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Copyright in the Cultural Industries
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Copyright in the Cultural Industries Edited by
Ruth Towse Department for the Study of the Arts and Culture (KCW), Erasmus University Rotterdam, The Netherlands
Edward Elgar Cheltenham, UK • Northampton, MA, USA
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© Ruth Towse 2002 Chapter 2 © William Landes Chapter 9 © Martin Kretschmer All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited Glensanda House Montpellier Parade Cheltenham Glos GL50 1UA UK Edward Elgar Publishing, Inc. 136 West Street Suite 202 Northampton Massachusetts 01060 USA
A catalogue record for this book is available from the British Library
ISBN 1 84064 661 6 Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall
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Contents List of tables List of contributors Preface Ruth Towse Introduction Ruth Towse 1 2
3 4 5
6 7 8
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10 11 12
vii viii xiii xiv
Copyright and the cultural industries: the policy-maker’s view Rick van der Ploeg Copyright, borrowed images and appropriation art: an economic approach William Landes Choice of law issues in relation to copyright Paul Torremans Copyright and freedom of expression: an economic analysis Michael Rushton Copyright in the digital age: the economic rationale re-examined Jacco Hakfoort Copyright compulsory licensing and incentives Thomas Gallagher Copyright and corporate power Fiona Macmillan The abolition of copyrights: better for artists, Third World countries and the public domain Joost Smiers Copyright societies do not administer individual property rights: the incoherence of institutional traditions in Germany and the UK Martin Kretschmer Music licensing in the digital age Michael Einhorn Copyright protection, appropriability and new cultural behaviour Joëlle Farchy and Fabrice Rochelandet Performers in the digital era: empirical evidence from Japan Shinji Matsumoto v
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63 85 99
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140 165 178 196
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Creativity without a copyright: music production in Vienna in the late eighteenth century Peter Tschmuck Exploiting museum images Babette Aalberts and Annemarie Beunen Copyright in the digital age: opportunities and drawbacks for scientific research Emanuela Reale The problems of authors’ property rights administration in Russia Elena Levshina and Natalia Pakhomova
Index
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233
250
257
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Tables 9A.1 10.1 11.1 11.2 11.3 11.4 11.5 12.1 12.2 12.3 12.4 12.5 12.6 12.7
Collective administration of music copyright in the UK and Germany Copyright for audio, non-dramatic uses of music Classification of blank CDs Audio tape and CDR sales in France Features of copying Reasons for connecting Private copying levies in European countries Average annual income, 1998 (million yen) Distribution of annual income, 1998 Sources of annual income by genre, 1998 Public performances in Japan, 1997 Remuneration for rental and secondary-use fees for commercial phonograms, 1998 (musicians) Year CDs published and their use, 1997 Rank of rental and share of remuneration, 1997
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164 167 179 180 181 181 187 197 198 199 200 204 206 206
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Contributors Babette Aalberts studied Dutch law at the University of Leiden. Since 1998 she has worked as a research fellow at the University of Leiden and the University of Tilburg at the Center for Law, Public Administration and Information, and as a lawyer at the Intellectual Property department of the law firm Kennedy Van der Laan in Amsterdam. Annemarie Beunen studied law and art history at the Catholic University of Nijmegen in the Netherlands, where she also worked as a researcher specializing in copyright. She is currently preparing a doctoral dissertation on the protection of databases at the Department of Law and Computer Science at Leiden University. She also worked at the Boekmanstichting in Amsterdam as the editor of the Museumrechtwijzer, a book on Dutch museum law published in November 2000. Michael A. Einhorn received a PhD in economics from Yale University and is now a Principal in the firm of LECG, LLC, New York (www.lecg.com). Dr Einhorn specializes in microeconomic analysis, intellectual property, and antitrust, with particular regard to media, entertainment, and electronic content. With offices in 19 cities in North America and Europe, LECG is an economic consulting firm that provides sophisticated economic and financial analysis, expert testimony, litigation support, and strategic management consulting to a broad range of public and private enterprises. Joëlle Farchy is assistant professor at the University of Paris Sud. In 1990, her PhD in economics at the university of Paris Pantheon Sorbonne, was about the French film industry. She now teaches both in the University of Paris Sud and in the Pantheon-Sorbonne. She has published several papers on cultural industries. Her last book entitled The End of the Cultural Exception, published in 1999, deals with the consequences of digital innovations for cultural industries. Thomas Gallagher is a scholar on the Programme for Comparative Media Law and Policy at the Centre for Socio-legal Studies, University of Oxford. Previous academic employment includes the post of Research Officer at the viii
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Institute of Economics and Statistics, University of Oxford from 1996 to 1998, where he conducted research concerning the formulation of public policy towards the information superhighway. This research was supported by the Economic and Social Research Council’s Media Economics and Media Culture programme. He is currently submitting completed research for the degree of DPhil at the University of Oxford. Jacco Hakfoort received his degree in economics from Erasmus University in Rotterdam. Previously, he held positions at the University of Amsterdam, Utrecht University and City University Business School, London. He is now affiliated to the Competition and Regulation Unit of the CPB Netherlands Bureau of Economic Policy Analysis, an independent economic research institute. He participated in the CPB research project Publishers Caught in the Web? published in 2000, investigating the impact of ICT developments on markets for information goods and the appropriate public policy for these markets (http://www.cpb.nl/eng/pub/pubs/werkdoc_119/). His current research interests include real-estate economics, transport economics and the economics of information goods. He has published widely in national and international journals, and books, in these areas. Besides his CPB affiliation, Hakfoort also holds a visiting professional fellowship at the Cambridge International Land Institute. Martin Kretschmer (PhD philosophy, UCL) is Leverhulme Reader in Intellectual Property and joint director of the Centre for Intellectual Property and Management (www.cippm.org.uk), School of Finance and Law, Bournemouth University. He was consultant editor for BBC Worldwide and Time Warner. MK is a Fellow of the Centre for Strategy Research at City University Business School, London (where he was ESRC Research Fellow from 1996 to 1999) and a Fellow of the Queen Mary Intellectual Property Research Institute, University of London. William M. Landes is Clifton R. Musser Professor of Law and Economics at the University of Chicago Law School. He was previously Clifton R. Musser Professor of Economics and before that he was Professor of Economics at the University of Chicago since 1974. He specializes in industrial organization, economic analysis of law, and intellectual property and art law, and has published widely in these fields, often with Richard A. Posner. He was President of the American Law and Economics Society in 1992/93 and was editor of The Journal of Law and Economics from 1975 to 1991 and of The Journal of Legal Studies from 1991 to 2000. Elena Levshina has a degree in Arts and taught for many years at the
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Department of Theatre Management at St Petersburg Theatre Arts Academy. She now is a head of INTERSTUDIO: Institute of Innovative Programs for the Professional Development of Cultural Workers, the State Educational Institution of Continuing and Postgraduate Education. She specializes in copyright and cultural economics, and management. Fiona Macmillan is a Reader in Law at Birkbeck College, University of London and an Associate Fellow of the Queen Mary Intellectual Property Research Institute, University of London. She has previously held academic positions at the University of New South Wales, the University of Leicester, the Institute of Advanced Legal Studies at the University of London, and Murdoch University in Western Australia. At Murdoch University she was the Copyright Director of the Asia Pacific Intellectual Property Institute. Fiona Macmillan’s research interests are focused on the regulation of private power. A particular application of this research area is in relation to the commodification of copyright. Shinji Matsumoto was the Director of GEIDANKYO until mid 2001. He was formerly a viola player with the Japan Philharmonic Symphony Orchestra and Secretary of the Musicians’ Union of Japan. He has specialized in performers’ rights in Japan, which have been officially recognized since 1970. He was appointed Director of GEIDANKYO in 1987. GEIDANKYO has been actively involved with the Association for Cultural Economics International for over ten years and was responsible for the organization of the International Symposium on Cultural Economics in Tokyo in 1999. Natalia Pakhomova has a degree in Arts and taught for many years at the Department of Theatre Management at St Petersburg State Theatre Arts Academy. She now is a head of the department of Cultural Policy at the INTERSTUDIO: Institute of Innovative Programs for the Professional Development of Cultural Workers, the State Educational Institutional of Continuing and Postgraduate Education. She specializes in copyright and cultural economics, and management. Frederick (Rick) van der Ploeg obtained his doctorate in economics from King’s College, Cambridge in 1981. He held posts at the University of Cambridge, the London School of Economics, the University of Tilburg, the European University Institute in Florence and at the University of Amsterdam. He has also been visiting professor at universities in the United Kingdom, the United States, the Czech Republic, Italy and Austria. He has been a member of the board of the Wiardi Beckman Foundation and sat in the party executive of the Labour Party (PvdA) from 1992 onwards. From 1994 to 1998, he was a
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member of the Lower House of the Netherlands States General. In 1998 Dr van der Ploeg was appointed State Secretary for Education, Culture and Science in the second Kok government. Emanuela Reale is a researcher in science policy and law at the Institute for Studies on Research and Scientific Documentation, National Research Council, Rome. She deals with political and institutional aspects of the public research system, giving special attention to the dissemination of research results. Her more recent publications are on the public scientific system in Italy (1998); on concepts, methods and instruments for monitoring science and technology (2000); on relationships between research and science museums (2000); and on the changing role of public research institutes (2000). Michael Rushton received his PhD in Economics from the University of British Columbia, and is currently Professor of Economics at the University of Regina, Canada, and book review editor of the Journal of Cultural Economics. In the autumn of 2000 he was a visiting scholar in cultural economics at Erasmus University Rotterdam. He has published papers on copyright reform in Canada, moral rights, methodological individualism and cultural economics, and the public funding of controversial art. His recent papers include an economic analysis of copyright in works of artistic craftsmanship, and a critique of the economic approach to freedom of expression. He is currently doing research on the constitutional structure of arm’s-length publicly funded arts councils. Fabrice Rochelandet is a researcher at the University of Paris Sud. He received his Doctorate in Economics from the University of Paris PantheonSorbonne. His thesis addressed the question of copyright in view of the technological changes in the cultural industries. He has taught courses and seminars on public economics, copyright economics, and heritage and copyright. His current research centres on electronic commerce of cultural goods, intellectual property and information economics. He has written and published several articles on the protection of copyrighted content in the digital age, the efficiency of copyright collecting societies and on European copyright harmonization. Joost Smiers is Director of the Centre of Research of the Utrecht School of the Arts, the Netherlands. His books include Etat des lieux de la création en Europe. Le tissu culturel déchiré, Paris 1998 (L’Harmattan). His present research is on the consequences of economic globalization for artistic life in different parts of the world.
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Paul Leo Carl Torremans was educated at the universities of Leuven (Belgium), Le Havre (France) and Leicester (UK). He is currently Professor of Business Law and Director of the Centre for Business Law and Practice in the Department of Law of the University of Leeds (UK), where he teaches intellectual property law and private international law. From July 1997 until August 2000 he served as Sub-Dean for Graduate Studies at the University of Leicester. His main research interests are intellectual property rights, their international exploitation and their interaction with private international law. He has published widely in these areas in scholarly journals such as the European Intellectual Property Review, the Intellectual Property Quarterly, the International Review of Industrial Property and Copyright Law, IPrax and the Cahiers de Propriété Intellectuelle. His two main books are Intellectual Property and Private International Law, with Professor James Fawcett, Clarendon Press 1998 (OUP) and Holyoak and Torremans Intellectual Property Law, with Jon Holyoak, 2001 (Butterworths, 3rd edn). Ruth Towse held posts in economics at several UK universities before moving to the Department for the Study of the Arts and Culture (KCW) at Erasmus University Rotterdam in 1999, where her current post is Senior Lecturer in Cultural Industries. For the last ten years, she has specialized in cultural economics and published a number of books and articles in the field. Her latest book, Creativity, Incentive and Reward: an Economic Analysis of Copyright and Culture in the Information Age, brings together her work on the economics of artists’ labour markets and copyright. She has been joint editor of the Journal of Cultural Economics since 1993. Peter Tschmuck is an assistant professor at the Institute for Cultural Management of the University of Music and Performing Arts in Vienna. From 1990 to 1995, he studied economics and business administration at the University of Innsbruck. His doctoral thesis was on the relationship of music to socioeconomic change at the Innsbruck Courts in the late sixteenth and early seventeenth century. He obtained his doctoral degree in April 2000. In his current research, he works on structure and processes in the music industry. Further research fields are the history of ideas in cultural economics, the economics of copyright, and arts management. Peter teaches courses at the University of Music and Performing Arts in Vienna, at the University of Economics and Business Administration in Vienna, at the University of Innsbruck and at the University of Klagenfurt.
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Preface Ruth Towse This book derives from the international conference ‘Copyright in the Cultural Industries’ held in September 2000 at Erasmus University Rotterdam, the Netherlands, organized by Ruth Towse from the Department for the Study of the Arts and Culture (KCW) and Roger van den Bergh, Professor of Law and Economics in the Faculty of Law, Erasmus University Rotterdam, in conjunction with the Association for Cultural Economics International (ACEI). Professor David Throsby from the Department of Economics, Macquarie University, Sydney, Australia assisted with the initial selection of papers. Financial assistance was provided by the ACEI, the Erasmus Research Centre for the Arts and Culture at KCW (ECKCW) and the Faculty of Law of Erasmus University Rotterdam. This project was also supported by the Foundation Vereiniging Trustfonds Erasmus Universeit Rotterdam in the Netherlands. Many people were involved in making the conference a success: the conference administrator Theresa Oostvogels and her assistant, Miro de Ruiter; the session chairmen, Roger van den Bergh, Rudi Holzhauer, Hector MacQueen, Michael Rushton and Paul Rutten. Jules Theeuwes was chairman of the panel discussion on the problems of administering copyright in the digital era; members of the panel were Gerri Hevel (SENA, the Dutch Neighbouring Rights Society), Darrell Panethiere (Warner Music, UK), Shinji Matsumoto (GEIDANKYO, which administers performers’ rights in Japan) and Michael Einhorn (formerly of BMI in the USA), these latter two participants have also contributed chapters to this book. We are very grateful to all the people and organizations involved. All the authors have revised their papers for inclusion in this book and have commented on each others’ papers. Edwin Thus, a student at KCW, undertook the considerable task of organizing revisions and preparing the manuscript. I am grateful for his meticulous work.
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Introduction Ruth Towse Much has been written on the theoretical aspects of copyright and also on the cultural industries. Much less has been written about the applied side - how copyright law works in practice. How do lawyers, copyright collectives, authors and performers, and firms in the cultural industries manage and administer copyrights? What are the economic, legal and managerial problems? What are the implications of these problems for copyright policy? We live in an era in which technical changes due to digitalization are significantly affecting markets in the cultural sector, with implications for artists and other cultural workers, for the organization of the cultural industries and for consumers. These changes are raising questions about the whole purpose of copyright, as well as its ability to adapt to and cope with technical and economic developments. Napster has pushed these issues to the front page of every newspaper. As may be seen from the chapters in this book, some contributors question the efficacy of copyright, which is increasingly seen as protecting multinational corporations rather than individual creators. Others are less critical of copyright per se but question its ability to meet current challenges. More specific problems are analysed: Landes discusses copyright in relation to the development in contemporary art of appropriation art, in which artists purposely use other artists’ images (the same issues arise in music sampling): Torremans considers the problem of what law should govern international transactions of copyrighted material; Rushton provides an economic analysis of freedom of expression; Hakfoort asks whether there is an economic case for extending copyright; Gallagher shows that compulsory licensing is an inevitable aspect of copyright administration; Macmillan is critical of the role of copyright in its influence on the economic power of cultural industries and on cultural development; Smiers shares the same concerns, particularly for the Third World, advocating the abolition of copyright; Kretschmer analyses the role of music collecting societies in Europe and Einhorn gives a detailed explanation of musical licensing in the digital age; Farchy and Rochlandet evaluate economic and legal solutions to Internet distribution of copyright material; Matsumoto provides data on the copyright earnings of Japanese performers and identifies problems in the administration of performers’ rights with digitalization; Tschmuck gives an xiv
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account of musical composition in Vienna before copyright was established; Aalberts and Beunen analyse the problems of the exploitation of museum images; Reale considers copyright limitations and exceptions in relation to scientific research; Levshina and Pakhamova describe the administration of dramatic copyrights in Russia. All these authors, whose biographies are to be found on pages viii to xii, participated in the international conference ‘Copyright in the Cultural Industries: Economics, Law and Management’ at Erasmus University Rotterdam in September 2000. The conference was opened by Rick van der Ploeg, the Dutch Secretary of State for Education, Culture and Science, who is a wellknown academic economist; the text of his speech is the opening chapter in this volume and presents the policy-maker’s view of copyright issues in the cultural industries. The purpose of the conference was to bring together academics from the relevant disciplines with those who administer copyrights, and a particular feature of the conference was a panel session of practitioners. A list of panel members is to be found in the Preface. Having learned in my own research how much academics in this field have to gain from this type of exchange, I wanted as conference organizer to encourage this interaction. The panel discussion’s main theme was the difficulty of royalty collection with Internet use; two aspects of this were the perceived resistance on the part of consumers to pay for online copyrighted material and the collecting societies’ data problems with digital delivery. This dialogue between practitioners and academics is clearly an important one, not only for understanding the changes taking place around us but also because it provides a basis for assessing the important policy changes that are now being mooted to adapt copyright law, nationally and internationally, to the Internet. I hope this book, with its international flavour, can inform these discussions. In order to make the contents of the chapters in this book accessible to those who are new to copyright issues, a brief introductory summary of the main topics of copyright law is provided before proceeding to a short summary of each chapter. Those familiar with copyright law can safely skip over the next section.
INTRODUCTION TO COPYRIGHT The acknowledged purpose of copyright law is to protect the work of authors from unauthorized use. It does so through creating statutory property rights, consisting of economic rights, which enable authors to earn royalties for their intellectual effort, and moral rights, which protect their integrity. Copyright law gives the right to copyright owners to exclude others from copying their work without permission, thus creating property rights that overcome some of
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the public good aspects of information goods by preventing ‘free-riding’, that is, unpaid use. It therefore provides an incentive to creative work. As techniques for reproducing and copying creative work have developed and the hardware for applying them has become cheaper, making it possible for the average household to own several copying devices (aural and video tape recorders, photocopiers, computers), the scope and degree of protection of copyright law has increased. Copyright law does not protect ideas, only their expression in fixed form (the fixation); copyright belongs initially to the author, the creator of the first fixation and is automatic in some countries. Copyright applies to a wide range of literary, dramatic, musical and artistic works in various media, such as broadcasts, films, recordings, computer software and the like. Copyright law confers rights on the basis of creative effort; thus arrangements, compilations, listings, databases and so on are protected by copyright separately from the original material embodied in them. Neighbouring rights (rights ‘neighbouring on’ copyright) are property rights of performers for their fixed performances and of firms in the cultural industries that create works, such as literary publications, sound and image recordings and the like. Copyright lasts for the life of the author plus 70 years and neighbouring rights 50 years from the date of fixation. It should be noted that in countries with an Anglo-Saxon legal tradition (such as the UK and USA), there is not such a strong distinction between copyright for authors and neighbouring rights as there is in European countries, where authors’ rights are limited to individuals and moral rights have a stronger role. These differences, however, are being gradually eroded due to international conventions. The basic right conferred on the copyright holder is that of controlling or restricting acts of copying - reproducing the work, issuing copies to the public, performing the work in public, broadcasting it by wire or satellite and including the work in a cable programme, playing and showing the work in public and renting or lending it to the public. The author may license, assign or sell economic rights outright or in part, or transfer them to an agent; moral rights, however, are unwaivable. Typically, royalties on sales and other kinds of so-called primary use are administered by the publisher; secondary use, such as photocopying and public performance of recorded works, is licensed by cooperative collecting societies. Copyright law provides an economic incentive to creative production by enabling authors and publishers to recoup their outlays on the resources used in creating the work; that is, on the fixed costs of the expression and its first fixation. Avoiding the fixed cost is not the only benefit on which a copier could free-ride were she not prevented from doing so by being required to obtain authorization; the copier can also avoid the risk of testing the market for this original work because she will obviously only copy works that are successful and profitable. However, in providing this incentive, copyright also
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enables firms in the cultural industries to bar entry to potential competitors for the life of the copyright; to counteract the effect of the temporary monopoly, legislators limit copyright law and allow unauthorized and unpaid use of copyrighted material for private purposes. This is known as fair use1 and it provides an exception to the copyright holder’s exclusive right of authorization. With the advent of cheap office- or home-based copying machinery, such as photocopiers, home video recorders and copying music via the Internet, unauthorized use has increased considerably, some of which is fair use but much of which is illegal. Fair use, therefore, is an important issue in relation to the cultural industries. A too strong copyright regime that tolerated little fair use would raise transaction costs and copyrightbased earnings, transferring rents to rights holders from users; it would, however, raise the costs of creating the work in the first place. A too weak regime, on the other hand, would increase fair use of copyright material and reduce transaction costs but would not provide sufficient economic incentives. The impact of digitalization on fair use and piracy now dominate discussions of copyright as technical developments gather pace. There are two opposing versions of discussion about the future of the cultural industries: one is that cheap downloading from the Internet of music, words and images in private homes will wipe out authors’ and publishers’ ability to collect royalties, and the other is that it will so facilitate their collection that fair use is threatened. Finally, in this brief overview of copyright, we come to the role of copyright collection organizations. Collecting societies have developed over the last hundred years to administer rights on behalf of copyright owners. They are mostly non-profit-making collective organizations controlled by their members, on whose behalf they typically issue collective or blanket licences. In some countries (for example, the Netherlands), the monopoly to administer copyrights is granted by the State. Collecting societies have three main functions: they license the works in which they hold the copyright for specific uses, they monitor use and collect revenues, and they distribute the revenue as royalties to members of the society. The problems that these copyright collecting arrangements overcome are the cost and bother to individual authors, publishers and users of clearing and paying for the use of copyright material and that of enforcing copyright. Digitalization may or may not exacerbate these problems.
COPYRIGHT IN THE CULTURAL INDUSTRIES The cultural industries consist of publishing, broadcasting (television and radio), film and video, multimedia and the music business. There is an
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increasing tendency towards defining the cultural (or creative) industries in terms of their reliance on copyright; thus, besides the visual arts and crafts, computer games, toys and other entertainment goods, advertising and scientific research are lumped together with these industries into the ‘cultural sector’. This reflects, on the one hand, a more open approach to perceptions of culture and, on the other, the recognition that it is very difficult to draw a line on the production side between ‘creative’ and ‘mundane’ work - is the sound engineer not creative? Similarly, what about advertising, with its search for novelty and employment of highly trained film-makers, artists and performers? The cultural sector is seen as increasingly important for employment and economic growth, an aspect that is mentioned by Rick van der Ploeg in Chapter 1. In the Netherlands in 1995, industries reliant upon copyright accounted for around 5 per cent of Gross Domestic Product, were growing at an annual rate above that of the economy as a whole and employed 3 per cent of workers; similar figures are to be found in other developed countries. He outlines the policy of the Netherlands on extending copyright protection to works in digital form and on the Internet, and exposed the balancing act that governments face when dealing with new technologies, the cultural, social, economic and political effects of which are so widespread. William Landes’ Keynote talk to the conference (Chapter 2) offers an economic approach to the post-modern art form known as appropriation art: the use of borrowed images from the work of others for the creation of new images. The subject essentially hinges on two issues in copyright: what constitutes an original or a derivative work of art, and whether appropriation is fair use. Landes brings to this topic the economic analysis of the doctrines of copyright law that he developed with Posner, applying it here to lawsuits involving appropriation artists. His conclusion is that the economic interpretation of fair use in terms of productive and reproductive use, which adopts the criterion of financial damage to the owner of the rights to the original work, may also be applied to borrowed images. Where only a few copies are made by the appropriation artist, this should be treated as fair use but when the appropriation artist makes many copies, he or she should be treated as any other large-scale producer of derivative works and required to obtain a license from the artists(s) whose works are used. Therefore, existing copyright law is capable of adapting to this art form. In Chapter 3, Torremans gives a legal analysis of the problem of the choice of law for international transactions of copyrighted material, which, as he points out, are involved almost by definition in any successful digital online exploitation in a society that is increasingly creative. Using the example of UK copyright law in relation to the Berne Convention, as well as looking at various international cases, Torremans analyses the difficulties and concludes
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that a combination of rules is called for, with national law playing a major protective role in combination with a single worldwide law governing such key issues as authorship and ownership. The contribution by Rushton (Chapter 4) draws together economic analysis of copyright and freedom of expression. He puts forward the view that, in some aspects, copyright protection over the past century has become overbroad, and that the costs in terms of lost freedom of expression and in transaction costs from expanding copyright’s domain have not been matched by offsetting benefits. He bases his argument on two examples from Canadian cases: copyright’s expansion to corporate symbols (usually covered by trademark law) and parodies, to which fair-use exceptions apply. In Chapter 5, Hakfoort investigates the claim that copyright protection should be extended and more resources spent (by governments) on copyright enforcement. He applies the standard economic model of copyright, based on the apparent increased attractiveness of copies and the decrease in their marginal cost with new technologies. However, Hakfoort argues that by taking a more detailed look at the characteristics of the markets for information goods, competition between originals and copies is becoming less important and, furthermore, publishers can often internalize part of the revenue created by copies. Gallagher (Chapter 6) takes as his topic the economic analysis of compulsory licensing - when unauthorized use of copyrighted material over and above fair use is sanctioned. As with fair use, the rationale for compulsory licensing is to maintain a balance between incentives and access so that the law does not confer too strong a monopoly to the copyright holder. Gallagher’s focus is on the incentive justification for this limitation to the rights of owners rather than the more usual access justifications based on other public policy concerns. Macmillan (Chapter 7) and Smiers (Chapter 8) share a scepticism concerning copyright law based on the disproportionate power both believe it has conferred on publishers (firms in the cultural industries) rather than authors (individuals who are the primary creators). Each argues that the excessive commodification of works protected by copyright has been one of the foundations of the power of the media and entertainment sector, which has led to a homogenized culture. They reach the same conclusion from very different standpoints: Macmillan is an academic lawyer and Smiers a cultural analyst. Macmillan contrasts the rhetoric of copyright law as being associated with concepts of genius, creativity and culture with the many cases in which it was used to bolster the position of powerful multinational entertainment corporations. Smiers argues the point from the perspective of artists (creators/authors), who are in a weak bargaining position in relation to the oligopolies with which they have to deal to get their work published; he advocates the abolition of copyright to be replaced by alternative means of
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remuneration. Both refer to the problem of applying copyright in Third World countries. With the contributions of Kretschmer (Chapter 9) and Einhorn (Chapter 10), we move to the problems associated with copyright in practice, which is the theme of all the remaining chapters. Kretschmer considers the development of collecting societies for musical performance in several European countries with reference to the concept of property that underlies their transactions. He concludes that tensions between author and publisher members make collective administration unstable and that the system therefore requires reform. In Chapter 10, Einhorn provides a detailed discussion of the problems of charging for music on the Internet. He argues that the present administrative arrangements devised in the USA for analogue distribution of music copyrights are not suitable for digital distribution. Farchy and Rochelandet (Chapter 11) follow with the theme of copyright protection and appropriability issues raised by Internet distribution. They consider private copying of different types of cultural content and using different copying devices, providing some much-needed empirical data (from France). Having considered various economic and legal solutions, they conclude there is no one efficient institutional arrangement for the appropriation of rewards or of fair use that applies across the board. Evidence of another kind is provided by Matsumoto in Chapter 12; as Director of GEIDANKYO, the Japanese Council of performers’ organizations, which is concerned with the economic welfare and social status of performers as well as administering their rights, he is in a unique position to assemble data on both earnings of performers in general and on earnings from neighbouring rights in particular. The question of performers’ earnings is set in the context of the finance of the performing arts in Japan, where private rather than state funding is the norm, causing performers to rely heavily on the market for their incomes. He presents the evidence and discusses the problems of a collecting society now faced with digital distribution. As he told the conference in the panel discussion, there is a serious problem in obtaining sufficient information on each performer’s contribution sound recordings and on all uses of them, which prevents a fair distribution. By contrast, the paper by Tschmuck (Chapter 13) looks at the position of composers before the advent of copyright law; as he points out, this did not mean that there was no protection from unauthorized publishing, as the right to publish or perform was a privilege granted by the ruler. He describes the system of protection for musical composition in Vienna in the late eighteenth century - the fruitful period of artistic production just before the introduction of copyright laws and examines how far the de facto absence of copyright laws affected both the potential for artistic creativity and the possibility for the artist to profit from his or her creations.
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In the next two chapters, Aalberts and Beunen (Chapter 14) and Reale (Chapter 15) shift the scene to other areas in which copyright plays a role. Beunen and Aalberts take up a new problem, the exploitation of Internet distribution of images of objects in museums. Many museums, public and private, have seen the Internet as providing an opportunity for publicizing their collections and facilities but, as the authors show, there are copyright problems to be solved and difficult decisions to be made to avoid museums being exploited by specialist companies. Reale analyses an old problem that has a new dimension to it with digital technology - the limitations and exceptions to copyright as they apply to scientific research in the context of the European Directive On the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society. She contrasts the opportunities and drawbacks of copyright in the digital age and discusses the consequences for Italian copyright law. Finally, Levshina and Pakhomova in Chapter 16 describe the problems of transition in the administration of copyrights for dramatic performance in Russia. Under the Soviet government, copyright was intimately tied up with censorship, and the administration of authors’ rights was undertaken by a state agency; now, the data needed for royalty distributions must be assembled and international standards applied. Levshina and Pakhomova also describe the problems of introducing a new type of collective copyright for dramatic productions of stage works, where directors and performers together create a work for performance. The scope and breadth of copyright coverage is well illustrated by the range of topics included in the chapters of the book, which together show the complexities of the legal, economic and management problems to be solved in the cultural industries. The difficulties and doubts about the present administration of copyright law, as well as uncertainties about its future possibilities in the face of fast technical change, are described and analysed by international experts in law, economics and administration of copyright in the cultural industries. Their thoughts about copyright’s ultimate purpose in stimulating cultural development deserve serious consideration by those responsible for copyright policy in every country and by the supranational policy-making bodies. Copyright policy is not only an issue for law-makers but also for social scientists and cultural analysts. The informed analysis by the contributors to the conference and to this book of the problems of administering copyright in the cultural industries fully justify the combination of theory and practice. Much has been learned from their exchanges. We have gone some way in exposing the problems and possible solutions, though there is still much more to learn. These are issues that will recur again and again as information technologies develop and change our culture.
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NOTE 1. The doctrine is known as fair dealing in the UK; in the USA and the UK exceptions and limitations are judged in the context of the case; in other countries they are specified by statue.
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1. Copyright and the cultural industries: the policy-maker’s view Rick van der Ploeg The news bulletin on Dutch television on 21 July 2000 ended with a report which had a bearing on the issue of copyright. The report showed how you could download music from the Internet and make your own CD, including the CD cover, of music by popular groups. Amazingly easy and at very little cost - and no question of paying any royalties. The same report showed a radio DJ using state-of-the-art equipment to download everything the music industry had to offer, who said, and I quote: ‘I wouldn’t really call it theft. To my mind, music is public property after all.’ Anybody reading an article in the Dutch press the same day, in which the journalist Francisco van Jole called for copyright values and standards to be applied to the Internet, would have been rudely awakened from any flights of fancy occasioned by the news item seen on TV. Also on the same day, the newspapers carried a story on plans by the bestselling author Stephen King to publish a number of chapters from his new book on the Internet so that these could be read on payment of a fee without the intervention of a publisher. The ultimate exploitation of copyright by none other than the author himself. Three copyright ‘hits’ in one day - to use the Internet jargon - must add up to something more than just a passing fancy. The news retained a copyright flavour during the days to come, with various court cases in progress such as the case against Napster and the case of PCM versus Kranten.com. In fact, the issue of the information superhighway and the Internet versus copyright has been brewing for some time. If I understand it correctly, the debate raises the following questions.
