Disrupting Copyright

How Disruptive Innovations and Social Norms are Challenging IP Law

Margery Hilko

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000338959
• Edition: 1
• Topic: Jura
• Subtopic: Urheberrecht

New innovations are created every day, but today's business leaders are focused on finding disruptive innovations which are cheaper and lower performing than upmarket technologies. They create new markets, and challenge the status quo of existing technological thinking creating uncertainty both in the future of the innovation and the outcome of the market upheaval. Disruptive innovation is an influential innovation theory in business, but how does it affect the law?

Several of these technologies have brought new ways for individuals to deal with copyright works while disrupting existing market expectations, while their ability to spawn social norms has presented challenges for legislation. Considering disruptive innovation as a class, this book examines innovations that have impacted copyright in the past, what lessons can be learned from how the law interacted with them, and how the law can successfully deal with them going forward. Creating comprehensive guidance that can be used when faced with disruptive innovations with the aim of more successful legislation, it considers whether copyright law itself has been disrupted through these innovations.

Exploring whether disruptive innovations as a class have unique properties that necessitate action by legislators and whether these properties have the possibility to disrupt the law itself, this book theorises how the law should deal with disruptive innovations in general, going beyond a discussion of the regulation of specific innovations to develop a framework for how law makers should deal with disruptive innovations when faced by one.

Chapter 1

Disruptive innovation and the law

“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”¹

“Would you like some fries with that?” my waiter asked. His t-shirt proclaimed “DISRUPT YOUR ORDER,” but thus far, I saw nothing new or different about ordering burgers and fries. My waiter may not have known it, but his t-shirt was just one more incidence of a world gone “disruption mad.” The slogan was catchy, but the experience failed to live up to the hype that many see attached to disruption.

It comes as a surprise to many, probably including my waiter, that “disruption” has an academic theory of innovation behind it. The idea of disruption has taken the fast-paced business world by storm. Some of the most sought-after new technologies currently are those deemed “disruptive;” driving new markets, new innovations, and new customers to stagnant fields.

How does this concept interact with the law? Inevitably, technology and law will come together, whether in disputes or regulations. If this new-found craze for disruptive innovations is this prevalent in the business world, should legislators be taking greater notice of disruptive innovations?

Every industry will eventually meet the challenge of disruption according to Clayton Christensen, the business thinker who coined the phrase and wrote The Innovator’s Dilemma, the book that inspired the disruptive craze.² The legal sphere sometimes appears to pass the vagaries of time without significant change from outside influences, changing significantly only when law reform occurs. However, if Christensen is correct, then this is merely a fiction perpetuated by the inability to grasp the possibilities beyond our history. It is the very success of the legal regime, this “incumbent thinking,” that blinds our eyes to the possibilities that disruptive innovations provide.

Disruptive innovation reminds us that what we think we know may not always be how it is, and the legal world is not immune to that. Seduced by the apparent success in guiding society to date, it is difficult to imagine of forces beyond the catastrophic that would upset the legal framework we labour within. The law is ripe for disruption, whether that disruption occurs through the practice of law, the effect of specific technologies on the law, or challenges to the core principles upon which the law is built. How this disruption will play out has yet to be determined, and the prudent legal mind will learn to identify disruptive innovations that will challenge the law.

This book examines the intersection of the disruptive innovation theory and the law. Before this can be fully explored, the connections between technology, society, and the law are explored generally. In drawing these links, it is possible to see the interconnectedness of the three and how important considerations of technology and society are to law creation and reform.

We start by considering how the disruptive paradigm can be applied to and within the legal world, this chapter will explore how and why disruptive innovation is relevant to the legislator. But before we look at how it intersects with the law or society, we have to understand what disruptive innovation is. The simple response is that disruptive innovation is a business management theory first hypothesised by Clayton Christensen and popularised in his 1997 book The Innovator’s Dilemma.³ It has had a significant impact on the business and technology industries and been applied to a myriad of industries such as online financial marketing, low-cost airlines, human resources, Peer-to-Peer networking, personal computers, and education to name a few.⁴ However, a deeper understanding of this theory is necessary before we continue.

Disruptive v sustaining innovation: the core of the theory

Business management is interested in technological innovation for two purposes. Understanding innovation allows companies to predict future growth patterns or opportunities, and it enables managers to direct their R&D efforts towards those that will maximise profits. Business innovation theories have grown to interpret, explain, and guide businesses through “periodic shifts between chaos and continuity,”⁵ and studied innovation in a variety of sectors. It comes as no surprise that there are competing theories, categories, and models of innovation.

One of the common factors among many business innovation theories is their polar nature in categorising innovations. Broadly speaking, categorisations attempt to show the differences in how innovations and markets change. Each of these categorisations attempts to put into context the challenge faced by firms when confronted with that inevitable change. Whatever the names and the specifics, each of these theories and categorisations attempts to explain minor change versus major change in innovation patterns.

