On the standard economic view of copyrights, as on the economic view of other monopolies, average revenue equals demand. Those two measures trace one and the same line. Why? Because for most products and services, consumption closely matches supply at the market-clearing price. Sales reveal consumer demand and, in the case of copyright and other supposed monopolies, only one seller reaps revenue from those sales. Thus, for instance, might a utility’s sales show the aggregate consumer demand for electric power.
Even a so-called monopolist might face competition, however. The sole authorized seller of hard liquor might fail to capture the entire market of drinkers, for instance, losing some to the resale of stolen goods and others to moonshine. So, too, might an electrical utility suffer theft, competition from home-brewed power, and exit to gas appliances.
The caveats to “monopoly” prove especially strong in the case of copyright, which permits some unauthorized uses of protected works, such as fair uses, and fails to prevent many infringing uses. We might fairly say that the former category of uses, because copyright holders have no statutory power to bar them, do not really cut into the market share for a copyrighted work. Copyright holders cannot lose what never have, on that view. I here thus focus on infringing uses. Still, though, it bears noting that, whether due to permitted or forbidden uses, a copyright holder never commands all of the market for an expressive work.
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Ike Elliott offers a great analogy:
Tim asserts that copyright should be adequate protection for software, and that patents for software are harmful because they inhibit innovation. I find that argument far more fascinating.
I found myself comparing software to music. Music is not patentable, but it is subject to copyright. So, at the risk of oversimplifying, Tim is proposing that we treat software in the same way that we treat music.
Imagine if music were patentable…what kind of changes would it have caused in the music industry? I imagine that somebody along the way would have patented the twelve-bar blues, the classic blues form that frames so many great blues songs. For the ensuing twenty years, nobody else could have written a twelve-bar blues song without “licensing the blues” from the patent holder.
To me, the patentability of music would have created a grave inhibitor to creative expression, and would have deprived the world of many great musical works. I would definitely not favor patenting music.
Don Marti has drawn a similar analogy to literary patents. One can imagine a world in which novelists file patents describing the plot twists and other literary techniques they use in their novels, requiring other novelists to license the patent if they want to use that particular literary technique in their own novels. Needless to say, I don’t think very many novelists would be in favor of this plan, although the patent bar and some large book publishers might be.
Creating a work can cost authors a lot, whereas copying a work costs others very little. Absent copyright, then, authors might find it discouragingly difficult to recoup the costs of creating fixed expressive works. Authors might then underproduce expressive works, and the public consequently suffer.
To avoid that policy tragedy, the Copyright Act empowers authors to control the reuse of their fixed expressive works. By selling those special statutory privileges, authors can offset their production costs. Thus does copyright arguably do what the common law allegedly cannot: ensure that the public enjoys an adequate supply of expressive works.
The benefits of copyright policy come at a price, however. Although it may cost a great deal to make the first copy of a fixed expression, it usually costs very little to make and distribute subsequent copies. Absent copyright protection, those works would constitute public goods. Copyright bars the public from freely enjoying the very goods labeled “public.” Instead, the Act vests copyright holders with the power to charge whatever the market will bear to escape liability for infringement. Though the monopoly rents that copyright holders thereby win allegedly provide a necessary stimulus to creativity, non-holders suffer the opportunity costs of losing cheap access to fixed expressive works. Most commentators thus understand copyright policy to aim at striking a balance between giving authors sufficient incentives to create expressive works and providing the public with adequate access to the works thereby created. [The figure below] illustrates that, the standard economic model of copyright policy.
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In my 2004 book, Media Myths: Making Sense of the Debate over Media Ownership, I pointed out that mergers and acquisitions represent just one of many strategies media companies utilize to respond to consumer demand and new market challenges. Other strategies include spin-offs and line-of-business divestitures on the one hand, and new technological investments or expanded product or service offerings on the other.
But those other strategies never seem to attract the same amount of attention as mergers and acquisitions even though they are far more common. In fact, as media guru Ben Compaine correctly observes, “Break-ups and divestitures do not generally get front-page treatment.” Such stories usually get buried in papers and magazines, or get a small mention at the bottom a news website, if at all.
That’s why I started this series of “media DE-consolidation series” of essays a few years ago. I wanted to highlight the other side of the story and show how the media marketplace is far more dynamic than critics care to admit. In fact, as FCC Commissioner Robert McDowell noted recently in an excellent speech on the true state of the media market, “Traditional media’s numbers are shrinking,” and “The ironic truth is: in many cases, media consolidation has actually become media divestiture. Companies such as Disney, Citadel, Clear Channel and Belo actually have been shedding properties to raise capital for new ventures.”
That’s exactly right, and the many other entries in this series prove that point. We’re in the midst of a massive wave of media divestitures and downsizing. And today we have another example with News Corp’s announcement that it will be shedding 8 of its Fox-affiliated TV stations in mid-sized markets.
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One of my favorite podcasts is David Levine’s Hearsay Culture, which I stumbled across this summer. I noticed recently that back in March he did a podcast with Richard Epstein, a giant of classical liberal legal thought, back in March, so I’ve been listening to that episode.