• • •
Must or can the original concept of copyright remain in effect or has it had its day? Does the copyright structure, in its present form, take sufficient account of technological developments? What impact will technical protection measures have and what impact should they have? 1
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• • • • •
What should be the government’s role in exercising and enforcing copyrights? What role do we see for libraries, broadcasting corporations, research and educational institutes in relation to copyright? How does consumer privacy tie in with copyright? Must record companies, publishers, book and CD shops stay in business or can or must authors themselves exercise their copyright in direct relation to the consumer? All the preceding questions implicitly prompt the following question, which is equally valid: Is copyright wrongfully safeguarding the interests of information producers to an increasing extent, rather than protecting the interests of the individual author as originally intended? Professor Hugenholtz has highlighted this very point.
Permit me to tell you how I, as the State Secretary for Culture, deal with these issues. As in all matters pertaining to copyright, I look at these and similar issues in consultation with the Minister of Justice who bears foremost responsibility for copyright. Of course, we must comply with the binding international standards set by the WIPO and the European Union Directives on this subject. I should explain that I use the term ‘copyright’ generally in this chapter to embrace both copyright and neighbouring rights. I consider copyright to be a classic example of an ‘elegant’ conception. Conceptions must meet the following three criteria in order to qualify as ‘elegant’: first, they must be intellectually satisfying; second, they must address all the issues, including new issues that are emerging; and, third, they must be sustainable. In my considered opinion, the copyright concept fully meets the first criterion, and, more generally, so does the concept of intellectual property rights. Everybody accepts that the conceiver and creator of a work is entitled to protect that work and the revenues generated by its commercialization. Copyright also epitomizes such recognition for works of art, science and literature through the direct link it forges between the intangible process of conceiving something (the virtual stage, so to speak) and the sole right of the conceiver to the publication and reproduction of the tangible form into which the original conception is transformed. Copyright paves the way for legal codification and for commercialization. By stating the obvious, we reinforce the idea that copyright has been around for ever. As a legal concept, it is simplicity itself. The copyright concept has been hugely successful in practice - in legal, economic, cultural and social respects - since it was embodied in the Berne Convention back in 1886. Later inventions, such as film, radio and TV, reprography and audio and video recording, were slotted into the copyright framework. The cross-border nature of copyright has been recognized and
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affirmed from the outset. Nationally and internationally, the cultural industries (ranging from a one-man band to conglomerates in the film and music industry) are grateful for the concept of intellectual property and copyright. This satisfies the second criterion. The third criterion, sustainability, is amply satisfied, as copyright has been enshrined in the Berne Convention since 1886 and in the Netherlands Copyright Act since 1912. This means that copyright has been around for over one hundred years and I consider that to be fairly sustainable. Though generally speaking I am an advocate of renewal and change, I must answer the question of whether copyright should stay with a resounding ‘yes’. At a time when the practical application of copyright is being sorely tested, it behoves us to reaffirm explicitly that the principle on which copyright is based is more essential than ever. Present-day society is economically entrenched in innovation and technological renewal. Product innovation has become a constant necessity, which, in turn, implies acceleration. From this perspective, we cannot do without creative minds that keep the process alive. For that reason, we must uphold and cherish the recognition of the maker’s creativity that enables the maker to turn his or her achievement to account. The maker can live off the proceeds of the work or product created and create a new product. For this reason, I emphasize that the principles of copyright are still valid, but the key question remains whether copyright in its present form is still compatible with technological developments. From a government policy perspective, we adhere to the principle that what is sauce for the goose is sauce for the gander or, in other words, offline and online transactions should be treated equally. We are under the impression that, for the time being, we’re managing to do just that. The government is considering various aspects of this subject at the moment. I mention in passing the government’s request to the Franken Committee for recommendations on Basic Rights in the digital era and the policy document ‘Legislation for the Information Super Highway’ presented by my colleague, Mr Korthals, the Minister of Justice. Another colleague, Mr Van Boxtel, has produced the policy paper ‘Contract with the Future’. As part of the Information Super Highway Action Plan, the Ministry of the Interior and Kingdom Relations is still implementing a project under the title ‘Communications between the Government and the Citizen’. Public libraries throughout the Netherlands have a major part to play in the project as they should provide easy access to the information superhighway. I also mention the ‘Infodrome’ project, which is designed to identify the impact of technological developments on society. The ‘Kennisnet’ project is at an advanced stage of development. This project assigns a major role not only to education but also to culture as a content provider through museums and libraries. The State Secretary for Traffic, Public Works and Water Management recently launched a pilot scheme in the
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context of the ‘Kennisnet’ project. The Netherlands Bureau for Economic Policy Analysis has published a study, which is as thought-provoking as it is controversial, entitled ‘Publishers Caught in the Web?’. Moreover, the Minister of Justice and I sent a letter on ‘Copyright, neighbouring rights and the new media’ to the Lower House of the Dutch Parliament in May 1999, in which we set out our position on the applicability of copyright in the light of the new media and dealt with a number of important issues. The letter was also intended to establish a specific stance on the draft EU Directive ‘Copyright and Neighbouring Rights in the Information Society’, which is due to have its second reading at the European Parliament any time now. We assume that the matter will be settled quickly in Brussels with few amendments to the present text. The time frame for implementing the Directive is tight, so we’ll have to start early. That is why work has recently begun on integrating the Directive with Netherlands law, with the full cooperation of the Ministries of Justice, Economic Affairs, and Education, Culture and Science. The implementation of the EU Directive also entails close consultation between the parties involved. Finally, a project under the prime responsibility of the Minister of Justice has got off the ground. It will study the long-term tenability of copyright. The project will analyse the legal economics and look at alternative forms of settling disputes and new ways of exercising and enforcing copyright in the future. We may therefore conclude that the Dutch government has broadly addressed the issue concerning the societal impact of information technology development (revolution or evolution) and the necessary (national and international) legal framework. The example set by Stephen King demonstrates how an author is able to sell his or her work to individual consumers (in this case to his readers) via the Internet for distribution purposes and the banking system for payment purposes, thus bypassing the publisher, printer, distributor and bookshop. The fact that many people are buying the book proves that it can be done, which means that King will sell the remaining chapters of his book in the same way. We have travelled a few more stations down the line and might even have changed track since the E-book. A common response was: ‘Well, Stephen King can do that as he’s a much-read and popular writer’ with overtones of: ‘It’s got to be a gimmick; King will end up going back to his publisher and not every writer can take such liberties.’ On the other hand, I would assert the following: that is all well and good, but this alternative method of selling a book has proved successful, even though you might think it would be difficult - after all, many people would insist on buying a physical copy which they could hold, touch and smell. If it can work with books, then it’s just got to work with things less tangible, such as music and films.
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All things considered, there is nothing wrong, in copyright terms, with the example set by King. On the contrary, you could see it as a new Utopia where authors can exploit all aspects of their copyright privileges themselves. Wait a minute, though; there’s a catch. There may not be anything wrong from a copyright angle, but this marketing method will have far-reaching effects if it continues. It will have consequences for copyright organizations on the one hand and the cultural industries on the other. I use the term ‘cultural industries’ to refer to the international book, music, and audio-visual industry as well as national small and medium-sized businesses in this sector. First a few words about copyright organizations. These were established by the stakeholders themselves, the copyright holders, to achieve as a group what individuals have not to date been able to manage, least of all in the international arena. Here in the Netherlands, a few of these organizations have established a monopoly in their particular field (Buma, Reprorecht, Thuiskopie, SENA and Leenrecht), which has been conferred on them by the Minister of Justice under the Netherlands 1912 Copyright Act. The Dutch government is therefore closely involved with the royalty collection organizations. The reason for this stems from efficiency considerations, as the collection of royalties on an individual basis is, in fact, impracticable and it makes sense for people who have to pay royalties to deal with just one negotiating and paying agent. This reason will lose its validity if a large number of copyright holders were to exercise their rights individually - and they could easily do so thanks to technological progress. Of course, the action taken by a single author in this respect does not essentially disrupt the present system. The point is that the new media provide the means and the methods for any author to set his or her own conditions. As stated, this will throw the collective system out of the window. In our letter on ‘Copyright, neighbouring rights and the new media’ dated the tenth of May 1999, the Minister of Justice and I therefore took the view that the collective copyright organizations do not have a role to play where it comes to new media, precisely because copyright holders can look after their own interests in an online environment. The Minister of Justice has promised to write another letter to the Dutch Parliament on the subject of collective management and the new media, and the Ministry of Justice has got the ball rolling. The book, music and audio-visual industry in fact operates on the basis of assigned copyright. This can be seen as an intrinsic weakness if all the creators follow King’s example and act as independent guardians of their own creations in their own little kingdoms. Here, too, the question is whether and how this would happen. My impression is that the industry has not quite yet got used to the idea of independent marketing methods. Many are still in denial mode: it won’t happen.
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Suppose it does, however. What is the government’s attitude likely to be? Let me put it this way: if the creators see opportunities to market their creations directly and if the middlemen in the book, music and audio-visual industry can no longer hold their own as a result, this does not, in itself, warrant any government intervention. This scenario still provides for a legitimate application of copyright which is already part and parcel of such opportunities, but, for reasons of efficiency and effectiveness, it was traded in for a form of subcontracted marketing long ago. This does not mean that the government can look on passively to see how things turn out in other instances. It is the government’s responsibility to ensure that legislation operates properly. As part of this task, it is the government’s duty to intervene once it becomes apparent that the spirit of the law - in this case the entire gamut of legislation on copyright, neighbouring rights and its offshoots such as reproduction and borrowing rights - can no longer be upheld in practice or that the rule of law no longer fulfils its intended purpose. It is in this context that the government is addressing the problems faced by the cultural industries. I cite private copying as just one example. This was originally permitted as a departure from absolute prohibition, as it was done on a small scale for private use in connection with a course of study or one’s profession. Anybody has the right to make a copy for themselves, but can a family of five make five copies? Can you let others make a copy as well? Can everybody in the happy world family of Internet users, as Napster and others perceive it, make a private copy of everything, and, if so, is that such a bad thing for the copyright holders? The effects of Internet behaviour are still far from certain. Where one survey refers to a major loss for the copyright holders, other research suggests that the free availability of products via the Internet has a positive effect on the ultimate purchasing behaviour of consumers. In this kind of situation, the regulations set by the government as legislator are expected to remain in keeping with ongoing developments. The more susceptible the music and audio-visual industry becomes to threats, alleged or otherwise, the more vociferously the lobby, acting for copyright organizations and the industry, calls for the legal position of the direct and indirect stakeholders to be strengthened. It is understandable that the European Commission and the European Parliament, for example, are sensitive about this pressure. The amendments to the EU Directive presented by the European Parliament and the response by the European Commission are clear evidence of this. Anybody who has read the letter that the Minister of Justice and I wrote to the Dutch Parliament in May last year about the draft Directive will have noticed that we do not agree with this attitude in all respects. This is because, in keeping with Dutch tradition, we look at both sides of the story. Thus, when determining what our policy on copyright will be, we consider the
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interests of the users as much as we take account of the affirmation and consolidation of the position of the direct or indirect copyright holder. We also regard principles such as the openness, accessibility, availability and affordability of information as building blocks in government policy. This hinges very much on the undesirability of monopolies and positions of power, and on the important principle that education and information should be available to everybody. We try to strike a balance between the justified interests of the copyright holders and the equally justified interests of the users. These include private individuals, institutional users - such as education, and scientific and academic research institutes - and also libraries, which act as intermediary institutes for users. It is our considered opinion that a reasonable balance between both interests has been struck over the years and we are keen to retain this status quo. As State Secretary for Culture, I have a very personal interest in copyright. In my policy document entitled ‘An Enterprising Culture’ I referred to a survey conducted on behalf of the British Ministry of Culture in 1998 to study the impact of Creative Industries on the UK economy. In Germany, a report was published in 1999 on the scale of the cultural industries in the region of North Rhine-Westphalia. Both surveys refer to explosive growth. I asked the IOO (Netherlands Institute for Public Expenditure Research) in the same year to try to compile similar statistics for the Netherlands. This proved to be a tall order, as compiling a sufficiently accurate picture of the size and structure of the cultural industries in the Netherlands did not seem a feasible proposition on the basis of existing statistical sources. Nevertheless, the findings of the survey presented an image of a mature sector with considerable potential for further growth. The findings showed that in 1995, the most recent year for which comprehensive statistics are available for all business sectors, seven out of every 100 companies incorporated in the Netherlands were active in the cultural industries and three out of every 100 workers were employed in them. The cultural industries accounted for nearly 5 per cent of total output and for over 4 per cent of the gross domestic product. I would not like to say how reliable is the figure of over 50 billion guilders for the total volume of business generated by the cultural industry in 1995, but it is clear that this volume is considerable. There was a time when we only meant the subsidized sector whenever we referred to cultural output. These statistics show that such a time is well and truly over and nobody could or would wish to deny the contribution that the commercial cultural industries makes to cultural output. The cultural industries can make this contribution under their own steam, thanks to factors such as copyright and an eager market. Businesses in the sector frequently refer to their long-term stakes in artists by way of the investments they make in young and unknown talent, which can develop and mature under their tutelage and guidance. Again, nobody would
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deny this. We should be aware, however, that the cultural industries also have their sights set on making a profit and are accordingly selective in their talent spotting. The cultural industries have very little room for the unruly and unconventional talent available on the market. That is why there will always be a need for government grants. The commercial cultural industries on the one hand and subsidized culture on the other complement and support each other, and there is no question of the two standing side by side yet divided by an insurmountable obstacle such as a Great Wall of China or a Berlin Wall. The book sector is a good example of how government grants, in a purely commercial context, can help launch less marketable but culturally important products. In its turn, subsidized culture contributes to the cultural industries. The cultural sector has masses of information, art collections, historic material and light entertainment products. This is why the sector can make a major contribution to a providing content for new information and communications services. The ‘content’ and ‘new media’ industries can use this material as a basis for new products. It is therefore quite wrong simply to speak in terms of threats and problems, although, of course, individual authors may experience a lack of marketing and promotion when the support of the media industry disappears. There is, of course, the risk of impoverishment of supply, but the Internet opens up new horizons for authors and for the cultural industries. A creative response to developments is thus called for, but this has always been the case in the world of the creative arts, and ‘enterprise’ has always been a synonym in these industries for ‘innovation’. The Internet makes the world accessible to individuals and groups who were previously restricted geographically to a given region. It is eminently suitable for enriching the primary material by providing all manner of additional information and references, and it makes perfect sense to put the Internet to far greater use. In conclusion, I quote from my own policy document, ‘An Enterprising Culture, referred to earlier: I set great store by the fact that musicians and artists are generally seizing on the new media in order to make the most of their talent artistically and commercially. Protecting copyright on the Internet remains the way forward until it becomes evident that this can be better achieved in other ways.
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2. Copyright, borrowed images and appropriation art: an economic approach William Landes1 In this chapter, I examine from the standpoint of economics the relationship between copyright law, borrowed images and the post-modern art form known as appropriation art. Appropriation art borrows images from popular culture, advertising, the mass media, other artists and elsewhere, and incorporates them into new works of art.2 Often, the artist’s technical skills are less important than his conceptual ability to place images in different settings and, thereby, change their meaning. Appropriation art has been commonly described ‘as getting the hand out of art and putting the brain in’. Some appropriation art does not implicate copyright law at all. For example, Marcel Duchamp exhibited ready-made objects such as a urinal, bicycle wheel and snow shovel as works of art. However, when the borrowed image is copyrighted, appropriation art risks infringing the rights of the copyright owner. Artists and judges have very different views regarding how the law should treat appropriation art. The artist perceives legal restraints on borrowing as a threat to artistic freedom. The following quote is typical: Whenever people’s response is ‘how dare you!’ I consider that a high compliment. First of all, taking from other artists is not illegal in the art world, as it is in the music industry, and second, it is a direct acknowledgment of how we work in painting. Everything you do is based on what came before and what is happening concurrently. I don’t see history as monolithic. I feel very free to take and change whatever I want, and that includes borrowing from my contemporaries. If some people are upset because my work has similarities to what they’re doing, that’s their problem. And if they take from me, that’s great! I don’t respect these artificial boundaries that artists and people around artists erect to keep you in a certain category.3
The law takes a more traditional view of appropriation art. Artists receive no special privileges to borrow copyrighted material. For example, in Rogers v. 9
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Koons the court held that Jeff Koons’ sculpture of puppies had infringed the plaintiff’s copyrighted photograph.4 In rejecting Koons’ fair-use defence, the court stated: Here, the essence of Rogers’ photograph was copied nearly in total, much more than would have been necessary even if the sculpture had been a parody of plaintiff’s work. In short, it is not really the parody flag that appellants are sailing under, but rather the flag of piracy.5
I approach the law’s treatment of appropriation art and the general question of borrowing pre-existing images from an economic perspective. Richard A. Posner and I have shown elsewhere that copyright law has an implicit economic logic.6 Its doctrines are best explained as efforts to create rights in intangible property in order to promote economic efficiency. To some, it may appear especially odd to look at both copyright and art in terms of economics. I hope to convince you otherwise by showing that economics can illuminate a variety of legal disputes involving borrowed images and appropriation art. This chapter is organized as follows. Section 2.1 sets out a number of examples based on actual legal disputes that illustrate several important copyright problems I want to examine. Some examples directly involve artists while others involve institutions that deal in visual images. Section 2.2 reviews the basic law and economics of copyright. Section 2.3 applies the economic model to the cases, and Section 2.4 presents some concluding remarks on how copyright law can accommodate the sometimes conflicting interests between appropriation artists and copyright holders.
2.1 SOME EXAMPLES OF THE PROBLEM Let me start with four examples outside the area of appropriation art concerning disputes over reproduction rights to works of art. These examples have in common with appropriation art the borrowing of pre-existing images for the creation of a new work. The examples also help illustrate the main theme of this chapter: namely, that appropriation art poses no special problems for copyright law. The current federal statute allows one to resolve conflicts over borrowed images in an economically efficient way and requires no special consideration for artists. 1. A copies B’s copy of a painting in the public domain. 2. A makes and sells a CD-ROM containing copies of B’s digital reproductions of old master paintings in the public domain. 3. A museum reproduces its collection of copyrighted and public domain
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works in digital format. It places the reproductions on its website. Other individuals download these images and distribute them over the Internet. 4. A purchases B’s copyrighted note cards, affixes them to tiles, and sells them as decorative objects. Example ‘1’ comes from a lawsuit against a firm for making unauthorized copies of an engraver’s reproductions of old master paintings.7 Example ‘2’ describes a case rejecting copyright for digital images of works in museum collections.8 Example ‘3’ comes from recent proposals involving educational fair use guidelines for digital images.9 The final example relates to a copyright claim against a firm for affixing tiles to lawfully acquired copyrighted images and reselling them.10 Next, I turn to a number of examples involving artist defendants who have borrowed images from pre-existing works. These examples cover the range of copyright problems that appropriation artists are likely to face. 1. A creates a unique collage that includes a copyrighted photograph taken by B. 2. A creates a limited edition series of prints that incorporates B’s copyrighted photograph. 3. The same facts as in the above example plus reproductions of A’s prints appear on posters, calendars and other mass-produced merchandise. 4. A creates a work that appropriates the outline of a nude from B’s photograph, the distinctive colour from C’s monochromatic painting, and a miniature yellow square from D’s painting. 5. A constructs several identical sculptural works based on B’s copyrighted photograph or comic-book character. 6. A creates a work that contains elements substantially similar to one of his earlier works owned by B who also happens to own the copyright in that work. The first three examples are based upon lawsuits brought by photographers against, among others, Robert Rauschenberg and Andy Warhol for using copyrighted photographs in their works.11 Example ‘4’ describes a lawsuit in Germany brought by the well-known photographer Helmut Newton against the artist George Pusenkoff who claimed that his paintings ‘quote’ rather than borrow from other artists.12 Example ‘5’ comes from several lawsuits brought against the artist Jeff Koons.13 Example ‘6’ is a special case of an artist appropriating images from his prior works.14 Here, the question of copyright infringement arises because another party holds the copyright in the earlier work.
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2.2 THE LAW AND ECONOMICS OF COPYRIGHT 2.2.1 The Economic Rationale for Copyright Protection To begin, let me briefly set out the economic rationale for copyright protection and the basic structure of the law.15 Copyright protects original works of authorship that are fixed in a tangible form. ‘Original’ does not mean novel or creative but simply that the work originates with the author. Originality is a threshold question. Its purpose is to save administrative and enforcement costs by screening out works that would be created even without copyright protection. Original works include, among others, books, photographs, paintings, sculpture, musical compositions, technical drawings, computer software, sitcoms, movies, maps and business directories. These works all have in common what economists call a ‘public good aspect’. Creating these works involve a good deal of time, money and effort (sometimes called the ‘cost of expression’). Once created, however, the cost of reproducing the work is so low that additional users can be added at a negligible or even zero cost. Thus, the cost of making ten or 250 copies of a print are roughly the same once the plate has been created.16 It follows that, in the absence of copyright protection, unauthorized copying or free-riding on the creator’s expression would tend to drive the price of copies down to the cost of making them. Then, however, the party who expended the resources to create the work in the first place will be unable to recover his costs. Hence, the incentive to create new works will be significantly undermined without protection against unauthorized copying. In the case of unique works, such as a painting, the case for copyright protection is weaker because the main source of income typically comes from the sale of the work itself rather than from copies. Nonetheless, unauthorized copying or free-riding on unique art works will reduce the income an artist receives from posters, note cards, puzzles, coffee mugs, mouse pads, t-shirts and other derivative works that incorporate images from the original work, and without this source of the income there will be less incentive ex ante to create unique works. As these examples suggest, copyright covers more than just a right to prevent unauthorized copying. It also includes rights over the distribution of copies, derivative works and public performances and displays. To be sure, some original works will still be created even in the absence of copyright protection. There may be substantial benefits from being recognized as the creator or from being first in the market, or the copies may be of ‘inferior’ quality. In the art market, even perfect or unsigned copies are often deemed inferior and sell for much less than original works.17 A striking example of this phenomenon is the much higher price paid for vintage photographs (prints made at the time the photograph was taken) than for the
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identical photograph printed later from the same negative.18 Creators may also use contract law or other private enforcement means to discourage unauthorized copying. For example, an artist could sell his work subject to a contract term that prohibits the buyer from making unauthorized copies or derivative works. Unlike a copyright, however a contract would be difficult to enforce against third parties or subsequent purchasers of the original work. A related point should be noted. Unauthorized reproductions of a painting or sculpture that appear on all sorts of merchandise will call greater attention to the original work. Such free ‘advertising’ or publicity may enhance the artist’s reputation and increase the value of his works. However, the reverse may also happen. Sophisticated collectors may turn away from artists whose images have become too commercial and commonplace. Because one cannot say a priori which effect will dominate, vesting adaptation or derivative work rights in the artist will create an incentive for him to license his work only in those instances where he expects the overall effect to be positive. In short, given the speed and low cost of copying, as well as the difficulty of employing private measures to prevent copying, we would expect a decrease in the number of new works created in the absence of copyright protection. This leaves open the question of how extensive copyright protection should be. The answer depends on the costs as well as the benefits of protection. Two costs, in particular, should be noted. 2.2.2 The Costs of Copyright Protection First, copyright protection generates access costs related to the public good aspect of copyrighted works. Access costs fall on consumers who value the work by more than the cost of making additional copies but less than the price being charged. Access costs also fall on creators who are deterred from building upon prior works because they are unwilling to pay the price the copyright holder demands. Copyright protection, therefore, raises the cost of creating new works. Paradoxically, too much copyright protection can reduce the number of new works created. To be sure, the copyright owner has an incentive to lower prices to potential customers initially denied access, but information costs and arbitrage may make price discrimination infeasible.19 In contrast, access costs are not a significant problem for most tangible goods.20 In a competitive industry, the price of a tangible good equals its marginal cost. Only individuals who value the good at less than its price or, equivalently, its marginal cost are denied access. The second major component of the costs of a copyright system are administrative and enforcement costs. These include the costs of setting up boundaries or erecting imaginary fences that separate protected and unprotected elements of a work. They also include the costs of excluding
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trespassers, and apprehending and sanctioning violators. These costs tend to be greater for intangible than tangible property.21 2.2.3 Doctrines that Limit Copyright Protection Because copyright tends to be a costly system of property, economics predicts more limited rights for copyrighted works than for tangible or physical property. Positive economic analysis of copyright law aims to show that various copyright doctrines that limit protection can be best explained as efforts to achieve the optimal balance between incentive benefits and access and other costs in order to promote economic efficiency.22 Consider the following copyright doctrines. 2.2.3.1 Protection of expression Copyright protects expression but not ideas.23 Protecting original ideas would involve substantial administrative and enforcement costs. It is far simpler to determine if B has copied A’s original expression than A’s original idea. In addition, most original ideas in copyrighted works are trivial and involve small expenditures of time and effort relative to the cost of expressing them. Hence, the added incentive benefits from protecting ideas would likely be swamped by the resulting access and administrative costs. 2.2.3.2 Protection against copying Copyright protects against copying but not independent duplication.24 Here the element of free-riding is missing, so independent duplication will not significantly undermine the incentives to create new works. Two other points reinforce this result. First, independent duplication should be rare for most works. Second, if independent duplication were actionable, authors would spend less time creating new works and more time checking earlier works to avoid copyright liability. This would lead society to expend greater resources on administering the copyright system in order to enable authors to search records, compare their work to prior works and determine how likely it is that an infringement would be found.25 In short, since independent duplication is probably rare, it is unlikely that the added incentive benefits from making independent duplication actionable would be worth the extra costs it would entail. 2.2.3.3 Right of adaptation Copyright gives the creator adaptation rights on his work. This right, called the derivative works right, is broader than the right to prevent unauthorized copying, for it covers ‘any other form in which a work may be recast, transformed or adapted’.26 Painting a moustache on the Mona Lisa or cutting
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up an original Picasso painting into a thousand pieces and reselling each piece as an ‘original’ Picasso are examples of derivative works. But destroying a painting, say by torching it, is not.27 The economic rationale for giving the original copyright holder rights over derivative works depends both on the added incentives to create original works and on the savings in transaction and enforcement costs that result from concentrating property rights in a single party. Consider first the incentive argument. One might reason that any added incentive benefit would be negligible, since only a few successful copyrighted works will generate income from derivative works. Moreover, there is likely to be a substantial time lag between the date of the original work and the later derivative works. This, however, confuses ex ante and ex post returns. Even if the number of artists who receive substantial income from ancillary products is small, the ex ante return, which depends on both the small probability and the potentially large income from ancillary products, could be large relative to the artist’s other expected earnings.28 Turning to transaction and enforcement costs, consider the late artist Andy Warhol. Several hundred ancillary products, ranging from umbrellas to condoms, incorporate images from Warhol’s works.29 By concentrating the copyrights in the Warhol Foundation rather than having each creator of a derivative work hold a separate copyright, the court avoids potentially burdensome lawsuits involving multiple plaintiffs. For example, how would a court decide, among many similar and widely accessible works, which one the defendant copied from? Licensing costs would also rise because a potential licensee would be well advised to seek licenses from many parties to avoid the risk of being sued by one of them. Finally, the copyright on the original Warhol image is sufficient to prevent unauthorized copying of the various derivative works since a party copying from a derivative work will still infringe the copyright on the original work. 2.2.3.4 Doctrine of fair use My final example is the fair use doctrine.30 Fair use limits the rights of the copyright holder by allowing unauthorized copying in circumstances that are roughly consistent with promoting economic efficiency. One such circumstance involves high transaction costs. For example, copying a few pages from a book probably does not harm the copyright holder because the copier would not have bought the book. If copying were prohibited, transactions costs would prevent an otherwise beneficial exchange from taking place. Here, fair use creates a net social gain. The copier benefits and the copyright holder is not harmed.31 Another circumstance that justifies fair use may be termed implied consent. Consider a newspaper or television review of an art exhibition that reproduces
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a few copyrighted images from the show. This will provide useful information to consumers that on average will tend to expand the demand for the underlying works. Moreover, if the law required the reviewer to obtain the artist’s consent to reproduce these images, readers would have less confidence in the objectivity of the review. In these circumstances, fair use can produce beneficial incentive effects and reduce access cost as well. The final category of fair use involves some harm to the copyright holder that is more than offset by lower access costs and possible benefits to third parties. Here, courts treat productive uses more favourably than reproductive uses of a borrowed work.32 The former, such as a parody, transforms the original work into a new work and is unlikely to substitute for the original work or reduce anticipated licensing revenues in any substantial way. Moreover, the cost of creating the transformative work falls, since transaction and licensing costs are avoided. A reproductive use, on the other hand, is more likely to substitute for the original work and, therefore, have significant negative effects on the incentives to create that work in the first place. Parody may also be protected as a fair use. Parody can involve high transaction costs because of the difficulty of negotiating with someone you want to poke fun at. It provides information or critical comment like a review. Finally, parody can be a transformative or productive use of the original work. Still, calling something a parody is not a blanket license to copy the parodied work. Parody is limited in two ways. One is that the parody can only take what is necessary to conjure up the original work. It cannot take so much of the original that it effectively substitutes for that work. The other is that the parody must target the work it parodies.33 Here, the economic rationale is that a voluntary transaction is less likely when the parody attacks a particular work than when it uses it to comment on or criticize society at large. Before I move on to specific cases, let me mention a major economic puzzle about copyright - its long duration. Today, a copyright lasts for the life of the author plus 70 years. Yet, from an incentive standpoint, the present value of $1000 in, say, 95 years is trivial given any reasonable discount rate. On the other hand, life plus 70 years can create substantial access costs (including the cost of tracking down the copyright owner and licensing the work) because a smaller amount of public domain material is available at any point in time. Thus, a shorter copyright term would reduce access costs without significantly reducing the incentives to create new works. There are several plausible but not convincing arguments for a long copyright term. These include the possibility that the returns from copyrighted works occur mainly in the last few years; that a near perpetual term avoids the tragedy of the commons; and that the value of an author’s earlier works will be enhanced by his later efforts.
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The first argument appears factually wrong, based on some scattered data showing that copyrights were rarely renewed when renewal was a condition of extending protection from 28 to 75 years.34 The second overlooks the fact that copyrighted expression is not exhaustible so the tragedy of the commons does not apply. Unlike natural resources that can be used up by overexploitation, previous editions of Shakespeare’s works do not preclude publishers from bringing out new editions. Finally, the third argument might account for a copyright term that extends 20 or so years after the author’s death but not the current time of life plus 70 years.35
2.3 APPLYING THE THEORY TO THE CASES 2.3.1 Cases Outside Appropriation Art Consider first the cases outside appropriation art. They have in common with appropriation art the production of new works based upon images from prior works. 2.3.1.1 Copying a copy of a public domain work In Alfred Bell & Co. v. Catalda Fine Arts, the defendant reproduced and sold copies of the plaintiff’s mezzotint engravings of eighteenth and nineteenth century paintings in the public domain.36 The plaintiff’s engravings were realistic reproductions requiring great skill and judgement. The defendant had argued that since the engravings were merely copies of works in the public domain, they failed the originality requirement. In short, the defendant claimed that he was doing nothing more than he was entitled to do - copying a public domain image, albeit by copying from a copy. The defendant lost the case, as he should have. Originality lay in the art of copying, which required significant expenditures of time, effort and skill. Free riding by the defendant would undermine the plaintiff’s incentives to produce high-quality copies of public domain works. Moreover, copyright protection does not prevent the defendant from hiring engravers and making copies of the same paintings or from licensing the right to make copies from the plaintiff. Copyright merely protects the plaintiff’s investment in copying from the public domain without cutting off the defendant’s access to the original paintings. Will the price of copies be higher following the Alfred Bell decision? One’s initial reaction might be ‘yes’. After all, if the defendant had won the case, this would lower his cost of copying and the added competition faced by the plaintiff would translate into lower prices. However, this result assumes that the plaintiff’s copies would still exist. In the future, however, the absence of copyright protection would discourage firms from hiring skilled craftsmen to
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copy public domain works, and as the supply of high quality copies dried up, the price of future copies would tend to increase.37 2.3.1.2 Copying a digital copy of a public domain work Now imagine a copyist so skilled that he produces near perfect reproductions of the original work. In Bridgeman Art Library v. Corel Corp., the plaintiff Bridgeman produced and marketed colour transparencies and digital images of well-known public domain works of art in museum collections.38 Bridgeman claimed that the defendant Corel sold compact disks containing images that it had copied from Bridgeman’s transparencies. The court likened Bridgeman’s transparencies to copies produced by a photocopy machine, and since photocopying obviously fails the originality requirement, so would Bridgeman’s transparencies. This, however, misconstrues the purpose of the originality requirement. Photocopying should fail the originality requirement because the element of free-riding is missing. If creating high-quality transparencies were as easy as photocopying, copying from Bridgeman’s copies would cost Corel about the same as photographing the underlying works. Free-riding would be minimal. Copyright protection should be rejected since it would create unnecessary administrative costs without offsetting incentive benefits. Creating high-quality transparencies of art works, however, is a time consuming process that requires considerable skill on the part of the photographer or copyist. Just as in Alfred Bell, it is significantly cheaper to copy from Bridgeman than to create the transparencies from the underlying works. Moreover, copyright protection will not deny Corel access to these works. Rather, Corel will have to pay museums to gain access to them or license the reproductions from Bridgeman. Finally, note that the Bridgeman court’s decision that originality requires a ‘distinguishable variation’ between the original and copy (that cannot be satisfied by a simple change in medium)39 creates a perverse incentive to produce second-rate or poor-quality copies. Such copies have less commercial and educational value but are more likely to satisfy the originality requirement. The Bridgeman case brings out another consideration - the costs of administering a copyright system - that works against copyright protection for exact reproductions of public domain works. To illustrate, suppose A and B both make exact reproductions of the same painting in the public domain. Assume further that B has had access to both the original painting and A’s copy before making his own copy. If A sues B for infringement, a trier of fact would have difficulty deciding whether B had copied from the original painting or from A or from both. Since A and B’s copies are nearly identical, the usual legal test for copying - access plus substantial similarity - would not help one decide if B had copied from A. Alternatively, direct evidence on copying is usually unobtainable or costly to develop. These sorts of
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complications would multiply when several other parties, say C, D and E, also made copies of the same public domain painting. Then a slew of overlapping claims could arise that would entangle a court in costly litigation over whether B had copied from A or the original painting or someone else. Additional litigation may also arise among A, C, D and E since all have produced copies that are substantially similar to the same public domain work and hence to each other. Each copyist might claim that the other parties had unlawfully copied from its copy. To be sure, the parties have an incentive to enter into licensing arrangements or settle their disputes to avoid expensive litigation, but licensing and settling are costly.40 In short, copyright protection would be economically efficient only if the added incentive benefits to create highquality copies of works in the public domain outweighed the extra administrative and licensing costs. This suggests that the socially efficient result could well be the current law that conditions copyright on a non-trivial variation between the copy and the public domain work.
