Copyfutures

Can I Call This a "Solution" if I Don't Think There's a Problem?

    It seems as if no one in our class likes the current copyright regime.  What I find most interesting, however, is what we identify as its problem.  Some think the problem is that the regime is too restrictive, and concentrates too much power to a few large corporations.  Others think the problem is that the current regime is so easily, and repeatedly infringed upon, with little consequence that it's viability is in question.  I tend to agree more with the latter than the former. I will focus exclusively on the relationship between digital media copyrights (specifically music and movies) and P2P, the area we spent the most time on and also the most interesting.  I may post more, but this post will serve as my "final post" wherein I identify the problems I see with the current regime (including their tactics), and offer a practical solution on how to remedy them.

    The biggest problem I see with the current copyright regime is that it is so easily and repeatedly violated that I fear the content providers will seek to regulate emerging technologies in some way.  And succeed.   We may  feel smug in our "knowledge" that the "horse is out of the barn," but  content providers don't appear to uniformly hold this view.  Also, history shows the content industry isn't shy when it comes to prosecuting and regulating enabling technologies (Betamax, Napster, Grokster, INDUCE, etc.). 

My solution for content providers is three-pronged:

1. Selectively sue infringers
2. Tell your story more effectively
3. Cut prices

I. Selectively Sue Infringers

    Even at this late date, many people do not think of downloading content for personal use as "stealing."  This doesn't much matter so long as they know it's illegal and will be punished for it.  A recent Harris Poll  of 2,306 adults revealed some disturbing results:

Fully three in four adult Americans (75%) agree that "downloading and then selling the music is piracy and should be prohibited, downloading for personal use is an innocent act and should not be prohibited."

This is consistent with a Harris Interactive survey of teens released in October 2003 which showed that roughly three in four teens feel that downloading music files without paying (74%) and letting others download files from them (78%) should be legal.

Nearly two of three adult Americans (64%) agree that musicians and recording companies should get the full financial benefit of their work. (all emph. added)

    Certainly I can't be the only one who finds it strange that 75% of respondents would simultaneously believe that "downloading for personal use is an innocent act and should not be prohibited" and, that "musicians and recording companies should get the full financial benefit of their work."  If we're to assume - correctly, I might add - that the extent of the financial benefit musicians and record companies receive is almost exclusively a function of the legal rights afforded them, then this these two beliefs are contradictory.  Musicians and record labels   I suspect that most people don't view copyright law this way. 
   
    The majority also agreed w/ the first part of the statement that, "downloading and then selling the music is piracy and should be prohibited."  I think most people feel that if someone were to do this, they would receive the financial benefits that rightfully belong to the musician and record labels, thus depriving the rightful parties of that financial benefit.  I think  those same people feel that when they are "downloading for personal use[,]" they are committing an innocent act because they are not receiving any financial benefit.

    Content providers should file lawsuits against the largest individual infringers on the sharing (supply) side.  Fellow classmate, Tommy O'Reardon, has a similar proposal.  He seems to have been met with more skepticism, resulting in a post titled, "Why won't anybody listen to me?"  (I'm listening Tommy!).  Lawsuits would serve two purposes: (1) Reduce the number of large file-sharers, thus, reducing the number of copyrighted files on the network and (2) Educate the public that downloading or uploading  copyrighted content, even for personal use, is a crime.

    In, "Reducing Digital Copyright Infringement Without Restricting Innovation," author Mark Lemley states:

While the number of users of p2p networks such as Morpheus and (before the injunction) Napster is massive, the overwhelming majority of those users engage only in downloading. Indeed, by one estimate, 3% of the users of a p2p network upload 97% of the files on that network. These high-volume uploaders also seem to be the users most likely engaged in uploading illegal content, rather than providing access to legal files. They are easy to identify, both because they will repeatedly appear in content searches and because many run so-called "supernodes" that facilitate fast downloads.  (emph. added)

     While the exact effect is unknown, a likely drop in file sharing would occur.  The only question is how substantial that drop would be.  The content providers need not sue every infringer - a "solution" that many have rightfully criticized as impractical - to substantially reduce infringement.  The secondary effect would be to scare current uploaders to stop, as individuals benefit little from uploading.

    George Mason University Economist, Tyler Cowens, argues that, the lawsuits aren't done to scare off downloaders (a point I disagree with, if not in intent, at least in effect), but rather they are:

about spreading the idea that downloading is wrong and illegal... think of the lawsuits as one way to buy space in the newspaper, but without paying advertising rates.

    In a later post on his blog, Marginal Revolution,  Cowens gives us the bottom line:

I see the music companies as trying to hold back a new commercial norm. Specifically, the music companies are trying to maintain the old norm that you should always pay for music.

