We covered a lot of terrain, ranging from definitional question (what is a book? Here is a legal definition under Swiss VAT law, for starters) to open access issues. The focus of the conversation, though, was on the question how digitization shapes the book market and, ultimately, whether the Internet will change the concept “book” as such. A broad consensus emerged among the participants (a) that digitization has a profound impact on the book industry, but that it’s still too early to tell what it means in detail, and (b) that the traditional book is very unlikely to be substituted by electronic formats (partly referring to the superiority-of-design-argument that Umberto Eco made some time ago).

I was the last speaker at the forum and faced the challenge to talk about the future of books from a legal perspective. Based on the insights we gained in the context of our Digital Media Project and the discussion at the forum, I came up with the following four observations and theses, respectively:

Technological innovations – digitization in tandem with network computing – have changed the information ecosystem. From what we’ve learned so far, it’s safe to say that at least some of the changes are tectonic in nature. These structural shifts in the way in which we create, disseminate, access, and (re-)use information, knowledge, and entertainment have both direct and indirect effects on the medium “book” and the corresponding subsystem.

Some examples and precursors in this context: collaborative and evolutionary production of books (see Lessig’s Code 2.0); e-Books and online book stores (see ciando or Amazon.com); online access to books (see, e.g., libreka, Google Book Search, digital libraries); creative re-uses such as fan fiction, podcasts, and the like (see, e.g., LibriVox, Project Gutenberg, www.harrypotterfanfiction.com).

Law is responding to the disruptive changes in the information environment. It not only reacts to innovations related to digitization and networks, but has also the power to actively shape the outcome of these transformative processes. However, law is not the only regulatory force, and to gain a deeper understanding of the interplay among these forces is crucial when considering the future of books.

While fleshing out this second thesis, I argued that the reactions to innovations in the book sector may follow the pattern of ICT innovation described by Debora Spar in her book Ruling the Waves (Innovation – Commercialization – Creative Anarchy – Rules and Regulations). I used the ongoing digitization of books and libraries by Google Book Search as a mini-case study to illustrate the phases. With regard to the different regulatory forces, I referred to Lessig’s framework and used book-relevant examples such as DRM-protected eBooks (“code”), the use of collaborative creativity (“norms”), and book-price fixing (“markets”) to illustrate it. I also tried to emphasis that the law has the power to shape each of the forces mentioned above in one way or another (I used examples such as anti-circumvention legislation, the legal ban on book-price fixing, and mandatory copyright provisions that preempt certain contractual provisions.)

The legal “hot-spots” when it comes to the future of the book in the digital age are the questions of distribution, access, and – potentially – creative re-use. The areas of law that are particularly relevant in this context are contracts, copyright/trademark law, and competition law.

Based on the discussion at the forum, I tried to map some of the past, current, and emerging conflicts among the different stakeholders of the ecosystem “book”. In the area of contract law, I focused on the relationship between authors and increasingly powerful book publishers that are tempted to use their unequal bargaining power to impose standard contracts on authors and transfer as many rights as possible (e.g. “buy out” contracts).

With regard to copyright law, I touched upon a small, but representative selection of conflicts, e.g. the relation between right holders and increasingly active users (referring to the recent hp-lexicon print-version controversy); the tensions between right holders and (new) Internet intermediaries (e.g. liability of platforms for infringements of their users in case of early leakage of bestsellers; e.g. interpretation of copyright limitations and exemptions in case of full-text book searches without permission of right holders); the tension between publishers and libraries (e.g. positive externalities of “remote access” to digital libraries vs. lack of exemptions in national and international copyright legislation – a topic my colleague Silke Ernst is working on); and the tension between right holders and educational institutions (with reference to this report).

As far as competition law is concerned, I sketched a scenario in which Google Book Search would reach a dominant market position with strong user lock-in due to network effects and would decline to digitize and index certain books or book programs, for instance due to operational reasons. Based on this scenario, I speculated about a possible response by competition law authorities (European authorities in mind) and raised the question whether Google Book Search could be regarded, at some point, as an essential facility. (In the subsequent panel discussion, Google’s Jens Redmer and I had a friendly back-and-forth on this issue.)