2.3.1.3 Copying both public domain and copyrighted works Now suppose a museum or educational institution wishes to create and distribute digital images of works in its collection. Clearly, if the works are in the public domain, it may make and distribute copies. On the other hand, the museum may not know if a particular work is still under copyright and, if it is, who owns the copyright. For works created after January 1, 1978, the effective date of the 1976 Copyright Act, the museum probably has to obtain permission from the copyright holder to reproduce them unless the artist has transferred the copyright to the museum. For works created before 1978, there is no easy answer to whether the museum can make copies. Prior to the 1976 Copyright Act (the ‘Act’), common law copyright protected unpublished works in perpetuity.41 The Act expressly pre-empted common law copyright and established a single federal system that protected a work from the moment it is fixed in a tangible form.42 For works that were unpublished at the time of the Act, the earliest the copyright would expire is 2002 or, if the work were later published, in 2027.43 In theory, a nineteenth century painting could be still copyrighted, if it had never been published. For unique works of art, publication is not a selfdefining term. The Act defines ‘publication’ as the distribution of copies (including the first copy that embodies the copyright) to the public for sale or other transfers of ownership.44 However, the law has not treated the sale of a unique work as opposed to prints as a publication.45 The statute specifies that a public display is not a publication.46 The distribution of reproductions might be treated as either a publication of copies or a derivative work. Publication of a derivative work, however, may not constitute publication of the original
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work.47 To complicate matters, copyright law also developed the concept of limited publication, which does not constitute publication for the purpose of divesting one’s common law copyright. Finally, if a pre-1978 work is still copyrighted, the museum may own the copyright because in some states the so-called ‘Pushman’ presumption meant that the transfer of a unique work also transferred the copyright to the new owner.48 What does one make of these complications? At a minimum, one can say there is great uncertainty over whether licenses must be obtained to reproduce older works. A fair-use claim might work given the high transaction costs of determining whether a work is still copyrighted and who owns the copyright. Still, a prudent museum director might well be reluctant to reproduce many important works in the museum’s collections. The market, however, has responded to this problem - there are now two important organizations (the Visual Artists and Galleries Association and the Artists Rights Society) that facilitate licensing between persons desiring to reproduce works of art and copyright holders. Each organization publishes a list of artists they represent, keeps a slide catalogue of works of its members, and acts as agents in negotiating licenses for reproductions of art in monographs, greeting cards, postcards, merchandise, advertisements, films, and so on.49 In short, the desirability of requiring museums and educational institutions to obtain permission to make reproductions depends on the usual trade-off between incentives and access. If one is sceptical that reproduction rights have much impact on the incentives to create works of art, then limiting the ability of educational institutions to make and distribute copies in digital format imposes access costs without offsetting benefits. A museum or educational institution also faces the problem of protecting the copies it lawfully makes. This is simply a variation of the question posed in the Alfred Bell and Bridgeman cases: does the copy satisfy the originality requirement? If creating copies in digital format is subject to free-riding by subsequent copiers, the incentive to make copies of original works will be undermined in the absence of copyright protection. Even so, administrative and licensing costs may make copyright protection inefficient. If creating a digital image is like making a copy from a photocopy machine, copying from a copy costs about the same as copying from the original. Then, free-riding is minimal and allowing unlimited copying will save costs and not undermine the incentives to create copies in digital format. 2.3.1.4 Altering and reselling a copyrighted work In Lee v. A.R.T. Co., the defendant A.R.T purchased note cards from the plaintiff, affixed them to tiles and resold them at retail.50 Since copying was not involved, the plaintiff claimed that A.R.T. had infringed its right to prepare a derivative work. The statute defines a derivative work broadly to include
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‘any other form in which a work may be recast, transformed or adapted.’51 These rights, however, are subject to another provision of the statute called the ‘first-sale doctrine’, which entitles the owner of lawfully acquired copy to sell or otherwise dispose of the copy without the copyright owner’s consent.52 Frank Easterbrook held that A.R.T. had not ‘transformed’ the copy to bring it under the derivative work provision. Rather, it had merely placed the equivalent of a mat or frame on a work it purchased and then resold it.53 To be sure, arguments can be mustered on both sides of the issue, but economics helps resolve this case in a way consistent with the social purpose of copyright law. Observe that the defendant’s activity benefited the plaintiff. The more tiled cards the defendant sold, the more cards he will purchase from the plaintiff. Moreover, the plaintiff’s position would transform copyright into a broad moral right under which the author can block any minor alteration of which he disapproves. In the end, this would harm creators because contracting costs would rise as galleries, museums and collectors would seek permission from the copyright owner to mat and frame works of art to avoid copyright liability. Hence, a finding that A.R.T. had not prepared a derivative work would reduce access costs without harming and possibly even enhancing the incentives to create the cards in the first place. Before leaving this case there is a subtle and general point that should be noted. Why would a plaintiff sue in circumstances where the defendant’s activity benefits him? One possibility is that the plaintiff’s reputation will be harmed from the sale of a product that she believes damages her reputation, but it seems implausible that mounting note cards on tiles would tarnish or disparage the plaintiff’s reputation. A more plausible explanation is price discrimination. The plaintiff would like to charge higher prices for note cards to parties who affix them to tiles and resell them than to other purchasers. Arbitrage, however, makes price discrimination infeasible. But if the law enjoins the activity of affixing tiles to cards and selling them, the plaintiff will receive additional revenues either from granting a license or from selling the tiled product itself. The incentive argument, however, is particularly weak. There is no indication that the plaintiff ever contemplated producing tiled note cards or licensing others to do so, and, prospectively, a ruling favouring the plaintiff would make contracting over appropriate frames and mats more costly in the art market. 2.3.2 Cases of Appropriation Art Let me turn now to the cases involving appropriation art. There is a widespread belief among members of the artistic community that copyright law poses a significant danger to appropriation art. Indeed, one prominent member claimed that ‘If these copyright laws had been applied from 1905 to
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1975, we would not have modern art as we know it.’54 These concerns are greatly exaggerated. The economic approach to copyright, which I have argued is the dominant approach to copyright, does not inhibit appropriation art or other new and innovative approaches to the visual arts. On the contrary, I show below that the economic approach allows unauthorized borrowing in numerous circumstances that promote artistic innovation. 2.3.2.1 Creating a unique work Consider first the case of an artist who incorporates a copyrighted photograph from, say, a popular magazine into a unique collage. The artist removes the actual image from the magazine, affixes it to a board and adds other objects, colours and original images. No copy of the photograph is made and the photograph itself may constitute only a small part of the collage. This should be an easy case. Since the magazine has paid the photographer for his work and charged consumers for copies of its magazine, allowing appropriation would have no significant impact on the incentives to create new commercial photographs or publish magazines but would enable potentially large savings in access and transaction costs. Like the Lee case above,55 the socially efficient outcome would allow the artist to use the image without the copyright holder’s permission. To be sure, a particular case might turn out the other way. Since a derivative work includes ‘any other form in which a work may be recast, transformed, or adapted’,56 a literal-minded court could find that a trivial or minor alteration is an unauthorized derivative work not protected by the firstsale doctrine. However, such a result would elevate literalism over common sense and economics. It is worth recalling Learned Hand’s often repeated admonition that ‘it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary’.57 2.3.2.2 Creating multiple copies One is more sympathetic to a copyright infringement claim against an artist for incorporating a photograph into series of prints. Unlike the previous case, unauthorized copies of the borrowed image are made. For example, Henri Dauman, a French photographer, sued Andy Warhol’s estate over his ‘Jackie’ series of silkscreen prints that incorporated a copyrighted photograph of Jackie Kennedy, which appeared in Life Magazine in 1963.58 The photographer also sued the estate for reproducing the silkscreen images on calendars, posters and other widely distributed merchandise. It might seem unreasonable to draw a bright line between a one-time use of an image lawfully acquired and reproducing that same image in multiple copies. That distinction, however, goes to the heart of the economic rationale for copyright. Commercial photographers are in the business of licensing reproduction rights to their photographs for a variety of unanticipated uses.
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Without copyright protection, the price of copies would be driven down to the cost of copying leaving nothing to cover the cost of creating the work. Allowing an artist to make multiple copies without authorization poses a more substantial threat to the incentives to create new works than the unauthorized use of a lawfully acquired copy. This, however, is not the end of the story. In the language of fair use, the silkscreens created by Warhol are clearly a productive or transformative, rather than reproductive, use of Dauman’s photograph. Warhol added substantial original expression to the original image and the silkscreens, one of which sold in 1992 at Sotheby’s for over $400 000, are not likely to cut into the market for the photograph. The case was eventually settled out of court so we don’t know how it would have come out. I suspect, however, that a court would have rejected the fair-use claim for two reasons. First, Warhol made a large number of reproductions of the silkscreens on posters, calendars and other merchandise. Thus, Dauman’s lost licensing revenues are likely to be substantial, particularly if this signals to other manufacturers that they need not pay to use photographic images that are incorporated in works of art. Second, transaction costs were low enough to make a negotiated license between Warhol and Dauman the likely outcome without altering Warhol’s incentives to use the original photograph. Now imagine that Warhol had been less successful in commercializing his works and had stopped reproducing the photograph after completing a limited edition series of silkscreen prints. Then, the case for fair use would be greatly strengthened. Permitting the limited use of copyrighted images by Warhol and other artists would have a negligible effect on the incomes and hence incentives of photographers to create new works. In addition, fair use promotes greater access by eliminating licensing and other transaction costs. 2.3.2.3 Appropriating from multiple sources A variation of the Warhol case involved the Russian painter George Pusenkoff who used the outline of a nude from a Helmut Newton photograph, a distinctive bright blue background from an Yves Klein monochromatic painting, and a small yellow square from the late Russian artist Malevich.59 Neither Klein nor Malevich objected to Pusenkoff’s borrowing. Nor could they because the colour blue and a yellow square are part of the public domain. Newton, however, objected to the use of his photograph and sought to have the painting destroyed. In Pusenkoff’s defence, he created a unique work rather than multiple copies, borrowed only the outline of a photograph rather than the entire photograph, and transformed this by adding public domain material and altering the medium. On the other hand, he clearly copied Newton’s wellknown image without paying for it. Indeed, his purpose was to copy recognizable elements from other artists. His game ‘is to make canvases buzz
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with cultural associations by “quoting” from other artists - a perfectly respectable postmodernist approach to picture-making.’60 A German court held that Pusenkoff’s painting was a free adaptation rather than a reworking and, therefore, did not infringe Newton’s copyright.61 From an economic standpoint, this is the right result. Pusenkoff’s ‘free adaptation’ was a productive or transformative use that does not substitute for the original photograph. To be sure, Newton might have given up a small licensing fee but that seems outweighed by the lower access and licensing costs. Had Pusenkoff created posters and other merchandise rather than a unique work, the outcome might well be different. Then, potential lost licensing revenues become more significant. Moreover, there would be no important difference between Pusenkoff’s activity and that of a commercial artist or business incorporating pre-existing copyrighted images into a product for wide distribution. The intermediate position - a limited edition series of prints - is a more difficult case to resolve. Like the Warhol example above, fair use should turn on whether the savings in access costs more than offset any small negative effects on the incentives of commercial photographers and publishers. The Pusenkoff example raises another issue. Transaction costs are likely to be large if the law required the artist to obtain permission to appropriate from multiple sources. Other things being the same, this implies that the law should be more sympathetic to the artist whose work borrows from multiple copyrighted sources. 2.3.2.4 Creating sculptures from a single source My next example is appropriation of mass media images by the artist Jeff Koons who was the defendant in three similar copyright cases in the Second Circuit.62 In the best-known case, Rogers v. Koons, the defendant purchased a note card displaying a photograph of a group of puppies with their owners, tore off the copyright notice from the card, and hired an Italian firm to make four large sculptures called ‘A String of Puppies’ based on the photograph. Koons’ role was conceptual. He did not physically make the sculptures but chose the subject matter, medium, size, materials and colours. Koons communicated extensively with the studio and provided them with detailed written instructions. He wrote that the sculpture ‘must be just like photo features of photo must be captured’.63 Indeed, altering the image to avoid a copyright lawsuit would have defeated his intended purpose of showing that meaning depends on context. Since Koons admitted copying the photograph, the only issue on appeal was if his copying was protected as a fair use. Counting against Koons’ fair-use argument, according to the court, was the commercial nature of the use; the fact that Koons earned a substantial sum from the sculptures (for example, three of the four sculptures sold for nearly $400 000); that Koons faithfully copied the original image; and that the
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sculptures were likely to damage the market for the copyrighted photograph. Although the products are in different markets and won’t compete against each other for sales, the court believed that Koons’ use could potentially eliminate an important source of licensing revenues for photographers and result in adverse incentive effects. Koons’ principal fair-use argument was that his work should be privileged as a satirical comment or parody. By placing this particular image in a different context, Koons claimed he was commenting critically on a political and economic system that places too much value on mass-produced commodities and media images. Not surprisingly, the court rejected his defence. A privileged parody requires that it target the original work. No privilege is given to a parody that uses the original work as a ‘weapon’ to comment on society at large. The economic rationale for this distinction rests on the idea of high transaction costs preventing a value-maximizing exchange.64 When the parody targets the plaintiff’s work, the parties are unlikely to come to terms on a price that allows the defendant to make fun of, embarrass or even humiliate the plaintiff’s work. Such a use, however, may provide substantial benefits to third parties. On the other hand, if the defendant uses the parodied work as a weapon to comment on society, he should have little trouble licensing the work. Moreover, if the copyright holder refuses, he can come to terms with another copyright holder of an equally usable work. Rogers v. Koons was not well received by the art community. Its members feared that the decision would cripple appropriation art, undermine artistic freedom and retard innovation. I believe this outcome is highly improbable. The more likely outcome is that not much will change other than appropriation artists paying small fees to license the images they appropriate. This is just an application of the Coase theorem - in the absence of transaction costs (and wealth effects) the outcome will be independent of the assignment of rights or liability rules. Licensing, however, is not free of difficulties. In some instances, an artist will not able to license his first choice or will wind up paying more than first anticipated. Some copyright holders may grant licenses only if they approve of the way their images are used. This, in turn, can undermine the critical message intended by the artist. Overall, these costs are probably small. Licensing also entails transaction and contracting costs. Finally, if the appropriation artist chooses not to pay, he faces risk-bearing costs and potential litigation costs that could be significant given that a fair-use defence will involve resolving the highly subjective ‘target versus weapon’ question. When these costs are weighed against the small beneficial incentive effects to persons creating appropriated images, the most efficient legal rule would allow appropriation provided the artist creates a unique work or (as in the case of Jeff Koons) a limited number of copies. On the other hand, if the
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appropriation artist creates multiple copies and, particularly, if he reproduces his work on many ancillary products, there is a strong economic case for finding a copyright violation. 2.3.2.5 Borrowing from one’s earlier work My final example is the case of an artist who appropriated images from his earlier works. There is a long tradition of artists returning to basic themes they had worked on earlier and even copying from their earlier works. There are some extreme examples. Gilbert Stuart is reported to have painted around 75 substantially similar portraits of George Washington.65 Giorgio de Chirico made numerous copies during his life of his best-known early Surrealist works.66 The issue of unlawful appropriation arises only if the artist no longer owns the copyright on the earlier work. This helps explain a puzzling copyright doctrine in the case of a unique work. Ownership of the copyright is separate from ownership of the work itself.67 Thus, if A transfers a unique work to B, A retains the copyright and B owns the work.68 Divided ownership, however, usually raises transaction costs. For example, if C wants to reproduce A’s work, he must obtain access to the work from B and a license to copy from A. Typically, that will involve greater transaction costs than C dealing with B alone, assuming B owns both the copyright and the work. There are, however, added costs to such an arrangement. It will be more difficult for the artist to return to earlier themes because he risks infringing the copyright on his earlier work.69 Moreover, these problems will multiply if the artist borrows images or elements from several of his earlier works in which he no longer holds copyrights. Thus, the prospect that an artist will appropriate in the future from earlier works may explain, in part, why divided ownership reduces rather than increases transaction costs and, thereby, promotes efficiency. Appropriating from one’s earlier work also brings out a difficult evidentiary question. How would a trier of fact determine whether A has copied from such work or independently created a work substantially similar to one he created earlier? Recall that Section 102(b) of the Copyright Act makes copying unlawful but not independent creation. Evidence on copying is usually circumstantial and inferred from access and substantial similarity between the two works, but access and substantial similarity will not do for works created by the same party. Obviously, A had access to his earlier work, and even if A created a new work without copying from his earlier work, one would not be surprised if the two looked substantially similar. As Richard A. Posner noted: ‘If Cézanne painted two pictures of Mont St. Victoire, we should expect them to look more alike than if Matisse had painted the second, even if Cézanne painted the second painting from life rather than from the first painting.’70 Thus, the evidentiary value of access and substantial similarity is attenuated
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when the same artist created both works. This suggests that a much closer degree of similarity would be required to infer copying when the same party created the two works in question.71
2.4 CONCLUDING REMARKS Appropriation art poses no special problems for the application of economic principles to copyright. Although there are no market impediments to licensing most copyrighted images used by appropriation artists, fair use would lower transaction and access costs. These savings should more than offset the reduced incentives to create new images in cases where the appropriation artist has already paid for the image or is making only a few copies. In contrast, when the appropriation artist makes many copies, he should be treated no differently from a firm that incorporates licensed images in products such as calendars, coffee mugs and beach towels. To sanction appropriation art in the latter case would weaken incentives to create new images and add uncertainty to the already uncertain question whether or not something can be lawfully copied. Moreover, if calling a work ‘art’ shields it from copyright liability, we can be sure that such claims would increase putting judges in the ill-suited position of having to decide what is art. As Justice Holmes warned in his much-cited phrase: ‘It would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of pictorial illustrations, outside of the narrowest and most obvious limits.’72
NOTES 1. This article is based on lectures I presented at George Mason University’s James M. Buchanan Center for Political Economy on 16 April 2000 and at the International Conference on Copyright and Cultural Industries at Erasmus University in Rotterdam on 11 September, 2000. An earlier version of the article appeared in the George Mason Law Review (November 2000). I would like to thank Elisabeth M. Landes, Richard A. Posner, Charles Rowley and the editors of the George Mason Law Review for many valuable comments. 2. For very helpful discussions of appropriation art and copyright, see E. Kenly Ames, Beyond Rogers v. Koons: A Fair Use Standard for Appropriation, 93 Colum. L. Rev. 1473 (1993) and Lynne A. Greenberg, The Art of Appropriation: Puppies, Piracy, and Post-Modernism, 11 Cardozo Arts and Entertainment Law Journal 1 (1992). 3. Richard Rubenstein, Abstraction in a Changing Environment, 82 Art. in Am. 102 (Oct. 1994) (quoting the artist Richmond Burton at 103). 4. 960 F.2d 301 (2d Cir. 1992). 5. Op. cit. at 310. Koons’ sculpture was prepared for a 1988 exhibition entitled ‘The Banality Show’. Op. cit. at 304. Copyright infringement suits were also brought successfully against two other Koons sculptures from the show. See Campbell v. Koons, No. 91CIV.6055, 1993 WL 97381, at *1 (S.D.N.Y. 1 April 1993) (involving Campbell’s copyrighted photograph of
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6.
7. 8. 9. 10. 11.
12. 13. 14. 15. 16. 17. 18.
19.
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Copyright in the cultural industries two boys and a pig); United Feature Syndicate v. Koons, 817 F. Supp. 370 (S.D.N.Y. 1993) (involving the character ‘Odie’ from the ‘Garfield the Cat’ comic strip). See generally William M. Landes, ‘Copyright protection of letters, diaries, and other unpublished works: an economic approach’, Journal of Legal Studies, 21 (79), (1992); Richard A. Posner, ‘When is parody fair use?’, Journal of Legal Studies, 21 (67), (1992); William M. Landes and Richard A. Posner, ‘An economic analysis of copyright law’, Journal of Legal Studies, 17 (325), (1989). See Alfred Bell & Co. v. Catalda Fine Arts, Inc., 191 F.2d 99 (2d Cir. 1951). See Bridgeman Art Library v. Corel Corp., 25 F. Supp. 2d 421 (S.D.N.Y. 1998) amended 36 F. Supp. 2d 191 (S.D.N.Y. 1999). See The Conference on Fair Use: Final Report to the Commissioner on the Conclusion of the Conference of Fair Use, at 33-40 (September 1998). See Lee v. A.R.T. Co., 125 F.3d 580 (7th Cir. 1997); Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341 (9th Cir. 1988). Both Warhol and Rauschenberg settled out of court. Warhol paid $6000 cash and royalties on the print edition of Flowers to the photographer Patricia Caulfield who had threatened to sue Warhol over his flower paintings. Rauschenberg gave the photographer Richard Beebe $3000 and a copy of the allegedly infringing work worth about $10 000. These cases and others involving the artists Sherri Levine, David Salle and Susan Pitt are discussed in Ames, ibid. note 1, at 1484-5. See Geraldine Norman, ‘The Power of Borrowed Images, Art and Antiques’, March 1996, at 123 (discussing the Pusenkoff case). See Rogers v. Koons, 960 F.2d 301 (2d Cir. 1992); Campbell v. Koons, No. 91CIV.6055, 1993 WL 97381, at *1 (S.D.N.Y. 1 April, 1993); United Feature Syndicate v. Koons, 817 F. Supp. 370 (S.D.N.Y. 1993); see also ibid., notes 3-4, and accompanying text. See Franklin Mint Corp. v. National Wildlife Art Exchange, Inc., 575 F.2d 62 (3d Cir. 1978). For a more complete analysis, see Landes and Posner, ‘An Economic Analysis of Copyright Law’, ibid. note 5. For prints, as opposed to photographs, there will be some deterioration in quality as the number of prints increases. If copies are good substitutes for an original work, the creator may be able to charge a higher price for his work to reflect the benefits from subsequent uses that are not protected by copyright. Consider the following two examples. Dorothea Lange’s widely reproduced 1930s’ vintage photograph known as ‘Migrant Mother’ recently sold at a Sotheby’s photography auction 7 October 1998 for $244 500. See Peter Lennon, ‘Whatever Happened to All These Heroes?’, The Guardian, 30 December 1998. An exhibition quality print of ‘Migrant Mother’ from the original or a copy negative can be obtained for less than $50 from the Library of Congress Photoduplication Service at http://www.loc.gov/rr/print/guide/price.html. An Edward Weston vintage photograph from 1929 entitled ‘Pepper’ sold at a Christie’s photography auction on 6 October 1997 for $74 000. A print from the same negative printed later by the photographer’s son, Cole Weston, sold at an auction at Swann Galleries (24 April 1996) for $1840. One possibility is a two-part pricing scheme where users pay entry fees that cover the costs of expression and a separate ‘small’ charge that covers the marginal cost of making copies. Note that two-part pricing can also generate access costs if some parties are unwilling to pay the initial fee but more than willing to pay the marginal cost of copying. In theory, these access costs can be eliminated by lowering the up-front charge to those parties, though information costs may make this infeasible. A particularly ingenious example of two-part pricing is the blanket license that users pay for public performance rights to copyrighted music. Since the marginal cost of performing already-created music is zero, access costs would be minimized by charging a zero price for additional performances. Under the terms of the blanket license, a user pays a fixed fee for the right to perform any of the millions of songs in the repertory of the performing rights society as many times as he wishes during the term of the license. In effect, this is a two-part price: an initial fee plus a zero price for additional uses corresponding to the zero marginal cost of additional performances. The two
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22. 23. 24.
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26. 27. 28.
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major performing rights societies in the USA are the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI). For additional information on the performing rights societies, see Robert A. Gorman and Jane C. Ginsburg, Copyright: Cases and Materials, 575-83 (5th edn, 1999). Two exceptions are monopolies and ‘public goods’ where prices or other means of rationing may exclude some individuals who value the good by more than the cost of its use. To see why these costs tend to be greater, consider the many questions that must be answered in deciding the scope of, say, a photographer’s copyright. Suppose A first creates a photograph and B later creates a similar photograph after having studied A’s photograph. Does B’s photograph of the same subject matter, say a portrait of Tiger Woods, infringe A’s photograph? If not, imagine that B’s photograph also employs the same background, angles, lighting, colors, and so on. Does B’s photograph now infringe A’s work? Or suppose C creates a collage that combines parts of A’s photograph with other materials. Does the collage infringe A’s copyright? Would it make a difference if the collage involves painting over A’s photograph so only Tiger Woods’ eyes are recognizable? Would a commercial or television program that reproduces A’s copyrighted photograph even for a few seconds infringe A’s copyright? What about a critical review of A’s work that reproduces one of A’s copyrighted photographs? Suppose A’s photograph is based on an earlier photograph of Tiger Woods in the public domain. Is A’s photograph still copyrightable and if so, how much is protected? This also raises difficult evidentiary questions. For example, suppose B had access to both A’s photograph and the public domain photograph. How does one decide whether B copied from the public domain or from A’s photograph or from both? Even if B copied from A, has B infringed A’s copyright? Maybe B just copied unprotected elements of A’s work including what A had copied from the public domain. Answering these questions requires fixing abstract boundary lines that separate protected from unprotected elements of a work and then determining if the alleged infringer has violated these boundaries. See Landes and Posner, ‘An economic analysis of copyright law’, ibid., note 5. See 17 U.S.C.A. § 102(b) (2000). See Sheldon v. Metro-Goldwyn Pictures, 81 F.2d 49, 54 (2d Cir. 1936), (Judge Learned Hand stated that ‘if by some magic a man who had never known it were to compose anew Keat’s Ode on a Grecian Urn, he would be an “author”, and, if he copyrighted it, others might not copy that poem, though they might of course copy Keats’s. But though a copyright is, for this reason, less vulnerable than a patent, the owner’s protection is more limited, for just as he is no less an “author” because others have preceded him, so another who follows him, is not a tort-feasor unless he pirates his work.’) (citations omitted). It is worth observing that the present copyright registration system involves minimal time and cost. Registration creates a public record of the basic facts of the copyright. An applicant seeking to register his work submits a $30 filing fee and fills out a short form listing the work’s title, author, year of creation, and date and place of publication (if published). The applicant must also deposit a copy of the work (or, in cases where this is not feasible, a photograph of the work). Registration is optional and is not a condition for copyright protection. The Copyright Office makes no effort to search prior copyrighted works for similarities with the applicant’s work before registering the copyright. Registration information and forms are available online from the US Copyright Office website at http://www.loc.gov/copyright. See 17 U.S.C.A. § 106(2) (2000) and the definition of a derivative work in 17 U.S.C.A. § 101 (2000). See 17 U.S.C.A. § 106A(3)(B) (2000). Intentionally destroying a work of recognized stature can violate the moral rights of the creator of a work of visual art under the Visual Artists Rights Act of 1990, which is now part of the Copyright Act. See op. cit. Another incentive consideration is the potential harm that may result from an unauthorized adaptation that tarnishes the artist’s reputation and reduces his future earnings. However, a critical review might also reduce future earnings. Why is the latter allowed, even if it reproduces some of the artist’s work, but not an unauthorized derivative work? On average, artists should benefit from reviews because they provide information on the underlying
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29. 30. 31.
32. 33. 34. 35.
36. 37.
38. 39. 40.
41. 42. 43. 44. 45. 46. 47. 48. 49.
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Copyright in the cultural industries works. To be sure, the demand for works that are trashed by reviewers will decline but that should be more than offset by the increase in demand for works that are praised. Moreover, the value of the information provided by reviews is enhanced when the reviewer does not have to acquire the right from the artist to review his works. Consistent with the economic approach, reviews that borrow some original expression are a non-infringing or fair use of the original work. For a sampling of more than 100 Warhol items, see The Warhol Store on the website of The Andy Warhol Museum at http://www.clpgh.org/warhol. See 17 U.S.C.A. § 107 (2000). The high transaction cost rationale should be narrowly construed. Otherwise, it would reduce the incentive to develop innovative market mechanisms that reduce transaction costs. These include performing rights societies like ASCAP and BMI, the Copyright Clearance Center for journals, and two arts organizations (Visual Artists and Galleries Association and The Artists Rights Society) that license reproduction rights to the works of many artists. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994). See op. cit.; see also Posner, ‘When is parody fair use?’, ibid., note 5. See H.R. Rep. No. 94-1476, at 133-6 (1976) reprinted in Gorman and Ginsburg, ibid., note 18, at 343 (noting that about 85 per cent of all copyrighted works are not renewed). Consider the following illustration. Imagine that a copyrighted work yields $1 royalties each year after the author’s death and assume a discount rate of 10 per cent. The present value of an annual $1 royalty equals $9.99 under a 70-year term, and $9.31 under a 28-year term. Hence over 93 per cent of the value of the copyright is received in the first 28 years. In this example, therefore, the added incentive effects of extending copyright beyond 28 years would be minimal. 191 F.2d 99 (2d Cir. 1951). An additional point is worth mentioning. Copyright protection in Alfred Bell does not result in the plaintiff earning monopoly profits. Copyright prevents free-riding but not entry by new firms. To be sure, the price of a copy will tend to be greater than the cost of making one more copy. But entry will occur until the marginal firm just covers its full cost of making copies without free-riding including a normal return on its capital. 36 F. Supp. 2d 191 (S.D.N.Y. 1999). See op. cit. at 196 (quoting L. Batlin & Son, Inc. v. Snyder, 536 F.2d 486, 490 (2d Cir. en banc 1976)). See generally Gracen v. Bradford Exch., 698 F.2d 300 (7th Cir. 1983) and Pickett v. Prince 207 F.3d 402 (7th Cir. 2000). Both Posner opinions discuss the administrative, enforcement and licensing costs arising from copyright protection for works that are substantially similar to each other because they are based on earlier copyrighted or public domain works. See also Durhan Indus., Inc. v. Tomy Corp., 630 F.2d 905 (2d Cir. 1980); L. Batlin & Son, 536 F.2d 486 (2d Cir. en banc 1976). See Gorman and Ginsburg, ibid., note 18, at 72. 17 U.S.C.A. § 301 (2000). 17 U.S.C.A. § 303 (2000). See also Gorman and Ginsburg, ibid., note 18, at 339-59 (discussing copyright duration for works created both before and after the 1976 Copyright Act and the transition from the 1909 Copyright Act to the 1976 Act). 17 U.S.C.A. § 101 (2000). See Gorman and Ginsburg, ibid., note 18, at 397. See 17 U.S.C.A. § 101 (2000). See Academy of Motion Picture Arts & Sciences v. Creative House Promotions, Inc., 944 F.2d 1446 (9th Cir. 1991); Gorman and Ginsburg, ibid., note 18, at 385-7. See Forward v. Thorogood, 985 F.2d 604 (1st Cir. 1993); Pushman v. New York Graphic Society, 39 N.E.2d 249 (N.Y. 1942). The Visual Artists and Galleries Association (VAGA) publishes a book entitled VAGA 2000, containing an alphabetical listing of the artists represented in the United States by VAGA and the Artists Rights Society. The book is available from VAGA at 350 Fifth Avenue, Suite 6305, New York, New York 10018. 125 F.3d 580 (7th Cir. 1997).