Two years ago most [American] downloaders did not know that their activities were illegal. Few uploaders felt guilty about making large numbers of songs available for free on the Internet. It was viewed as akin to lending your CDs out to your friends, except that the "friends" here were both anonymous and large in number. "Art should be free," right?
...
The music industry knows that the long run will bring a network of free music. It knows that free music may have illegal status, a "grey" status, white status (recorded from the radio), or perhaps be pirate (from abroad) but not illegal in the actionable sense. But there will be two networks, a pay network and a free network.
...
The music companies - present and future suppliers of the pay network - do not wish to face a ten year period where everyone is used to getting music for free. They do not want an entire generation to grow up thinking of music as a free commodity. They do not want hackers and illegal downloaders to become established as folk heroes.

Once commercial norms become established, they are difficult to dislodge. We are all used to breathing air for free. Imagine the response if suddenly we had to pay for air as we now pay for ice cream cones. Maybe the air would have a better quality and the price would be very low. Still I predict there would be a public outcry....  They cannot live with a norm that music should be free.  (emph. added)

    This ties back in to that other horse, still in the barn.  This is the single most important tactic that content providers must implement.  The MPAA is has announced that it plans to sue infringers, a decision partly based on what they saw the music industry go through.  The MPAA believes that the RIAA acted too slowly in filing civil actions against infringers, resulting in unnecessary losses.  They also believe that the the music industry's recent uptick is in some part due to the RIAA's renewed vigor in pressing ahead with lawsuits.
   
    Almost every foreseeable consequence from filing suits favors the content providers.  There is very little downside to this tactic because in reality, consumers have little else to choose from.

II. Tell Your Story More Effectively

    America's media companies are the richest, most influential, and most effective in the world.  To gaze across the global expanse is to witness American cultural hegemony, in large part shaped by these media companies.  Which is why I am always surprised at how inept and ineffective their anti-piracy advertising campaigns always turn out.  Content providers should leverage their natural institutional skillset, emphasizing storytelling.
    Show real individuals - no millionaire rap stars, please -  that were really harmed in some way and tie that back to downloaders.  At the same time, dramatize a real life lawsuit that will be prosecuted without mercy to show what can happen to violators.  Make an example out of a particularly egregious violator and explain that anyone could be next.  And then prove it by dramatizing a real court case against an "average Joe" or "average Jane."

III. Cut Your Prices

    Content providers will have to accept the fact that they can not completely stop P2P infringement.  In turn, they can no longer depend on their traditional distribution channels to provide the revenue streams they once did.  This does not mean, however, that content industries are headed towards inevitable decline, but it does mean that they will have to compete with P2P in the short term until they can innovate new channels and/or mediums.  The DVD is a great example of this innovation.  The new format / medium enabled content providers to generate nearly pure profit via the reissuing of hit films from their catalog; films that were producing little or no revenue prior.  The same Harris Poll cited above also shows:

[A]lmost... 70% say, "If the price of CDs was a lot lower, there would be a lot less downloading of music off the Internet."

    The hope is that lawsuits, coupled with a "good cop / bad cop" media blitz should make illegal file sharing much less attractive.  However, most of the hesitation towards file sharing  should be as a result of fear of punishment rather than some moral epiphany from the ad blitz.  I have no delusions that the 75% of the population who think that "downloading for personal use is an innocent act and should not be prohibited" will now view their actions as culpable of deserving of prohibition.  When consumers have only two choices, as they do here, the attractiveness of either option is a function of the other.  If content provider, for example, were to implement a five fold increase in prices (e.g. $55 movie, $90 CD) at the same time, file downloading would appear much more attractive, especially to the large segment of the population that was effectively shut out from the legal market.   

    For the short-term (1-4 years), content providers should cut their prices 15-30% across the board.  This will have several effects:

1. Welcome Back!  Lower prices would soften the financial blow to those consumers that are being (re)-incorporated back into the legal market - helping to ease them (back) into the habit of paying for content.
2. It makes P2P less appealing, legal content more appealing: See above
3. It serves as a gesture of goodwill.  We punish those who cross us, reward those that are loyal.
4. Keeps "grudge factor" down.  There is a small segment of the population that possesses the technical skill and resources necessary to create very good P2P software.  Let's say one of these people were to develop an alternate program that closed all the loopholes that content providers had been currently using to identify infringers.  This would be an expensive setback until alternate means could be found.  In the meantime, content providers would have to fight the spread of this technology, losing money all the while.  The hope is to reduce the number of people who would do this - out of spite, or a sense of being wronged - from the subset of people that are capable of doing this.  Equally important, it serves as a hedge against wide adoption from the consumer base, so that even if a new P2P technology were to come out, the hope is that they will be used to paying what they believe is a fair price for their content.

