At the same time FilmOn, an Aereo look-alike, is seeking a compulsory license to broadcast TV content, free market advocates in Congress and officials at the Copyright Office are trying to remove this compulsory license. A compulsory license to copyrighted content gives parties like FilmOn the use of copyrighted material at a regulated rate without the consent of the copyright holder. There may be sensible objections to repealing the TV compulsory license, but transaction costs–the ostensible inability to acquire the numerous permissions to retransmit TV content–should not be one of them. Continue reading →

A bill before Congress would for the first time require radio broadcasters to pay royalty fees to recording artists and record labels pursuant to the Copyright Act. The proposed Fair Play Fair Pay Act (H.R. 1733) would “[make] sure that all radio services play by the same rules, and all artists are fairly compensated,” according to Congressman Jerrold Nadler (D-NY).

… AM/FM radio has used whatever music it wants without paying a cent to the musicians, vocalists, and labels that created it. Satellite radio has paid below market royalties for the music it uses …

The bill would still allow for different fees for AM/FM radio, satellite radio and Internet radio, but it would mandate a “minimum fee” for each type of service for the first time.

A February report from the U.S. Copyright Office cites the promotional value of airtime as the longstanding justification for exempting terrestrial radio broadcasters from paying royalties under the Copyright Act.

In the traditional view of the market, broadcasters and labels representing copyright owners enjoy a mutually beneficial relationship whereby terrestrial radio stations exploit sound recordings to attract the listener pools that generate advertising dollars, and, in return, sound recording owners receive exposure that promotes record and other sales.

The Copyright Office now feels there are “significant questions” whether the traditional view remains credible today. But significant questions are not the same thing as clear evidence. Continue reading →

Last week, two very interesting events happened in the world of copyright and content piracy. First, the Pirate Bay, the infamous torrent hosting site, was raided by police and removed from the Internet. Pirate Bay co-founder Peter Sunde (who was no longer involved with the project) expressed his indifference to the raid; there was no soul left in the site, he said, and in any case, he is “pretty sure the next thing will pan out.”

Second, a leaked trove of emails from the Sony hack showed that the MPAA continues to pursue their dream of blocking websites that contribute to copyright infringement. With the failure of SOPA in 2012, the lobbying organization has pivoted to trying to accomplish the same ends through other means, including paying for state attorneys-general to attack Google for including some of these sites in their index. Over at TechDirt, Mike Masnick argues that some of this activity may have been illegal.

I’ll leave the illegality of the MPAA’s lobbying strategy for federal prosecutors to sort out, but like some others, I am astonished by the MPAA’s lack of touch with reality. They seem to believe that opposition to SOPA was a fluke, whipped up by Google, who they will be able to neutralize through their “Project Goliath.” And according to a meeting agenda reported on by TorrentFreak, they want to bring “on board ‘respected’ people in the technology sector to agree on technical facts and establish policy support for site blocking.”

The reality is that opposition to SOPA-style controls continues to remain strong in the tech policy community. The only people in Washington who support censoring the Internet to protect copyright are paid by Hollywood. If, through their generous war chest, the MPAA were able to pay a “respected” tech-sector advocate to build policy support for site blocking, that very fact would cause that person to lose respect.

Moreover, on a technical level, the MPAA is fighting a battle it is sure to lose. As Rick Falkvinge notes, the content industry had a unique opportunity in 1999 to embrace and extend Napster. Instead, it got Napster shut down, which eventually led to decentralized piracy over bittorrent. Now, it wants to shut down sites that index torrents, but torrent indexes are tiny amounts of data. The whole Pirate Bay index was only 90MB in 2012, and a magnet link for an individual torrent is only a few bytes. Between Bitmessage and projects like Bitmarkets, it seems extremely unlikely that the content industry will ever be able to shut down distribution of torrent data.

Instead of fighting this inevitable trend, the MPAA and RIAA should be trying to position themselves well in a world in which content piracy will always be possible. They should make it convenient for customers to access their paid content through bundling deals with companies like Netflix and Spotify. They should accept some background level of content piracy and embrace at least its buzz-generating benefits. They should focus on soft enforcement through systems like six strikes, which more gently nudge consumers to pay for content. And they should explicitly disavow any effort to censor the web—without such a disavowal, they are making enemies not just of tech companies, but of the entire community of tech enthusiasts and policy wonks.