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51. 17 U.S.C.A. § 101 (2000) (defining various terms, including ‘derivative work’). 52. See 17 U.S.C.A. § 109(b)(1)(A) (2000). The first-sale doctrine contains exceptions for renting and leasing of sound recordings (CDs, tapes) and computer programs without the copyright owner’s authorization. See op. cit. 53. In an earlier case, Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341 (9th Cir. 1988), the court found that the defendant’s activity of cutting out reproductions from a book, fixing them on tiles and then reselling them had infringed the copyright holder’s derivative work right. 54. See Geraldine Norman, ‘The Power of Borrowed Images’, Art & Antiques, March 1996, at 125 (quoting art dealer Jeffrey Deitch). 55. 125 F.3d 580. 56. 17 U.S.C.A. § 101 (2000). 57. Cabell v. Markham, 148 F.2d 737, 739 (2d Cir. 1945). 58. See Sarah King, ‘Warhol Estate Sued over Jackie Photo’, 85 Art in America, 27 (Feb. 1997). 59. See Geraldine Norman, ‘The Power of Borrowed Images’, Art & Antiques, March 1996, at 123. 60. See op. cit. 61. See op. cit. Newton was not happy with the German court’s decision; he remarked: ‘Poor Fellow, he hasn’t got an idea of his own, so he has to use other people’s.’ Op. cit. at 125. Note, however, that copyright does not protect ideas. 62. See Rogers v. Koons, 960 F.2d 301 (2d Cir. 1992); Campbell v. Koons, No. 91CIV.6055, 1993 WL 97381, at *1 (S.D.N.Y. Apr. 1, 1993); United Feature Syndicate v. Koons, 817 F. Supp. 370 (S.D.N.Y. 1993); see also ibid., notes 3-4 and accompanying text. 63. Rogers, 960 F.2d at 305 (quoting Jeff Koons). 64. See Posner, When Is Parody Fair Use?, ibid., note 5. 65. See William D. Grampp, ‘Pricing the priceless’, Art, Artists, and Economics, 6 (1989). 66. See Kim Levin, ‘Beyond modernism’, in Essays on art from the ’70s and ’80s, 251-3 (1988). 67. See 17 U.S.C.A. § 202 (2000). 68. Of course, A may also transfer ownership of the copyright to B or anyone else, provided that the transfer is in writing. See 17 U.S.C.A. § 204(a) (2000). 69. In comments to me, Richard Posner noted that there are many examples in literature of authors redoing their earlier work. Both Yeats and Auden, for example, revised their earlier poems extensively, long after they were published. Had they assigned their copyrights to their publishers, their revisions would have risked infringing copyrights owned by someone else. 70. Schiller & Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410, 414 (7th Cir. 1992). 71. See Franklin Mint, Corp. v. National Wildlife Art Exch., Inc., 575 F.2d 62 (3d Cir. 1978). 72. Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251 (1903).
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3. Choice of law issues in relation to copyright Paul Torremans 3.1 INTRODUCTION Copyright and private international law never got on very well. Several difficult issues arise both in relation to international jurisdiction1 and to choice of law. This chapter is only concerned with the latter one and whilst most of the analysis can be applied to any country in Europe and is comparative in nature, the English legal system has been taken as the basis for this analysis. The complexity of the choice of law issues involved was alluded to by the United States Court of Appeals for the Second Circuit when it began its discussion of them in the Itar-Tass case by stating that the ‘[c]hoice of law issues in international copyright cases have been largely ignored in the reported decisions and dealt with rather cursorily by most commentators’.2 The Copyright, Designs and Patents Act of 1988 does not contain a true choice of law rule. Section 1 immediately sets off to define the various types of work that will attract copyright protection. These are substantive rules, but a peculiar rule that is of interest to the choice of law analysis has been added to it. Copyright will, according to this rule, only be granted if the work also meets the qualification requirement,3 either through the author or through the country of first publication. This means, in broad terms, that the work will be granted copyright protection if the author is a British citizen, domiciliary or resident, or if the work is first published4 in Britain.5 The system is then expanded to other countries, either of first publication or of which the author is a national resident and so on, by means of an Order in Council.6 This system addresses the point of whether or not a work will be protected in the UK, but the Statute does not determine which law will govern that protection. A work of a Belgian author, first published in Belgium, should be protected in the UK, but should that protection be governed by Belgian or by British copyright law? In terms of substantive rules, the UK’s Copyright, Designs and Patents Act of 1988 stipulates that ‘the owner of the copyright in a work has . . . the exclusive right to do the following acts in the United Kingdom’.7 It could be argued that such a system equally expects all other systems to restrain their territorial 32
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scope to the territory of their own country. Does this go further, though, than the scope of the protection? The Berne Convention, on which all this is based, does not just grant national treatment; article 5(2) adds to this the additional substantive rights which are granted in the convention itself. An exception to this minimal rights rule is formed by the level of protection in the country of origin of the works that originate there. Article 5(3) does not mention the additional substantive rights in relation to these works and in general their level of protection is left entirely to the domestic law of the country of origin. In practice, a second exception might arise in those countries, such as the UK, that do not give direct effect to international conventions, as individual parties will not be able to invoke the provisions in the convention that grant them these additional substantive rights in the absence of national implementing legislation. With this in mind, we can now turn to the particular implications of this regime. We will look at issues such as the creation of the right, the scope of the right, the duration of the right,8 the assignability of the right, and so on.
3.2 THE CREATION OF THE RIGHT The Copyright, Designs and Patents Act of 1988 does not contain any detailed guidance on the issue of the applicable law. Whilst the provisions that were discussed in the previous paragraphs decide whether a work will be protected or not, no indication is to be found that would address the issue of which law should govern that protection. The creation of copyright leads to an exclusive right that restricts competition. It would therefore seem to follow that the UK’s public policy dictates that the creation of a copyright that will be exercisable in the UK will be governed by the provisions of the Copyright, Designs and Patents Act, 1988. Protection will be sought in the UK; therefore, the 1988 Act should apply as the law of the protecting country. The Berne Convention also leads to the application of the law of the protecting country9 to issues related to the creation of copyright, as these issues form part of the non-contractual ‘property’ category.10 Which issues, though, are related to the creation of copyright?11 3.2.1 The Types of Works that will be Protected Rules on the types of works that will be protected are a first example of rules that relate to the creation of copyright. Article 2 of the Berne Convention restricts itself to stating the principle that ‘literary and artistic works’, which include ‘every production in the literary, scientific and artistic domain’, will be protected and article 2bis allows for certain limitations without obliging
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member states to introduce them. The precise definition of the types of works that will be protected and the decision whether or not to introduce any limitation is left to the member states and their domestic legislation.12 Even if they are not large, differences exist between the laws of the member states. Whether a work comes within a category of works that will be protected and, if so, in which category of works, will be determined by the law of the protecting country. 3.2.2 Fixation in a Material Form Copyright is not simply created because a work comes within one of the categories of works that are protected. On top of this, fixation in some material form 13 may be required. Article 2(2) of the Berne Convention leaves it up to the member states to decide whether or not to introduce this additional requirement. The UK, for example, has decided to introduce this additional requirement,14 while many other countries in the European Union have decided not to do so.15 Whether or not this additional requirement is applicable is also an issue related to the creation of copyright and thus the issue will be decided under the law of the protecting country.
3.3 THE SCOPE OF THE RIGHT Once copyright has been created it is important to know what the content of the exclusive right will be. How far will the protection and the restriction of competition extend? Logically speaking, this issue is inextricably linked with the decision to grant copyright, as it determines what exactly is being granted. The issue should therefore be decided under the same applicable law. The law of the protecting country should apply.16 The law of the place where the right is used has to decide whether the right exists and what its content is.17 There is, however, no specific provision in the Copyright, Designs and Patents Act of 1988 that deals with this issue. This approach has also been adopted in the United States. The Court of Appeals for the Second Circuit held in Itar-Tass, a case concerned with Russian news articles that had been copied in the United States and incorporated in a New York publication, that the national treatment rule in the Berne Convention does not provide a full answer to all choice of law questions that arise in a copyright context and specifically not to the question whether a work attracts copyright protection or not or to the question of the scope of such copyright protection. Both the Second Circuit in Itar-Tass and the District Court for the Southern District of New York in Corel,18 a case dealing with the alleged copying of photographs in Britain and the United States, then went on
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to consider copyright as a form of property, to which they felt they had to apply the standard Second Restatement rule that the interests of the parties in property are determined by the law of the state with the most significant relationship to the property and the parties.19 In a copyright context that seemed to mean the law of the country of origin, as the law of the country where the works had been created and published. This led the courts to choose Russian law as the applicable law in the Itar-Tass case and English law as the applicable law in the Corel case. In the Itar-Tass case there was also no doubt that on top of that the works had been created by Russian nationals, one more factor strengthening the relationship between the case and Russian law.20 Both courts are happy to conclude that the law that determines whether or not a work attracts copyright also determines the scope of the right that is granted in appropriate cases. This choice of law point is important in practice, as the Berne Convention does not define the scope of protection in a rigid way. It rather sets minimum standards. While it is generally accepted that the copyright-holder has the exclusive right to reproduce the work and make public representations of the work, certain national legislations add to this the exclusive right for the copyright-holder to distribute copies of the work.21 3.3.1 Moral Rights Whether one sees moral rights as an integral part of copyright or as separate rights, the precise content of the moral rights that are granted is also determined by the law of the protecting country.22 Either they are just part of the scope of the copyright that has been granted, or, if they are seen as independent rights, they come into being automatically through the creation of the copyright. It is logical in these circumstances to accept that they are governed by the same rule, for reasons of uniformity. The applicability of the law of the protecting country is confirmed by article 6bis (3) Berne Convention, which explicitly states that the means of redress in relation to moral rights are governed by the law of the protecting country. The specific means of redress for each moral right are linked so strongly to the moral right concerned that it would make no sense to separate them in terms of the applicable law. Moral rights could also be seen as personality rights that are linked to the person of the author of the work. From a choice-of-law point of view they could then be classified as forming part of the personal law of the author. An alternative in copyright terms could be the law of the country of origin, because the latter is closely linked to the author. The common law approach to substantive copyright and moral rights, which is based on the commercial exploitation of the work rather than on the author, has never gone down this
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path. It is, therefore, submitted that this choice-of-law approach is to be rejected. We have argued elsewhere that moral rights should be seen as fundamental rights that protect the author against the abuse of his or her work.23 From that point of view, the UK’s approach to moral rights should form part of its public policy. This would have important implications in a situation where the case is litigated in the UK, but where the law of the protecting country is not the Copyright, Designs and Patents Act of 1988. Rather than applying the law of the protecting country, the court would be obliged to apply the UK’s provisions on moral rights, if the standard of moral rights protection in the law of the protecting country would be lower than the one in the Copyright, Designs and Patents Act, 1988. It needs to be stressed that this approach does not replace the choice of law rules and the law of the protecting country altogether. Public policy considerations, and eventually the application of the law of the forum, can only be considered at a later stage.24 Mandatory rules, however, operate in a slightly different way. These rules are directly applicable25 and the choice-of-law process is not followed at all. The provisions on moral rights of the forum are directly applicable, irrespective of the content of the law of the protecting country, if they are mandatory rules. This is the approach that was taken by the French Cour de Cassation26 in the John Huston case.27 It is submitted that the nature of moral rights, as rights that come into operation only when the copyright work is used abusively, does not justify the latter approach. The traditional law of the protecting country, plus public policy of the forum in exceptional cases, is far more suitable.28 The same law would then also be applied to all issues that form part of the scope of copyright. The applicability of the UK’s substantive provisions on moral rights has certain interesting implications. A foreign author, who is not resident in the UK and whose work is first published abroad, will not have the right to be identified, unless he or she asserts that right in the format prescribed by Section 78 of the Copyright, Designs and Patents Act, 1988.29 The fact that a similar assertion requirement is unheard of in the author’s country, or in the country of first publication, is irrelevant in this respect. This conclusion, though correct, could seem rather bizarre, especially as it may be doubted whether the UK’s assertion requirement is in compliance with the noformalities rule in the Berne Convention.30 3.3.2
Exceptions to the Rights
Restrictions placed on the exclusive right modify the content of the latter. So, if all issues relating to the content of the exclusive right granted by copyright are to be governed by the law of the protecting country, exceptions to the
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rights granted to the copyrightholder form the next issue in this category. The precise scope of the rights granted is, indeed, only to be determined when these exceptions are also taken into account. For example, the rightholder’s exclusive right to make copies of the work is restricted by the exceptional right of the user to make a copy for personal use. Further exceptions might exist for reporting current events, research and private study, and so on.31 The same exceptions obviously also play a role as defences against copyright infringement. 3.3.3 Civil Remedies Civil remedies are the final issue in this category. The availability of damages and injunctions restraining further encroachments on the exclusive rights of the rightholder make the rights effective. This includes the issue of who can sue; for example, whether a licensee can sue independently for copyright infringement or whether he or she needs to rely on the copyrightowner to do so. Such remedies determine the real scope of the right involved and should therefore come under the law of the protecting country.32 The parties cannot use the law of the contract to change the rights of each of them to sue, in so far as that change is to have effect against third parties.33 However, the traditional procedural restrictions apply in the situation where the law of the protecting country is not equally the law of the forum. For example, the quantification of damages issue will be governed by the law of the forum.34
3.4 TERMINATION OF THE RIGHT This issue is important because the Berne Convention only sets out a minimum term of protection of life of the author plus 50 years.35 Member States are free to introduce longer terms of protection into their legislation. The European Union countries have used this flexibility to introduce a 70-years-after-the-death-of-the-author term of protection as a general rule, although other shorter terms of protection apply to some categories of works.36 The Copyright, Designs and Patents Act, 198837 has introduced the 70-years-after-the-death-of-the-author term for literary, dramatic, musical and artistic works38 and, for example, for films39 whilst a 50-year term from release40 or broadcast applies to sound recordings41 and broadcasts42 respectively. The term of protection could thus be different, depending on which law is applicable. The question of which law should be applicable to the issue of the termination of copyright becomes easier to answer when it is considered that what is really involved is the term of copyright. The question can therefore be
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reformulated as meaning: For how long is the exclusive right created? Looking at it this way, it seems logical to opt for the same applicable law as the one that is applicable to the creation issues. The law of the protecting country will therefore govern the duration and the termination of the right.43 This solution also fits in well with the public policy idea that the country that authorizes a restriction on competition may only wish to do so if its legislation can also determine the length in time of the restriction. One special situation should be looked at in more detail. The Berne Convention restricts the length of the term of protection which Member States’ legislation grants to foreign works to the term granted in the country of origin of the work, but it also gives Member States the option to deviate from this rule.44 The UK has decided, in application of the Directive, to impose such a restriction on the length of the term of certain works. The restriction applies to works for which the country of origin45 is not a Member State of the European Economic Area46 and the author is not a national of such a Member State.47 The term of protection is initially still governed by the law of the protecting country, but the substantive rule only imposes a maximum length of the term of protection that is equal to that granted to domestic works. The specific length of the term of copyright protection for such works is then referred back to the term granted by the law of the country of origin. France has used the option left open by the Berne Convention in a similar way. The Court of Appeal in Paris ruled that a series of American Buster Keaton films that were no longer protected by copyright in their country of origin, the USA, were not entitled to copyright protection under the law of the protecting country, France. The films were not entitled to the normal longer French term of protection, because they were no longer in copyright in the country of origin and continuing copyright protection in the country of origin is a prerequisite for protection in France.48
3.5 VALIDITY OF THE RIGHT The question concerning the validity of the right is answered by looking at criteria for the creation of the right. The test is whether the criteria for the creation of the right were present at the time the right allegedly came into existence. If the answer is in the negative, the right is not, and never was, valid. Such cases arise frequently before the courts. Alternatively, the criteria might have been met at the time the right came into existence, but now no longer be met. In that case the right is no longer valid. Apart from the issue of the expiry of the term of copyright, situations involving the latter alternative will hardly ever arise in relation to copyright.
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The strong link with the creation of the right militates strongly in favour of the application of the same choice-of-law rules in both cases. It is suggested that the issue of validity should also be governed by the law of the protecting country.49 The fact that the validity point often arises in an infringement context, where typically an alleged infringer argues as a defence or by way of counterclaim that the right was not valid in the first place and that therefore it cannot be infringed, constitutes a factor which complicates matters slightly. It could be argued that the whole infringement issue, including the validity point, should be governed by the same law. This might seem attractive from a practical point of view, but it is submitted that this argument needs to be rejected. Apart from the fact that the two points arise in the same proceedings there is no substantive link between these points, while, as demonstrated above, there is a strong link between validity and the creation and existence of the right. Moreover, it makes no sense to apply a different law to the same validity point, depending on whether it arises independently or in the course of infringement proceedings. In the latter case, the validity of the right should be determined as a preliminary point on the basis of the law of the protecting country. The situation in which the validity point arises should have no influence on the choice-of-law rule.
3.6 AUTHORSHIP, OWNERSHIP OF COPYRIGHT WORKS CREATED BY EMPLOYEES 3.6.1 Authorship of Copyright Works Authorship could be said to be a factual matter. The author of a work is the person who creates it: the writer, painter, sculptor or such like. The Copyright, Designs and Patents Act, 1988 sets off in Section 9(1) by restating that rule. However, it does not stop there. A set of legal fictions follows. For example, the author of a film is taken to be the producer and the principal director.50 English law had traditionally referred to the producer in this respect, but other legal systems had traditionally (also) referred to the director. The new solution is clearly an EU compromise. Nevertheless, a different person could still be designated as author, according to the choice of the applicable law.51 Two obvious laws could be chosen as the law applicable to the issue of authorship. The law of the protecting country is an obvious candidate, if the function of copyright is to reward the author. It could seem logical to apply the law that authorizes the restriction and that determines its scope to the authorship issue if that reward is to take the form of a restriction on
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competition. After all, the author could well be the beneficiary of the right created. The law of the country of origin could be an alternative, though. The author is also the first point of contact for those parties that are interested in the worldwide exploitation of the copyright in the work. Such a worldwide exploitation has become the norm, for example on the Internet, and it is important that the same starting point is available on a worldwide scale. The logical aim of identifying the same author for the same work in every jurisdiction can be achieved if the issue of authorship is governed by the law of the country of origin, since each work has one country of origin only. It is submitted that the latter solution is the better option.52 It would facilitate the international exploitation of the work by eliminating the artificial situation in which a single work could have different authors in different countries. Furthermore English case law, as well as the Copyright, Designs and Patents Act, 1988 and the Convention, do not preclude it. Apart from often being used to identify the owner of the copyright, the definition of authorship is also used to identify the beneficiary of moral rights. The Copyright, Designs and Patents Act, 1988 grants to the ‘author’ of the work the right to be identified and the right to object to derogatory treatment. If someone is not identified as the author, that person cannot be granted moral rights from a substantive law point of view. It has been argued above that moral rights touch public policy and it must therefore follow that the identification of the author, solely for the purposes of the attribution of moral rights,53 must also touch upon public policy. The provisions of Section 9 and subsequent sections of the Copyright, Designs and Patents Act, 1988 should apply whenever the law of the country of origin grants an insufficient level of protection for moral rights, as compared with the level offered by the provisions of the law of the forum. The French Cour de Cassation applied the French authorship rules as mandatory rules for the purpose of the identification of the author of the film Asphalt Jungle. John Houston, in his capacity as director, was not the author under the law of the country of origin,54 the USA. Under US law he was therefore not entitled to moral rights protection. The French Cour de Cassation argued that lack of moral rights protection in the USA would lead to a French Court being obliged to deny moral rights protection in France. This was unacceptable from a French public policy point of view. The problem was solved through the mandatory application55 of the French rules on authorship, according to which Houston was an author. This meant that he was entitled to moral rights protection in France. It needs to be stressed, though, that the Houston ruling is restricted in scope to moral rights and authorship for the purposes of moral rights issues.56 The public policy argument does not apply to any other issue and the normal choice-of-law rules can then be applied to the authorship issue.57
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3.6.2 First Ownership of Copyright Works The Copyright, Designs and Patents Act, 1988 contains only a substantive rule on ownership. The author is supposed to be the first owner of the copyright in the work.58 The case law has never addressed the issue of choice of law in relation to the first ownership of copyright. Finally, the Berne Convention contains one detailed rule on ownership. Article 14bis (2) determines that the law of the protecting country will govern the issue of ownership in relation to cinematographic works. It is important to trace back the history of this rule to see what implications it has. The original version of the Convention contained no rule at all concerning ownership. In practice, almost no real problems arose because most legal systems considered the creator of a work to be the author of a work and the author to be the first owner of the copyright in the work, and cases of coauthorship and joint authorship are relatively rare. Differences did however arise in relation to the ownership of copyright in a cinematographic work. One could primarily look towards the maker of the film or alternatively to the individual creator of contributing parts of the work. Article 14bis (2) was introduced during the Stockholm revision conference of the Berne Convention to deal with these specific differences. There are no explicit indications that the Member States wanted to introduce an exception for cinematographic works to the general rule on ownership, but there are no indications to the contrary either. All that is known is that Member States could not agree who was to be the author of a cinematographic work. In the absence of an agreement as to who, in substantive law, was the author of a film, the point was addressed from a choice-of-law point of view. The rule that the issue will be governed by the law of the protecting country means that all Member States can continue to apply their own (different) substantive rules, without any of them having to give way. The choice of law rule confirms and continues the disagreement in the area of substantive law. The general point concerning the first ownership of copyright was not necessarily raised, but why would draughtsmen restrict the application of the rule to one category of works if the same rule was already applicable to all other works? If the latter had been the case, a note mentioning that the same rule would also apply to cinematographic works would have been sufficient. This brings us to the general rule. Which law should be applied to the issue of ownership?59 At first sight, there seems to be a strong link between the grant of the copyright and the issue of to whom it is granted. It may make sense to apply the same law of the protecting country to both issues.60 This would also result in a situation where a single choice of law rule deals with the issue of ownership in relation to all types of works. It is submitted, however, that upon closer analysis, these arguments are not convincing. Other arguments point towards the law of the country of origin.61 The exploitation of copyright works
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to an increasing extent takes place at international level. For example, literary works, photographs and films are disseminated and exploited over the Internet. The Internet does not know any borders and it would create enormous practical difficulties and costs if the first ownership of these works was given to different persons in different countries. A choice of law rule that links the first ownership of copyright to the law of the country of origin would solve this problem.62 The copyright in each work would have a single (first) owner. The latter would be able to sell the rights for the worldwide exploitation of the work and the buyer could be certain that he or she was dealing with the genuine rightholder.63 It would also make sense to apply the same law to the issues of authorship and first ownership, because most legal systems would have a substantive rule that makes the author the first owner of the copyright in the work. The approach we are advocating seems to have been adopted in the ItarTass case in the United States. The Second Circuit, when discussing the issue of the law applicable to the issue of copyright ownership, reached the conclusion that the issue was governed by Russian law as the law of the country of origin of the work.64 This discussion is not entirely academic in nature, because, although most legal systems operate the same general ownership rule, there are differences between the provisions in the various national copyright regimes that deal with issues such as co- and joint authorship, and authorship in relation to films and sound recordings. 3.6.3 Article 14bis (2) in More Detail Article 14bis (2) does not simply determine that the ownership of copyright in a cinematographic work is governed by the law of the protecting country; it also provides for certain exceptions and rules on formalities. Certain countries may include certain contributors to a film amongst the owners of the copyright in the film. If these contributions were made on the basis of a specific undertaking to do so,65 the normal article 14bis (2) rule is that these owners of copyright cannot object to the ‘reproduction, distribution, public performance, communication to the public by wire, broadcasting or any other communication to the public, or the subtitling or dubbing of texts, of the work’. This is subject to a stipulation to the contrary.66 However, authors of scenarios, dialogues and musical works that are created for the making of a film are exempted from this rule, unless there is a national legislative provision to the contrary.67 The form of the undertaking concerned (that is, whether a written agreement or a written text with the same legal effect is required), is to be determined by the law of the country where the maker of the film has his or her headquarters or habitual residence.68 This is a sensible
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move, since it will enable the maker of a film to settle the legal position in one agreement, satisfying the formal rules of his or her own domestic law yet having worldwide coverage. The application of the different provisions of the various laws of the protecting countries would have given rise to great practical problems. These problems come back in through the back door, though, as the same article (14bis (2)) also states that the law of the protecting country may require a written agreement. The result is a more or less cumulative application to this issue of the law of the protecting country and the law of the country where the maker of the film has his or her headquarters or habitual residence. Clearly, the Member States were not prepared to give up control over the issue via the law of the protecting country, especially as a foreign law over which they have no control might indirectly interfere with the distribution of the ownership of certain rights and the resulting royalty income. This solution is clearly undesirable. A harmonized substantive rule on formalities would have been a far better solution. 3.6.4 Ownership of Copyright in Works Created by Employees The provisions of the Copyright, Designs and Patents Act, 1988 depart from the normal first ownership rule in the situation where a literary, musical or artistic work is made by an employee in the course of his or her employment. Subject to an agreement to the contrary, the employer becomes the first owner of the copyright in the work, rather than the employee-author.69 This change, of course, is a change in the substantive law. The statute is silent on the choice of law point. Would it be advisable to follow the change in substantive copyright law and change the choice of law rule too? It would, of course, be possible to apply the same choice-of-law rule to works created by employees and works created outside an employeremployee relationship. The application of the law of the country of origin would have the advantage that the same law would be applicable to all issues concerning ownership. A choice in favour of the law of the protecting country would, however, seem to have the advantage that the copyright industry in a given country would always be able to apply the same law. This is not a valid argument. Such an approach would create great practical difficulties for the international use and exploitation of works created by employees. Let us take the example of a manual containing operating instructions and useful tips for the use of a video-camera. The manufacturers clearly want to market their product, accompanied by the manual, in as many countries as possible. Applying the law of the protecting country would mean applying as many different laws as there are countries in which the product is marketed and, because of the differences in national laws, the manufacturers might in a
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number of countries be selling a manual in which they do not own the copyright, whilst they might own the copyright in the country of production. This situation is clearly undesirable. This seems to point to the application of the law of the country of origin to the issue of employee-ownership. A matter that also needs to be considered is the employment relationship as set out in the contract of employment.70 If the employee retains the copyright and becomes the owner of the rights that flow from it, the exploitation of these rights might provide him or her with an extra income, whilst the extra royalty cost for the use of the work in which the employee owns the copyright will be taken into account by the employer. This might influence the determination of the salary of the employee in the contract of employment. This establishes a close link with the contract of employment and provides an argument for applying the same law to both that contract and the issue of employeeownership of copyright. Maybe the issue ought to be characterized as an employment-related contractual issue. Such a solution would also eliminate the problem highlighted above in relation to the law of the protecting country approach. One law would then govern the ownership issue, irrespective of the place of exploitation of the work. Which law would be applicable in such a situation though? After the entry into force of the EC Convention on the Law Applicable to Contractual Obligations, 1980 (the Rome Convention) there is no longer any doubt on this point. Article 6 of the Convention allows the parties to choose the applicable law and determines that, in the absence of a choice of law by the parties, the law of the place where the employee habitually carries out his or her work is applicable. In the situation where the employee does not habitually carry out his or her work in any one country, this rule is replaced by a rule applying ‘the law of the country in which the place of business through which he [the employee] was engaged is situated’. The employee will also be able to rely on the mandatory rules of the law that would govern the contract in the absence of a choice of law by the parties, even if the parties have made such a choice. It is submitted that the link with the employment relationship and the contract of employment is stronger than the link with the general copyright ownership rule. Accordingly, a contractual characterization is preferable71 and the choice of law rule contained in article 6 of the Rome Convention, 1980 should be applied to the issue of employee-ownership. This solution has also been adopted in the Austrian Private International Law Statute.72
3.7 TRANSFERABILITY OF THE RIGHT We are not concerned here with the actual transfer of the right. Before a transfer of a right enters the picture, there is a preliminary issue that needs
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to be addressed. This is the issue of whether the right can be transferred in the first place. Does the issue of the scope of the right granted also include the issue of whether the rightholder is able to transfer the right to another party? Once more, the statutory provisions remain silent on this point. This transferability issue is linked with the grant of the right, rather than with the transfer of the right by means of a contract. Transferability and assignability are closely linked to the issue of what can be assigned (for example pecuniary rights and moral rights, or pecuniary rights only) and with the scope of the right.73 It would clearly not be desirable to apply the law of the contract to it and allow the parties to choose a law which allows the transfer of the right at their convenience. It is therefore submitted that the issue of transferability should be governed by the law which governs the creation and the scope of the right.74 The choice of law rule should thus result in the application of the law of the protecting country.75 This solution has been approved in Campbell Connelly & Co Ltd v. Noble.76 In this case, the proper law of the contract (English law) was de facto applied to determine whether the contract had validly transferred the copyright in a popular tune, but only after the assignability issue had been determined under the law of the protecting country (US law). Whether the US copyright could be assigned had to be decided as a preliminary point and that issue was governed by the law of the protecting country.77 The issue of transferability assumes practical importance due to the fact that some legal systems allow for the transfer of the copyright itself, while others do not. For example, the UK’s Copyright, Designs and Patents Act, 1988 allows the transfer of copyright,78 whilst the German UrheberGesetz rules out any such transfer. The German act only provides the opportunity to grant licences to carry out some form of activity that would otherwise have amounted to copyright infringement. In contrast, the view is held, almost unanimously, that moral rights are not transferable, and so no choice-of-law problem arises.79 Up to now, we have been primarily concerned with the transfer of the right by contract during the lifetime of the rightholder. Similar problems arise, though, after the death of the author. These are of less practical importance in terms of private international law. This is because the rules in the various legal systems are very similar in this respect and allow for the transfer of copyright and moral rights by testamentary disposition. In the absence of a will, a statutory transfer regime is generally provided for.80 In the final analysis, there is no reason not to apply the law of the protecting country to the issue of transferability of rights, regardless of the situation in which it arises.81 The boundaries of the issue need to be taken into account, though. Assignability is restricted to the question whether or not the right can
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be assigned. Whether and under what conditions a transfer or assignment occurred is a matter for the law of the contract, if the law of the protecting country allows the principle of an assignment or a transfer of right.82 This approach was followed by the Court of Appeal in Paris in Anne Bragance v. Olivier Orban and Michel de Grèce.83 The contract between Anne Bragance, who had helped Michel de Grèce with the writing of his book, and the latter was governed by American (New York) law and included a transfer of all aspects of copyright to Michel de Grèce. This included both the moral and the pecuniary aspects of copyright. Due to the publication of the book in France, French law was the law of the protecting country. The French court ruled that moral rights are not assignable under French law and it was therefore impossible for the contract and the law of the contract to transfer these rights effectively. Pecuniary rights are, on the contrary, assignable under French law and the assignment was valid under the law of the contract.84 In practical terms, the outcome of the case was as follows. Anne Bragance gained the right to be identified as an author on every (French) copy of the book, but she did not gain any further pecuniary compensation, as she had effectively assigned all her pecuniary rights.