After that, well, there should be some other innovation that makes these technology specific problems moot.

 

 

 

 

 

 

 

 

A Quickie for all the Classical Music Fans Out There

    My guess is that Prof. Solum is the only classical music fan in class, but most in the class should find this post interesting:

The DVD format is taking over the classical music world, especially opera:

Sales regularly hit 5,000 units, the standard break-even figure for classical CDs, and go as high as 40,000 worldwide, says Klaus Heymann, the Hong Kong-based head of Naxos International. Also, the hard-core classical community doesn't have to wait around for the video companies to finish issuing meaningless Luciano Pavarotti galas before going on to the real stuff.

Once a nightmare of regional formats, DVDs are increasingly universal (look for the "0" in the code box), though savvy consumers still need a specially doctored player to read all codes on discs available on European Web sites.  Disc prices, which range from $10 to $35, are still unstandardized. The Deutsche Oper's Die Meistersinger is $39, but the Australian Opera's better cast sells for as little as $25.

Whatever the reason, even the most expensive DVD operas cost less than sound-only, full-price CD sets[.]  (emph. in orig.) 

My guess is that reasons are: (1) the market is new, (2) the format is unstandardized, and  (3) DVD's must compete against established record labels.  New markets are not as stable or efficient as robust, established markets.  The newness of the market puts pressure on the sellers to reduce prices to pull other customers away from CD's and towards DVD's.  There's an economic term for this that I've forgotten, but essentially, few people are going to buy both the CD and the DVD so the DVD sellers have to offer an incentive enticing enough to convince classical music consumers to break from their traditional buying patterns.

Towards a New Copyright Regime: A Modest Proposal

Note: This post represents my proposal for an ideal copyright regime, free of any political considerations with respect to feasability of adoption.  My later post will differ in that I will advocate the use of  certain tactics by content providers, who, on the whole, I tend to support more than those who oppose them.

    "Property, a creation of law, does not arise from value, although exchangeable -- a matter of fact." So begins this post by Prof. Cass Sunstein, quoting J. Holmes in INS v. AP. Although Sunstein’s post is on a different topic, he explains the quote:

“What Holmes is saying here is that even though property is exchangeable, it doesn't arise from value; it's a creation of law. And that's simply a matter of fact.”
…

“Property rights, as we enjoy and live them, are a creation of law; they don't predate law.”

    Like Holmes, I take this as simply a matter of fact. It is the foundation for my proposal so if you disagree, you’ll have to play along for this post to make sense. Property rights, whether in real or intellectual property, are not “natural rights.”  Private property rights (aside from the Crown) is a relatively young idea and practice; the notion of property rights in IP even younger. This proposal is aimed at works that can be digitalized and easily and widely distributed; namely music and movies.

The 2 questions I’ll try to answer are:

1. What is the goal of copylaw?

2. What regime would best further that goal?

First Things:

    The Congress shall have Power… To promote the Progress of Science and useful Arts, by securing for limited Time to Authors and Inventors the exclusive Right to their writings. U.S. Const, Art I, sec. 8.

    Even though this proposal is an ideal one, free from political considerations, I’ve restricted myself from any solution that requires modifying the text of the Constitution. Since we’ve covered this in class, I’ll exclude any detailed discussion. Like real property rights, the goal of copylaw is essentially a public policy argument, “To promote… the useful Arts.” The usefulness, or utility, of a particular work varies depending on the person deriving utility. I find Milli Vanilli’s most recent album "useless" in this sense.  Perhaps you agree...

    In this light, my proposal serves a pure public policy goal, concerned only with maximizing overall utility.  While imperfect, I offer the free market system as the best mechanism to measure the utility, or value, of any particular piece of IP.  Simply put, the goal of copyright law is to make the most money possible for society as a whole.  Of course, we have to take into account fairness norms; we couldn't, for example, revoke someone's copyright simply because we thought they weren't maximizing the utility of a particular piece of IP.  In this sense, the proposal should greatly reflect the society's current notion of private property (and IP) as a natural right.

    We’re limited in our means: “securing for limited Time to Authors and Inventors the exclusive Right to their writings “

    Implicit in the text is the notion that a grant of exclusive right in a work – essentially,  the exclusive right to profit from ones labor – is an incentive that encourages the production of more “useful [a]rts” by society as a whole. This gain must be balanced against the lost potential gain the public bears for the duration of the copyright.  For example, George Clinton may have written a song back in the 70's that is no longer sold anywhere.  The Backstreet Boys may want to sample a riff from that song in order to create a new, hit song.  Clinton could refuse to sell the right to sample that riff, even if offered $1 million, and society overall would be poorer for it.  Following my proposal to an extreme conclusion, the governement would be authorized to rescind the right of exclusivity from Clinton and grant permission to the Backstreet Boys to use it.

