Software Protection and Japan's Copyright Law

Is software piracy rampant in Japan, as the BSA's claim of $1.1-billion in annual losses for software developers would suggest? How far does copyright law protect software, and is it sufficient? And what are government ministries and industry groups doin g to discourage illegal copying? In this overview of the topic of software protection, we try to offer some answers.

by Cheryl Hill

The newest CD-writing technology represents a breakthrough for businesses, software vendors, and "power users." Instead of having to deal with a dozen or more floppy disks to install a single application, we can install a multi-megabyte program from a sin gle CD-ROM. And instead of using inconvenient tape systems or stacks of floppies to back up data files, we can now (or soon, when the price of the equipment drops to an affordable level) back up a hard-disk full of information onto a single CD-R (compact disc-recordable).

Yet the advance in technology also worries software developers, for the same reason that it tempts software pirates. One CD-R can easily hold dozens of illegally copied commercial software packages, or thousands of pages of copyrighted text. The promise (and danger) is that, unlike traditional video methods, digital media does not degrade with copying: the 100th copy is identical to the original.

By now, we've all read about the hassles of copyright negotiation in store for a CD-ROM publisher who wants, for example, to combine a few musical scores, magazine covers, newspaper articles, and a radio or TV clip in one disc. The legitimate publisher w ill go through the hassles in order to issue a legal product. Put the new technologies into the hands of the less-than-scrupulous "collector," though, and the danger to software developers, writers, artists, and musicians is obvious.

The laws on decompilation

Almost everyone agrees that software piracy is wrong. Many would even consider decompilation and/or reverse-engineering as synonymous with piracy, but legally these practices are defensible in some instances. Japan's current copyright law, which covers computer software, is more stringent than European or US law, and filled with obstacles that hobble local software manufacturers. In Japan, for example, one cannot copy a "program work" - period.

Taken to its logical conclusion, this prevents programmers from even studying the ideas behind a software interface. Superficially, allowing the decompilation of software code in order to reverse-engineer a program might seem to hinder innovators of the software industry. Until recently, though, decompiling was flatly illegal in most countries, because it requires "copying" the binary/object code (machine language) to hexadecimal and then into a version of source code (high-level language).

According to Chris Wells, a lawyer with the firm of White & Case in Tokyo, a famous 1986 US court case, Whelan v. Jaslow, decided that software structure, sequence, and organization (SSO) are protectable. The Tokyo High Court, however, held in a 1989 cas e that SSO (or processing flow, as it is known in Japan) in a factory automation CAD/CAM program was not protectable.

Two 1992 US court cases involving Japanese game software makers considered issues of interoperability as well as how far a copyright should protect non-patentable functions. In Sega Enterprises Ltd. v. Accolade, Inc. and Atari Games Corp. v. Nintendo of America, the court invoked the "fair use" doctrine to allow decompiling of software binary code in circumstances where there was no other way to decipher the chip interfaces to produce game software products for a specific system. These recent precedents in the Federal Circuit Courts in the US, as well as the new EC Software Directive, make decompiling in those countries legal in very limited circumstances.

Significantly, though, Japanese law has no "fair use" concept for software; decompilation is technically a copyright violation. On the other hand, computer programs are not protected in Japan as literary works, which is the standard in Europe and America at present.

Some observers predict these software copyright issues will eventually be tested in the courts. The US is a common law country, however, whereas Japan is a civil code country. Japanese judges are known to follow a literal interpretation of the law, and do not have the power to "legislate" from the bench.

The multimedia issue

Several government bodies, including both the Ministry of Education (Monbusho) and the Ministry for International Trade and Industry (MITI), have been actively studying the multimedia issue as it relates to software and intellectual property. The Subcommi ttee on Multimedia of the Copyright Council, a private consultative committee to the Agency for Cultural Affairs (ACA), has considered the issues of reverse-engineering, private-use exemption, and possible restrictions on the distribution of devices that can be used to circumvent copyright protection (such as digital recording equipment). The subcommittee proposed the establishment of a Copyright Rights-Information Centralization Organization within the ACA. Under the proposal, that organization would be the sole channel through which multimedia publishers and copyright holders would negotiate usage and modifications, thereby establishing standards by which later multimedia works would be guided.