In the disruptive innovation theory, the categories are “disruptive” and “sustaining.” Understanding the differences in these categories is key to understanding the disruptive paradigm as a whole. Innovations that bring smaller change are classified as sustaining, incremental, or competency-enhancing.⁶ According to Christensen, the survival of a firm is rarely challenged by such innovation, and business managers and consumers find this type of change easy to understand. These minor innovative changes are the kind we all are familiar with. Sustaining innovation, the disruptive theory’s minor change categorisation, is where the core technology in a new product is an improvement on what has come before, an obvious upgrade, or merely incorporates new features.⁷ Sustaining technologies are ordinary, building upon the technology that has come before. Sustaining innovation is common, and happens regularly.

We intuitively understand this type of change having been conditioned to expect it through business-innovation practices over the past century. Sustaining innovation simply makes sense. Most importantly, sustaining innovations improve their performance in ways that the primary customer base understands, in working towards standards that customers have traditionally valued.⁸ The path forward is clear for these innovations, as both the firms that make them and the customers that use them know what to expect and how the improvements will benefit them.

When Apple launches its latest improvement and the market upgrades to the shiny new iPhone, this is a sustaining innovation. The upgrades and new features on the iPhone are typically accepted and understood by the market and customers. Better security, faster processing, improved camera, and larger screen size are all traditional performance parameters for the smartphone market. These improvement parameters have a known ability to attract customers. While some customers would have no need for some of these features, the majority are able to see the use and benefits of the new model.⁹ This is the classic way that sustaining innovations behave with a ready market for the innovation.

Opposing these are the technologies and innovations, which result in big changes to business models, supply chains, markets, and underlying technological processes. These can be classified as disruptive, radical, architectural, or competency destroying.¹⁰ These are innovations with the capability to radically alter existing markets, undermine the position of firms within that market, and “cannibalize” previous technologies.¹¹ These types of innovation present greater challenges for business firms who may find it difficult to cope or adapt to the new technology’s framework and market and, if it meets the requirements, may be disruptive.

What is disruptive innovation?

The question becomes, what, precisely, is disruption? Disruptive change is a major and rare change.¹² The fact that disruption does not happen on a regular basis makes it difficult to study, define, and understand but also makes the theory better for assisting in selecting technologies that may have an impact. It becomes a select group by definition.

One of the most compelling and persistent criticisms of Christensen’s disruptive theory is the issue of definitions, particularly the lack of a definitive definition of the theory and terms used.¹³ Christensen’s body of work does not provide concrete definitions of the terms “disruptive,” “disruption,” “technology,” or “innovation.” These last two are compounded as Christensen changes from technology to innovation in later works, accepting that the theory holds true for broader innovation models and not just specific technologies. This requires any discussion on these subjects to consider what these terms mean.

In creating the disruptive theory, Christensen focused on the circumstances surrounding an innovation rather than merely its properties.¹⁴ This differs from prior categorisations which consistently looked at the nature of the innovation itself. For example, architectural innovation concentrates on how the components of a particular technology are pieced together.¹⁵ This differs from the disruptive theory which would only consider a technology disruptive based on its effect on the market, regardless of how the technology was pieced together.

Perhaps more useful than a definition, Christensen created a road map of the circumstances that surround disruption and the technologies that produce it, which can be identified. These include an over-served market, new entrant possibilities, and an under- or non-served consumer base.¹⁶ Where these circumstances exist, disruption is more likely to follow. This does not give us a usable definition, but it does lead towards a standardised understanding of disruption.

Despite the initial difficulty found in this lack of a precise definition, the literature has taken the concepts elucidated by Christensen and applied them. A definition, or at least a collection of attributes, has become standard in the literature. Distilling the definitions from the literature, the definition used in this book includes the major characteristics of a disruptive innovation as well as providing a way to test whether an innovation falls under the disruptive category. A disruptive innovation can be defined as such:

A technology that creates new markets or changes the performance metrics upon which companies compete.¹⁷

Additionally, a disruptive technology will have at least two of the three characteristics:

• Lower performance along metrics traditional customers value
• Lower price points for products¹⁸
• Higher accessibility for non-mainstream consumers¹⁹

These three factors prove highly indicative in determining what is and what is not a disruptive innovation and will be used to help identify disruptive technologies. While not all disruptive technologies have all three factors, not having any is often a sign that an innovation may be purely radical and not disruptive.²⁰ However, these three factors must be considered secondary to the primary requirement that a disruptive innovation must change the performance metrics of its market or create new markets as this is the core difference between disruptive and sustaining innovations.

This still does not guide us in the most basic question; what is a technology/innovation?

“Technology” v “innovation”

In a general sense, defining “technology” is a difficult proposition. Many definitions, including those found in popular dictionaries, seem inadequate. Rather than construct a meaning merely useful for this project, the definition of technology used will be tied to other concepts in use already. Specifically, how is the term “technology” defined or utilised within the disruptive paradigm?

The disruptive theory came from considering a high-tech industry, the disk-drive industry. Hard drives are commonplace today, however, the time period studied by Christensen was a particularly turbulent and inventive period for the industry, producing five new architectures over twenty years, establishing common formats, sizes, and standards. Initial disruptive innovations were predominantly high-tech industry products; the Bell telephone, Honda motorcycles, minicomputers, personal computers, wireless telephony, endoscopic surgery, and eBay. However, by 2003 the list of disruptive technologies included some surprises. Discount department stores (K-mart, Walmart, etc.) and catalogue retailing (Sears, JC Penney, and Montgom...