    But this is an individual case, and even though we don't behave rationally in every instance, on the whole, the market behaves both rationally and efficiently.  Most people could be offered some price that they would agree to so the fact that there are some instances - and there always will be - where the market is not efficient does not show that the overall market system is inefficient.

    My argument is that an exclusive right to profit, for a limited time, from a piece of IP is the regime that would best serve the goal.  The time should be limited to 70 years from the time of creation (roughly one generation), however, this is not to be applied retroactively.  I support this long duration because certain works and brands possess great value and reflect a substantial investment on the part of the copyright holder.  Disney holds copyrights to their many characters and their movies, which they have invested a substantial amount in.  Protecting their ability to profit from this work is in society's best economic interest - unless you believe that society at large would be better able to generate revenue from Disney's copyrights.

    Registry: There should be a registry of all works copyrighted, more to serve notice to potential infringers than anything else.  However, the registry should be free, much like the "Do Not Call" registry.  This is to prevent an undue burden being placed on individuals who create IP.

The Sky is Falling!

Throughout the semester, we have been discussing why copyright law today is in such a mess. We've shot down every proposed solution that would radically alter the copyright regime as either unworkable or impractical (musical socialism, anyone?). Here are some of the major copy problems:

• The P2P Threat. Every PC is a potential printing press, mastering facility, and recording studio, all rolled into one. Duplication of copyrighted works can be done cheaply and with high fidelity. P2P Internet creates a low-cost mass distribution channel for these copies. And unlike the original Napster, the decentralized nature of most P2P clients today means they will continue to operate even if P2P software companies are shut down.
• Copynorms. To the vast majority of P2P users, P2P file sharing of copyrighted works is socially acceptable, even encouraged. This directly conflicts with current copyright laws.
• One-sided Legislative Process. Until recently, most copy legislation has been shaped primarily by the content holders. Consumers do not get a chance to sit at the copyright policy table. Not surprisingly, consumers feel these laws are grossly unfair and serve only to maintain the content holders' monopolies and profits. The results of this lopsided process are copyright laws that make no sense:
  • The DMCA. What happened to our fair use rights?
  • The Sonny Bono Copyright Term Extension Act. What happened to our public domain works?
  • The INDUCE Act. Unlike previous legislation, for the first time, consumers had someone sit at the negotiation table whose interests aligned with theirs. The Consumer Electronic Industry pretty much shut down the proposal, for the time being.
• The International Problem. Being able to enjoin P2P developers in the U.S. will only cause them to move to safe haven countries, or countries where the IP protection is lacking.

As it stands, either norms change or the law must change. Despite all the doom and gloom the RIAA and MPAA are prophesying, I just don't see it. And I may be going out on a limb here, but the current copy system isn't in complete disarray. It works for the most part. Every now and then new technologies will cause a little chaos but either the system itself or the market will eventually fix the problem. Like a piece of buggy software, applying relatively minor, problem-specific patches to fix the major problems may be all we really need. Here are some fixes that probably need to be made:

Mandatory registration

One of the Free Culture problems results from the lack of mandatory registration of copyrights. Our culture builds upon the past; new, creative works sometimes will require authorization clearance from content owners of older works. Transaction costs of obtaining this clearance are increased unnecessarily because IP rights are transferable and without a central registry, content creators have a difficult time finding the current rights holders. Mandatory registration will also help creators determine if a work is already in the public domain (so they can go ahead and use it without needing permission).

A central registry will hopefully be of some assistance to judges, court clerks, and third parties like ISPs in determining whether to issue/comply with those nasty DMCA subpoenas. Finding the current owner of a work can also be problematic due to copy protection lasting well after an author dies, which brings us to the next problem.

Create shorter but renewable copyright terms

Stop all this retroactive term extension nonsense. If Disney wants to keep Mickey in their dungeons for eternity, that's fine, but don't lock up our public domain works in there as well. Most works have little commercial value after their initial run, which seems to be 3-5 years after inception. This could be the basis for setting each term length. The Copyright Office can do a study and set this figure (and change it as the situation requires). Once the term is up, most works should fall into the public domain since the owners would have little incentive to pay a renewal fee if their works have little revenue-generating value. For the few works that remain commercially viable, those can be continually renewed. Mr. Hand suggests the Copyright Office handle the registry and renewal fees- that works for me: Patent Office handles patent registrations, Copyright Office handles copyright registrations.