3.8 CONCLUSION Even when all considerations concerning jurisdiction are left on one side, private international law raises a whole array of difficult issues in the copyright area. Any successful exploitation of copyright material in the digital on line age is almost by definition transnational. This means that those involved in copyright exploitation will have to take these issues into account and tackle them. The analysis that has been outlined above suggests that there is a major role to be played by the law of the protecting country. This has the advantage that all works that are exploited in a single jurisdiction are subject to the same rules. This has particular advantages for those new complex works such as multimedia works that include a vast number of pre-existing works. Those clearing rights will be able to work with a single set of rules for all works involved. At the same time though, it is vital that key issues such as authorship and ownership are governed by a single law worldwide. The application of the law of the country of origin will assure that the link between the creator and his or her work will be safeguarded. This is indeed one of the most vital elements in a creative society. Works need to be created in a stimulating and rewarding environment if exploitation is to take place and if copyright is to play its facilitating role. This combination of rules, rather than the application of a single rule, may
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look complicated at first sight, but it is submitted that it will produce a solution that is not only more workable but also more equitable for all involved.
NOTES 1. See J.J. Fawcett and P. Torremans (1998), Intellectual Property and Private International Law, Clarendon Press, Chapters 1-8. 2. Itar-Tass Russian News Agency; Itar-Tass USA and Fromer & Associates, Inc. (PlaintiffsCounter-Defendants-Appellees), Argumenty I Fakty; Moskowskie Novosti Komsomol-Skaya Pravda; Union of Journalists of Russia; Ekho Planety; Megapolis Express; Balagan Israeli Comic Magazine; Moskowsky Komsomolets: A.R. Publishing Co., Inc. and Yevgen I. Fromer (Plaintiffs-Appellees) v. Russian Kurier, Inc. (Defendant-Counter-ClaimantAppellant) and Oleg Pogrebnoy (Defendant-Appellant) 153 F.3d82, 47 USPQ 2D 1810 (2nd Cir. 1998) 153 F.3d 82, at 88, for a detailed analysis see Torremans (1999), Intellectual Property Quarterly, 372. 3. S. 1(3) Copyright, Designs and Patents Act, 1988. 4. Or broadcast. 5. See ss. 153-62, Copyright, Designs and Patents Act, 1988. 6. For more detail on the qualification rules, see J. Holyoak and P. Torremans (2nd edn, 1998), Holyoak and Torremans Intellectual Property Law, Butterworths, Ch. 10. 7. S. 16(1), Copyright, Designs and Patents Act, 1988. 8. In a wide-ranging approach that can be used as a first starting point, Von Bar, 108 (1988) UFITA 27, refers for the three latter issues to the law of the country where the right has been used, which is also the approach of the Austrian Private International Law Statute. 9. Holleaux has argued that the French Cour de Cassation decided, in a case where he was the judge-rapporteur, that the existence, creation and scope of copyright in France was governed by French law, as the law of the protecting country. See Judgment of 22nd December of the French Cour de Cassation, Société Fox-Europa v Société Le Chant du Monde (1960) 28 RIDA 120, annotated by Holleaux at p. 121 et seq. The very short text of the judgment mentioned the fact that the composers whose music had been used in a film also enjoyed copyright protection in the USSR, the country of origin. This gave rise to the argument that the law of the country of origin was the applicable law, while the law of the protecting country was only concerned with the enforcement of the rights that had been granted by the law of the country of origin. See, for example, Desbois, ‘Les Droits d’Auteur et le Droit International Privé Français’, in Festschrift G.S. Marikadis, Athens (1966), p. 29, at 34. The Berne Convention did not apply in this case. 10. The non-contractual property category is a conflict-of-laws category to which the same rule needs to be applied and which includes all non-contractual aspects of property rights, such as their creation and their scope. Issues such as whether copyright exists and what is its content in each case are governed by the law of the country where the copyright work is exploited; see Siehr’s argument in 108 (1988) UFITA 9, at p. 18 and the reference to Art. 34 para. 1 of the Austrian Private International Law Statute: ‘The creation, content and extinction of rights in intangible property shall be judged according to the law of the state in which an act of use or violation occurs.’ 11. See E. Ulmer (1978), Intellectual Property Rights and the Conflict of Laws, Kluwer & Commission of the European Communities, at 34-5. 12. Compare in this respect Art. 2(1) of the Berne Convention and ss. 1-5B of the Copyright, Designs and Patents Act, 1988. 13. This does not mean that publication is required. Unpublished works that are fixated in some material form; for example, because the work has been put in writing; are fully protected. 14. S. 3(2), Copyright, Designs and Patents Act, 1988. 15. For example, Belgium; see the recent Copyright Act: Wet betreffende het auteursrecht en de naburige rechten, 30 June 1994, [1994] Belgisch Staatsblad 19297.
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16. See Novello & Co LD v. Hinrichsen Edition LD and Another [1951] 1 Ch 595 and see also Art. 34 para. 1 of the Austrian Private International Law Statute, n. 8 above, that contains the same rule and Schack 108 (1988) UFITA 51. 17. See Walter (1976) 89 RIDA 45, at 51 and, for an example, see the Judgment of 1 March 1989 of the Arrondissementsrechtbank (Dutch court of First Instance) in Leewarden, United Feature Syndicate Inc v. Van der Meulen Sneek BV, [1990] Bijblad Indutriële Eigendom 329; the scope of copyright in the Garfield dolls in the Netherlands was determined by Dutch law (law of the protecting country) rather than under US law. 18. Bridgeman Art Library v Corel 36 F Supp 2d 191 and 25 F Supp 2d 421. 19. Itar-Tass Russian News Agency; Itar-Tass USA and Fromer & Associates, Inc. (PlaintiffsCounter-Defendants-Appellees), Argumenty I Fakty; Moskowskie Novosti Komsomol-Skaya Pravda; Union of Journalists of Russia; Ekho Planety; Megapolis Express; Balagan Israeli Comic Magazine; Moskowsky Komsomolets: AR Publishing Co., Inc. and Yevgen I. Fromer (Plaintiffs-Appellees) v. Russian Kurier, Inc. (Defendant-Counter-Claimant-Appellant) and Oleg Pogrebnoy (Defendant-Appellant) 153 F.3d82, 47 USPQ 2D 1810 (2nd Cir. 1998), at 90. 20. Ibid. 21. E. Ulmer, n. 11 above, at 36. 22. The term ‘rights’ in the Berne Convention includes both pecuniary and moral rights; see Ginsburg 17 (1993) Columbia-VLA Journal of Law and the Arts, 395, at 405, and see also the analysis of the John Huston Case, below. 23. J. Holyoak and P. Torremans, n. 6 above, Ch. 13; see also Stamatoudi (1997), Intellectual Property Quarterly, 478. 24. See Ginsburg and Sirinelli (1991), 15 Columbia-VLA Journal of Law and the Arts, 135, at 139. 25. In French legal terminology, these rules are refered to as ‘règles d’application immédiate’, which characterizes them very well. 26. Different decisions were reached at first instance and upon appeal; see Judgment of 23 November 1988 of the Tribunal de Grande Instance de Paris, [1989] Recueil Dalloz Sirey 342 (Jurisprudence), annotated by Audit, and [1989] Revue Critique de Droit International Privé 372, annotated by Gautier; Judgment of 6th July 1989 of the Cour d’Appel de Paris, [1990] Recueil Dalloz Sirey 152 (Jurisprudence), annotated by Audit, and [1989] Revue Critique de Droit International Privé 706, annotated by Gautier; Judgment of 28 May 1991 of the Cour de Cassation, [1991] Revue Critique de Droit International Privé 752, annotated by Gautier. In this case, French law was both the law of the protecting country and the law of the forum, but that does not influence our conclusions. The related issue concerning the law applicable to the authorship issue will be returned to later (see below). 27. For an in-depth analysis of the case, see Ginsburg and Sirinelli, n. 24 above (an English translation of the judgment is attached as an appendix); Ginsburg and Sirinelli [1991] 150 RIDA 3; see also Ginsburg 36 (1988-89), Journal of the Copyright Society of the USA, 81 and Ginsburg 17 (1993), Columbia-VLA Journal of Law and the Arts, 395. 28. See Ginsburg and Sirinelli (1991), 150 RIDA 3, at 21. 29. The exceptions to moral rights will also apply; see ss. 79 and 81, Copyright, Designs and Patents Act, 1988. 30. English courts are not entitled to verify this point, but see Art. 5(2) Berne Convention and Stamatoudi, n. 23 above. 31. For a full catalogue of these exceptions under UK law see Chapter 3 (ss. 28-76) Copyright, Designs and Patents Act, 1988. 32. See, for an example in the case law, the judgment of 17th June 1992 of the German Bundesgerichtshof (Supreme Court), [1993] GRUR Int. 257 and see E. Ulmer, n. 11 above, at 35. 33. See the judgment of 17th June 1992 of the German Bundesgerichtshof (Supreme Court), n. 32 above. 34. See Cheshire and North (13th edn, 1999), Private International Law, Butterworths, Chapter 6 and more specifically at 87-8. 35. Art 7(1), Berne Convention.
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36. In general, see EC Council Directive 93/98/EEC of 29 October 1993, harmonizing the term of protection of copyright and certain related rights, [1993] OJ L 290/9. 37. Ss. 12 to 15. 38. S. 12(2). 39. S. 13B(2). 40. Or from the end of the calendar year in which the recording was made if the recording was not released during that period, see S. 13A(2)(a). 41. S. 13A(2). 42. S.14(2). 43. See also Art. 34, para. 1 of the Austrian Private International Law Statute, n. 8 above, which contains the same rule; Schack, n. 16 above and Ulmer [1983] GRUR Int 109. 44. Art 7(8), Berne Convention. 45. The first (country of origin) limb of the rule has not been retained in relation to sound recordings and broadcasts, and cable programmes. 46. The areas of cooperation between the EU and the EFTA countries include intellectual property. The EU zone could, therefore, be expanded to the EEA zone. 47. See ss. 12(6), 13A(4), 13B(7) and 14(3) Copyright, Designs and Patents Act, 1988. 48. Judgment of 24th April 1975 of the Cour d’Appel de Paris, S.A. Galba Films v. Friedman, S.a.r.l Capital Films, Pernot and Société Les Films La Boétie, (1975) 83 RIDA 106; the decision was appealed unsuccessfully in the French Cour de Cassation, see judgment of 15th December 1975, Léopold Friedman v. S.A. Galba Films, (1976) 88 RIDA 115, annotated by Françon. 49. See Caldwell 6 (1976), Denver Journal of International Law and Policy, 191, at 199, who refers in this respect to Ernst Rabel’s, The Conflict of Laws (1950), at 295. 50. S.9(2)(ab). 51. See, generally, Seignette [1990] Informatierecht/AMI 195. 52. See Judgment of 29th April 1970 of the French Cour de Cassation [1971] Revue Critique de Droit International Privé 270, at 271; Judgment of 14th March 1991 of the Cour d’Appel de Paris [1992] La Semaine Juridique 21780 (Jurisprudence); Judgment of 21st September 1983 of the Tribunal de Grande Instance de Paris, (1984) 120 RIDA 156; Judgment of 14th February 1977 of the Tribunal de Grande Instance de Paris, (1978) 97 RIDA 179; and see, generally, Ginsburg 36 (1988-89) Journal of the Copyright Society of the USA, 81, at 98-9 and Ginsburg and Sirinelli 15 (1991), Columbia-VLA Journal of Law and the Arts, 135, at 141. 53. See Ginsburg 36 (1988-89), Journal of the Copyright Society of the USA, 81, at 98-9. 54. It has been suggested that authorship for moral rights purposes is determined by applying the provisions of the law of the country of origin; see judgment of 14th February of the Tribunal de Grande Instance de Paris (First Instance Court), Dimitri Busuioo Ionesco v. Sté Metro Golwyn Mayer and Sté Romania Films, (1978) 96 RIDA 179. This decision can no longer stand in the light of the Cour de Cassation’s (supreme court) decision in the John Huston case. 55. Concerning the distinction between mandatory rules and public policy (see above), the same comments apply in this case. 56. See Ginsburg and Sirinelli (1991) 150 RIDA 3, at 19. 57. On the difference in approach between moral rights and pecuniary rights, see also Judgment of 1st February of the Cour d’Appel de Paris, Anne Bragance v. Olivier Orban and Michel de Grèce (1989) 142 RIDA 301. 58. S. 11(1) Copyright, Designs and Patents Act, 1988. 59. See, generally and from a US point of view, Nimmer [1973] GRUR Int. 12. 60. For an example, but admittedly one in relation to cinematagraphic works and outside the scope of the Berne Convention, see the judgment of 17th June 1986 of the Austrian Supreme Court, Hotel Video, [1986] GRUR Int. 728. 61. See also Drobnig 40 (1976) RabelsZ. 195, at 198-202. 62. See Schack, n. 16 above and see Judgment of 14th March 1991 of the Court d’Appel de Paris, SARL La Rosa v. Sté Almax International SPA [1992] La Semaine Juridique 21780 (Jurisprudence), in which the Paris Court of Appeal applied this approach, even if the Italian
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63. 64. 65. 66. 67. 68. 69. 70. 71. 72.
73. 74. 75.
76. 77. 78. 79. 80. 81. 82. 83. 84.
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Copyright in the cultural industries law of the country of origin granted the rights to a company, whereas French substantive law would rule out such an option. The fact that the author is a company does not offend against French public policy; see Judgment of 3rd June 1961 of the Cour d’Appel de Paris, Soc. Toho Cy Ltd. v Soc. Film d’art et Soc. Prodis, (1961) 33 RIDA 112. See Ginsburg’s annotations under the judgment of 14th March 1991 of the Court d’Appel de Paris, SARL La Rosa v. Sté Almax international SPA, [1992] La Semaine Juridique 21780 (Jurisprudence), at p. 5. 153 F.3d82, at 90-91; see also 47 USPQ 2D 1810. For example, if a script or screenplay has been commissioned from an author. Art 14bis (2) (b) Berne Convention. Art 14bis (2) (d) Berne Convention. Art 14bis (2) (c) Berne Convention. S. 11(2) Copyright, Designs and Patents Act, 1988. See Drobnig, n. 61 above, at 202-3. See Ulmer 41 (1977) RabelsZ 479, at 507-9. Art. 34, para. 2: ‘For intangible property rights arising from the activity of an employee within the framework of his employment relationship, the conflicts rule governing the employment relationship (Art 44) shall be determinative for the relationship between the employer and the employee.’ De Boer [1977] WPNR Nr 5412 p 674, at 707. See Dicey and Morris, The Conflict of Laws, Sweet & Maxwell (13 edn, 2000), Rule 1120, at 934. Contra: Schack, n. 16 above, who argues that the law of the country of origin should govern this issue, because that would mean that the same law applied in every jurisdiction and this would facilitate the worldwide commercial exploitation of copyright works. It is submitted that this suggestion is to be rejected as infeasible, as the issue of assignability is strongly linked with the public policy of each country. [1963] 1 WLR 252, at 255. A similar result was reached in an American case in which the law of the contract was Brazilian law; see Corcovado Music Corp. v. Hollis Music, 981 F.2d 679 (2d Cir. 1993). See s. 90(1). See, for example, s. 94 Copyright, Designs and Patents Act, 1988. See, for example, for the United Kingdom ss. 90(1) and 95 Copyright, Designs and Patents Act, 1988. See Campbell Connelly & Co Ltd v. Noble [1963] 1 WLR 252, at 255. See Ginsburg 17 (1993), Columbia-VLA Journal of Law and the Arts, 395, at 408. Judgment of 1st February of the Cour d’Appel de Paris, (1989) 142 RIDA 301. The public policy argument that was invoked in relation to moral rights was not invoked in relation to pecuniary rights, even if the specific arrangement would not have been permissible under French law. See Ginsburg 17 (1993), Columbia-VLA Journal of Law and the Arts, 395, at 414.
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4. Copyright and freedom of expression: an economic analysis Michael Rushton 4.1 INTRODUCTION In its judgment in the case of Harper & Row v. Nation Enterprises,1 the US Supreme Court held that The Nation magazine had infringed on Harper & Row’s copyright in the as-yet unpublished memoirs of former US President Gerald Ford when it published an excerpt, supplied by an unauthorized source, without license. In fact, Harper & Row had negotiated an agreement with Time magazine to publish excerpts, but when The Nation’s ‘scoop’ was published, Time cancelled its article and refused to pay Harper & Row the balance of its account. The Nation attempted to persuade the court that its publication was fair use, and that the constitutional principle of freedom of expression should be applied, but the court declined to do this, and warned ‘it should not be forgotten that the Framers [of the US Constitution] intended copyright itself to be the engine of free expression’.2 The US Constitution grants Congress the power ‘[t]o promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writing and discoveries’.3 Likewise, Britain’s first copyright statute was ‘A Bill for the Encouragement of Learning by Vesting the Copies of Printed Books in the Authors, or Purchasers, or such Copies, during the Times therein Mentioned.’4 In each country there was at least the appearance that the lawmakers saw copyright as something to encourage, rather than suppress, expression. Even prior to the copyright statutes, Milton’s Areopagitica contained arguments against censorship and in favour of copyright. Yet in this age there seem to be more frequent conflicts between the laws of copyright and the principle of freedom of expression. This chapter is not concerned with the constitutionality of various aspects of copyright.5 Rather, it is an attempt to draw together economic analysis of copyright and freedom of expression. It will suggest that, in some aspects, copyright protection over the past century has become over-broad, and that the 51
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costs in terms of lost freedom of expression and in transaction costs from expanding copyright’s domain have not been matched by offsetting benefits. The analysis is focused on two examples. First, drawing from some recent Canadian cases, it will be shown that copyright’s expansion to corporate symbols (usually covered by trademark law) has imposed some significant losses in terms of freedom of expression. Second, the analysis considers the case of parodies, more heavily discussed in the academic literature than the first case. The tentative conclusion will be that the root of the problem is the overextension of the concept of property into the world of copyright.
4.2 WHY FREEDOM OF EXPRESSION? One approach to the question of freedom of expression is to claim that the ability to express oneself without restriction is valuable simply as a human liberty: freedom for freedom’s sake. This does not mean that there is never a rationale for restriction on speech - on yelling ‘Fire!’ in a crowded theatre when there is no fire, or threatening grievous bodily harm - but simply that it is not necessary to justify the value of speech in terms of it being an instrument to a different goal. A second approach, which I will call republican, is that expression serves the goal of maintaining a vigorous democracy, a healthy civic life.6 One of the most famous judicial statements of this view is from US Supreme Court Justice Brandeis: Those who won [American] independence . . . believed that freedom to think as you will and to speak as you think are means indispensable to the discovery of and spread of political truth; that without free speech and assembly discussion would be futile; that with them, discussion affords ordinarily adequate protection against the dissemination of noxious doctrine; that the greatest menace to freedom is an inert people; that public discussion is a political duty . . . 7
A third approach to the value of freedom of expression is that it serves the cause of uncovering truth. Turning to another US Supreme Court Justice, Oliver Wendell Holmes: when men have realized that time has upset many fighting faiths, they may come to believe even more than they believe the very foundations of their own conduct that the ultimate good desired is better reached through free trade in ideas - that the best test of truth is the power of thought to get itself accepted in the competition of the market, and that truth is the only ground upon which their wishes safely can be carried out.8
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When Richard Posner (1986) applied economic analysis to the question of freedom of expression, he took care not to get caught in the idealism that often surrounds American academic writing on the subject: ‘What I shall not assume . . . is that freedom of speech is a holy of holies which should be exempt from the normal tradeoffs that guide the formation of legal policy.’9 With this statement Posner recalls his Chicago colleagues, Director (1964) and Coase (1974, 1977), who wondered why markets for speech should be treated differently from any other markets. Coase and Director argued that the two kinds of markets shouldn’t be analysed differently, but suggested that there is a potential bias in academic treatment of the subject: it is human nature to believe that other people’s behaviour should be subject to regulation, but not one’s own. Since academics trade in the marketplace of ideas, they are much more likely to think regulation is a good thing in markets for goods and services rather than in expression. Posner is less concerned with why anyone would think that freedom of expression is something not subject to tradeoffs, than with applying economic analysis to the question. He adopts a version of a Learned Hand rule. Speech should be regulated if and only if the cost of the regulation is less than the expected harm of the speech, where the latter is the product of the probability that the speech would actually cause harm and the degree of harm that would occur in that event, all appropriately time discounted. The cost of regulating speech is the sum of two parts: the social loss of suppressing valuable ideas or expression, and the legal-error costs in trying to distinguish which speech warrants suppression. It should be noted that the ‘economic analysis’ being undertaken is simply an application of cost-benefit analysis. Although Posner’s formula is superficially the same as that applied by Hand, the interest from an economics viewpoint is quite different. The Hand tort rule is so often cited in law and economics textbooks because it is a wonderful example of efficiency in a legal judgment. If negligence is defined by whether the cost of marginal efforts to reduce the probability of an accident exceeds the expected benefits, in terms of avoided losses, from such efforts, then the caretaker’s costs and benefits of care are made to coincide with social costs and benefits, and a potential externality is internalized. Posner’s formula for the analysis of freedom of speech, however, is not about internalizing social costs and benefits, or the creation of correct incentives - it simply compares the costs and benefits of allowing certain kinds of speech (see Rushton (2000) for further discussion). That being said, the application of cost-benefit analysis principles can still be enlightening. For example, courts tend to be most unwilling to suppress political speech, and the economic analysis suggests this is with good reason. Posner points out that the cost of suppressing political speech is high because exemption from criticism enables governments to secure a monopoly on
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power, and government is the most dangerous form of monopoly. Further, because it has so many external benefits, political speech is the most likely form of speech to be under-produced. In terms of the costs of legal error, Posner notes that most contentious political speech is highly critical of the very system of which judges are a part. Since their impartiality will therefore be in question, judges must take extra care in making decisions, and so should err on the side of no regulation. This will be especially true when the expression takes the form of art, and so is especially hard to evaluate.10 Posner’s views can be summarized thus: Ideas are a useful good produced in enormous quantity in a highly competitive market. The marketplace of ideas of which Holmes wrote is a fact, not merely a figure of speech. As a practical matter it is this marketplace, rather than some ultimate reality, that determines the ‘truth’ of ideas. For we say that an idea (for example, that the earth revolves around the sun) is true not because it’s really true - who knows? - but because all or most of the knowledgeable consumers have accepted (‘bought’) it. This pragmatic conception of truth is very damaging to efforts to suppress ideas or to forbid their expression or dissemination. No one has a pipeline to ultimate reality. Such truths as we possess are forged in a competitive process that is distorted if potential competitors - unpopular or repulsive ideas - are forcibly excluded.11
In a critique of Posner’s economic approach to freedom of expression, Hammer (1988) warns of applying the cost-benefit technique of regulation when the relevant magnitudes are so subject to dispute. Further, while the quotation above from Posner might suggest that he exercises a reasonable degree of caution, a recent paper by Eric Rasmussen (1998), applying economic analysis to one particular type of regulation of expression - flag burning - shows how economists can get on the wrong track when they place too much faith in the ability of economists to assess these most difficult ethical questions. In asking whether there should be prohibitions against the desecration of venerated symbols, Rasmussen asserts that we simply need measure what individuals would be willing to pay to avoid desecration: If someone would pay $3,000 to avoid flag burning, that is the amount of the desecration externality. The economist need not judge whether $3,000 is too much or too little. It is simply data. . . . The point is crucial because both sides will claim their tastes are privileged. Jones [who wants to desecrate the flag] will say the Smithians’ [who venerate the flag] disutility is illegitimate in a free country, and the Smithians will say that Jones’s pleasure from desecration is sinful. The economic approach allows for an objective analysis that depends on the empirical facts rather than special pleading.12
Rasmussen is not the first economist to suggest that we can solve tremendously difficult ethical questions ‘objectively’ by attaching numbers to the analysis. However, it is especially worrying in this case, given the
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complexity of the issues of freedom of expression; especially, as in this case, freedom of political expression. The case that inspired Rasmussen to write his essay on flag desecration involved a man charged for burning the American flag on the steps of the Dallas City Hall.13 The US Supreme Court found that flag burning was constitutionally protected expression. However, Justice Rehnquist, in his dissent, suggested the following: Only two terms ago in San Francisco Arts and Athletics, Inc. v. United States Olympic Committee, the Court held that Congress could grant exclusive use of the word ‘Olympic’ to the United States Olympic Committee . . . As the Court stated, ‘when a word [or symbol] acquires value “as the result of organization and the expenditure of labour, skill, and money” by an entity, that entity constitutionally may obtain a limited property right in the word [or symbol]’. Surely Congress or the States may recognize a similar interest in the flag.14
Rehnquist’s statement provides a link between the question of freedom of expression and copyright. Essentially, if an organization wishes to suppress some sorts of criticism of the organization, or possible uses of symbols or words which are not critical but which may induce associations in the public mind, the way to suppress these expressions is by claiming a copyright. The word ‘Olympic’, or the stars and stripes, become intellectual property. How, though, did it come to pass that copyright could be applied this way?
4.3 COPYRIGHT OR INTELLECTUAL PROPERTY? In Posner’s (1992a) text Economic Analysis of Law, he discusses copyright in his chapter on property. After taking students through the analysis of the static and dynamic efficiencies that arise from the creation of rights in real property, he remarks that ‘the economist experiences no sense of discontinuity in moving from physical to intellectual property’ (p. 38). However, even if we do not sense a discontinuity, the links between real property and copyright are not straightforward. A seminal essay by Demsetz (1967) sets out the costs and benefits of the establishment of a regime of property rights. The benefits from privatizing a commons come from the internalization of the costs and benefits of using a particular resource. The costs come from the difficulties of defining and assigning initial rights, and in enforcing those rights. As Demsetz makes clear, it will not always be efficient to establish private property rights in each resource.15 As L. Ray Patterson (1987) argues, copyright did not begin as property.16 The root cause of modern conflicts between copyright and freedom of
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expression arise because copyright moved from being a regulatory mechanism, in the public interest and designed to encourage distribution of works (‘the engine of free expression’ as the judges in Harper & Row put it), to being a proprietary mechanism. Characterizing copyright as property is misleading, because it causes us to adopt the norms of property law in an unanalysed way. When, in their economic analysis of copyright, Landes and Posner (1989) write that ‘[s]triking the correct balance between access and incentives is the central problem in copyright law’ (p. 326), it is hard to disagree. Patterson, however, places the burden of proof on those changes in the law that would restrict access: in creating a work an author harvests his ideas from the public domain. Copyright, which protects the expression of these ideas, is an encroachment on the public domain and can be justified only if it provides the public with some form of compensation.17
Nimmer (1970) suggests that the conflicts between copyright and freedom of expression can be resolved with a rigorous application of the distinction between an idea, which is not protected by copyright, and an expression of an idea, which is protected. This satisfies the need for public access to ideas and their ability to express them, regardless of which of the ends of freedom of expression we most value, and it also provides encouragement for expression. However, he goes on to assert that when only the expression is meaningful, as in graphic works, he would favour the copyright interest, since this encourages creation in such works, and they are not really a part of democratic debate anyway.18 Graphic works, and images and keywords, however, are a part of democratic debate. There is a political aspect to the use of symbols in critical literature, but as ‘fair use’ comes to be more narrowly defined and codified, property rights are established in images which have, with the hopes and intentions of their inventors, become a part of our language, from the golden arches of McDonald’s to the ears of Mickey Mouse. When proprietary rights are established in such symbols purely in order to stifle critical literature, then the ‘correct balance’ referred to by Landes and Posner has been tipped.
4.4 APPLICATIONS 4.4.1 Corporate Symbols James Boyle warns that: A free speech discourse that imagines that the only threat to vigorous public
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discourse is direct censorship by the state is blind to the multiple ways that stategranted property rights fence off the public domain, even directly restrain certain kinds of ‘speech.’ In America, you are not allowed to call your games the Gay Olympics.19
In Canada there have been numerous cases where it has been held that a labour union is infringing the copyright of its employer when the union, in its own literature, uses the employer’s trade symbol. Constitution-based claims of freedom of expression cannot be invoked. In one instance, a union was prevented from using the familiar (to Canadians) triangular logo of the hardware store chain Canadian Tire in its pamphlets.20 In Canada Safeway Ltd. v. Manitoba Food and Chemical Workers, Local 832, in which the union made unauthorized use of the stylized ‘S’ used by the grocery store chain Safeway, it was held that ‘there is no right under the guise of free speech to take or use what does not belong to [you]’.21 Likewise, an interlocutory injunction was issued against the labour union using the stylized head of a rooster and signature of the Quebec restaurant chain St-Hubert, on its buttons, stickers and pamphlets.22 St-Hubert was unsuccessful in seeking relief under Canada’s Trade Marks Act, since the defendants had not used the trademark in competition with the plaintiffs goods and services, but it was found that there was copyright infringement. The defendants invoked constitutional protections of freedom of expression, without success: ‘Cet argument n’est pas fondé. Une ordonnance d’injonction ne priverait aucunement les défendeurs d’informer le public de leurs revendications.’23 It must be admitted that one could refer to a corporation without the use of its logo, and instead rely on Times New Roman font, but clearly the message is substantially diluted. It is the goal of the marketing departments of Canadian Tire, Safeway, and St-Hubert that their logos become part of our language, that a red letter ‘S’ in a particular shape will cause North Americans to think automatically of Safeway. Our ability to communicate with each other through literature is unquestionably diminished if corporations can control others’ use of those images. Turning finally to a dispute involving Michelin tire, the use by the Canadian Auto Workers’ union of the cuddly cartoon character ‘Bibendum’ in the unfamiliar role of ‘boss’s henchman about to stomp two workers into submission’24 was found to be copyright infringement. This was in a pamphlet advocating a unionization drive. The judgment in this case uses a definition of fair use of copyrighted material that emphasizes a particular meaning of ‘fair’: The term ‘fair dealing’ is not defined in the Copyright Act [of Canada] but I accept the Plaintiff’s submission that the overall use of copyright must be ‘fair’ or treat the copyright in a good faith manner. The Collins Dictionary defines ‘fair’ as ‘free from
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Copyright in the cultural industries discrimination, dishonesty, etc. just; impartial’ . . . [E]ven if parody were to be read in as criticism, the Defendants would have to adhere to the bundle of limitations that go with criticism, including the need to treat copyright in a fair manner. The Defendants held the ‘Bibendum’ up to ridicule.25
In this case, fair use has gone from a legitimate right of the public to make copies or make use of works so long as they do not infringe the specifics of copyright, to an obligation to use materials in an impartial way. On what grounds could we justify the prevention of the use of corporate symbols in the text of a pamphlet for the purposes of criticism? There is no justification on economic grounds. The injunctions against the use of corporate logos in the cases discussed are not based on any kind of balancing of costs and benefits, but instead are justified in property rights-based terms: ‘There is no right under the guise of free speech to take or use what does not belong to [you].’26 Copyright becomes intellectual property. In his essay on freedom of expression, Posner (1986) notes that labour disputes have few external effects, so there is a low amount of harm if bad speech is allowed and a low value from good speech. Given this, the dominant variable in the cost-benefit assessment is the possibility of legal error, and he suggests that this alone is ‘a decisive . . . argument against regulation’ (p. 41). However, in the cases above there seems to be little judgement of this kind; instead there is a picture of theft of corporate property. This is hardly a picture of copyright being the engine of free speech. Suppose we imagine that there is something to Justice Brandeis’ argument that freedom of expression furthers the goal of democratic participation and dialogue.27 It is clear that these rulings in Canadian courts have significantly hampered labour’s ability to communicate with the public, by taking from it the ability to use the most effective means of identifying its grievances. For many workers, labour action is one of their main opportunities to enter into public dialogue, to say something to the public and to try to change people’s minds. Copyright, however, has developed a form that prevents them from doing this. 4.4.2 Parody In an extension to the economic analysis of copyright, Posner (1992b) considers the economic aspects of parody.28 He would allow fair use when the parodied object is the target of the parody, since there is unlikely to be a voluntary license granted by the original creator to use the object, even though the social benefits of allowing the parody outweigh the costs. However, using the parody as a weapon against something other than what is being parodied would not be fair use. He notes that this restriction might curtail freedom of expression since the creator of parodies would face
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transaction and royalty costs. ‘But, as we do not suppose that writers should be allowed to steal papers and pencils in order to reduce the costs of satire, neither is there a compelling reason to subsidize social criticism by allowing writers to use copyrighted materials without compensating the copyright holder’ (p. 73). While he goes on to note that there is a difference between pencils and expressions, since pencils are rival and expressions are non-rival goods, the comparison raises an important issue. Why is there no ‘compelling reason’ to allow parodists to use copyrighted material? One of the results of the model of Landes and Posner (1989) is that increased copyright protection is only ever justified if it would lead to an increase in the number of works. This places a heavy burden on an advocate of any restriction on fair use to demonstrate that incentives will be positively enhanced (and enhanced in a way so valuable as to exceed all the costs of restricting the available use of the work). We also need to recall Posner’s cost-benefit analysis of freedom of expression. The likelihood of legal error in distinguishing parodies that target a work and parodies that employ a work to attack something else is very high. If we consider some of the better-known parody cases of recent years - an underground comic book using Walt Disney cartoon characters in very uncharacteristic ways,29 a rap version with changed lyrics of a popular Roy Orbison song,30 a post-modern artist incorporating kitschy postcards in a sculpture 31 - it is impossible to distinguish ridicule directed at the copied work from that directed at the culture that produced and buys it.32 Further, such cultural criticism as is contained in these parodies should be considered ‘political’ speech, which further raises the costs if there is judicial error. As in the labour disputes described in the previous section, the root of the problem in the parody cases seems to be that notions of ownership are guiding thinking about copyright rather than notions of the best balance between incentives and access to works. Jeremy Waldron puts it well: If one were to pursue an analogy with real property, one might get the idea . . . that Mickey Mouse was supposed to be the private domain of his creator, analogous to Walt Disney’s home or a piece of land that he owned, and that all he was asking was that the courts should compel others to respect the ‘Keep Out’ signs that defined the boundaries of his property. But of course any such analogy would be ludicrous. The whole point of the Mickey Mouse image is that it is thrust out into the cultural world to impinge on the consciousness of all of us. We see this happening in the attempt of every advertiser to make the brand name of his product ‘a household word,’ to so inscribe his intellectual property in the mind of every consumer as to make it a part of their everyday vocabulary . . . It becomes ludicrous to continue insisting on the original proprietor’s right to control their use.33
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CONCLUSION Copyright and freedom of expression are each aspects of Holmes’ marketplace of ideas, and the original copyright statutes were designed to encourage the publication and distribution of valuable ideas and expression. Economists are right to take the approach that both copyright and freedom of expression should be held subject to the various tradeoffs they bring with them and which lawmakers must balance. The argument of this chapter is that the more copyright is thought of as intellectual property akin to real property, and the more that analyses of copyright take the view that ‘ownership is ownership is ownership,’34 the more we lose sight of the necessary balance. When author Margaret Atwood addressed the Canadian parliamentary committee during debates on the most recent copyright reform, she said: It is too often forgotten that intellectual property is property and that taking it without permission is theft . . . Reproducing intellectual property without permission from its owner amounts to theft, and I do not feel my government should legalize theft.35
What exactly is being ‘forgotten’ here? How did fair use become theft? We must find a way to return copyright to being the engine of free expression.