Not all of the recent legal conflicts involving the medium “book” are related to the transition from an analog/offline to a digital/online environment. Law continues to address book-relevant issues that are not new, but rather variations on traditional doctrinal themes.

I used the Michael Baigent et al. v. Random House Group decision by the London’s High Court of Justice as one example (has the author of Da Vinci Code infringed copyright by “borrowing” a theme from the earlier book Holy Blood, Holy Grail?), and the recent Esra-decision by the German BVerfG as a second one (author’s freedom of expression vs. privacy right of a person in a case where it was too obvious that the figure used in a novel was a real and identifiable person and where intimate details of the real person were disclosed in the book.)

Unfortunately, we didn’t have much time to discuss several interesting other issues and topics that were brought up and related to the generation born digital and its use of books – and the consequences of kids’ changed media usage in a changed media environment, e.g. with regard to information overload and the quality of information. Topics, to be sure, that John Palfrey and I are addressing in our forthcoming book.

In sum, an intense, but very inspiring conference day.

Update: Dr. David Weinberger, among the smartest people I’ve ever met, has just released a great article on ebooks and libraries.

The line-up of speakers is fantastic as you can take from the website, and so is the social and cultural program. Once again I’m impressed how much effort this wonderful school puts into relationship management – in the best sense of the word. At least some of us at the Univ. of St. Gallen could learn a great deal from our colleagues and friends on this side of the Atlantic – not only in terms of professionalism, but also with regard to personal commitment of faculty members and University staff. For me personally, yet another rewarding experience, both professionally and personally (with thanks to the Alumni office and JP for making it possible.)

In the last session before “flyout” week, Silke Ernst and I had a first cut at a synthesis aimed at tying together several of the core themes we’ve been discussing so far. At the core of the session was the question as to what extent the law & economics approach can help us to deal with the complex IPR-questions that are triggered while transitioning from an analog/offline to a digital/online information environment. The students contributed to the session by presenting their views on the promises of and limits on a law & economics approach to IPR in the digital age. Using the time while traveling from Oxford back to Zurich, my recollection of the in-class discussion looks as follows (alternative interpretations, of course, encouraged and welcome) – starting with the argument that the law & economics approach to IPR serves at least two functions:

• On the one hand, it provides a toolset that helps us to frame, analyze, and evaluate some of the complex phenomena we observe in cyberspace (such as, for instance, large-scale file-sharing over P2P networks or the user-created content), and enables us to gain a better understanding of the interaction among existing rules and norms and these phenomena. We might want to call it the “analytical function” of law & economics (this aspect gets close to – but is in my view not exactly identical with – what has traditionally been described as the “positive” strand of discussion in law & economics.)

• On the other hand, law & economics may guide us at the design level (again, this gets close to what has been termed “normative” law & economics. For reasons I don’t want to discuss here, I don’t want to work with this distinction in the present context.). First, it can help us to identify the need for law reform by showing that the existing rules have a negative impact on social welfare. Here, the design function intersects with the previously mentioned analytical function. Second, law & economics provides a consistent framework to evaluate the impact of alternative means of regulation on the (economic) behavior of individuals and compare costs and benefits of different approaches aimed at solving a particular problem.

At a more granular level, we might identify the following promises and limitations of a law & economics approach with regard to the respective functionality:
Analytical function

• Promises: coherent framework, consistent and shared set of criteria, rational and quasi-objective analysis, …
• Limitations: Bounded rationality/areas of non-rationale behavior, lack of transparency regarding underlying causalities, limited possibilities to quantify phenomena, lack of empirical data, …

Design function:

• Promises: Cost-benefits analysis of alternative policy choices, taking into account perspectives of different actors in an ecosystem, at least ideal-type predictions based on models, …
• Limitations: Complexity of real-life situations, non-economic perspectives, motives, and effects, non-economic values, …

We reached some sort of consensus that the law & economics approach indeed provides a great toolset to analyze at least some of the trickiest IPR-related policy questions in cyberspace. However, the large majority seemed also to agree that some of the limitations of such an analysis become particularly visible in the digitally networked environment with phenomena such as commons-based peer production of content based on intrinsic motivations. Most of us also agreed that it would be dangerous to attempt to answer the IPR policy questions only against the backdrop of law & economics theory. Indeed, many of the decisions to be made in this space ultimately include choices about core values of our society that do not easily translate into the frameworks of law & economics, like for example informational justice, equal access, participatory culture, or semiotic democracy.

