the most popular open source database), making the business license more attractive to organizations.

Taking a different approach requires CEOs to change their mindsets; often the old approach no longer works. Companies like Kodak were slow to move online. As such the digital imaging landscape is now led by Yahoo (flickr), Google (Picasa) and Apple.

When legal options are not made available, people resort to illegal means. For example,, a website owned by NBC, Disney, and other media companies, offers legal streaming of popular TV programs within the US but blocks access from abroad. This makes it tempting for non-US viewers to resort to illegal downloads. In contrast, there is no incentive for people to illegally download the highly popular Masterchef Australia TV Series because Channel Ten streams every episode from their website. Some people even prefer to watch Masterchef on a computer instead of a TV because they can watch it anytime, post comments, and quickly jump forwards and backwards through the video.

Instead of filing a lawsuit against viewers, Ten gains their support while earning revenue from advertisements embedded in each episode and on their website. Perhaps it is time for more companies to think creatively about satisfying consumers’ needs, not just narrowly around intellectual property.

Author: kwanghui

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