In 2012, the US Chamber of Commerce put out a report claiming that intellectual property is responsible for 55 million US jobs—46 percent of private sector employment. This is a ridiculous statistic if you merely stop and think about it for a minute. But the fact that the statistic is ridiculous doesn’t mean that it won’t continue to circulate around Washington. For example, last year Rep. Marsha Blackburn cited it uncritically in an oped in The Hill.

In a new paper from Mercatus (here’s the PDF), Ian Robinson and I expose this statistic, and others like them, as pseudoscience. They are based on incredibly shoddy and misleading reasoning. Here’s the abstract of the paper:

In the past two years, a spate of misleading reports on intellectual property has sought to convince policymakers and the public that implausibly high proportions of US output and employment depend on expansive intellectual property (IP) rights. These reports provide no theoretical or empirical evidence to support such a claim, but instead simply assume that the existence of intellectual property in an industry creates the jobs in that industry. We dispute the assumption that jobs in IP-intensive industries are necessarily IP-created jobs. We first explore issues regarding job creation and the economic efficiency of IP that cut across all kinds of intellectual property. We then take a closer look at these issues across three major forms of intellectual property: trademarks, patents, and copyrights.

As they say, read the whole thing, and please share with your favorite IP maximalist.

Last week, the Mercatus Center and the R Street Institute co-hosted a video discussion about copyright law. I participated in the Google Hangout, along with co-liberator Tom Bell of Chapman Law School (and author of the new book Intellectual Privilege), Mitch Stoltz of the Electronic Frontier Foundation, Derek Khanna, and Zach Graves of the R Street Institute. We discussed the Aereo litigation, compulsory licensing, statutory damages, the constitutional origins of copyright, and many more hot copyright topics.

You can watch the discussion here:


Adam and I recently published a Mercatus research paper titled Video Marketplace Regulation: A Primer on the History of Television Regulation And Current Legislative Proposals, now available on SSRN. I presented the paper at a Silicon Flatirons academic conference last week.

We wrote the paper for a policy audience and students who want succinct information and history about the complex world of television regulation. Television programming is delivered to consumers in several ways, including via cable, satellite, broadcast, IPTV (like Verizon FiOS), and, increasingly, over-the-top broadband services (like Netflix and Amazon Instant Video). Despite their obvious similarities–transmitting movies and shows to a screen–each distribution platform is regulated differently.

The television industry is in the news frequently because of problems exacerbated by the disparate regulatory treatment. The Time Warner Cable-CBS dispute last fall (and TWC’s ensuing loss of customers), the Aereo lawsuit, and the Comcast-TWC proposed merger were each caused at least indirectly by some of the ill-conceived and antiquated TV regulations we describe. Further, TV regulation is a “thicket of regulations,” as the Copyright Office has said, which benefits industry insiders at the expense of most everyone else.

We contend that overregulation of television resulted primarily because past FCCs, and Congress to a lesser extent, wanted to promote several social objectives through a nationwide system of local broadcasters:

1) Localism
2) Universal Service
3) Free (that is, ad-based) television; and
4) Competition

These objectives can’t be accomplished simultaneously without substantial regulatory mandates. Further, these social goals may even contradict each other in some respects.

For decades, public policies constrained TV competitors to accomplish those goals. We recommend instead a reliance on markets and consumer choice through comprehensive reform of television laws, including repeal of compulsory copyright laws, must-carry, retransmission consent, and media concentration rules.

At the very least, our historical review of TV regulations provides an illustrative case study of how regulations accumulate haphazardly over time, demand additional “correction,” and damage dynamic industries. Congress and the FCC focused on attaining particular competitive outcomes through industrial policy, unfortunately. Our paper provides support for market-based competition and regulations that put consumer choice at the forefront.

Bell-3D-cover-webLast week, the Mercatus Center at George Mason University published the new book by Tom W. Bell, Intellectual Privilege: Copyright, Common Law, and the Common Good, which Eugene Volokh calls “A fascinating, highly readable, and original look at copyright[.]” Richard Epstein says that Bell’s book “makes a distinctive contribution to a field in which fundamental political theory too often takes a back seat to more overt utilitarian calculations.” Some key takeaways from the book:

  • If copyright were really property, like a house or cell phone, most Americans would belong in jail. That nobody seriously thinks infringement should be fully enforced demonstrates that copyright is not property and that copyright policy is broken.
  • Under the Founders’ Copyright, as set forth in the 1790 Copyright Act, works could be protected for a maximum of 28 years. Under present law, they can be extended to 120 years. The massive growth of intellectual privilege serves big corporate publishers to the detriment of individual authors and artist.
  • By discriminating against unoriginal speech, copyright sharply limits our freedoms of expression.
    We should return to the wisdom of the Founders and regard copyrights as special privileges narrowly crafted to serve the common good.