Get rid of the DMCA, or explicitly give us a fair use right in DRM'ed works

The major premise of the DMCA was that every PC creates an authorized copy in its temporary memory; this is ridiculous. Circumvention of copy protection schemes is prohibited, no matter the reason or purpose. The DMCA has withstood constitutional challenges; at least one court has said that it doesn't violate the fair use doctrine because the analog hole still allows consumers to make copies (albeit poor quality copies). There needs to be explicit exceptions to circumvention of copy protection for fair use purposes. This is going to be very important because it looks like most content will soon be locked up in some copy protection scheme and even the analog hole will be plugged up.

Criminal enforcement of copyright violators

No, I'm not really advocating this (at least not yet), but there's nothing like seeing your college dorm buddy handcuffed and incarcerated for a year for sharing some songs. How's that for dramatic effect. Current copynorms are not going to change unless things like this happen. Of course there's the prison overcrowding problem, and using limited federal resources to enforce copy violations when there are more serious crimes out there doesn't make this a realistic option. If copynorms cannot be changed, that means the copy laws must change.

The RIAA and MPAA have decided that civil infringement suits against P2P individuals, coupled with interdiction software that floods the file sharing networks with fake copies will drive users to the legitimate services. And for a short while it seemed to work. But all indications are that while iTunes had grown steadily, P2P traffic remains steady, if not growing in leaps and bounds.

A more balanced copy legislation process

It may be unnecessary for consumers to have representatives sit at the negotiations table, as long as their interests are adequately represented. For this to happen, there needs to be a more balanced approach to the legislation process. Perhaps the Copyright Office needs to take a more active role in conducting market studies and influencing copy policy. Sure, it's important to have the input of the copyright holders, libraries, consumer electronics industry, and others who sit at the negotiations table, those interests shouldn't be the only interests copyright law should be protecting. Any legislation needs to have in mind the overarching principles embedded in the Progress Clause of our Constitution:

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

Copy protection should be only given to the extent necessary to induce incentives to create. Too much protection and we hinder creativity because our culture builds on pre-existing works. That's why I don't see the P2P threat as a huge problem, given the current situation. Music consumption has more than tripled with the rise of P2P file sharing networks, netting a huge societal benefit. At the same time, profits of the major record labels has only declined slightly from this "rampant piracy." A lot of this was due to their own stubborness to embrace the new technologies, which is completely understandable given how profitable the current distribution methods were and will continue to be for a long, long time. Record sales account for nearly $7B annually, with online sales of music in digital format accounting for under 8% of this currently. CD sales still dominate, and although digital sales will increase over the next couple of years, CD sales will be the larger chunk of record label profits. Like RCA trying to snuff the FM technology so they can squeeze more out of their monopolistic hold on AM, the content holders seek to shut down any new technologies that threaten their currently profitable distribution channels.

Even if the content holders get the ruling they want from Grokster, the results might not be what they were hoping for. Incongruent worldwide IP protection will make it impossible to shut down P2P. KaZaA has already won in the courts of the Netherlands. The Canadian legislature has recognized a right to make copies for private use, and the Canadian Supreme Court has held that downloading copyrighted works via P2P for personal use is not a violation of copyright laws. Many other countries have little or no IP protection. Developing countries see IP rights as hindering their country's progress.

Thus, shutting down P2P in the U.S., if that's even possible, will only shift operations extraterritorially. But even that's not necessary to keep P2P alive. Shutting down Napster created a slew of decentralized P2P software that will continue to operate even if the developers were to be enjoined. A lot of the P2P software code is also freely available for others to develop their own clients.

The content owners claim that if P2P is not shut down, artists will no longer have an incentive to create, and less new works will be released. But this simply is not true. Minus the few successful artists, the vast majority make very little from their association with the record labels. Artists will continue to create, because the big pay day is not what drives them to create (although it certainly may be a factor).

If, however, the content holders are right and people stop paying for content enmasse because of P2P, then we should consider more drastic measures. But with the current situation, it looks like market forces will fix itself. P2P creates new markets and opportunities for the content owners, but they must be willing to adapt. There were many technologies, novel for their time, that created threats to copyright law and it turned out benefit the content holders more than it hurt them (i.e., the VCR).

Civil enforcement of copy violations and any educational campaigns to change copynorms seems futile. Part of the problem harkens back to having a more balanced legislative approach, but that means nothing if the copy laws and policies that ultimately pass seem unfair or makes no sense to consumers. As Lord Templeman in CBS Songs Ltd. v. Amstrad Consumer Electronics (a Canadian copyright case) put it:

From the point of view of society the present position is lamentable. Millions of breaches of the law must be committed by home copiers every year. Some home copiers may break the law in ignorance, despite the extensive publicity and warning notices on records, tapes and films. Some home copiers may break the law because they estimate that their chances of detection as non-existent. Some home copiers may consider that the entertainment and recording industry already exhibit all the characteristics of an undesirable monopoly, lavish expenses, extravagant earnings and exorbitant profits and that the blank tape is the only restraint on further increases in the price of records. Whatever the reason for home copying, the beat of Sergeant Pepper and the soaring sounds of Miserere from unlawful copies are more powerful than law abiding instincts or twinges of consicence. A law which is treated with such contempt should be amended or repealed.

