Copyright and Coase

by on February 13, 2009 · 24 comments

copyright balancingOne of the biggest problems with the present copyright system is transaction costs, inhibiting Coasian bargaining. If I want to make a movie and have to get permission from dozens of different copyright owners, I may just give up – especially if I can’t locate some of them. (For more on the specific problem of orphan works, see Tim Lee’s techknowledge article at Cato and some of the many discussions on TLF.)

What copyright regime would best deal with the problem of transaction costs, while ensuring sufficient incentives to create? Robert Merges argues that the fair use doctrine may hamper the formation of copyright clearing-houses (or “collective rights organizations”) and thus increase transaction costs because fair use results in somewhat uncertain rights. See Robert Merges, Contracting into Liability Rules, 84 Cal. L. Rev. 1293 (1996).

Would compulsory licensing, as is required of song covers, radio, and cable retransmission, solve this problem? But, as I have argued elsewhere, compulsory licensing is price-fixing… and makes particularly little sense in industries where the players are all well-known to each other (like cable rebroadcasting network TV).

I don’t know what the solution is, but I’d like to hear everyone’s proposals for a more efficient (and decently liberty-friendly) system. Registration? Some stringent form of equitable estoppel?

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