I’m very much looking forward to continuing the discussion about the role of law and economics in the digital age with my colleagues, the teaching team, and – most importantly – with the wonderful group of students enrolled in this seminar.

Recently, I have been heavily involved in the law and economics program (I should mention that St. Gallen doesn’t follow the rather traditional approach to law and economics that is predominant among U.S. law schools. Click here for a brief description of the St. Gallen interpretation of law and economics). Today is a special day for the program’s faculty and staff, because the first generation of students enters the final 10th semester of the Bologna-compatible Master program. Arguably, this 10th semester is rather unique as far as structure and content is concerned. Instead of providing the usual selection of courses for graduate students, we have designed what we call an “integrating semester” in which all students are required to take three (but only three) full-semester courses aimed at “integrating” the knowledge, skills, and methods they have acquired over the past few years. All three seminars – together worth 30 credits – are designed and taught by an interdisciplinary group of faculty members from the University of St. Gallen and beyond, including legal scholars, economists, business school profs, technologists, etc. The first seminar, led by Professor Peter Nobel, Thomas Berndt, Miriam Meckel and Markus Ruffner, is entitled Law and Economics of Enterprises and deals with risk and risk management of multinational corporations. The second seminar, led by Professor Beat Schmid and me, concerns legal, economic, and business aspects of intellectual property rights in the digital age. Professors Hauser, Waldburger, and van Aaken, finally, are teaching the third seminar entitled Law and Economics of Globalization, addressing issues such as world market integration of low-income countries, foreign investments, global taxation, and regulation of multinational enterprises.

My seminar on law and economics of IPR in the digital age starts with a discussion of basic concepts of economic analysis of intellectual property law and a stock-taking of the main IPR-problems associated with the shift from an analog/offline to a digital/online environment. It then follows a module in which we will explore three key topics in greater detail: digital copyright, software and business methods patents, and trademarks/domain names. Towards the end of the semester, we will then try to tie all the elements together and develop a cross-sectional framework for economic analysis and assessment of IPR-related questions in the digitally networked environment. In this context, we will also be visiting the Swiss Federal Institute of Intellectual Property (in charge, among other things, with working on IP legislation in Switzerland), where we will discuss the promises and limits of economic analysis of IP law with the Institute’s senior legal advisor and the senior economic advisors.

Clearly, we have a very ambitious semester ahead. I’m particularly thrilled that a wonderful group of colleagues from Europe and abroad is helping me to do the heavy lifting (of course, my wonderful St. Gallen team is very involved, too, as usual.). My colleague and friend John Palfrey, Clinical Professor of Law at Harvard Law School, the Berkman Center’s executive director, and member of the board of our St. Gallen Research Center for Information Law, will be discussing with us thorny digital copyright issues and future scenarios of digital media. Klaus Schubert, partner of WilmerHale Berlin, will be guiding us through the software patents and business methods patents discussion. Last but not least, Professor Philippe Gillieron from the University of Lausanne will be speaking about trademark law in the digital age, focusing on domain name disputes.

All sessions are (hopefully) highly interactive. The students will contribute, among other things, with discussion papers, term papers, group presentations, and will participate in mock trials (one on Google’s recent copyright case in Europe), Oxford debates, and the like. Unfortunately, the Univ. of St. Gallen is still using a closed online teaching system called StudyNet, but if you’re interested in the Syllabus, check it out here. Comments, thoughts, suggestions, etc. most welcome!