This week, on Wednesday, May 7, at noon, the Cato Institute will hold a book forum featuring Bell, and comments by Christopher Newman, Assistant Professor, George Mason University School of Law. It’s going to be a terrific event and you should come. Please make sure to RSVP.

Aereo’s antenna system is frequently characterized perjoratively as a Rube Goldberg contraption, including in the Supreme Court oral arguments. Funny enough, Preston Padden, a veteran television executive, has characterized the legal system producing over-the-air broadcast television–Aereo’s chief legal opponents–precisely the same way. It’s also ironic that Aereo is in a fight for its life over alleged copyright violations since communications law diminishes the import of copyright law and makes copyright almost incomprehensible. Larry Downes calls the legal arguments for and against Aereo a “tangled mess.” David Post at the Volokh Conspiracy likewise concluded the situation is “pretty bizarre, when you think about it” after briefly exploring how copyright law interacts with communications law.

I agree, but Post actually understates how distorted the copyright law becomes when TV programs pass through a broadcaster’s towers, as opposed to a cable company’s headend. In particular, a broadcaster, which is mostly a passive transmitter of TV programs, gains more control over the programs than the copyright owners. It’s nearly impossible to separate the communications law distortions from the copyright issues, but the Aereo issue could be solved relatively painlessly by the FCC. It’s unfortunate copyright and television law intertwine like this because a ruling adverse to Aereo could potentially–and unnecessarily–upend copyright law.

This week I’ve seen many commentators, even Supreme Court justices, mischaracterize the state of television law when discussing the Aereo case. This is a very complex area and below is my attempt to lay out some of the deeper legal issues driving trends in the television industry that gave rise to the Aereo dispute. Crucially, the law is even more complex than most people realize, which benefits industry insiders and prevents sensible reforms. Continue reading →

The House Subcommittee on Communications and Technology will soon consider whether to reauthorize the Satellite Television Extension and Localism Act (STELA) set to expire at the end of the year. A hearing scheduled for this week has been postponed on account of weather.

Congress ought to scrap the current compulsory license in STELA that governs the importation of distant broadcast signals by Direct Broadcast Satellite providers.  STELA is redundant and outdated. The 25 year-old statute invites rent-seeking every time it comes up for reauthorization.

At the same time, Congress should also resist calls to use the STELA reauthorization process to consider retransmission consent reforms.  The retransmission consent framework is designed to function like the free market and is not the problem.

Continue reading →

I’m pleased to announce that Alex Tabarrok and I have a new working paper out from the Mercatus Center today, “Public Choice and Bloomington School Perspectives on Intellectual Property.” The paper will appear in Public Choice in 2014.

Here’s the abstract:

We mine two underexplored traditions for insights into intellectual property: the public choice or Virginia school, centered on James Buchanan and Gordon Tullock, and the Bloomington or Institutional Analysis and Development school, centered on Elinor Ostrom and Vincent Ostrom. We apply the perspectives of each school to issues of intellectual property and develop new insights, questions, and focuses of attention. We also explore tensions and synergies between the two schools on issues of intellectual property.

The gist of the paper is that the standard case for intellectual property—that a temporary monopoly is needed in order to recoup the sunk costs of innovation or creation—ignores issues raised by the two schools we investigate.

From a public choice perspective, a temporary monopoly provides enormous opportunities for rent seeking. Copyright and patent owners are constantly manipulating the political environment to expand either the duration of the monopoly or the scope of what can be monopolized. We document the evolution of intellectual property in the United States from its modest origins to its current strong and expansive state.

From a Bloomington perspective, the standard case for IP wrongly treats the commons as a kind of wasteland. In fact, numerous innovations and sprawling creative works occur without monopolization—just look at Wikipedia. Innovation occurs when the right institutional structures are in place, and intellectual property that is too severe can hamper the smooth operation of these institutions. Too much IP can harm as much as too little.

Read the whole thing, cite it copiously, etc.