Fair Use Trumped by Digital Licensing

A recent article in the Press Herald exposed a new twist to current problems with fair use of digital media.  Professors are faced with copyright problems when attempting to assign their students to read articles written by the professors themselves.  Many journals have moved towards publishing in a paperless format.  James Cambell, a graduate student at the University of Maine, noted that their are "ssituations throughout the country... where faculty members who write articles can't assign them to their classes to read because the library can't afford to buy the journal."

Increasing costs in journal subscriptions have forced many libraries to cancel both their paper and electronic subscriptions.  "As a result, digital copyright owners[, rather than authors,] can control how digital materials are used."  The fair use provision of U.S. copyright law allows for copying and distribution of many materials if they are solely used for the purpose of education.  "The provision can be overridden by digital licensing restrictions."  These "electronic barriers" have effectively blocked students from gaining access to the information. 

At a recent convention on the subject in Bangor, Maine, gave some tips to professors.

One way to provide open access is for scholars to post works on their own Web pages before submitting them to publishers. Authors can also choose to publish their works in free open-access journals.

It's unfortunate that professors are forced to take these measures in order for their students to have the opportunity to read their articles.  They should be able to choose to publish in any journal they want, knowing that fair use will allow their their students to read the articles. 

I'm starting to wonder if fair use really even exists.  It seems very strange that digital licensing can keep authors from sharing their own works through fair use.

MPAA introduces new Chairman & CEO: Dan Glickman

Dan Glickman, former Secretary for the US Dept. of Agriculture under Clinton, has been named as Chairman and CEO of the MPAA.  C-SPAN - in my opinion, the best thing on TV, has video of his meeting with the National Press Club, discussing, "The Motion Picture Industry in the 21st Century - A New Golden Age?"  NOTE: If you're having trouble viewing the video, go here.

I'm unable to find a transcript of the meeting, so you'll have to go off my hand transcription.  This discussion provides some.  This NPC discussion provides tremendous insight into how the MPAA views copyrights, their violation, and their strategy to combat it. 

Some noteworthy segments:

9:02: "These same forces threaten to unlease a wave that will undermine the very foundation of moviemaking."

This is the scope of the threat as viewed by the MPAA.  Quite large, and rightly so.  Cites the difficulty the music industry is undergoing and says he wants to make sure the movie industry doesn't go through the same thing.

10:00: He cites the notion that because they create IP rather than something we can touch it feel, it confuses people into thinking it's OK to download it.

10:43: "Downloading a movie of the internet is just as serious as walking out of Blockbuster w/ a movie under your shirt."

A lot of his speech sounds like what we've gone over in class: Non-rivalrousness (though he doesn't use that word), the viral nature of the internet, high speed access as a cause, etc.

He also announces that the MPAA is going forth with lawsuits targeted at people who share movies online.  The approach for the MPAA appears to be two-pronged: educating the public, especially the youth, that piracy = theft and litigation against pirates.

He states that the average movie costs $103 million to produce and market and 4 out of 10 movies don't recoup that cost.  See Glitter.

In a related note: In an interview w/ USA Today, the following was asked:

Q: Can piracy be licked?

A: We can stay ahead of the game, and we can make life very difficult for people who want to break the law. Will we totally obliterate piracy? No. But we have to make it as difficult as possible.  [emph. added]

Property Rights for IP Necessary

In class on Tuesday, we discussed whether it is necessary to give intellectual property similar rights to those of tangible property. In doing so, the issue was raised as to whether an alternative model should replace the current copyright regime. Some of the reasons for distinguishing intellectual property from tangible property were raised in Mark Lemley’s paper, Property, Intellectual Property, and Free Riding, as well as on Prof. Solum’s Legal Theory blog. Essentially, the major difference results from their consumption; where the consumption of tangible property is rivalrous, that of intellectual property is nonrivalrous, although under current law there is a right to exclude in both. Further, as Prof. Solum’s blog explains, some tangible property may initially be nonrivalrous (e.g. movie theater) but if overconsumption occurs, the utility of the good will be reduced by overcrowding. This type of good is known as a “club good.” On the other hand, intellectual property is a “toll good” because it is not subject to overconsumption.

All of the above gives one reason to think that further expansion of intellectual property rights is not necessary and may be detrimental, and with this I agree. However, some have even argued that there should not be any private property right in intellectual property.

