Ethics and Intellectual Property at E-Motion Company - Case Study Example

Introduction The case examined in the following essay involves a controversy arising from the actions of an animation company from the Philippines, E-Motion, that was contracted to do support work for the motion-capture animation and game development firm Animation Vertigo, Inc. (AVI) of the United States. (Paredes, 2009; Jurado, 2010) The issue involved is one of intellectual property protection, in two different respects: first, the misuse of proprietary technology, and second, the misuse of confidential company information, specifically customer records, business, sales, and marketing plans. The first part of the essay will review the case as described by the news media, and in the second part, the ethical issues will be defined. In the third part, the presentation of the ethical problem by the media will be analysed. Finally, a few questions of the use of intellectual property that are raised by the odd lack of conclusion to the case will be examined. A Good Deed Punished In a story that was first reported in March 2009 and again in May 2010, a Filipino animation firm called E-Motion had run afoul of a non-disclosure, no-compete contract it had signed with Animation Vertigo, Inc. (AVI) upon the latter’s engaging E-Motion to complete support work for AVI’s American and European clients. (Paredes, 2009) The reason E-Motion was selected for the outsourcing contract is because of the reputation for talent Filipino animators enjoy in the industry, and because the president of AVI, Maria de Castro Rausch, is a native Filipino. Rausch convinced the management of AVI to give E-Motion the contract as a means of tapping the talent and supporting the animation business in her home country. (Jurado, 2010) The exact nature of the work done on behalf of AVI by E-Motion is not specified in either of the two commentaries, but involved motion-capture animation used by the video game and movie industries. In order to complete the work, E-Motion’s staff received intensive training in AVI’s proprietary software and techniques, and in the course of the months-long orientation E-Motion also gained insight into AVI’s business plans, marketing strategy, and customer information. To protect its intellectual property, AVI required E-Motion to sign a non-disclosure agreement and a non-competition agreement for a term of two years. (Jurado, 2010) After a good start to the working relationship, the quality of work from E-Motion began to rapidly decline, and the small firm began missing deadlines or ignoring job orders entirely. AVI was eventually forced to cancel the outsourcing contract. (Jurado, 2010) Shortly afterwards, AVI began receiving calls and e-mails from some of its clients, who informed AVI that they had been contacted by “a small Filipino firm” who told the customers they should cancel their contracts with AVI because they could provide the same motion capture animation technology and services at a lower price. (Jurado, 2010) In addition, E-Motion claimed to the customers that they were in fact the actual animation studio, while AVI was simply a marketing agency, which was a gross misrepresentation of the role of both companies. (Paredes, 2009) AVI invoked the non-disclosure and non-competition clauses of its contract with E-Motion, and requested assistance from the Intellectual Property Office (IPO) of the Philippine government, which responded by issuing a 20-day temporary restraining order on E-Motion in March 2009. (Paredes, 2009) In response, E-Motion closed its business and restarted under a new name, Mo Anima, offering the same sort of services and techniques learned from AVI. (Jurado, 2010) The first report (Paredes, 2009) was originally published on 27 March 2009 in the Manila newspaper Malaya, according to a link provided on the government webpage of the Congressional Commission on Science & Technology and Engineering where it is reprinted. The second report (Jurado, 2010) was published on 21 May 2010, more than a year later. What the final resolution of the case was is unknown, as there appears to be no further information published about it. The company known as MoAnima is still in operation, offering motion capture (“mocap”) clean-up and animation editing services, according to its website. (MoAmina, 2010) Ethical Issues The ethical issues arising from the E-Motion case can be broadly described as misuse of intellectual property. The particular violation that E-Motion was accused of by AVI was using the techniques and technology of AVI to compete unfairly; in other words, AVI’s proprietary knowledge shared with E-Motion for the purpose of facilitating E-Motion’s work on AVI’s behalf was being used for a different, unauthorised purpose. Under US law, this would be a possible violation of the Uniform Trade Secrets Act. (Monsees, 2011) Under Philippine law, this would possibly be a violation of Republic Act 8792, known as the Electronic Commerce Act of 2000, which provides penalties for, among other things, “Piracy, or the unauthorized copying, reproduction, dissemination, removal, distribution, importation, use, substitution, modification, storage, uploading, downloading, communication, making available to the public, or broadcasting, of protected materials, electronic signatures or copyrighted works, including legally protected sound recordings, phonograms and information material on protected works, in a manner that infringes on intellectual property rights.”(Sembok, 2003, p. 273) In this case, E-Motion’s actions seem to be defined by the terms “unauthorized distribution” and “unauthorized use in a manner that infringes on intellectual property rights.” The legal violation as described by the two news stories seems clear: E-Motion was not to use AVI’s technology or processes, nor compete directly with AVI for a period of two years. (Jurado, 2010) In contacting AVI’s existing customers directly and offering the “same” services, E-Motion apparently broke both of those promises, and was ordered to stop by the Philippine authorities. Portrayal of the Case in the Philippine Media In both articles addressing the E-Motion case, the attitude expressed toward the matter is one of shame. In the earlier of the two articles (Paredes, 2009), the story is headlined with the word SAYANG! which in the native Filipino language is an exclamation of distress like “Oh, dear!” (A Filipino student explained that the word literally means “Dear” or “Darling”, but is used only as an invective.) The point being made