NOTES 1. 471 US 539 (1985). 2. Ibid., at 558. 3. U.S. Const. art. I, §8, cl. 8. 4. Statute of Anne, 1710 (UK), 8 Anne, c. 19. 5. See Hugenholtz (2000) for a survey of recent cases in Europe, and Nimmer (1970), Patterson (1987) or Patterson and Birch (1996) for analysis of American constitutional aspects of the copyright/expression conflict. 6. Advocates of this view include Sandel (1996) and Sunstein (1993). 7. Whitney v. People of the State of California 274 US 357 (1927) at 375. Whitney was an organizer with the Communist Labour Party, charged under the Syndicalism Act. The Court upheld the conviction. Brandeis concurred: although he disagreed with the Court and was ‘unable to assent to the suggestion . . . that assembling with a political party, formed to advocate the desirability of a proletarian revolution by mass action at some date necessarily far in the future, is not a right . . .’ he did agree that there was evidence of a conspiracy to ‘commit present serious crimes’, which warranted prosecution (p. 379). 8. Abrams v. United States 250 US 616 (1919) at 624. Abrams was circulating leaflets calling for a general strike and attacking capitalism, during a time when the USA was at war. The Court affirmed the conviction, with Holmes dissenting. 9. Posner (1986, p. 6). 10. See Hamilton (1996) for an argument that art requires the most stringent protection from suppression, since it provides the opportunity to imagine worlds different from the status quo in ways that ordinary speech cannot. 11. Posner (1992a, p. 665).
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12. Rasmussen (1998, p. 249). 13. Texas v. Johnson 491 US 397 (1989). 14. Ibid., at 429-30, quoted by Boyle (1996, pp. 147-8). 15. Also, see Carol Rose (1996). 16. See Patterson (1968), Kaplan (1967), Goldstein (1994), or Mark Rose (1993) for detailed histories of the origins of copyright. 17. Patterson (1987, p. 7). 18. Nimmer would, however, make an exception for photographs and films of newsworthy events. 19. Boyle (1996, p. 148). Boyle is referring to the case San Francisco Arts & Athletics Inc. v. U.S. Olympic Comm. 483 US 522 (1987), where the court held that as of 1978 one needs the permission of the US Olympic Committee to make use of the word ‘Olympic’, even though, as Boyle points out, the Committee could in no ordinary sense of the word be considered the ‘authors’ of the term. 20. Canadian Tire Corp. Ltd. v. Retail Clerks Union Local 1518 of United Food and Commercial Workers Union 7 C.P.R. (3d) 415 (1985). 21. 73 C.P.R. (2d) 234 (1983) at 237. 22. Rotisseries St-Hubert Ltee v. Le Syndicat des Travailleurs(euses) de la Rotisserie St-Hubert de Drummondville (C.S.N.) 17 C.P.R. (3d) 461 (1988). 23. Ibid., p. 476. 24. Cie Générale des Établissements Michelin-Michelin & Cie v. C.A.W.-Canada (1996) 71 C.P.R. (3d) 348 (Fed. T.D.) at 384. 25. Ibid. 26. Safeway, op. cit. note 21. 27. Op. cit., note 7. Also see Netanel (1996) and Benkler (1999) for an analysis of copyright based on the principles of civic republicanism. 28. There is a large number of papers in the legal literature on the question of parody, and the reader is referred to them for more detailed discussion: Light (1979), Merges (1993), Winslow (1996), and Yen (1991). 29. Walt Disney Prods. v. Air Pirates, 581 F.2d 751 (9th Cir. 1978). 30. Campbell v. Acuff-Rose Music, Inc., 114 S. Ct. 1164 (1994). 31. Rogers v. Koons, 960 F.2d 301 (2d Cir. 1992); see the discussion of this case in the chapter by Fiona Macmillan in this volume. 32. This point is noted by Merges (1993) and Winslow (1996). 33. Waldron (1993, p. 883). 34. Taken from Sub-Committee on the Revision of Copyright, Standing Committee on Communications and Culture (Government of Canada, 1985, p. 9). 35. Standing Committee on Canadian Heritage, Evidence, pp. 3-6.
REFERENCES Benkler, Yochai (1999), ‘Free as the air to common use: First Amendment constraints on enclosure of the public domain’, New York University Law Review, 74, pp. 354446. Boyle, James (1996), Shamans, Software, and Spleens: Law and the Construction of the Information Society, Cambridge, Mass.: Harvard University Press. Coase, R.H. (1974), ‘The market for goods and the market for ideas’, American Economic Review, Papers and Proceedings, 64, 384-91. Coase, R.H. (1977), ‘Advertising and free speech’, Journal of Legal Studies, 6, 1-34. Demsetz, Harold (1967), ‘Toward a theory of property rights’, American Economic Review, Papers and Proceedings, 57, 347-59. Director, Aaron (1964), ‘The parity of the economic market place’, Journal of Law and Economics, 7, 1-10.
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Goldstein, Paul (1994), Copyright’s Highway: The Law and Lore of Copyright from Gutenberg to the Celestial Jukebox, New York: Hill and Wang. Hamilton, Marci A. (1996), ‘Art speech’, Vanderbilt Law Review, 49, 73-122. Hammer, Peter J. (1988), ‘Free speech and the “Acid Bath”: an evaluation and critique of Judge Richard Posner’s economic interpretation of the First Amendment’, Michigan Law Review, 87, 499-536. Hugenholtz, P. Bernt (2000), ‘Copyright and Freedom of Expression in Europe’, Institute for Information Law, University of Amsterdam. Kaplan, Benjamin (1967), An Unhurried View of Copyright, New York: Columbia University Press. Landes, William M. and Richard A. Posner, (1989), ‘An economic analysis of copyright law’, Journal of Legal Studies, 18, 325-63. Light, Sheldon N. (1979), ‘Parody, burlesque, and the economic rationale for copyright’, Connecticut Law Review, 11, 615-36. Merges, Robert P. (1993), ‘Are you making fun of me? Notes on market failure and the parody defense in copyright’, AIPLA Quarterly Journal, 21, 305-12. Netanel, Neil Weinstock (1996), ‘Copyright and a democratic civil society’, Yale Law Journal, 106, 283-387. Nimmer, Melville B. (1970), ‘Does copyright abridge the First Amendment guarantees of free speech and press?’, UCLA Law Review, 17, 1180-204. Patterson, Lyman Ray (1968), Copyright in Historical Perspective, Nashville, Tenn.: Vanderbilt University Press. Patterson, Lyman Ray (1987), ‘Free speech, copyright, and fair use’, Vanderbilt Law Review, 40, 1-66. Patterson, Lyman Ray and Judge Stanley F. Birch, Jr. (1996), ‘Copyright and free speech rights’, Journal of Intellectual Property Law, 4, 1-23. Posner, Richard A. (1986), ‘Free speech in an economic perspective’, Suffolk University Law Review, 20, 1-54. Posner, Richard A. (1992a), Economic Analysis of Law (4th edn), Boston: Little Brown. Posner, Richard A. (1992b), ‘When is parody fair use?’, Journal of Legal Studies, 21, 67-78. Rasmussen, Eric (1998), ‘The economics of desecration: flag burning and related activities’, Journal of Legal Studies, 27, 245-69. Rose, Carol (1996), ‘The comedy of the commons: custom, commerce, and inherently public property’, University of Chicago Law Review, 53, 711-81. Rose, Mark (1993), Authors and Owners: The Invention of Copyright, Cambridge, Mass.: Harvard University Press. Rushton, Michael (2000), ‘The Economic Analysis of Freedom of Expression: A Critique’, Department of Economics, University of Regina. Sandel, Michael J. (1996), Democracy’s Discontent: America in Search of a Public Philosophy, Cambridge, Mass.: Harvard University Press. Sunstein, Cass R. (1993), Democracy and the Problem of Free Speech, New York: Free Press. Waldron, Jeremy (1993), ‘From authors to copiers: individual rights and social values in intellectual property’, Chicago-Kent Law Review, 68, 841-87. Winslow, Anastasia P. (1996), ‘Rapping on a revolving door: an economic analysis of parody and Campbell v. Acuff-Rose Music, Inc.’, Southern California Law Review, 69, 767-825. Yen, Alfred C. (1991), ‘When authors won’t sell: parody, fair use, and efficiency in copyright law’, University of Colorado Law Review, 62, 79-108.
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5. Copyright in the digital age: the economic rationale re-examined Jacco Hakfoort 5.1 INTRODUCTION Markets for information goods have a number of specific economic characteristics. First, they are characterized by high fixed and low marginal costs. Publishers of information goods2 incur high - often sunk - fixed costs to produce content or ‘the original’. Reproduction of the original (making ‘copies’) on the other hand is relatively cheap. Second, information goods are non-rival. Once the content is produced, other consumers than the initial buyer can use it without additional cost. You can listen to the CD a friend or relative has bought. The non-rivalry of information goods combined with the ‘high fixed, low marginal cost’ character of production creates a latent market failure: underproduction. The incentive to publish new content is lower than in the case of rival goods because the publisher cannot appropriate all the revenues from producing the good. This problem becomes even worse when others have access to copying technology that enables reproduction of content at (low) marginal cost. In the latter case, the publisher competes both with publishers who produce substitutes and with the copies made by consumers and/or producers. This competition forces the publisher to adjust his or her price downwards. As a result, the publisher will not be able to recoup his or her initial investment (that is the fixed cost). This reduces the incentive to produce new work and may hurt diversity. Economic theory suggests three policy solutions to the problem of underproduction: subsidies, rewards, and the allocation of property rights (see the discussion in Ledyard, 1987). The government may subsidize the production of information goods to solve the problem of the missing market for the information good. This instrument is frequently used to stimulate the creation of works of art and science. Another solution to the underproduction problem might be to reward creators of information goods (Shavell and van Ypersele, 1999). The reward mechanism is often advocated to stimulate R&D; 63
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rewards can take the form of prizes or grants. Finally, the government can decide to allocate property rights - in this case, intellectual property rights to the publishers of the work, enabling them to appropriate the benefits of the information goods exclusively. In this study, we will not discuss the pros and cons of the three mechanisms to solve the problem of underproduction.3 Rather, we will focus on the changing role of a specific kind of intellectual property rights: copyrights. Copyrights give the publisher of a work exclusive rights to exploit this work. In allocating these rights, the government shields the publisher from competition by publishers and/or consumers who can copy this work (although the publisher still faces competition from close substitutes). The publisher is able to reap the benefits from the production of the information good for a certain period of time. While it is clear that effective copyright protection may provide a solution to the problem of underproduction, it is equally clear that the introduction of a copyright regime (as well as the introduction of subsidies and rewards) may have unintended consequences (Ledyard, 1987). The allocation of intellectual property rights to publishers of information goods is equal to granting a temporary monopoly for the exploitation of the information good to the publisher. As such, the introduction of copyrights can result in underutilization that hampers the diffusion of the information good. The solution to the latent market failure in markets for information goods therefore requires a balancing act by policymakers between two second-best solutions. When deciding on the specific terms of copyright protection (such as the length and scope of protection), the government faces a trade-off between underproduction and underutilization.4 The public debate about the optimal copyright regime has recently been revived as a result of developments in the markets for information goods. Technological innovations in the market for information goods enable consumers to make much cheaper copies (that is: consumers face a decrease in the marginal cost of copying). The quality of these copies has often increased at the same time, often to the point that originals and copies are hardly distinguishable (for example MP3 files, copies of CDs). The use of digital media such as the Internet to distribute illegal copies of information goods have made traditional ways of copyright enforcement more difficult, leading some observers to describe the Internet as one ‘giant, out of control, copying machine’ (Shapiro and Varian, 1999). In short, the technological developments in markets for information goods are perceived to provide a challenge to the existing copyright system. The response of music and software publishers, in particular, and their copyright collectives has been to call for a wider scope for copyright legislation and an increase in the time and money spent on enforcement. Other observers,
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however, argue that copyright enforcement will never be the same: ‘Intellectual property law cannot be patched, retrofitted, or expanded to contain digitized expression . . . We will need to develop an entirely new set of methods as befits this entirely new set of circumstances’ (Barlow, 1994). In this chapter I want to investigate what economic theory has to tell us about the appropriate level of copyright protection in the light of developments in information technology. My starting point is the seminal model of Landes and Posner (1989) (LP) which has become the standard model on the economics of copyright. After a description of the factors that determine the optimal copyright regime in this model, I will introduce four assumptions that suggest that the optimal level of copyright protection is lower than predicted by the LP model in specific markets in which these assumptions hold. A full analysis of the optimal level of copyright protection also has to take account of the (contractual) relationship between author and publisher. If we assume that copyright protection serves the objective of stimulating the creation of new works by authors, differences in motives and objectives are important. Another factor that has to be taken into account when considering the optimal level of copyright protection, and that is relevant for many markets in which information technology plays a role, is the existence of non-pecuniary network externalities. We draw on a number of more recent contributions in the economic literature to show that, in markets that experience these type of externalities, a decrease in costs of copying (or an increase in the share of illegal copies) might actually benefit publishers and society as a whole. By discussing standards for copyright enforcement and legislation, it therefore seems useful to make a distinction between markets with and markets without network externalities. An assumption of the LP model is that fixed costs increase with the level of protection, while marginal costs remain constant. As such, the model does not allow for reductions in costs as a result of improvements in technology. A reduction in the cost of producing, bundling and distributing information goods is, however, a fact of life in many markets for information goods. These lower (or even close to zero) costs make it easier for publishers to use business strategies such as giveaway free samples, reveal parts and combine advertisements and contents. Section 4 discusses these strategies and their impact on the claim for increased copyright protection. Economic theory suggests that the optimal level of copyright protection is different across markets, depending on the specific economic characteristics of the market. In line with the LP model, most analyses have modelled the level of copyright protection as a single index and are therefore not very specific in what such a copyright regime should look like in practice. Section 5 discusses some of the trade-offs involved and addresses the need for more research to bridge the gap between economic analysis and legal studies.
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5.2 ECONOMIC MODELS OF COPYRIGHT Given the explicit trade-off involved in choosing the optimal copyright regime, it is perhaps no wonder that economists have started investigating this issue. While it cannot replace the legal approach, economic theory provides an explicit framework to investigate the impact of alternative copyright regimes on market structure and social welfare (defined here as the sum of consumer and producer surplus). This framework might be valuable to consider the impact of a copyright regime in the case of rapidly changing conditions, as I hope to demonstrate later in this study. The economic literature on intellectual property rights is primarily concerned with patents and innovation, but a number of contributions have paid attention to issues related to copyright. Landes and Posner (1989) make a distinction between the economics of copying and the economics of copyright. The first branch of the literature - and the most voluminous considers the impact of the availability of copies on the demand for originals, the profits of the publisher and social welfare in various settings. The literature on the economics of copyright, on the other hand, considers the impact of copyright protection and the costs of enforcement on the trade-off between limiting access to the original and creating incentives to produce new work. The model developed by Landes and Posner (1989) can be used to analyse the mechanisms behind this trade-off. The LP model has the following ingredients.5 Publishers incur fixed costs to produce content but can reproduce this content at (constant) marginal cost; this assumption is equivalent to the ‘high fixed, low marginal cost’ assumption we have discussed in Section 1. For the moment, we assume that the author acts as his or her own publisher. The level of copyright protection affects the fixed costs of the producer (in the terminology of Landes and Posner, ‘the costs of expression’). Copiers supply copies up to the point where price equals marginal cost. This marginal cost of copying increases with both the number of copies and the level of copyright protection. Taking account of this behaviour by copiers, publishers maximize profits. Assuming that publishers differ with respect to their fixed costs, the marginal author that equals (gross) profits to this fixed cost will determine the number of works in the market. Given these assumptions, one can consider the impact of a change in the level of copyright protection on the number of works. An increase in the level of copyright protection has two effects in the model: (1) it increases the gross profits of each publisher, and (2) it increases the fixed costs of each producer. The latter effect can be interpreted as an enforcement tax that increases with the number of works produced. At low levels of copyright protection, it is likely that the first effect will dominate the second; at high levels, the second is likely to dominate the first. As a result, the number of works increases at low
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levels of copyright protection and decreases at high levels. Too much copyright protection raises the fixed costs of production to such a level that many publishers cannot recoup their fixed costs (even when they have complete protection for their work). An implication of the LP model is also that the price per copy is greater the less elastic the demand for copies, the less elastic the publisher’s supply curve and the larger the publisher’s share in the total number of copies produced. The first relationship relates to the price elasticity of demand for the information good; if consumers react strongly on price changes, the publisher has to set his or her price at a lower level than in the case where this price elasticity is low (and hence the demand for copies less elastic). The slope of the publisher’s supply curve is also important in determining the optimal price set by the publisher. If other suppliers react strongly to an increase in price and react by entering the market, this is likely to erode the profits of the publishers that are already in the market. We come back to the slope of the supply curve of the publisher when discussing the relationship between author and publisher below. Finally, the fact that the price of copies is higher when the publisher’s share in total copies is higher is, not surprisingly, related to the relative prices of originals and copies. An examination of the relationship between the level of copyright protection and the gross profits of publishers shows that gross profits increase up to the moment when copiers start making copies. Additional copyright protection will provide no further benefits because there are no competitors to exclude in this case but it does raise the price of copyright protection. The most important welfare implications of this model can be summarized as follows (Landes and Posner, 1989, pp. 343-4): 1. The optimal amount of copyright protection is higher for classes of work that are more valuable socially (the value of a work is defined here as the social welfare per work minus the cost of creating the work). 2. Increasing copyright protection above the optimal level leads to the production of more works, but to a lower welfare per work (as a result of higher fixed costs/higher administrative and enforcement costs), which results in a lower level of welfare. 3. If, over time, growth in income and technological advances enlarge the size of the market for any given work, and the cost of copying declines, copyright protection should expand. The model therefore suggests that copyright protection should indeed expand as a result of a decline in the marginal cost of copying and provides support for the claim by copyright holders that copyright protection should be increased as a results of recent technological developments.6
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5.3 OTHER FACTORS The LP model clearly illustrates the trade-offs involved in setting the level of copyright protection. A number of specific factors of markets for information goods - some of them mentioned by Landes and Posner - that are not incorporated in the model may change the optimal level of copyright because they shield the publisher of the information goods from competition by copies or by close substitutes. In this section I will discuss four of these characteristics: (1) the passage of time; (2) the possibility that publishers internalize part of the value created by copies by charging higher prices for their originals; (3) the use of price discrimination and other business strategies; and (4) the ‘superstar’ phenomenon. Much information is only valuable when it is new (for example newspapers, magazines and so on). Since copying takes time, this reduces the value of copies in markets for information goods where ‘time is money’. The passage of time can be said to provide an additional layer of protection for the publisher and provides an argument for a reduced protection in these type of markets (Breyer, 1970). Publishers might also anticipate the fact that copies will be made from their products and charge a higher price for the originals they produce, recognizing an opportunity to appropriate revenues from copying other than through the copyright system (Liebowitz, 1985). Publishers can also use various business strategies to increase revenues such as price discrimination to appropriate revenues from various market segments or at different points in time. The paperback version of the book that appears half a year later than the hardcover version, but which sells at half the price is an example of such a strategy. Price discrimination pushes copies ‘out of the market’, and therefore reduces the need for copyright protection. Finally, the LP model assumes that there is no uncertainty about the quality of a product. Adler (1985) shows that if consumption requires knowledge, the phenomenon of ‘stars’ might arise (earlier, Rosen (1981) termed this phenomenon the ‘economics of superstars’). If consumers can save on search costs by choosing a popular artist, patronizing him or her might be the optimal choice, even though the quality of his or her work is similar to that of other artists. In markets with ‘superstars’, the most popular artist has a degree of monopoly power that can take the place of copyright protection. These four factors therefore suggest a lower optimal level of copyright protection in 1. markets where ‘time is money’; 2. markets where it is possible for publishers to internalize part of the value of the original, due to the possibility of copying;
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3. markets where price discrimination between market segments or over time is possible; 4. markets that are dominated by ‘superstars’.
5.4 AUTHOR AND PUBLISHER So far, we have assumed that the author acts as his or her own publisher. This is clearly an unrealistic assumption in many markets for information goods. Think of the often-conflicting roles of musician and the music publisher, the author of fiction and his/her publishing house and so on. Towse (1999) discusses the different incentives faced by authors and publishers, and argues that the two might differ in (1) time preference, (2) risk and (3) reputation. Authors are likely to have a shorter time horizon, be more risk-averse and be more concerned with reputation than are publishers. Besides these differences, publishers tend to have more information about the chances of success of a new work being published. In other words, there is asymmetric information between author and publisher. The distinction between author and publisher is important in order to estimate the impact of copyright legislation on the incentives to produce new work. As discussed above, the price elasticity of supply is an important determinant of the number of works on the market. This is likely to be true for publishers but not necessarily so for authors, who might have other motives such as to ‘appear in print’, to produce good quality work or to reach a wider audience. A side effect of a too high level of copyright protection might therefore be that it simply redistributes revenues from authors to publishers and does not affect the incentive for authors in itself. An important factor in determining the long-run supply elasticity of new works is the contractual relationship between author and publisher. This relationship can take the form of royalties (where the author gets a certain percentage of the sales revenue), sometimes combined with a lump sum advance, or a buy-out. Where author and publishers share the risk equally in a royalty agreement, the system of buy-out shifts the risk to the publisher. A final option is that an author is the publisher of his/her own work (through the Internet, for example). As suggested by Towse (1999), the pattern of contractual relationships in a specific industry might shed some more light on the supply elasticity for new works. As we have seen in the discussion of our standard model, if authors have little incentive to come on the market with substitutes for the information goods from the incumbent firm(s), this reduces the need for a high level of copyright protection. The consideration of the author-publisher relationship
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might therefore provide an additional argument for a lower degree of copyright protection than predicted by the LP model.
5.5 ENFORCEMENT OF COPYRIGHT AND PIRACY The LP model assumes that the chosen level of copyright can be enforced at a certain cost to the publisher. In fact, copies will be driven out of the market in the optimum. In practice, we observe that piracy, counterfeiting and bootlegging in many markets for information goods appear to be widespread,7 directly contradicting the implications of the LP model. One explanation is that the level of copyright protection is too low: in that case, a positive number of (illegal) copies is produced. Another explanation is that the relationship between the costs and the level of copyright protection is wrongly specified in the LP model. Landes and Posner assume that the enforcement costs for publishers are linear in the level of copyright protection, but that copiers face increasing cost when confronted with copyright protection. Unfortunately, there is little serious empirical work on the relationship between enforcement costs and the level of copyright protection. If costs are sharply increasing in the level of copyright protection, it is possible that the optimal level of (illegal) copies is positive in equilibrium. Burke (1996) uses macro-data to study the impact of international copyright conventions in the music industry on the level of audio software counterfeiting. His results suggest that copyright conventions have not been very effective in reducing counterfeiting. This holds even when the duration of copyright convention membership and the specificity of the articles of the convention are taken into account. Burke concludes that the ‘extensive efforts and copious attention to detail by international legal experts are not sufficient to effectively curtail counterfeit activity and are indeed secondary in importance to the socioeconomic environment in which these laws are applied’. This study therefore suggests that there might not be a relationship between the level of protection and piracy at all, undermining one of the major assumptions underlying the LP model.
5.6 COPYRIGHT IN MARKETS WITH NETWORK EXTERNALITIES So far, we have only discussed copyright regimes in markets for information goods that have no hardware-software characteristics or network effects. The trade-off for policymakers might be quite different from that in ‘traditional’
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markets when network effects are present. In this type of market, publishers take account of the fact that creating a large market shortly after the introduction of a new good creates a higher willingness to pay for the product in the following periods. As a result, publishers use aggressive strategies to obtain a higher market share, especially in the case when they are competing for a monopoly standard (as in the case of so-called ‘tippy’ markets). Economides (1996) defines a network externality or positive consumption externality as an externality that causes the value of a unit of a good to increase with the number of units sold. A distinction can be made between direct network externalities that are created through the direct effect of a number of buyers on the quality of the product and indirect effects that are caused by things such as the greater availability of complementary goods when the network of buyers increases.8 Liebowitz and Margolis (1994) show that the consequences of internalizing direct and indirect network effects are quite different and that these concepts should therefore be treated with some care. Indirect network effects, generally, are pecuniary in nature and should therefore not be internalized by the producer because, in that case, they impose dead-weight losses. When we refer to network effects or network externalities in the remainder of this study, we refer to direct or non-pecuniary externalities. Bensaid and Lesne (1996) give another classification of network effects, highlighting three types: 1. Metaphorical network externalities: these arise when the users of a good benefit from the same additional services and common expertise. 2. ‘Word of mouth’ externalities: these arise from the fact that when a product has more users, more information about its quality becomes available leading to lower search costs and higher reservation prices. This type of externality seems to be especially relevant for information products where the quality cannot be learned by a superficial inspection of the product (for example, experience goods). 3. ‘Learning-by-doing’ externalities: these originate from the fact that when a product has more consumers the quality of the product is likely to be improved by further updates. This type of externality is particular relevant in the software market. After the introduction of a new product into a market with network externalities, consumers base their decision whether or not to adopt the new product not only on the stand-alone benefits (which are likely to be larger for the new product compared to the old product), but also in relation to the network benefits (that are likely to be larger for the new product compared to the old product). In many instances, the adoption of a new product is hindered
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because it is incompatible with the network of the old product, even though the adoption of the new product might be welfare enhancing. The introduction of any type of network effect in a market for information goods where copying is possible, changes the basic trade-off for policymakers in setting the copyright regime. Analytically, we can make a distinction between a static and a dynamic environment. In a static environment 9 the introduction of network externalities implies that the size of the market positively influences individual consumers’ willingness to pay for an information good. The publisher will, of course, take account of this characteristic of the market when deciding on the optimal price for the information good. The implication of network effects can be illustrated when one considers how different levels of copyright protection will influence the outcomes in the market compared to the LP model. Reducing copyright protection will result in more (illegal) copying. However, if the network effects are strong enough to substantially increase the valuation of consumers when copyright is reduced, and if enough pirates start using copies, a decrease in copyright protection can cause both price and publishers’ profits to rise. The exact nature of the result will therefore depend on the relationship between the size of the market on the one hand, and the willingness to pay of consumers, the degree of quality difference between originals and copies, and the number of highvaluation consumers compared to low-valuation consumers, on the other. The static models of markets for information goods with network effects suggest that the optimal level of copyright protection is typically lower in markets with network effects than in other markets. Reducing copyright protection might enhance profit and welfare under certain conditions (see Takeyama, 1994). Considering the same issue in a dynamic context makes it possible to study the adoption path of new information goods and the pricing strategies of publishers over the life cycle of the information good (see, for example, Takeyama (1997)). Willemsen and Hakfoort (1999) were the first to examine network externalities in a two-period model of copying. They assume that a profitmaximizing monopolist produces a durable information good that exhibits network effects. Consumers, who differ in their valuation of the quality of copies, can either (1) buy an original in the first period; (2) wait and buy an original in the second period; or (3) buy/make a copy in the second period. It is assumed that there is a linear relationship between the size of the market (including copies and taking account of the fact that the information good is durable) and the valuation of the information good, and also that this valuation differs among consumers over a continuous range. Based on this, three regimes can be distinguished.
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In the first regime, the market is divided up between consumers who buy originals in the first period and consumers with a lower valuation who buy copies in the second period. In the second regime, there are three groups of consumers (depending on their valuation): consumers who buy an original in the first period, consumers who buy an original in the second period and consumers who buy a copy in the second period. In the third regime, there are only consumers who buy originals in the first period. The monopolist chooses which regime is relevant by setting his/her price for originals in the first and second period. This choice is based on the strength of network effects, the difference in quality between copies and originals, and the size of the intertemporal discount rate. An increase in the importance of the network effects will lead the monopolist to increase his/her price in both the first and the second period. This, in turn, will lead to higher profits for the publisher. An increase in the quality of copies will lead the publisher to decrease his/her price in both the first and the second period, leading to a decline in the discounted value of profits. Finally, an increase in the discount rate will lead the publisher to increase his/her price in the first and second period. The effects on profits are ambiguous in this case and dependent on the relevant regime. Although the paper does not address the issue of copyright protection directly, the paper by Willemsen and Hakfoort (1999) shows that the existence of network effects leads to a different price-setting behaviour by the monopolist and, as a result, a different adoption path of the information good. Improved copying technology (or cheaper copies) will erode the profits of publishers, despite the fact that they will try to lower prices to keep the market share for originals. Again, the adoption path of the information good is affected. The LP model does not take account of demand network externalities (demand is not dependent on the size of the market for the information product) and the adoption of new technologies or standards in markets. The economic literature suggest that - if network externalities play a role and are non-pecuniary in nature - the optimal level of copyright protection is below that predicted by the original LP model. Setting a too high level of copyright protection might also have dynamic implications, such as a slower adoption of new technology and or standards.