With this, I disagree. I would argue that recognizing a right to exclude others from one’s non-tangible “property” is essential because it yields efficient markets. The class discussion on Tuesday reminded me of a short lecture my torts professor gave on why the Soviet Union crumbled. He literally gave this lecture in about 3 minutes. Basically, the argument goes something like this:  the USSR did not have private property and markets to determine prices, and without prices it did not know which resources were becoming scarce and should be used more sparingly. If no one owns the right to a certain resource (e.g. wood), overconsumption occurs. The government could respond by artificially setting a price, but the pricing information which tells us how much the resource is worth, or how much value people place in the resource, is not available. This leads to inefficient markets.

Of course, as discussed above, intellectual property is not really subject to overconsumption. But an analogy can be made nonetheless. With toll goods, if their price is set at zero, there will be no private supply, or at most very little. If the government does not give the right of exclusion in the toll good then essentially all incentives to create are destroyed. But even if some IP works are created, there is no way to determine what there value is. With overconsumption not an issue, perhaps one might say that it is not necessary to determine a value. But if we assume the IP works will be still be utilized, without knowing what the value of it is, there will be a great deal of uncertainty in how much one should invest in its utilization. For instance, for works like Lawrence Lessig’s book and Linux, if they were created under a regime that recognizes no IP rights, there would be no way to determine their value or how much should be spent in their utilization. Even now, as was mentioned in class, it is difficult to know their actual value; but, we can still estimate their value only because we have works with a market-determined value with which to compare. Without any pricing information, we don’t know what value people attach to the works and it becomes impossible to know their value. This may lead to an inefficient market, much like what happened in the USSR.

On the other hand, with toll goods, if their price is set at anything above zero, underconsumption begins to take place. But this may not be a bad thing because the goods (or IP works, in this case) now have a value attached to them and this leads to a more efficient market.

Silver Lining (maybe dull gray)

Those who favor a less restrictive copyright regime and supported John Kerry can take solace in avoiding going 0-for-2.  Lawrence Lessig wrote back in September:

One of the exciting thing about the early days of the Democratic primary was that there was at least some debate about whether the Democratic Party would continue to be led by IP extremists. Some of the worst in IP came, after all, from the Clinton administration....  Word now is that Bruce Lehman, former Assistant Secretary of Commerce, and Commissioner of Patents, is spreading the word that he is running IP policy on the Kerry campaign. In the scheme of extremists, few are more extreme.  Of all the government “Czars” in our form of government, he proved himself to be most to be feared.   [emph. added.]

One of Lehman's recent manuevers was an attempt to move the U.S. Copyright Office from the jurisdiction of the Library of Congress and under his own jurisdiction within the Patents and Trademarks Office.  As the National Writers Union stated,

The Library of Congress has a long, distinguished history promoting the arts, culture and knowledge in this country by...advocating for the preservation of the works of individual creators. That is its primary role...However, the PTO's primary role is to encourage commerce. In the current environment, we are concerned that the interests of individual creators will not be properly protected by the PTO whose main constituency is the business community.

For ardent Kerry supporters, this is small consolation perhaps, but consolation nonetheless.

GHOST OF GWTW COMES BACK AND HAUNTS PG AUSTRALIA

Raizel Liebler of the Library Law Blog had an interesting post that highlights the difficulties encountered where a work enters the public domain under 1 set of copyright laws and simultaneously remains under copyright protection under another set of copyright laws.

The blog at issue:  Gone with the Wind in the public domain? Will Peter Pan never grow up?  Discusses how GWTW entered the public domain in Australia in 1999 because copyright protection expires upon death of the author + 50 years but in the United States, protection lasts until publication date + 95 years of 2031.  (Although Peter Pan is mentioned in the Liebler blog, it will not be discussed here as it mentions a different problem worthy of its own separate discussion).

Project Gutenberg, an organization run by volunteers is the oldest produce of FREE electronic books (most of which are in the public domain).  Project Gutenberg Australia’s efforts to digitize and make Gone With the Wind available in Australia caught the attention of Margaret Mitchell’s estate.

GWTW was expunged from PG Australia’s site presumably to avoid costly litigation with US lawyers over copyright infringement issues despite the fact that it DOES NOT VIOLATE AUSTRALIAN COPYRIGHT LAW!  It’s not surprising that the party who has the most resources to expend on litigation in effect “bullies” the minor party into alignment with the major party’s view by threat and fear of financially ruin via long and costly litigation.

