Distribution - Security

Once a consumer pays for digital goods, which are normally received in the form of a downloadable file, it is possible for the recipient to make endless copies of the file and redistribute them for profit or for free. This obviously damages the original seller's profit potential. One area where this kind of fraud has cost manufacturers is software. Pirates are well known for duplicating software applications that cost many hundreds of dollars in stores and selling them at lower costs via online auctions or other means.

Obviously, law enforcement agencies prosecute pirates for copyright violations and online fraud. However, this problem presented a serious roadblock for companies looking to sell digital goods via e-commerce in the early 2000s. While companies like the Wall Street Journal were able to sell information with little concern over privacy (the information quickly becomes outdated), piracy was a more serious threat for companies selling digital goods like books or audio, which had much longer life spans.

In addition to permanent copyright notices called digital watermarks, which serve as means of identifying when illegal distribution has occurred, several measures were being developed to safeguard these kinds of goods during distribution. These involved limiting what people were able to do with digital content after a file was downloaded. One example were digital music files that only played on the computer to which they were downloaded. Another was a system that allowed digital goods to be transferred between media with the condition that they were removed from the system they were copied from, leaving only one copy. InterTrust Technologies Corp. was one company offering technology like this. It offered solutions in the area of digital rights management to content providers, service providers, application builders, and others. Its technology ensured that organizations could "release digital information and profitably benefit from it throughout its full lifecycle by persistently protecting it, implementing a wide variety of business models, monitoring usage, and getting paid."