5.7 IMPLICATIONS FOR COPYRIGHT PROTECTION Perhaps the best example of a market for information goods that is characterized by network effects is the market for software. In this market,
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consumers benefit both from the direct and the indirect benefits of a larger market for the product. The direct network effects result from the possibility of being able to exchange programs based on the software while the indirect effects arise from the greater availability of complementary goods such as user guides. In the classification of Bensaid and Lesne (1996), software is also characterized by metaphorical network externalities and learning-by-doing externalities. The existence of network externalities in the market for other information goods is less clear. However, one can argue that information goods, such as books, CDs and movies, experience what Bensaid and Lesne (1996) call ‘word of mouth’ externalities. In this case, the fact that more consumers have read a certain book, listened to a certain CD or went to see a certain movie provides more information about the quality of these experience goods 10 and therefore increases the value of this good to the consumer. Word of mouth externalities might, for example, arise in markets for ‘superstars’, where consumers incur costs when they search for a product they like. In markets with network effects that are also characterized by hardwaresoftware standards, firms that compete for standards (such as Betamax vs. VHS or MS DOS vs. Macintosh OS in the past) do in fact compete for a monopoly in the future. This will generally lead them to employ a number of aggressive strategies to compete for market share. When markets ‘tip’ to one standard (such as in the case of MS Windows), the winning firm in fact already obtains a monopoly on this standard. Employing a too high level of copyright protection might, in this case, lead to dynamic inefficiency by preventing future competitors from entering the market, either by reducing the level of innovation or by ‘trapping’ an industry into an obsolete or inferior standard. In summary, when considering the impact of network effects on the optimal level of copyright protection, policymakers need, again, to examine the nature of the market at hand. In markets such as the market for software and markets that exhibit ‘word of mouth’ externalities, one must be careful not to impose a too high level of copyright protection. According to Menell (1998) ‘copyright law should not stand in the way of competitors seeking to develop interoperable computer systems and products’. Menell (1998) argues that the analysis of whether copying is fair use should be based on the market realities at the time of competition. Going beyond this level of copyright protection ‘would risk extending monopoly power well beyond what is needed to encourage innovation, undermine the realisation of network externalities, and impede innovation in complementary markets’.
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5.8 THE CHANGING ROLE OF PUBLISHERS In the previous sections, I have discussed the characteristics of the optimal copyright regime in the case that policymakers choose to solve the underproduction problem by allocating property rights. The LP model provided the starting point for discussion of the optimal copyright regime, but a number of factors were discussed which suggested that in specific markets the optimal level of copyright protection might well be lower than that predicted by the LP model. However, is it really necessary for the government to intervene at all? The LP model ignores the fact that the decrease in the cost of copying might also lead to a lower cost of production, distribution and marketing of information goods. This means that developments in copying technology do not necessarily lead to a disincentive for publishers to put new works on the market (as predicted by the LP model). Rather, these developments also offer opportunities for publishers to engage in new types of business strategies. Besides, publishers have also used alternatives for existing copyright protection - such as contractual and technical devices - to enable them to appropriate (more of) the revenues of their content and thereby to solve the underproduction problem. Lower production, distribution and marketing costs may lead publishers to use a number of alternative business strategies (see Shapiro and Varian, 1999): 1. Giveaway free samples: this strategy exploits the ‘experience good’ nature of the information good. By allowing potential customers to experience (part of) the information good, publishers are able to advertise their products through media such as the Internet in a much more efficient way, reaching a wider audience and creating demand for the hard copy product. 2. Versioning: the digital reproduction of content makes it easier on the one hand to copy the product, but on the other hand allows the original publisher to price discriminate more effectively between different groups of consumers by selling a version for ‘dummies’, a ‘light’ version, a ‘family’ version and a ‘luxurious pro’ version of a product. 3. Selling complementary products: by digitally interacting with consumers, the publisher can sell complementary products more easily. The LP model is not able to analyse these strategies, because in that model, publishers do not profit from a decrease in the price of copies (fixed cost is increasing in the level of copyright protection and marginal cost is assumed to be constant). Examples of previous innovations from the history of information goods
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give credence to the point that the availability of cheap copies will not automatically hurt the market for originals.11 With the arrival of the circulation library in eighteenth-century England, for example, the complaint was raised that the market of originals would be negatively affected as well as the incentive for producing new works. Contrary to these expectations, the wider availability of books opened up the market for an audience that was not able to enjoy books before. The demand for content increased as a result. The introduction of the Xerox machine brought a similar debate. If there was a noticeable effect on the demand for originals in that case, it was a positive one. Finally, the introduction of prerecorded videotapes in the 1980s created a larger demand for movies instead of the opposite. In economic terms, the introduction of cheap copies allowed the movie companies to employ effective price discrimination and cater to the demand for ‘repeat-view’. All these examples indicate that the availability of cheap copies did not diminish the demand for the originals by publishers. Rather, it opened up a whole new audience for the information good. Simply assuming that the markets for information goods operate in a similar way to markets for physical goods - with corresponding business strategies might lead one to overemphasize the losses to the publisher caused by improved copying technology and to demand increased protection that might be unwarranted (Boyle, 1997). Incumbent publishers are also forced to adjust to the new circumstances because the decreased cost of distribution and marketing has considerably lowered entry barriers to the market. In the market for music, for example, artists have already started publishing their own music through the Internet in order to keep maximum control over their products. According to these artists, this enables them to publish more work than would be possible were they to sign with a music publisher, and thus to maximize their revenues. If this trend towards disintermediation continues, music publishers (and publishers in other markets for information goods) will have to reinvent themselves in order still to be able to create value added. Besides employing business strategies to adjust to the new environment, publishers also use alternative protection mechanisms, such as contractual agreements and technological devices, to appropriate more of the revenues of their content. We briefly consider the use of new business strategies and the two alternative protection mechanisms in the markets for music, books and software. For music CDs, the availability of digital copying techniques such as MP3 has made it possible to download music from the Internet. MP3 is easy to use and allows consumers to choose beyond the album format; they can pick any song they like and download it. According to Jones (1999): ‘Since MP3 opened the floodgates and showed people how easy and flexible digital music
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downloads can be, the record industry has faced a big challenge in creating a system that matches MP3’s ease of use and controls distribution and copyrights.’ Another challenge to the music publishing industry is the wide availability of writeable CD-ROMs that can also store music files. CD-ROMs can be bought cheaply yet store a lot of music. According to Inen (1999), this has created a whole piracy ‘industry’ where new CDs are copied and then sold to friends and colleagues. The Dutch band De Kast, for example, claims that illegal copying of their CDs reduces regular sales by about 40 per cent. The reaction of the music industry and its copyright collectives has been twofold. First, the industry and copyright collectives are using new techniques to detect illegal copying over the Internet. In the USA, for example, this has led to the conviction of a number of offenders (in most cases students) who were posting MP3 files on the Internet (often from the campus of their university (Sullivan, 1999). Possible violations can be detected by the heavy data exchange that is needed from the server. Second, the industry is trying to develop new business strategies that take advantage of the new technologies. One of these strategies is to develop a safety standard that protects MP3 files (and files in other formats) from being illegally copied. The problem at the moment is that the industry is still working out which standard to choose from the 20 competitors or so that propose a new standard. Similar to the downloadable MP3 files, the system also has to be interoperable, so that the files can be played on an MP3 player, and also easy to use (Sullivan, 1999). Besides the development of a new standard, record labels are in the process of using digital rights management systems that allow them to securely distribute and track files as they are transmitted over the Internet to portable players. As already mentioned, the possibility of singer/songwriters selling their material via the Internet suggests that markets can be entered without the use of the marketing, advertising, retail and distribution efforts of a music publisher. Some successful artists who have already used this medium to sell their music are David Bowie, Public Enemy (who even provide their songs for free) and Ani DiFranco.12 Against this background, the most likely new role of music publishers will be to reduce search costs by offering a complete catalogue of music files on the Internet and to use their expertise in the market to develop new talents (see also Inen, 1999). In the market for books, the main impact of new digital technology has been twofold. First, there has a reduction in pre-press costs - authors can now hand in digital text or data files that can be easily manipulated - and second, publishers can use new business strategies to market and distribute books (for example, through the Internet). Providers such as amazon.com provide
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search options for the customer, inform the customer of new books on topics of their interest, reward frequent customers with vouchers, and so on. Compared to the music and software industry, the changes in the book publishing market have not affected the basic trade-off in setting the level of copyright protection. One can argue whether the market for books exhibits ‘word of mouth’ externalities, as mentioned in the classification of Bensaid and Lesne (1996), but this effect in unlikely to be strong.13 The main changes in the market structure of the industry will occur in the production of the book and in the distribution channel, where digital bookstores such as amazon.com and barnesandnoble.com have become serious competitors for physical bookstores. The market for software has been affected by the decrease in the cost of copying. Piracy of software is estimated by the Software Information Industry Association (SIIA, 1999) to have been around $11 billion in 1998 for business application software around the world. Piracy is as high as 87 per cent in Bolivia and El Salvador, 93 per cent in Russia and other former Soviet States, 95 per cent in China and 97 per cent in Vietnam. As in the case of the music publishing industry, software publishers have turned away from the traditional copyright protection system towards alternative means of protecting their rights: (1) licences and contracts on copyright, and (2) technological devices to protect software from copying. After buying the software, users agree to a contractual relation with the software publishers by opening the package in which the software is wrapped or by clicking a button with ‘I agree’ (the so-called ‘wrap’ and ‘click’ licences). An alternative way of rights management is to use technological devices, such as periodically renewable passwords, digital watermarks and devices that only allow a limited number of copies for personal use. The latter option is less dependent on the enforcement of the copyright system. Experience shows that technological devices for the protection of software are often the subjects of ‘hacking’. The developments in the markets for music and software show that publishers in these markets increasingly turn to other means of protecting their rights than traditional copyright legislation. The use of technological devices in the music and software market, and of licences and other contractual agreements in the software markets (‘code’ and ‘contract’), have the potential to make copyright and its statutory limitations redundant (Hugenholtz, 1996). Is there a reason to fear that the private means of protecting rights (contractual agreements and technological devices) will be too restrictive if left to the incumbent publishers? To address this point, we must consider the situation where publishers are at liberty to set their own terms and conditions for the copyright regime. In that case, they implicitly or explicitly make a trade-off between the quantity of
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sales and the revenues (excluding illegal copies) from sales. An important point to recognize is that relaxing the terms and conditions of use of the information good might increase the value of the good to consumers and hence their willingness to pay. Allowing ‘home use’ of software, for example, besides ‘office use’ might lead to a higher valuation of a software program. Extending the period of use has the same effect. In Figure 5.1 we illustrate the trade-off between the scope of protection (for Panel 1.1
Panel 1.2
P
P
P' Profit DWL t=1
D'
D
P'
Panel 1.3
t=2
D'
D
Panel 1.4
P
P
P'
P' Profit t=1
D
Profit
DWL
D'
t=2
D
Figure 5.1 (adapted from Gilbert and Shapiro, 1990)
DWL
D'
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example, the fair-use conditions) and the length of protection. It is assumed that there are two periods, that demand is linear and that marginal cost is zero. In panels 1.1 and 1.2 it is assumed that copyright holds for only one period, but that the scope of copyright is extensive. By extending the length of the copyright period, but reducing the scope, welfare is increased but the total profit of the producer is left intact. This can be seen in panels 1.3 and 1.4. The implication is that producers might well be indifferent between outcomes that maximize social welfare and those that do not. An implication for government policy is that care must be taken in ensuring that the alternatives to copyright protection chosen by firms are not too restrictive. In the case that the incumbent firm develops a standard that is not available to potential entrants (for example, a new standard for the distribution and playing of music files), there is also a possible case for competition policy. This brings us to the discussion of the optimal copyright regime in a world where publishers have the opportunity to take advantage of business strategies and alternative protection mechanisms. Compared to the LP model, the role of copyright protection is certainly weakened. Formal copyright protection is still important, but often acts as a ‘protection of last resort’. According to Menell (1998): ‘the limitations of traditional copyright law may be of little significance as a result of new opportunities to circumvent copyright law through technological and contractual means’. After technological devices and contractual agreements have failed, publishers can turn to the legal system. Although its formal role may be diminished, copyright law will continue to play a useful indirect role in enhancing the appropriability of investments in markets such as that for software. However, a too strong protection of the ‘right of use’ might give publishers an unnecessary lead because competitors or potential entrants cannot profit from interoperability with these standards. This is particularly true for markets with network effects (such as software). This, in turn, can impede innovation and possibly lead the industry to adopt an inferior standard.
5.9 SUMMARY AND CONCLUSIONS In this chapter, I have investigated the claim made by representatives of the information goods industry that, in an era with decreased costs of copying and an increased quality of copies, copyright protection should be extended, and time and money spent on copyright enforcement should be increased. The standard economic model (based on Landes and Posner, 1989) that was discussed in section 2 suggests that the increased attractiveness of copies provides a disincentive to produce new work. Therefore, the level of copyright
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protection should be increased as a result of a decrease in the marginal cost of copies. A more detailed look at the characteristics of the markets for information goods reveals, however, that these markets often have characteristics that make competition between originals and copies less important. Furthermore, publishers can often internalize part of the revenue created by copies. In markets that are characterized by network effects, copying can be both profit and welfare enhancing. In all these cases, increasing copyright protection has either no effect or adverse effects on welfare. Further, the LP model does not take account of the fact that the decrease of copying and distribution costs might also provide new opportunities for the publishing sector. We have discussed various business strategies that publishers might engage in to take advantage of the decrease in cost. It is not clear beforehand that the decrease in cost will hurt the profits of publishers, although these might cause them to reconsider their role in the value chain. Again, this suggests that policymakers should be cautious when increasing the level of copyright protection in response to developments in technology. Finally, we have discussed the issue of the relevance of the copyright system in relation to other methods of rights management. According to some observers, traditional copyright protection will become redundant in the digital age and be replaced by ‘contract’ (such as licensing agreements) and ‘code’ (technological devices that afford publishers discretion in setting the length and scope of copyright protection), as enforcement of copyright protection becomes more difficult and costly. The use of contract and code makes it possible for publishers to make goods rival, solving the latent market failure that is the result of the high fixed, low marginal cost characteristic combined with the non-rivalry of information goods. Copyright legislation remains an important ‘protection of last resort’. Economic theory is helpful in investigating the trade-offs underlying the level of copyright protection. At the same time, it leaves open a number of important questions that should be incorporated in future work in this area. First, most economic models treat the complex set of rules, restrictions and exceptions that make up ‘the level of copyright protection’ as a single index. For policymakers, a more desegregated look at this issue is necessary. Recent work by Michael Rushton (1998, 2000) is a useful first step in that direction, but more work is needed to bridge the gap between economic theory and legal practice. Second, an area that deserves more attention is how the relationship between author and publisher affects the optimal level of copyright (but see Towse, 1999). Third, the implications of most economic models of copyright are that policymakers should look at the specific characteristics of a market which can change rapidly over time because of new technology - and then decide on the optimal level of copyright protection. Implementation of these
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ideas is in sharp contrast with current legislation, which typically defines the length and scope of copyright protection in some detail and is set uniformly across markets. The trade-off between the two regimes can be interpreted as the ‘rules vs. discretion’ debate in other parts of the economic literature. While discretion by courts in deciding on the specific characteristics of copyright protection in certain situations is preferable when it comes to fine-tuning of the regime, this introduces additional uncertainty in the marketplace, which will possibly affect decisions to introduce innovations on to the market. Discretion in copyright protection is also likely to lead to higher enforcement costs. The ‘rules’ solution might involve lower transaction costs, but has the disadvantage of causing distortion in specific markets that either have a too high or too low level of copyright protection. Clearly, more work is needed on all these issues.
NOTES 1. This chapter is based on a wider study of the CPB Netherlands Bureau of Economic Policy Analysis ‘Publishers: Caught in the Web?’ that is available from CPB’s website (www.cpb.nl). The author is very grateful for helpful comments and suggestions by Erwin Arkenbout (Ministry of Justice), Nicole Hagemans (Ministry of Economic Affairs), Kamiel Koelman (Institute for Information Law, University of Amsterdam), Ruth Towse (Erasmus University Rotterdam and editor of Journal of Cultural Economics) and colleagues from the CPB Netherlands Bureau of Economic Policy Analysis. The chapter also benefited from comments and discussion from participants in the ‘International Conference on Copyright and the Cultural Industries’, Erasmus University Rotterdam, 11–12 September 2000. The usual disclaimer applies. 2. We define information goods here as ‘everything that can be digitized’. Publishers of information goods are firms or individuals that offer copies of the information good to others. 3. For a comparison of the reward system with that of intellectual property rights see Shavell and van Ypersele (1999). 4. By focusing on the trade-off between underproduction and utilization, I implicitly assume that governments are interested in maximizing social welfare (that for our purposes can be approximated by the sum of consumer and producer surplus). Other objectives for the government might be freedom of expression and the granting of moral rights to artists. Michael Rushton discusses these two other objectives in two recent papers (Rushton, 1998; Rushton, 2000). 5. For details see Landes and Posner (1989). 6. Koboldt (1995) determines the optimal copyright regime in a model with constant marginal cost of producing copies and imperfect substitutability between originals and copies. The model by Landes and Posner (1989) has increasing marginal cost of copies; imperfect substitutability is proxied by assuming that an original is equal to a number of copies. According to Koboldt (1995), this introduces an additional element of limit pricing by the incumbents. However, the model by Koboldt (1995), does not include the feedback mechanism caused by the costs of enforcement of the copyright system. 7. Representatives of the publishing industry use loss estimates to make this point and at the same time to plead for increased copyright protection. The American Business Software Alliance (BSA), for example, claims that: ‘A new kind of crime, the illegal copying and distribution of software, movies, books and music over the Internet, threatens US jobs. Piracy may take place on a single computer, but its effects ripple through the economy. An
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8. 9. 10. 11. 12. 13.
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estimated 38 percent of all software programs used worldwide in 1998 was pirated, at a market value of $11 billion and a loss of 109 000 American jobs . . . Without adequate copyright protection, thieves can pilfer software and other creative products at will and in staggering volume’ (http://www.bsa.org/policy/copyright/intro_c.html). The response of the BSA and many other interest organizations of the information goods industries is to call for a wider scope for copyright legislation and increased levels of copyright enforcement (often at a supranational scale). Apart from the fact that exact figures about piracy rates are by definition unavailable, a look at the assumptions behind the revenue and job losses suggest that BSA has simply calculated the estimated number of pirated software programs and multiplied these programs by the retail price of these programs. This method of calculation ignores the fact that a lot of the pirated software would never have been bought in the first place were it sold at retail price, even when the publishers used some type of price discrimination scheme. Therefore the calculations by BSA and similar reports by other rightholders overestimate the real extent of the lost revenues. (We will come back to this point when we discuss network effects in the next section.) See Liebowitz and Margolis (1994) for a critical appraisal of the literature on network effects. See, for example, Conner and Rumelt (1991), Takeyama (1994) and Shy and Thisse (1999). See also the related literature on ‘herding’ behaviour. See Shapiro and Varian (1999). In the case of David Bowie, the sale of his new CD in the autumn of 1999 on the Internet before it went to the shops was met by the Dutch music retailer Free Record Shop by a ban on the sale. Although there is the example of the two textbook authors who bought a million copies of their own book, taking it to the top of the sales list, such that it consequently sold an unheard amounts of books (Monteiro and Moraga-González, 1998).
REFERENCES Adler, M. (1985), ‘Stardom and talent’, American Economic Review, 75 (1), 208-12. Barlow, J.P. (1994), ‘The economy of ideas’, Wired, 85, available from http://www.hotwired.com/wired/2.03/features/economy.ideas.html/. Bensaid, B. and J.P. Lesne (1996), ‘Dynamic monopoly pricing with network externalities’, International Journal of Industrial Organization, 14 (6), 837-55. Boyle, J. (1997), ‘Intellectual property online: a young person’s guide’, Harvard Journal of Law and Technology, 47, available from: http://www.wcl.american.edu/pub/faculty/boyle/joltart.htm. Breyer, S. (1970), ‘The uneasy case for copyright: a study of copyright in books, photocopies and computer programs’, Harvard Law Review, 84 (2), 281-351. Burke, A.E. (1996), ‘How effective are international copyright conventions in the music industry?’, Journal of Cultural Economics, 20, 51-66. Conner, K.R. and R.P. Rumelt (1991), ‘Software piracy: an analysis of protection strategies’, Management Science, 37 (2), 125-39. David, P.A. (1993), ‘Intellectual Property Institutions and the Panda’s Thumb: Patents, Copyrights and Trade Secrets in Economic Theory and History’, in M.B. Wallerstein, M.E. Wogee and R.A. Schoen (eds), Global Dimensions of Intellectual Property Rights in Science and Technology, Washington, DC: National Academy Press, pp. 19-61. Economides, N. (1996), ‘The economics of networks’, International Journal of Industrial Organization, 14 (6), 673-99. Gilbert, R. and C. Shapiro (1990), ‘Optimal patent length and breadth’, Rand Journal of Economics, 21 (2), 106-12.
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Hugenholtz, B. (1996), The Future of Copyright in a Digital Environment, The Hague: Kluwer Law International. Hurt, R.M. and R.M. Schuchmann (1966), ‘The economic rationale of copyright’, American Economic Review, 56, 421-32. Inen, J. (1999), ‘Oorlog om het idee’, Intermediair, 35 (32), 12-17 (in Dutch). Jones, C. (1999), ‘SDMI: divide or conquer?’, Wired, available from http://www.wired.com/news/print/0,1294,32513,00.html. Koboldt, C. (1995), ‘Intellectual property and optimal copyright protection’, Journal of Cultural Economics, 19 (2), 131-55. Landes, W.M. and R.A. Posner (1989), ‘An economic analysis of copyright law’, Journal of Legal Studies, 18 (2), 325-63. Ledyard, J.O. (1987), ‘Market Failure’, in J. Eatwell, M. Millgate and P. Newman (eds), The New Palgrave Allocation, Information and Markets, London: Macmillan Press, pp. 141-51. Liebowitz, S.J. (1985), ‘Copying and Indirect Appropriability: Photocopying of Journals’, Journal of Political Economy, 93 (5), 945-57. Liebowitz, S.J. and S.E. Margolis (1994), ‘Are Network Externalities a New Source of Market Failure?’, available from: http://wwwpub.utdallas.edu/~liebowit/ netwextn.html. Menell, P.S. (1998), ‘An epitaph for traditional copyright protection of network features of computer software’, The Antitrust Bulletin, Fall-Winter 1998, 651-713. Monteiro, P.K. and J.L. Moraga-González (1998), ‘“We Sold a Million Copies”- The Role of Advertising Past Sales’, Working paper. Rosen, S. (1981), ‘The economics of superstars’, American Economic Review, 71, 845-58. Rushton, M. (1998), ‘The moral rights of artists: droit moral ou droit pécuniaire?’, Journal of Cultural Economics, 22 (1), 15-32. Rushton, M. (2000), ‘Copyright and Freedom of Expression: An Economic Analysis’, Paper prepared for the International Conference on Copyright and the Cultural Industries: Economics, Law and Management, Erasmus University Rotterdam, 11-12 September 2000. Shapiro, C. and H.R. Varian (1999), Information Rules; A Strategic Guide to the Network Economy, Cambridge, US: Harvard Business School Press. Shavell, S. and T. van Ypersele (1999), ‘Rewards versus intellectual property rights’, NBER Working Paper No. 6956, Cambridge, US: NBER. Shy, O. and J.F. Thisse (1999), ‘A strategic approach to software protection’, Journal of Economics and Management Strategy, 8 (2), 163-90. SIIA (1999), SIIA’s Report on Global Software Piracy 1999, Software Information Industry Association. Sullivan, J. (1999), ‘Free music, Getcher free music’, Wired, available from: http://www.wired.com/news/print/0,1294,32722,00.html. Takeyama, L.N. (1994), ‘The welfare implications of unauthorized reproduction of intellectual property in the presence of demand network externalities’, Journal of Industrial Economics, 42 (2), 155-66. Takeyama, L.N. (1997), ‘The intertemporal consequences of unauthorized reproduction of intellectual property’, Journal of Law and Economics, 40 (2), 511-22. Towse, R.M. (1999), ‘Copyright and economic incentives: an application to performers’ rights in the music industry’, Kyklos, 52 (3), 369-90. Willemsen, S. and J. Hakfoort (1999), ‘A Model of Copying With Network Effects’, Mimeo, The Hague: CPB Netherlands Bureau of Economic Policy Analysis.
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6. Copyright compulsory licensing and incentives Thomas Gallagher 6.1 INTRODUCTION Consequentialist approaches to copyright law rely on economic analysis to explain existing law and to evaluate proposed changes to copyright law. Economic analysis of copyright law is pursued from two distinct perspectives. It is equally acceptable to explain copyright either as an incentive or in the context of transaction costs.1 The incentive argument for copyright focuses on the under-production/under-utilization paradox that provides the central problem in the economics of information.2 Seen in copyright terms, exclusive property rights provide incentives to produce copyright works and inevitably restrict access for secondary users and consumers.3 Acceptance of the premise that copyright law must strike the correct incentives/access balance provides a framework for understanding more complex areas of the law, such as the compulsory licensing of copyright works. The economic consequences of compulsory licensing of copyright works are also usefully explained from either the ‘incentives/access’ or ‘transaction costs’ perspective. This chapter solely focuses on the relationship between compulsory licensing and copyright’s incentive function. This approach differs from existing scholarship in the United States, where compulsory licensing is discussed purely in terms of its impact upon transaction costs in copyright markets.4 The incentive argument for compulsory licensing focuses on incentives/access imbalances in copyright: the under-production of works in new technological environments lacking copyright protection and the under-utilization resulting from copyright protection in the presence of market power. Once compulsory licensing is introduced, the higher levels of either production or utilization can be justified, since owners’ rewards are more closely, if imperfectly, related to the value of works (as measured by consumer demand). Corrective compulsory licensing provisions may also be used when copyright law expands and the incentives/access balance shifts in favour of owners. Where compulsory licensing offers an improved balance between 85
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owners, secondary users and consumers, detailed consideration of those instances allows for pertinent questions to be asked in relation to other areas of copyright law. The chapter provides an explanation of the incentive justification for compulsory licensing in the following tripartite structure. The first section shows how existing copyright law strikes a balance between under-production and under-utilization. The second section illustrates how compulsory licensing strikes a very different, access-oriented balance between under-production and under-utilization. The third section argues that copyright compulsory licensing corrects the copyright balance in situations where the balance has become biased towards owners, secondary users or consumers. In conclusion, the chapter looks at other areas where compulsory licensing may serve to correct imbalances in copyright law.
6.2 COPYRIGHT AND INCENTIVES From the perspective of incentives, it is accepted that existing copyright law faces the problem that works will be under-produced in the absence of exclusive rights and under-utilized in the presence of exclusive rights. In cost/benefit terms, the aim of copyright law is to maximize the benefits resulting from the legal protection of works while minimizing the costs of protection. At a certain (unspecified) level of protection, there exists an ‘ideal’ copyright balance where the diminishing marginal returns from protection equal the increasing marginal costs of protection. The incentives/access balance must be examined from the ‘cumulative creation’ perspective, where owners’ interests conflict with those of secondary, creative users, and the ‘single work’ perspective, where owners’ interests conflict with the access claims of consumers.5 This section aims to illustrate how copyright law claims the ‘ideal’ balance by delineating the scope of exclusive rights, the breadth of the package of exclusive rights included in copyright and the duration of copyright. Copyright law determines the incentives/access balance by calibrating the scope of legal protection available for the subject matter of any given work. Under-production is ameliorated by protecting, in the terminology of United Kingdom copyright law, a ‘substantial part’ of any given copyright work.6 The threat of under-utilization for secondary, creative users is partially resolved by allowing certain uses of material through the operation of devices like the idea/expression dichotomy and the defence of fair dealing.7 Allowing certain takings promotes the production of imperfect substitutes, since copyright protection for any given work does not prevent the production of other works of the same genre, using stock characters or situations. The existence of
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imperfect substitutes lessens the distortionary effects of monopoly protection and limits the dead-weight losses resulting from under-utilization in the consumer market for any given work. At the same time, copyright tackles the problem of under-production by allowing owners to reap monopoly profits from any ‘single work’ and to invest in the supply of new works. Similar incentives/access balances can be seen across the breadth of copyright protection: ‘core’ reproduction rights and ‘ancillary’ adaptation or public performance rights offer incentives for owners while securing the availability of imperfect substitutes for both secondary, creative users and consumers. Finally, the rewards granted to owners by the scope and breadth of copyright protection are limited by the fixed term of copyright law, allowing secondary, creative or consumptive users free access to copyright material after expiry.8 In conclusion, it is possible to show how copyright is justified from the ‘incentives/access’ perspective. Protection is calibrated to allow owners to capture the value of copyright works in core and ancillary markets characterized by imperfect competition. Access is facilitated for secondary, creative or consumptive users both during and after the period of exclusive copyright protection. Existing copyright law has never been empirically proven to strike the ‘ideal’ balance and, indeed, has been continually expanding its ‘ideal’ breadth and duration. Despite these problems of legitimacy, exclusive rights are explicitly preferred in national and international copyright and, one suspects, implicitly assumed to be ‘ideal.’
6.3 COMPULSORY LICENSING AND INCENTIVES Compulsory licensing occurs when third parties are allowed access to copyright works, for the purposes of productive or transformative (creative) use, without the consent of the owner and upon payment of a stipulated fee.9 Facilitating transactions in the absence of the owner’s consent usually involves setting the fees for compulsory licensing below the market rate for access to any given copyright work.10 It is clear that the compulsory licensing of copyright works operates an alternative access-oriented approach to the under-production/under-utilization paradox. Given the ‘ideal’ balance of existing law, compulsory licensing threatens comparative under-production while tackling the residual under-utilization that accompanies exclusive rights. In cost/benefit terms, the aim of compulsory licensing is to maximize the benefits resulting from increased access to works while minimizing the costs of access. Once again, one must examine compulsory licensing and incentives from both the ‘cumulative creation’ and the ‘single work’ perspectives. Analysis of the economic effects of access and entry into the market depends on four relevant interest groups: owners, secondary creative users, secondary
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productive users and consumers. This section illustrates how compulsory licensing offers an alternative incentives/access balance across the scope and the breadth of copyright. Where compulsory licensing is used to mediate transactions between owners and secondary, creative users of copyright material in core markets, under-utilization is ameliorated by allowing access to a substantial part of any given copyright work. The increased access typically threatens the underproduction of copyright works by allowing more competitive substitutes and thereby reducing owners’ rewards for any given work. Under-production will only be avoided in the rare cases where works have been funded by advertising or produced, without any expectation of reward, as commercial by-products.11 In other cases, under-production may be partially mitigated by payment of fees, by specifying limited amounts of compulsory licensing or by securing preferential treatment for value-added uses in distant markets. Where compulsory licensing is used to mediate transactions between owners and secondary, productive users of copyright material in core markets, under-utilization concerns in consumer ‘single work’ markets are met by new entrants producing perfect substitutes and forcing down prices.12 The promotion of product competition by the practice of compulsory licensing will enhance social welfare in static terms by reducing the dead-weight losses associated with monopoly pricing.13 Yet the increase in output, downward pressure on prices and market share taken by the entrant threaten underproduction by reducing the rewards available to owners.14 Although underproduction effects may be lessened by setting fees at levels close to the market rate or limiting the number of entrants, the damage to incentives will always be positive and will eventually become prohibitive. Where compulsory licensing is used to mediate transactions between owners and secondary, creative or productive users of copyright material in ancillary adaptation15 or public-performance16 markets, under-utilization concerns are met by allowing access to works in these markets. Increased utilization will result in under-production, however, if expected rewards for the exchange of individual rights fall below market rates for licensing in these markets. Yet when evaluating the worth of compulsory licensing for adaptation rights, one must balance the negative effects on incentives for the owner of the underlying work against the positive incentive effects resulting from increased access for secondary, creative users. For example, in relation to the compulsory licence for mechanical recordings of musical works, incentive justifications must estimate the benefits of interwork competition in the market for musical works versus the benefits of intrawork competition in the derivative work market for sound recordings. The threat of underproduction for underlying works will be partially tackled by payment of fees, mitigated for adaptation rights by requiring sizeable creative contributions on
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the part of secondary users17 and for public performance rights by the performers’ contribution to owners’ incentives.18 In conclusion, compulsory licensing is hard to justify from the ‘incentives/ access’ perspective in comparison to the ‘ideal’ copyright balance. Underproduction occurs when owners only capture the value of copyright works in increasingly competitive core markets and their rewards from ancillary markets are limited by licensing fees set below market rates. Over-utilization occurs when greater access is facilitated for creative or productive secondary users, and ultimately consumers, for the entire period of copyright protection.19 Of course the ‘ideal’ status of the existing copyright balance is unobservable and compulsory licensing may generally promote preferable ‘user-biased’ copyright balances by reducing incentives. However, it remains true that compulsory licensing threatens existing incentives for the supply of new works in a number of ways. State-sponsored distortions in the level and direction of creative and productive investment run contrary to the ‘structural’ function of copyright in maintaining an independent creative and productive sector.20 Finally, price-setting authorities, such as the Copyright Tribunal, and state-authorized collecting agencies, such as the United States’ Copyright Office, involve obvious public costs and increase private costs for owners and users, further damaging existing incentives. Yet if one assumes that all copyright law can be explained by reference to incentives, the compulsory licensing provisions in existing copyright law can also be explained by reference to incentives. There are situations where existing copyright law does not offer the ‘ideal’ incentives/access balance, and where compulsory licensing unusually promotes superior owner-user equilibria. In these cases, the gains from compulsory licensing may outweigh the public and private costs involved in monitoring copyright transactions. The final section identifies these situations, examines why compulsory licensing offers improvements and concludes by exploring other areas of copyright where an improved balance of incentives/access will be secured by the introduction of compulsory licensing.