Here, we have a minority party giving up rights they are entitled to under Australian law to avoid a conflict of law litigation that may ultimately end up in their own favor.  This highlights the importance that copyright protection should be consistent as much as possible with other countries to avoid these problems.  The Liebler blog mentions that the US and Australia is expected to sign a trade agreement setting the Australian copyright term to life of author + 70 years.  However, this still doesn’t reconcile the length of copyright protection in Australia and US and hence will probably have little or no effect in resolving the problem of works entering the public domain in 1 regime and simultaneously remaining under copyright protection in another regime. 

It’s clear that Project Gutenberg’s efforts provide a great public benefit by enabling public access to public domain works as well as preserving works that might otherwise would have disappeared into obscurity.  It is equally clear that a serious problem in enforcing copyrights where conflicting copyright laws apply.  However, I think the proper way to resolve this discrepancy should be by negotiation of international treaties and/or adoption of international conventions like WIPO rather than forcing the proverbial square peg into a round hole by forcing the adversary to give up legal rights intended to benefit the public or face the threat of financial ruin.

No Price Could Stop Robin Hood

News.com reports that the Business Software Alliance (BSA) is doubling the maximum reward it will pay to individuals who report companies that are using pirated software. The BSA is a trade group supported by Apple Computer, Intuit, Microsoft, Adobe and about 20 others which focuses on stopping software piracy in businesses. The BSA claims that 22 percent of all commercial software licenses used in the United States have not been paid for, costing the industry more than $6.5 billion annually. The figure for business using unlicensed software is a more staggering 27% in Europe.

In an effort to curb this growing trend, BSA is offering employees and incentive to tell on their employers for using unlicensed products. The BSA will give the snitches 10 percent of the face value of the software recovered, up to $37,000 (double of the previous $18,500). This rate needed to increase apparently in response to only recovering $2.2 million in out-of-court settlements last year and the industry still losing approximately $6.5 billion in profits in the United States alone. But will doubling the amount paid to employees for ratting out their employer work?

I’m immediately reminded of the classic hero for the poor, Robin Hood. He would steal from the rich and give to the poor and regardless of the ransom put out for his head no one would ever rat him out. The reward could never be high enough since the reward would only be a one time thing, whereas Robin Hood was a constant source of income. Similarly, employees telling on their employer would face a one time bonus, but would stand to lose out on long term success with the company. I don’t think most employees would be welcome back at the firm and even if they stayed I wouldn’t expect them to see many bonuses or raises in the near future. Further, I don’t know if many companies are going to want a rat working for them.

Loyalty is a major factor for employers, especially those who work with trade secrets or other valuable company secrets. If a person is willing to sell the company out for some software infringement, what else might they sell the company out for? This may be a bit of an exaggeration, but it might not be too far off either. I would definitely consider it before telling on my employer. Job security is a valuable thing and a one time deal doesn’t seem all great given the larger implications. You typically do not tell on the person who is keeping food on the table…just bad policy generally.

BSA does report that 47% of employers said they would be bothered if they found out their company was using pirated software. However, given the low recovery rate and low settlement figures, it doesn’t seem too many people are acting on this worry, or more likely don’t even know. It would likely be safe to assume that the only people who know about the software licensing are the IT people at firms and maybe the guys running the show (though I would think they are just as likely to be out of the loop). It would seem an IT guy has even less incentive to tell since he may be implicated for the actions as well since he is the one using it. I would assume most IT people would either tell the company to start buying licensed versions or just turn his head (and possibly get paid off by the company for doing so). Or, again, it is the IT guys who are suggesting it and saving their company some money and thus are not going to tell on themselves.

So what can BSA do to stop companies from continuing to pirate software if the Robin Hood idea of not telling on the guy who provides you with food is true? One idea is obviously to continue to increase the money a rat would get, but this again is just bad policy for an employee. BSA may try to insulate the rat by keeping it anonymous, however, since it would typically only be the IT guys doing the telling, this likely wouldn’t be very effective. One idea that might work is to require companies to provide verification for their products when they want to upgrade as suggested in a previous post discussing Microsoft’s attempt to crack down on consumer piracy. Another idea may be to offer companies an incentive such as a tax break for using new software or at least providing a valid copyright. Software companies may also provide a break for companies that want to upgrade their product if they already have a licensed version (though they can probably just get a free pirated update, so don’t know if this is very valuable). These ideas all involve money however and the amount saved from pirating is often going to be way more than could ever be offered to get a license.

So maybe criminal prosecution is the answer, however, this again requires someone to first make a showing that companies are infringing. I think the most sure fire way to prevent all this is through government intervention. Require companies to report valid software licenses when they apply for a work license or when they file taxes. This would likely cost a decent amount of money, but I’m sure the software industry would be willing to help out in this venture and possibly subsidize most if not all of the cost if it guaranteed decreased piracy. There needs to be a true incentive to get licensed software and not being able to get a business license or file taxes without a showing of licensed software seems to be a pretty good incentive to me.