Epstein has long been one of my favorite libertarian thinkers. On most subjects, I find myself nodding along in agreement. But when he gets to the application of patent and copyright law to the technology industry he has a tendency to go off the rails pretty quickly. This is apparent in his Hearsay Culture interview as well. For example, about 25 minutes into the interview, he talks about the problem of patent thickets in the tech industry thus:
The question is, how do we know when there’s a blockade? Well, a lot of it depends on the topology of the landscape if you’re looking at physical resources, and the same thing will happen with respect to intellectual property. So just to take the general question, let’s start with a background on the tech side before we get to the documentary film. Do we think that the addition of any new patent in any particular area is going to increase or reduce the blockade effect of other patents? And the answer to that question is frankly my dear we don’t know in the abstract but the betting would be that the more patents you have, the fewer the blockades. Now why is that? If you imagine these things as being in an array. Suppose you have to go through six steps in order to get a process, and at every one of these steps you’ve got four alternatives. Well if that’s what’s happening, you’ve got a lot of choices at each stage and you’ll be able to bargain one off against another and presumably find a path through this thicket. Somebody comes up with a new invention, now instead of having four alternatives at the first stage you may have five. Or you’ll get a new invention which means that you don’t have to bargain with anybody at stages 6 or 7. And if that guy comes in with a blockbuster patent, he will not be able to charge more than the old 6 and 7 combination could have been able to do, and if he’s really good somebody else is going to come into that same field because the patent doesn’t give you a monopoly over the functionality as such, only the device or the invention that allows you to actualize that functionality. I mean, that’s not 100% correct, but it’s 95% correct for these particular points. Samuel Morse could patent the telegraph, he could not get control over all uses of the electromagnetic spectrum. So new inventions in the tech area generallly seems to me to expand possibilities by giving you alternative stepping stones through the thicket.
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Jason Schultz weighs in on whether the Richter Scales video was fair use:
Hard to say for sure, but in the end, it probably is a fair use. On the one hand, the Video does use Lane’s photo without permission or attribution. Plus, this is how Lane pays her rent. She takes and licenses photos for a living. Uses like this, if they were to become widespread, could potentially undermine her livelihood and thus, her ability to take photographs like the one used in the video. Thus, there is an argument under Factor 4 that this is not fair.
However, the other three factors probably weigh in the Video’s favor. First and foremost, what The Richter Scales did was what copyright law often calls “transformative use” — using other people’s copyrighted works in a new way that adds creativity and cultural value. And while perhaps not a direct parody of Lane and her specific work, the inclusion of the photograph in the video was part of an overall commentary on the world that Lane photographs and the people in it. One could even argue that Lane is a part of that world herself and thus, implicitly part of the subject matter TRS intended to comment on. (Note: I haven’t talked to TRS, so I have no idea what they intended). Some courts have found fair use in similar cases involving Barbie dolls, use of concert posters in a book about the Grateful Dead, the Mastercard “Priceless” ad campaign, a Family Guy parody of Carol Burnett, and 2 Live Crew’s cover of Roy Orbison’s “Pretty Woman.” Of course, other courts have come out differently, such as one decision over the use of Dr. Seuss-like rhymes in a book about the OJ Simpson murder trial. Still, overall, I think a court would find the video transformative and thus, that Factor 1 weighed in its favor.
Factors 2 and 3 would also probably weigh in favor of the Video. The photo is a published work depicting a factual occurrence (a person at a Web 2.0 event). It’s also being used for that purpose — to comment on the person being at the event. The amount of the photo taken is, of course, the whole thing, but with photographs its hard to apply this factor since few photos are useful in pieces. Courts have also found that when it is necessary to use another person’s entire copyrighted work to make your own commentary, that weighs in favor of fair use. Given that three of the four factors are likely in the Video’s favor (including the critical Factor 1), the Video is probably fair and not illegal.
As Schultz points out, this isn’t really the sort of issue copyright law was designed to resolve. Norms are likely to be more effective than laws in this sort of situation. Given that the video wasn’t a big money-maker, it’s not reasonable to expect them to pay her for using the photo, but it is reasonable to expect them to give her credit. And if they fail to do so, it’s worthwhile for the tech blogosphere to criticize them for failing to respect those norms.
Google is promoting its “privacy tips” video series. As I’ve noted before, this is good stuff. Over the long haul, education will be much more effective protection for consumers than privacy regulation – and it will have none of the costs of regulation in wasted tax dollars, market-distorting rent-seeking, and regulatory capture.
Conflict of interest warning!: I was a guest of Google at the recent International Association of Privacy Proffessionals dinner. As you weigh the credibility of what I’ve written here, you are welcome – indeed, encouraged – to consider the embarassingly close relationship I have with Google – how I basically survive on the rubber chicken dinners they sneak me once every . . . 40 years. If it appears that I am being too nice to Google, you are welcome to call me out on it. It is much more fun being mean, but it is important to be fair, so I do say nice things when I see good being done. Now that my disclosure is longer than the substantive post, I’m relatively sure that I won’t be regarded as easier than an FTC Commissioner after an Aspen Summit – at least not this time.
Via PDF, Beth Simone Noveck, director of the Institute for Information Law & Policy at New York Law School, highlights the Peer-to-Patent experiment being conducted with the PTO in her very interesting article about using collaborative software in the regulatory process.
Our institutions of governance are characterized by a longstanding culture of professionalism in which bureaucrats–not citizens–are the experts. Until recently, we have viewed this arrangement as legitimate because we have not practically been able to argue otherwise. Now we have a chance to do government differently. We have the know-how to create “civic software” that will help us form groups and communities who, working together, can be more effective at informing decision-making than individuals working alone.
Good stuff. Here’s more.
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.