Gray Markets in Cyberspace

Journal of Intellectual Property Law Volume 7 | Issue 1 Article 2 March 1999 Gray Markets in Cyberspace Shubha Ghosh Follow this and additional works at: https://digitalcommons.law.uga.edu/jipl Part of the Intellectual Property Law Commons, and the Legislation Commons Recommended Citation Shubha Ghosh, Gray Markets in Cyberspace, 7 J. Intell. Prop. L. 1 (1999). Available at: https://digitalcommons.law.uga.edu/jipl/vol7/iss1/2 This Article is brought to you for free and open access by Digital Commons @ Georgia Law. It has been accepted for inclusion in Journal of Intellectual Property Law by an authorized editor of Digital Commons @ Georgia Law. Please share how you have benefited from this access For more information, please contact . Ghosh: Gray Markets in Cyberspace JOURNAL OF INTELLECTUAL PROPERTY LAW VOLUME 7 FALL 1999 NUMBER 1 ARTICLES GRAY MARKETS IN CYBERSPACE Shubha Ghosh* CONTENTS Page I. INTRODUCTION ....................................... 3 II. THE GRAY MARKET ANALOGY .......................... A. THE GRAY MARKET AS ARBITRAGE ...................... 15 20 B. GRAY MARKETS, DISTRIBUTION, AND PRODUCTION ....... C. GRAY MARKETS AS IMPERFECT CONTRACTING D. SUMMARY ........................................ ........... 22 24 27 III. COMPARATIVE LEGAL REGIMES IN REAL SPACE AND CYBERSPACE ..................................... A. B. 27 THE LEGAL ISSUES RAISED BY GRAY MARKETS IN REAL SPACE AND CYBERSPACE ....................... 27 THE LAW OF THE GRAY MARKET IN REAL SPACE ......... 29 31 32 34 1. ComparingReal Space and Cyberspace ................ 2. ContractingIssues and Web Linking ................. 3. The PossibleLegal Regimes for Cyberspace .............. Professor Ghosh holds a J.D. from Stanford Law School, a Ph.D. from The University of Michigan, and a B.A. from Amherst College. He teaches and writes in the areas of Antitrust, Intellectual Property, Law & Economics, and Torts. The author would like to thank Bill Edmundson, Robert Kwall, and Mark Lemley for extensive comments on earlier drafts of this paper and Rivka Monheit and the staff of the Journal for excellent editing and cite-checking work. Published by Digital Commons @ Georgia Law, 1999 1 Journal of Intellectual Property Law, Vol. 7, Iss. 1 [1999], Art. 2 J. INTELL. PROP.L. 2 a. Copyrights and Trademarks ..................... b. Contractand Property ......................... c. Sui Generis Regulation of the Gray Market .......... C. D. IV. [Vol. 7:1 35 37 39 LEGAL IMPLICATIONS FOR LINKING ................... 39 1. Copyright ..................................... 2. Trademarks .................................... 3. Contractand Property ............................ 4. Sui GenerisRules ................................ 39 46 49 51 IMPLICATIONS OF RECENT CASES: BERNSTEIN, FUTUREDONTICS, INC. AND STORM IMPA CT, INC............ 52 CONCLUSION ....................................... https://digitalcommons.law.uga.edu/jipl/vol7/iss1/2 55 2 Ghosh: Gray Markets in Cyberspace 1999] GRA YMARKETS IN CYBERSPA CE I. INTRODUCTION Cyberspace' is the Rorschach test for legal scholars. To those advocating greater contract and property rights on the Web, what one author refers to critically as Lochnerization, 2 Cyberspace is a frontier waiting to be foraged and settled as an extension of the marketplace in real space.' To those In this Article, I use the term "Cyberspace" synonymously with "Internet," "Net" and "World Wide Web." Technically, "Internet" refers to the set of protocols that govern the connections among separate and distinct computer networks that has expanded from the Department of Defense's Arpanet. MICHAEL L. DERTOUZOS, WHAT WILL BE: How THE NEW WORLD OF INFORMATION WILL CHANGE OUR LIVES 39 (1997)("Arpanet would lead to the Internet and the Web."). "World Wide Web" refers to the particular means of communication among these networks; the Web rests on the technological platform provided by the Internet. ("The Internet did not become a widespread cultural phenomenon until the Web... hit the streets.") Id at 40. Cyberspace is a much broader term than either the Internet or the World Wide Web; it refers to the set of legal, social, economic, and political relationships that govern and connect users of the Internet. Cyberspace would technically include individuals who have never logged onto the Internet but may be affected by its presence, because it serves as a conduit for personal information. The Rorschach test mentioned in the text refers to the visions an individual sees when examining the set of relationships that defines Cyberspace. By using the term Cyberspace synonymously with Internet and World Wide Web, I do not mean to ignore the important differences. Rather, my point is that whatever vision one has about Cyberspace will affect the structure of the Internet and the World Wide Web. The other reason that I use the term Cyberspace is to underscore the problem of making false analogies from real space and real property law to the arena of information. Cf.Id. at 2021 ("The other name we often hear, Cyberspace, is also flawed, because it evokes a gleaming otherworld ... But the action of the Information Marketplace is a part of everyday life. .. ."). While certainly Cyberspace is part of everyday life, Cyberspace also offers a technological means to manage and distribute products for the information marketplace. The differences are important to recognize even though the underlying economic problems are the same. For a history of the Internet and World Wide Web, see id. at 25-55. See also Barry M. Leiner et al., A BriefHistory of the Internet (last modified Feb. 20, 1998) < http://www.isoc.org/internet/ history/brief.html > (recounting the conception and development of the Internet). I am indebted to M. Ethan Katsh for my use of the term Cyberspace. M. ETHAN KATSH, LAW IN ADIGITAL WORLD 28-33 (1995). ' Julie E. Cohen, Lochner in Cyberspace: The New Economic Orthodoxy of"Rights Management,"97 MICH. L. REV 462 (1998) (defining a group of cybereconomists whose legal conclusions are based in an ideology of freedom of contract and strong property rights, rather than in a scientific or analytical understanding of underlying economics or technology). The discussion in this article is intended as a response to Professor Cohen's cybereconomists as well as to her characterization of economic analysis, as applied to Cyberspace. ' The following are samples of such a perspective: Trotter Hardy, Property (and Copyright) in Cyberspace,1996 U. CHL LEGAL F. 217 (1996); Trotter Hardy, The Ancient Doctrine of Trespass to Web Sites, 1996 J. ONLINE L. 7 (Oct. 1996) <http://www.wm.edu/law/publications/jol/hardy.htm>; Maureen A. O'Rourke, Fencing Cyberspace:DrawingBorders in a Virtual World, 82 MINN. L. REV. 609 (1998); Maureen A. O'Rourke, CopyrightPreemptionAfter the ProCDCase:A Market-BasedApproacb,12 BERKELEY TECH. L.J. 53 (1997); PETER HUBER, LAW AND DISORDER IN CYBERSP (...truncated)