In yet another example of the turf wars over which agency will control the multimedia sector, MITI asked the Institute for Intellectual Property (IIP) to develop an alternative proposal. IIP's proposal calls for the creation of a Digital Information Cent er, similar to the US Copyright Clearance Center, which would, for a fee, allow artists, authors, musicians, songwriters, software developers, and other copyright owners to register their copyrightable works. In doing so, creators would partially waive th eir rights of integrity to allow some modification (such as inclusion in CD-ROM packages). The new agency would pass on royalties from authorized users to the individual copyright holder, and perform other administrative tasks.

Which proposal is eventually adopted will be determined by whichever branch of government, MITI or Monbusho, manages to wrest control of the development of multimedia in Japan. Either ministry's success, though, will not necessarily be beneficial to eith er content creators or consumers. The innate Japanese government desire for minute, detailed control discourages dissension or experimentation and, therefore, creativity - and the multimedia market isn't likely to be any different. In Japan, the more that government or government-controlled organizations get involved, the slower things move; Japan may once again find itself outpaced by foreign content providers.

Changes to the copyright law?

According to the IIP's report entitled "Exposure '94: A Proposal of the New Rule on Intellectual Property for Multimedia," application of traditional Japanese copyright concepts greatly restricts use of the multimedia technology in Japan. Some CD manufact urers have advocated the weakening of copyrights in order to help advance the multimedia industry and reduce the temptation to piracy.

Just as the right to privacy is at odds with the right to publicize, copyright is at odds with the right to manufacture, so the theory goes. As technology advances, society must change the concept of copyright protection to avoid the problems associated with the modification and combination of copyrighted materials into a mass-produced CD-ROM. Some multimedia proponents charge that authors and artists have too much leverage in the current copyright system.

One idea that has been suggested here in Japan is to set up degrees of copyright, and link degree of copyright to popularity. In privacy law, the more famous actors, athletes, or public officials become, the less legal protection they have from the public's right to know. Similarly, copyright could give lesser protection to the more popular artists - less control over distribution and perhaps lower royalties, thus "benefiting" society as a whole.

There was an attempt a couple of years ago to revise Japan's copyright law, but those plans have been dropped for now. A recent report in a Japanese newspaper, though, suggests that the Education Ministry's next proposed revisions will include restrictio ns on the manufacture and sale of software-protection cancellation devices. Other changes are likely as many groups continue to debate copyright law revisions.

In an obvious attempt to take the lead on this issue, thereby winning greater powers for itself, MITI set up a panel last year to look into copyright law revision, an action that brought a hue and cry from both foreign and domestic computer and legal exp erts. The nervousness surrounding any proposal to change Japan's copyright law is understandable, according to Christian Bigeard, President of Chorus Systems KK (a French-American joint-venture in Japan). There was great concern, he notes, that the chan ges proposed in 1993 would have resulted in de facto unrestrained reverse-engineering in Japan, to the detriment of foreign software producers.

Piracy on the digital high seas

The Business Software Alliance (BSA) releases an annual software piracy report. According to its February 1995 report, the United States has the highest amount of piracy losses of all the countries studied (an estimated at $2.25 billion). Next on the list is Japan; BSA's statistics claim that software piracy in Japan will cause losses to software producers of $1.1 billion, and that the piracy rate (of programs in use) approaches 67%. (Germany, by the way, is a close third.)

Upholding software copyrights, or even convincing the public that the act of copying a program is wrong, depends in large part on moral consciousness and cultural attitudes. "The Japanese have a low sensitivity to the issue of misappropriation," says Wells, and foreigners who have lived in Japan can attest to the cultural ambiguity of "ownership." It is not uncommon for a lost wallet to be returned, usually with the money still inside. But as soon as it starts to rain, an unattended umbrella becomes common property, and an unlocked bicycle is an invitation to footsore pedestrians.

This same ambiguity is evident in the computer area. No one would think of walking off with a piece of hardware, but to many Japanese the magnetic bits on a disk are intangibles to be shared freely. Almost ACCS targets businesses and schools in
its anti-piracy campaign. everyone has a "friend," or a "friend-of-a-frien d," who has a shelf full of programs that he will gladly "share" (in the form of copying). And, until recently, copy-protection-bypass programs were sold openly in most computer stores.