in both articles is that the Filipino company proved to be untrustworthy, and caused harm to the reputation of Filipino businesses for other foreign companies who might have otherwise considered contracting work in a similar manner. The later article (Jurado, 2010) goes further in explaining that E-Motion was chosen not just for their talent, but as a result of a personal effort of AVI’s Filipina president to help some of her countrymen, who proved themselves unworthy of her faith in them. Even though both articles acknowledge the negative implications for business in the Philippines, neither article attempts to justify what happened with E-Motion or appeal to international businesses by portraying it as an isolated incident that should not be held against the country’s businesses in general. Rather, the articles are addressed to the Filipino audience and are very condemnatory, saying essentially that “Filipinos are cheats, and no one will want to do business with us.” How Unethically Did E-Motion Actually Behave? The certain condemnation of E-Motion (now MoAnima) in the Philippine press seems odd, since apart from the temporary restraining order issued by the Philippine Intellectual Property Office in March 2009, there is no other record in the press or other available online that any further action was taken against the company; and as noted earlier, MoAnima is currently operating, doing much the same work as its parent company did at the time of the problems with AVI. There are a number of possible reasons for this. The difficulties in working out a legal matter between companies in different countries, or the ways in which the Philippine court system may work may have something to do with the apparent lack of resolution in the case, but those are outside the scope of this discussion. There are a couple ideas related to the use of intellectual property, however, that may be relevant. First, there is the possibility that no actual harm was done to AVI by E-Motion. In a similar case in the US described by Monsee (2011), several key employees of a software developer left to take positions at a company which had been doing work under license for the developer in a relationship similar to that between AVI and E-Motion. In the process, the licensee company acquired the developer’s largest competitor; the developer responded by suing the former licensee, claiming that the knowledge the key employees had of the developer’s systems and products could be used for unfair competitive advantage. The complaint was rejected by the US courts on the grounds that the potential for an infringement of intellectual property rights did not amount to actual damage. In E-Motion’s case, they contacted customers and offered the same services, and if it is assumed (as the two news articles assume) that they were offering AVI software and proprietary information, then that would be unethical; since there was a contract preventing them from doing that, it would actually be illegal. But the second possibility to consider is that E-Motion might have felt they were not doing anything unethical. In the case cited by Monsee (2011), the court felt that just because the employees had knowledge did not mean they would misuse it; on the contrary, it would be quite natural for them to develop new ideas from it, which (if they were acting ethically, and in accordance with any agreements on non-disclosure or IP protection) would be something evolved beyond the knowledge provided to them by the development company, and therefore beyond what the developer could claim as its intellectual property. This agrees with a principle described by Thompson (1999, p. 109) that intellectual property should be defined not by its nature, but by the process by which it was created. A website, for example, may have content updated and changed by different users; the particular design and code used for the website, however, remains the same and remains the IP of the designer, because the process which created what a visitor sees when viewing the website, even though it may have different content from day to day, has not changed. In E-Motion’s, now MoAnima’s, case they are in an industry sector where the potential customers are in fact the same as for AVI, so they are already a competitor. If the knowledge they learned from AVI gave their own developers new insights to develop something completely new on their own, they would not be using AVI’s IP any longer, but their own, and would be acting ethically. Thus the lesson in this case is that in relationship where intellectual property is shared, the terms of definition of the IP and its use must be carefully described in detail, not only to protect the IP rights of the developer of products and concepts, but to protect the rights of its partner to pursue its own developments and business on a fair basis. References Jurado, Emil. (2010) “Closure from winners and losers.” Manila Standard Today, 21 May 2010. [Internet] Retrieved 29 April 2011. Available from: http://www.manilastandardtoday.com/insideOpinion.htm?f=2010/may/21/emiljurado.isx&d=2010/may/21. MoAnima. (2010) MoAnima. [Website] MoAnima, Inc. Retrieved 29 April 2011. Available from: http://moanima.com/static/index.html. Monsees, Paul R. (2011) “Your Licensee Knows Your Confidential, Proprietary Technology and Just Acquired Your Main Competitor: Can You Sue for Threatened Trade Secret Misappropriation?” Trade Secret/Noncompete. [Website] Foley & Lardner LLP, 28 March 2011. Retrieved 28 April 2011. Available from: http://www.tradesecretnoncompete.com/your-licensee-knows-your-confidential-proprietary-technology-and-just-acquired-your-main-competitor-can-you-sue-for-threatened-trade-secret-misappropriation/. Paredes, Ducky. (2009) “Are Pinoys artists and entrepreneurs or are we simply modern-day pirates? SAYANG!” Congressional Commission on Science & Technology and Engineering, 29 March 2009. [Internet] Retrieved 29 April 2011. Available from: http://www.comste.gov.ph/content.asp?code=358. Sembok, Tengku M.T. (2003) “Ethics of Information Communication Technology.” In Bergstrom, Philip (Ed.) Ethics in Asia-Pacific, pp. 239-324. Bangkok: UNESCO, 2004. [Internet] Retrieved 28 April 2011. Available from: http://www2.unescobkk.org/elib/publications/ethic_in_asia_pacific/. Thompson, Dennis. (1999) “Intellectual Property Meets Information Technology.” Educom Review, 1999, pp. 107-118. [Internet] EDUCAUSE. Retrieved 29 April 2011. Available from: http://www.educause.edu/Resources/IntellectualPropertyMeetsInfor/158504. Read More