Software piracy implies more than just an occasional illicit copy passed to a friend. It is generally unjust copying on a grand scale, usually enabling the pirate to make a profit. The largest collection of pirated software ever confiscated in a raid in Japan was that of a doctor in Aichi Prefecture who ran a software-by-mail piracy operation. Police confiscated 20,000 illegal copies of 8,500 software titles. And in November 1992, the National Police Agency (at the request of the Association of Copyright for Computer Software) shut down the Akihabara and Shibuya shops of the Maxload PC software-rental service, whose rental membership was over 14,000 registered clients after six years of operation.

A business that encourages unlawful, simultaneous use of software around the office now risks being turned in by a disgruntled employee. The BSA Japan Office is offering a reward of ·10,000 for information on software piracy, and ·100,000 for court testi mony. According to BSA Japan's February 1995 press release, "In the first two months of operations, more than 70 calls have been made to the hotline... regarding illegal software copying at, for example, advertising agencies, software rental shops, manufa cturing companies, trading companies, technical schools, and computer leasing companies.... Where the violator has cooperated with BSA's investigation, BSA has been willing to settle the matter for a promise to purchase replacement software plus an agreed settlement amount covering past infringement."

(Realistically, given the choice of losing one's job or letting your employer's software piracy go undetected, the reward is not much of an incentive. If you suspect illegal software use and want to report it, though, you can call the Business Software A lliance Japan hotline at 03-3239-7719.)

Educating the public

Whereas lawsuits are common in the West, other methods (including sending "demand letters" to pirates and out-of-court settlements) are generally used in Japan. A wide range of semi-governmental and industry groups are active in various aspects of intelle ctual property laws with regard to computer software and multimedia.

There are frequent public education events. The Copyright Research and Information Center, for example, has held seminars on copyright protection of software intellectual property. In February, a seminar on copyright and databases was organized by the Co pyright Study Group of the Information Science and Technology Association, and in April the Association for the Protection of Copyright held seminars on copyright issues for software manufacturers.

The line between "piracy" and "just helping out a friend" is not an easy one to draw. Most of us have, at one time or another, passed a copied program (perhaps for "evaluation purposes") along to a friend, knowing that it is not strictly legal. A 1994 su rvey of its membership by the Japan PC Software Association found that 86% percent of the 3,000 respondents were aware that it is illegal to make copies of software other than for backup purposes, but 52% admitted to having done so. And regarding the use of copied programs for work purposes, 70% percent said they had not received any corporate notification discouraging or prohibiting illegal copying.

In view of the prevalent attitude, in November 1994, the Agency for Cultural Affairs issued recommendations for educating business people and students about copyrights. The Association of Copyright for Computer Software (ACCS) and the Copyright Research and Information Center, meanwhile, have conducted poster campaigns and speaker programs geared toward educating teachers, students, and business people that unrestrained copying is wrong.

The ACCS campaigns are directed at students and other selected demographic groups. It also sends speakers to give copyright lectures at police training academies, prefectural boards of education, and ordinary companies. The ACCS cooperates in field inves tigations of companies, schools, and illegal copy shops, and serves as expert witnesses in court prosecutions. (In the first seven years after the 1986 revision of Japan's usufructuary laws, more than 80 illegal software dealers were sued.)

Who polices the police?

Remember that it is the Agency for Cultural Affairs, within the Ministry of Education, that administers Japan's Copyright Law. Then consider that, according to Chief Secretary Yutaka Kubota of the ACCS, high schools and universities are the biggest sourc e of software piracy in Japan. Other than letters (sent by the BSA in 1993 and Ministry of Education in 1994) to 15,000 schools and universities, warning that violations of copyright could be prosecuted, however, little action has been taken to correct th e situation.

University students I have spoken with admit that Japanese professors and teachers encourage free copying of almost anything within reach. In defense, teachers and students point to the minuscule budgets allocated for software purchases by schools. In a November 1993 report entitled "Protection of Computer Programs and Databases in Japan," presented to the World Intellectual Property Organization's Regional Copyright Seminar for Asia and the Pacific Region, Kubota stated that, "Whereas businesses make co pies in order to maximize their profits, schools and teachers put providing their students with information at the lowest possible cost ahead of instilling respect for copyright."

The situation thus presents the Ministry of Education with a conflict of interest. If it gets really serious about copyright enforcement, it would have to crack down on the high schools and universities that are under ministry control, and acknowledge th at it has allowed widespread software piracy to continue within schools under its purview.

Why copyright software?

Why has copyright law been chosen as the most appropriate legal safeguard for computer software? Why not patent law, or trade secret law instead?

Without some type of legal protection, companies and individuals would have little incentive to produce software programs. Even with legal restraints, though, slavish (electronic) imitation is rampant. This pushes up the costs for buyers of the real thin g, to compensate for the revenue lost in the form of illegal copies. (This is often seen as a "chicken or egg" type of question: Are illegal copies of programs prevalent because packaged software prices are so high, or are software prices high because the re are so many illegal copies?)

Despite some variations, Japan's intellectual property laws follow accepted international norms. Briefly, the law covering protection of intellectual property has four sub-areas. Patent law provides a production/sales monopoly on inventions; though this protection is broad, it requires thorough identification of prior art and proof of the uniqueness of the invention. Copyright law establishes a set of (transferable) publication rights. Trademark law protects the identifying names, logos, and other symbo ls used in manufacturing or service businesses against unfair competition. And trade secret law protects unpatented and concealed processes, compounds, or tools with competitive advantage.

Trade secret protection might seem a good fit for software - and, in fact, it is often part of shrink-wrapped licensing agreements and development contracts. This is because, once an "idea" is freely distributed outside the inventing company, discovery b y analysis or other method would otherwise entitle the discoverer to take free advantage of the (secret) idea. If a trade secret is stolen or illicitly obtained by a competitor, the inventor must be able to prove that it was secret and known only to a few employees. (One US court case in 1994, Microsoft v. Stac, dealt with precisely this issue.)

Enforcement of trade secret law requires a "discovery process" whereby an "inventor" can legally obtain records from the competitor to determine if the method of analysis was valid. Japan, however, has no discovery process; Japanese trade secret law req uires the inventor to discuss the "secret" in open court.

Patent law might seem another valid choice for software protection, and some very basic hardware interfaces and program languages were patented when computer technology was new. Today, however, it is harder (although not unheard of) to obtain the grant of a patent for a computer software program.

Operating systems, communications protocols, and software interfaces are functional, like patentable inventions. Algebraic equations, universally applicable knowledge, or inventions in the public The Association of Copyright for Computer Software (Tomonari Foresight BIdg. 5F, 5-40-18 Otsuka, Bunkyo-ku, Tokyo 112) can be reached at phone 03-5976-5175. domain, however, are not patentable. While no one can pate nt an idea, what can be copyrighted is the creative expression of that idea (as in a computer program).

Current software copyright problems center around such legal concepts as "fair use" and the "merger" test for deciding what "non-literal" elements are protectable (for example, SSO or processing flow). Fair use of copyrighted materials does not constitute an infringement of copyright, but what is fair use when it comes to software coding? The merger test focuses on where to draw the boundary between public domain (idea) and copyrightable works (expression). The merger test regarding computer software seems to be a fuzzy-logic border.

According to Intellectual Property Owners Association Director Herbert C. Wamsley, "What we're seeing now is recognition of the value of technology and knowledge-based industries. Because of that, businesses have been willing to invest in research and de velopment and to put greater importance on securing the best possible intellectual property rights as a way of protecting knowledge."

Finding a common ground

In making a final decision on the software protection and piracy, it is essential that Japan consider the international situation and tailor its laws accordingly. In his preface to the "Exposure" report, IIP Multimedia Committee Chairman Nobuhiro Nakayama writes, "We must find a common ground on which we can reconcile existing copyright protection with the emerging multimedia technology. A purely domestic solution is unlikely to be successful [because] the multimedia era, characterized by the borderless e xchange of information, require consistency across the legal systems of the world. Any revision of the Japanese Copyright Act contrary to international standards will only create disorder and hinder further multimedia development. New revisions must also preserve the conformity within the entire structure of domestic intellectual property law."

The author would like to acknowledge the assistance provided by Seiichi Nunome of Kodak Japan, Christian Paoli of the French Embassy, and John Stern of the American Electronics Association.

Cheryl Hill is president of Japan Online Company, which provides research on Japanese-language databases to an international clientele. In 1990, she founded (and continues to serve as program director of) the Information Services Society.