6.4 COPYRIGHT COMPULSORY LICENSING AND INCENTIVES Returning to the under-production/under-utilization paradox in copyright law, it is clear that the absence of copyright protection leads to an under-production of copyright works and copyright protection leads to an under-utilization of works. When compared to these positions, compulsory licensing creates an incentives/access balance in place of an absence of protection and alters the incentives/access balance offered by existing copyright protection.
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‘User-biased’ copyright balances, with no copyright protection, are found in situations where copyright law has not responded to the advent of new media technologies. ‘Owner-biased’ copyright balances in existing copyright law are found where copyright owners have considerable market power or where copyright law has expanded in its breadth or duration. This section will examine these scenarios in more detail, by identifying the variables that disturb the copyright balance, examining the way in which compulsory licensing controls for these variables and evaluating the ways in which compulsory licensing might claim to offer an improved incentives/access balance. 6.4.1 User-biased Copyright Balances Whenever new media technologies are invented, users are presented with alternative ways of copying existing copyright works and copyright law is challenged by an external shock resulting in a ‘user-biased’ copyright balance.21 If the law does not extend to protect copyright works disseminated by new media technologies, owners’ incentives will be damaged when consumers realize that copies of works in new technological formats are imperfect substitutes for the same works in incumbent technological formats. The difficulties that copyright law faces in responding to new technologies can be illustrated by the example of performing rights. Courts in the United States have been reluctant to extend performing rights to new technologies, believing that such action is best left to Congress.22 Potentially unlimited copying of valuable copyright works results from the law’s user-biased balance and increased resources will be devoted to the exploitation of works in new technological environments. The typical response of copyright law to such user-biased copyright balances consists of either creating new exclusive rights for the owner or adapting existing rights to protect the owner’s investment in new media markets.23 However, if the law extends the exclusive rights of owners to include new media technologies, the development of innovative creative and productive systems may be stymied by reserving rights to owners in alien technological environments. Competition authorities in the United Kingdom and the United States have suggested that owners who refuse to license exclusive rights to users in new technological markets are abusing the protection granted by copyright.24 Traditional copyright law faces problems in finding the ‘ideal’ balance between under-production and under-utilization, because both owners and users are contributing value to the production and dissemination of the work. The allocation of exclusive rights to either group fails to calibrate incentives accordingly. Compulsory licensing has often been used to create an incentives/access
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balance between owners and users in new technological environments promoting user-biased copyright balances.25 Increased production by copyright owners will flow from revenues earned on third-party uses of valuable works that were previously free of charge. Users retain the ability to exploit copyright works without the consent of the owner, allowing the state to encourage producers who are solely users of copyright works, such as jukebox manufacturers and broadcasters.26 Compulsory licensing, when setting prices in the public interest, must balance the interests of copyright owners and the interests of copyright users. Economic incentives for non-copyright industries are assumed to be as important as copyright incentives for the creation and production of works. This assumption has ensured that the exercise of exclusive performing rights be made subject to compulsory licensing in the United Kingdom.27 6.4.2 Owner-biased Copyright Balances Given the incentives/access balance represented by copyright law at any given time, it is possible to identify two instances where the exercise of the rights included in copyright can be described as promoting an ‘owner-biased’ copyright balance. In certain scenarios, owners receive rewards greater than those normally provided by copyright law due to the existence of market power. At certain times, owners receive rewards greater than those provided by existing law due to an expansion in the breadth or duration of copyright protection. This section examines how market power and the expansion of copyright may distort the law’s incentive justification, represented by the ‘ideal’ copyright balance outlined above. It is argued that the traditional responses of copyright law fail to calibrate incentives accordingly. Compulsory licensing is explained as an alternative response to ‘owner-biased’ copyright balances, more properly (if imperfectly) calibrating incentives in situations where standard copyright law paradigms provide no answers. Market power refers to the economic power of the copyright owner to act with relative disregard of other participants in a specific market.28 It is a basic assumption of all competition and antitrust law that the owner of an intellectual property right is not de jure in a position of market power.29 Yet there are circumstances, dictated by the nature of the individual copyright work or the economic arrangements for exploiting copyright works, where copyright owners are said to be in a de facto dominant position. When measuring dominance, the first analytical step is to define the market over which the copyright owner is deemed to have independence from either other producers or consumers. The market is defined by tests of supply and demand substitutability between the copyright work and other copyright works.30 Given the existence of exclusive copyright protection for original copyright
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works, it can be assumed that the supply of any unique copyright work is relatively inelastic. If the demand for any given work is inelastic with regard to changes in price, the market power of the copyright owner will distort the incentive function of copyright by drawing too many resources into the creation and production of certain works. Copyright owners of individual works may enjoy market power due to the fact that the subject matter of the work cannot be expressed in any other way. In these cases, the typical exceptions to copyright protection, such as the idea/expression dichotomy, fail to allow for the imperfect substitutes that typically alleviate the market effects of exclusive rights. Examples of works where the restricted opportunities for expression have caused problems for copyright law include television programme-listings information,31 telephone directories,32 and industrial designs for spare automobile parts.33 Traditional ‘ideal’ copyright law, in responding to cases of individual market power, either extends exclusive rights or fails to provide protection for such works. Copyright law in the United States includes the idea/expression ‘merger’ doctrine, where copyright protection falls away from a work of expression when the work cannot be expressed in any other way.34 The inadequate choice between complete protection and no protection will provide either inflated rewards for owners or will remove the possibility of any reward. In short, there are reasons to believe that incentives will be poorly calibrated in scenarios of restricted expression. Copyright owners will also enjoy market power when rights are exercised collectively through the natural monopolies of copyright collecting societies. Collecting societies, operating as a ‘one-stop shop’ for users, allow owners to exploit performing rights through the mechanism of blanket licensing.35 The needs of users ‘create’ this natural monopoly of demand, by requiring that all rights can be most efficiently and conveniently purchased in one place, and there are consequently no substitutes for the repertoire of these collecting societies. If one considers the position of radio broadcasters in the United Kingdom, there are no alternative sources for the purpose of obtaining permission to broadcast sound recordings apart from Phonographic Performance Ltd (PPL). Following an investigation by the Monopolies and Mergers Commission, it was found that collective licensing bodies, such as PPL, enjoyed market power and might prevent the emergence of new media by imposing licensing agreements which either restrict output or raise prices to unacceptable levels.36 Once again, there is a poor choice between granting exclusive rights with inflated rewards or withdrawing protection by failing to grant performing rights or preventing the establishment of collecting societies. There are also reasons to believe that incentives will be calibrated poorly in scenarios where rights are exercised collectively. Compulsory licensing has been used to alter the incentives/access balance
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in situations of individual or collective market power.37 If compulsory licensing is introduced as a response to copyright law’s refusal to accommodate individual works of restricted expression, the positive impact of compulsory licensing upon rewards for owners is obvious. If compulsory licensing is introduced following the extension of copyright law to individual works of restricted expression or works exercised collectively, the positive impact of compulsory licensing depends upon providing owners with rewards that are commensurate with the value of the work in the absence of market power.38 Compulsory licensing can be seen as one method of combating market power in situations where it appears that the owner is getting too much of a reward.39 The gradual expansion of copyright, in terms of its breadth and duration, offers the second scenario where compulsory licensing is used to correct for an ‘owner-biased’ copyright balance. As outlined above, the implicit assumption of the incentive justification of copyright law is that existing law at any time provides the ‘ideal’ balance between owners, secondary users and consumers. Expansion in the breadth of copyright, by introducing adaptation rights in the late nineteenth century, and the duration of copyright, by continually extending the copyright term, will therefore ex hypothesi provide owners with over-inflated rewards.40 Suggestions that adaptation rights continue to provide over-inflated rewards to copyright owners are highlighted by Article 86(b) of European competition law, which states that abuse of a dominant position may be found where right-holders are ‘limiting production, markets or technical development to the prejudice of consumers’.41 Where copyright intervenes in the process of ‘cumulative creation’, it is important to remember that the claims of owners and users upon copyright’s incentive function are equal, since both groups are engaging in creative and productive activity. It is possible that, in some cases, exclusive adaptation rights offer greater market power than is necessary to provide adequate incentives and the introduction of compulsory licensing provisions will limit rewards for owners.42 Finally, the extension of the copyright term will provide owners of certain, long-lasting works with greater rewards. If the previous copyright term is assumed to be offering the ‘ideal’ incentive balance, compulsory licensing will limit rewards in the extended period by allowing access to competing users.43
6.5 CONCLUSION This chapter has examined the incentive arguments that explain existing compulsory licensing provisions in copyright law. Compulsory licensing is explained as a method of providing the correct incentives/access balance, by
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encouraging production in the absence of copyright protection or by encouraging utilization in the presence of individual or collective market power. In these cases, the policy can be justified since owners’ rewards are more closely, if imperfectly, related to the value of works (as measured by consumer demand). It has also been shown that compulsory licensing corrects imbalances introduced into the law by the expansion of copyright’s breadth and duration. In conclusion, it is worth considering areas where either the existence of market power or the continuing expansion of copyright law suggests a consideration of compulsory licensing. There are a number of areas where the market power resulting from copyright protection for individual works of restricted expression may undermine existing arguments for exclusive rights. Examples include the new database right (which protects the ‘data’ as well as the ‘base’),44 technological standards that promote interoperability, certain functionally efficient elements of computer programs and parodies (where the underlying work is the target of the parody and cannot be expressed in any other way). Market power resulting from collective arrangements for exploiting rights may require the investigation of compulsory licensing of broadcast rights for sports leagues. Finally, it is worth considering compulsory licensing when new rights are introduced into United Kingdom copyright law, such as a blank-tape levy, or when the duration of existing rights is further extended.
NOTES 1. Transaction costs include the costs of finding willing buyers or sellers and their prices, the costs of bargaining with buyers or sellers over the terms of the transaction and the costs of monitoring ongoing transactions. The seminal work was R.H. Coase (1960), ‘The problem of social cost’, Journal of Law and Economics, 3, 1-44. For an application of Coase’s approach to copyright law, see W.J. Gordon (1982), ‘Fair use as market failure: a structural and economic analysis of the Betamax case and its predecessors’, Columbia Law Review, 82, 1600-57. 2. K.J. Arrow (1962), ‘Economic Welfare and the Allocation of Resources for Invention’, in Universities-National Bureau Committee for Economic Research, The Rate and Direction of Inventive Activity - Economic and Social Factors: a Conference of the UniversitiesNational Bureau Committee for Economic Research and the Committee on Economic Growth of the Social Science Research Council, Princeton: Princeton University Press. 3. W.M. Landes and R.A. Posner (1989), ‘An economic analysis of copyright law’, in Journal of Legal Studies, 18, 325-63. 4. In the United States, the impact of compulsory licensing upon transaction costs is discussed as the primary justification for the introduction of the policy. Compare R.S. Lee (1982), ‘An economic analysis of compulsory licensing in copyright law’, Western New England Law Review, 5, 203-26 with R.P. Merges (1996), ‘Contracting into liability rules: intellectual property rights and collective rights organizations’, California Law Review, 84, 1293-393. 5. The ‘cumulative creation’ perspective is outlined in great detail in G. Lunney Jr. (1996), ‘Re-examining Copyright’s Incentives-Access Paradigm’, in Vanderbilt Law Review, 49, 483-650. The classic ‘single work’ incentives/access paradigm is articulated in relation to
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6. 7.
8. 9.
10.
11.
12.
13. 14.
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patents in W.D. Nordhaus (1969), Invention, Growth and Welfare, pp. 86-90, Cambridge, Mass: MIT Press. Copyright, Designs and Patents Act, 1988, Section 16 (3). The idea/expression dichotomy suggests that copyright protection does not extend to protect ideas but only to the creator’s expression of those ideas. See R.H. Jones (1990), ‘The myth of the idea/expression dichotomy in copyright law’, Pace Law Review, 10 (3), 551-607. The defence of fair dealing, or fair use in the United States, allows for certain unauthorized uses of a substantial part of a copyright work on certain terms and conditions. See Copyright, Designs and Patents Act, 1988, Sections 29-36. In the United Kingdom, Section 12 (1) of the Copyright, Designs and Patents Act, 1988 fixes the term of protection for original literary, musical or dramatic works at the life of the author plus seventy years. The Copyright, Designs and Patents Act, 1988 reintroduced compulsory licences for the first time since the Copyright Act, 1911 was repealed by the 1956 Copyright Act. See H. Laddie, P. Prescott and M. Vitoria (1995), The Modern Law of Copyright and Designs, p. 648, London: Butterworths. This trend has continued with the Duration of Copyright and Rights in Performances Regulations, 1995 (Statutory Instrument 1995, No. 3297) and the Copyright and Related Rights Regulations, 1996 (Statutory Instrument 1996, No. 2967). In the United Kingdom, the Copyright Tribunal has the statutory role of setting prices for access to copyright works under all compulsory licensing provisions. Section 127 of the Copyright, Designs and Patents Act, 1988 instructs the Tribunal to make orders as to pricing that are ‘reasonable in the circumstances’. The Tribunal’s very existence allows the assumption that pricing is below the ‘free market’ rate. In the United States, compulsory licensing fees are set in the statute and adjusted by the US Library of Congress’ Copyright Arbitration Royalty Panels. Section 801(b) of the Copyright Act instructs the Panels to maximize the availability of creative works to the public and pricing is set below the ‘free market’ rate. Examples of by-products include chess problems, program-listings information and sports scores. See, respectively, B. Frank (1996), ‘On an art without copyright’, Kyklos, 49 (3), pp. 3-15; Joined Cases C-241 & 242/91P Radio Telefis Eireann and Independent Television Publications Ltd v. E.C Commission [1995] E.C.R I -743; [1995] 4 C.M.L.R. 718; M.Y. Youn (1997), ‘Case note: neither intellectual nor property’, Yale Law Journal, 107, 267-72. United Kingdom copyright law contains a number of compulsory licensing provisions relating to the reproduction rights to individual works. Under Section 149 of the Act, introduced in Sections 175-6 of the Broadcasting Act, 1990, compulsory licensing is available for broadcast programme-listings information. Compulsory licensing is also available in relation to lapsed and revived copyrights, resulting from the extension of the term of duration under the implementation of the Copyright and Related Rights Directive (Council of the European Communities [1993], Directive 93/98 harmonizing the term of protection of copyright and certain related rights O.J. L290/9), included in the Duration of Copyright and Rights in Performances Regulations, 1995 (Statutory Instrument 1995, No. 3297). A compulsory licence is also available for any copyright work under Section 144 of the Act on recommendation from the Monopolies and Mergers Commission (now renamed the Competition Commission). Refusal to license or restrictive licence conditions may empower the Secretary of State, under the Fair Trading Act, 1973 (Schedule 8, Part I), to order a compulsory licence. The European Commission also has the power to order the compulsory licensing of copyright works if a copyright owner is found to have violated Article 86 of the Treaty of Rome affecting trade between member states. A. Plant (1934), ‘The economic aspects of copyright in books’, Economica (May), p. 191: (‘the new royalty system . . . makes it possible . . . to enjoy a wider circulation of books at lower prices’). Some economists argue that the initial gains from allowing entry through compulsory licensing will more than outweigh any associated loss of producer profit and the effects of such loss on incentives to create and produce copyright works. See I. Ayres and P. Klemperer (1999), ‘Limiting patentees’ market power without reducing innovation
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15.
16.
17.
18. 19.
20. 21. 22.
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Copyright in the cultural industries incentives: the perverse benefits of uncertainty and non-injunctive remedies’, Michigan Law Review, 97, 987. The United States’ compulsory licensing provision for the mechanical ‘cover’ recording of musical works - a provision that is mirrored in Article 13 of the Berne Convention and in many other countries (although not the United Kingdom) - involves the compulsory licensing of an adaptation right. See 17 U.S.C § 115 (1994). According to Ringer, this compulsory licence, introduced in the 1909 Copyright Act, was the first statutory compulsory licence in history. See B.A. Ringer (1976), ‘Copyright in the 1980s’, in Bulletin of the Copyright Society of the U.S.A., 23, 304. In addition, Article 2 of the Appendix of the Berne Convention and Article 5 of the Universal Copyright Convention include adaptation right compulsory licences for translations of literary or dramatic works. In the United Kingdom, the Copyright Tribunal monitors the activities of all collecting societies, including performing right societies, under the copyright licensing provisions, Sections 116-144, of the Act. There are also specific compulsory licensing provisions for the control of collecting societies. The Copyright Tribunal has jurisdiction over the licensing activities of Phonographic Performance Limited and the Performing Right Society through the compulsory licence for the inclusion of sound recordings in broadcasts or cable programme services (introduced in the Broadcasting Act, 1990) in Sections 135A to 135H of the Act. The majority of the United States’ compulsory licensing provision concerns public performance rights. The United States’ public performance compulsory licensing provisions include: a compulsory licence for the public performance of non-dramatic musical works on jukeboxes, 17 U.S.C § 116 (1994); a compulsory licence for the public performance of sound recordings in certain digital radio transmissions, 17 U.S.C § 114 (d)(2) (1994); a compulsory licence for public performances of sound recordings by certain non-interactive, non-subscription digital audio services (‘webcasters’), 17 U.S.C § 116 (1999); a compulsory licence for the use of published non-dramatic musical works and published pictorial, graphic and sculptural works in non-commercial broadcasting, 17 U.S.C § 118 (1994); a compulsory licence for the secondary transmission of copyright works by cable systems, 17 U.S.C § 111(c) (1994); and a compulsory licence for the secondary transmission of copyright works by satellite carriers for private home viewing, 17 U.S.C § 119 (1994). If the creative contributions of individual users are sizeable, as with adaptations of musical works in sound recordings, then each adaptation forms its own niche market and there is obvious potential for increased licensing fees for the owner of any given work. If the creative contributions of individual users are negligible beyond the amount required from transformation into a different medium, then two or more adaptations could be similar enough to compete in the same market, resulting in increased output and downward pressure on prices. In instances of low creative contribution by users, where the potential for increased production of adaptations is limited, the increased access offered by compulsory licensing could only lower rewards for the owner of any given work. See AIRC v. PPL, Case No. 25, in M.J. Freegard and J. Black (1997), The Decisions of the UK Performing Right and Copyright Tribunal, p. 203, London: Butterworths. At this point it is worth mentioning that pure access/dissemination concerns may justify the compulsory licensing of the rights included in copyright. The compulsory licensing of reproduction rights may be justified by dissemination concerns if reproduction under compulsory licensing is important for public education or the provision of market information to consumers. The compulsory licensing of adaptation rights may be justified by dissemination concerns if adaptation under compulsory licensing is important for the translation of literary works, especially with regard to scientific or technological publications that contribute to economic growth in developing countries. N.W. Netanel (1996), ‘Copyright and a democratic civil society’, Yale Law Journal, 106, 283-387. R.P. Adelstein and S.I. Peretz (1985), ‘The competition of technologies in the market for ideas: copyright and fair use in evolutionary perspective’, International Review of Law and Economics, 5, 209-38. In the United States, the court ruled that pianola rolls were not copies of musical
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23. 24.
25. 26.
27.
28. 29.
30.
31. 32. 33.
34.
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compositions, White-Smith Music Publishing Co. v. Apollo Co. (1908) 209 U.S. 1, and the Supreme Court refused to recognize that cable operators who rebroadcast local programming actually infringed any copyright because the audio-visual works were not performed by the cable companies; they were merely operating in a viewer function. Fortnightly Corp. v. United Artists Television, 392 U.S. 390 (1968). Even Congress found that the playing of records on juke-boxes did not constitute public performance, since the practice was granted an express exemption in the 1909 Copyright Act. As an example of this process, see World Intellectual Property Organisation Copyright Treaty, (1997). In the United Kingdom, abuse is found where a copyright owner is using the exclusive rights conferred by copyright to expand into markets beyond the primary market for any given copyright work. See J. Temple Lang (1996), ‘The Principle of Essential Facilities and its Consequences in European Community Competition Law’ in A. Peacock (ed.) The Political Economy of Broadcasting, Oxford: Regulatory Policy Institute Essays in Regulation, No. 7, (p. 32). In the United States, the Department of Justice stated that it is unacceptable that ‘the networks or other large copyright holders might withhold permission to rebroadcast programs and thereby seek to reserve the CATV (cable TV) market for themselves’, quoted in R.V. Bettig (1996), Copyrighting Culture: The Political Economy of Intellectual Property, Oxford: Westview Press, p. 129. In the United States, the court decisions on pianola rolls and cable television, and the legislative exemption for juke-boxes, were followed by the statutory compulsory licensing provisions for mechanical reproductions, cable television and juke-boxes. The compulsory licensing of public performance rights may be justified by dissemination concerns if public performance under compulsory licensing is important for ensuring competition in media content ownership. If particular copyright works, for instance sports rights, are considered to be the primary content required by all entrants into any given media market, then the state may compulsory licence such rights in order to encourage new entrants. The state may also seek to promote competition in media delivery system ownership or between different delivery platforms such as cable and satellite television. At the 1948 Brussels revision conference of the Berne Convention, the United Kingdom’s representatives declared that the UK government would accept the existence of the exclusive performing right so long as they remained free to act to prevent abuse of monopoly positions. R. Subiotto (1992), ‘The right to deal with whom one pleases under EEC competition law: a small contribution to a necessary debate’, in European Competition Law Review, 6, 234. In Europe, it has been recognized by the Court of Justice that, in principle, the owner of copyright does not occupy a dominant position merely by exercising his or her exclusive right to distribute the protected articles. See Case 78/70 Deutsche Grammophone GmbH v. Metro-SB-Grossmarkte Gmbh & Co. [1971] E.C.R. p. 487. Such tests can either be based on econometric tests, involving an estimate of the effects on demand for the copyright work of a small but significant increase in price, or other evidence, such as substitution in the recent past or the views of customers or competitors. See S.D. Anderman (1998), EC Competition Law and Intellectual Property Rights, p. 152, Oxford: Clarendon Press. Joined Cases C-241 & 242/91P Radio Telefis Eireann and Independent Television Publications Ltd v. E.C. Commission [1995] E.C.R. I-743. See the United States’ Supreme Court decision in Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991). Monopolies and Mergers Commission (1985), Ford Motor Company Limited: A Report on the policy and practice of the Ford Motor Company Limited of not granting licences to manufacture or sell in the United Kingdom certain replacement body parts for Ford vehicles, Cmnd 9437; British Leyland Motor Corp. Ltd v. Armstrong Patents Co. Ltd, [1986] 1 All E.R. (p. 850); AB Volvo v. Erik Veng (UK) Ltd [1988] E.C.R. 6211. The merger doctrine has its origins in Baker v. Selden 101 U.S. 99 (1879). The doctrine has developed and is often used in computer cases, such as NEC Corp. v. Intel Corp. 10 U.S.P.Q2d (BNA) 1177.
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35. There are also collecting societies that administer reproduction rights, such as the Copyright Licensing Agency’s supervision of photocopying blanket licences granted to libraries. 36. Monopolies and Mergers Commission (1988), Collective Licensing: A Report on Certain Practices in the Collective Licensing of Public Performances and Broadcasting Rights in Sound Recordings, Cmnd 530 London: HMSO. 37. The United Kingdom’s compulsory licence for television programme listings combats individual market power while the compulsory licences for the control of collecting societies combat collective market power. 38. The United States compulsory licence for the cover recording of musical works evolved in response to the fact that one company, Aeolian, had bought the mechanical recording rights for the majority of published musical works. See S.L. Bach (1986), ‘Music recording, publishing, and compulsory licenses: toward a consistent copyright law’, Hofstra Law Review, 14, 379-401. 39. J.C. Ginsburg (1990), ‘Creation and commercial value: copyright protection of works of information’, Columbia Law Review, 90, 1926: (‘the real purpose of a compulsory license is to reduce the extent to which copyright ownership of the covered work conveys monopoly power’). 40. The term of protection for literary works has been gradually extended from a flat twenty-one years of protection for new works in the 1709 Statute of Anne, through the 1814 Act (twenty-eight years or the life of the author, whichever was longer), the 1842 Act (forty-two years or the life of the author plus seven years, whichever was longer), the 1911 Act (the life of the author plus fifty years) to the current term of copyright protection standing at the life of the author plus an additional seventy years. 41. This has been confirmed by case law. The European Commission in the ‘Magill’ case, in granting the compulsory licence in programme listings, constantly referred to the competitive relevance of a ‘new product’ but did not define the limits of the term ‘new product.’ See Joined Cases C-241 & 242/91P Radio Telefis Eireann and Independent Television Publications Ltd v. E.C. Commission [1995] E.C.R. I-743 42. In United States copyright law, there is a provision for the denial of injunctions, in effect issuing a compulsory licence, where the owner of a derivative work right bring an action to enjoin the production of a derivative work to which the contribution of the underlying work is minimal. See 17 U.S.C 502(a) 43. As evidenced by the United Kingdom’s compulsory licence for lapsed and revived copyrights. 44. J.H. Reichman and P. Samuelson (1997), ‘Intellectual property rights in data?’, Vanderbilt Law Review, 50, 51-166.
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7. Copyright and corporate power Fiona Macmillan1 7.1 INTRODUCTION This chapter considers the relationship that copyright has to ‘culture’,2 on the one hand, and to matters that might be loosely grouped around concepts of trade and economics, on the other. It does not attempt to argue that matters of culture and matters of trade exist in mutually exclusive domains, nor does it attempt to argue that these two matters are necessarily incompatible within a body of law serving the function of copyright law.3 What the chapter does try to do is to show that the focus of the Anglo-Saxon model of copyright law on economic rights has facilitated the build-up of significant bases of private power over cultural output and that these bases of private power now threaten not just the cultural development function of copyright but the very idea of cultural development.
7.2 CULTURE AND DEVELOPMENT The utilitarian/development justification for copyright is overwhelmingly familiar. A well-known example appears in the Preface to the World Intellectual Property Organization’s Guide to the Berne Convention for the Protection of Literary and Artistic Works (WIPO, 1978), which states: Copyright, for its part, constitutes an essential element in the development process. Experience has shown that the enrichment of the national cultural heritage depends directly on the level of protection afforded to literary and artistic works. The higher the level, the greater the encouragement for authors to create; the greater the number of a country’s intellectual creations, the higher its renown; the greater the number of productions in literature and the arts, the more numerous their auxiliaries in the book, record and entertainment industries; and indeed, in the final analysis, encouragement of intellectual creation is one of the basic prerequisites of all social, economic and cultural development.
The general idea, of course, is that the grant of copyright encourages the production of cultural works that is essential to the development process. 99
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The articulation of this notion has now reached the status of a mantra and, befitting such a status, is chanted more often than analysed. Analyses that do exist tend to raise as many questions about this utilitarian rationale as they do about its competing (or accompanying - depending on who you listen to (Waldron, 1993, pp. 850ff.)) natural rights rationale. These questions are not just about the efficacy of such rationales as a justification for the existence of copyright law,4 but also about the extent to which the content of copyright law appears to relate to them (Macmillan Patfield, 1997). Leaving aside for the moment the contribution of copyright law, something interesting about the utilitarian rationale is its assertion of a connection between the promotion of culture and the process of development. This connection has been subscribed to, in a context not directly related to copyright law, by the UNESCO World Commission on Culture and Development in its Report, Our Creative Diversity (World Commission on Culture and Development, 1996). In his Foreword, the President of the Commission, Javier Pérez de Cuellar, noted that: New questions needed to be asked and old ones posed anew. What are the cultural and socio-cultural factors that affect development? What is the cultural impact of social and economic development? How are cultures and models of development related to one another? How can valuable elements of a traditional culture be combined with modernization? What are the cultural dimensions of individual and collective well-being?
The Report aims to lay the groundwork for looking at these sorts of questions. In order to do this, it had to grapple to some extent with the meaning of expressions like ‘culture’ and ‘development’. Generally, the Report takes a broad approach to the definition of culture embracing (but not limited to) ‘creativity in politics and policy-making, in technology, in industry and commerce, in education, in the arts, and in social and community development’ (World Commission on Culture and Development, 1996, Analytical Chapter 9). While it states that ‘[o]ur primary objective must be to extend the focus of “culture” beyond the arts and heritage’, it acknowledges that addressing the problems of cultural policy in relation to these areas is a good start. This is perhaps because arts and heritage are some of the more easily definable parts of the notion of culture. To the extent that these issues are being considered against the background of the role of copyright law, it seems appropriate to focus on that part of the definition of culture which concerns itself with cultural output in the form of the arts. In relating this definition of culture to the process of development, the Report contrasts two concepts of development. In the first ‘development is a
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process of economic growth, a rapid and sustained expansion of production, productivity and income per head (sometimes qualified by an insistence on a wide spread of the benefits of this growth)’ (World Commission on Culture and Development, 1996, Introduction). In the second and alternative concept, ‘development is seen as a process that enhances the effective freedom of the people involved to pursue whatever they have reason to value’ (World Commission on Culture and Development, 1996, Introduction). Economics is clearly what matters in the first concept. The sort of things that matter according to the second concept are ‘longevity, good health, adequate nutrition, education and access to the world’s stock of knowledge, absence of gender-based inequality, political and social freedoms, autonomy, access to power, the right to participate in the cultural life of the community and in important decisions affecting the life and work of the citizens’ (World Commission on Culture and Development, 1996, Introduction). The role of culture differs in relation to these two concepts of development. In relation to the first concept, culture is said to be instrumental, whereas its relationship to the second concept is fundamental. The Report acknowledges that the instrumental approach to culture is important for the very reason that economic growth is regarded as important.5 However, the Report notes that the economic approach is limited. Various ‘development disasters’ can be laid at the door of the economic approach, such as environmental degradation and the introduction of oppressive authoritarian laws (World Commission on Culture and Development, 1996, President’s Foreword). Further, economic development cannot be regarded having turned the industrialized world into a nirvana, as is demonstrated by social deprivation and high rates of institutionalized unemployment (World Commission on Culture and Development, 1996, President’s Foreword). In rejecting the economic approach to development in favour of the alternative freedom-of-choice approach, the Report did not perceive itself as having left economics behind, but rather as having transcended it (World Commission on Culture and Development, 1996, President’s Foreword). The rejection of an instrumental view of culture in favour of a fundamental one means that culture is seen as not being just about the production of a saleable commodity, but rather as having a value in itself. According to this approach, education, for example, is not seen as being merely about skills training, building up the industrial base and making money; rather it is seen as intrinsically valuable while also being capable of delivering economic benefits. What are the consequences of embracing the wide freedom-of-choice approach to development and its concomitant fundamental approach to culture? One consequence obviously is that we value cultural output as an end in itself. A commitment to multiculturalism is also an important consequence.6 This commitment goes hand in hand with the need to control the exercise of
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power by way of cultural domination or hegemony. It seems reasonable to argue, as the Report does, that the exercising of the power that comes with cultural domination cuts down both collective and individual freedoms. Not only does this mean that the development goal of freedom of choice is not reached, it also puts that goal exponentially further beyond reach by discouraging creativity and diversity (World Commission on Culture and Development, 1996, Analytical Chapter 9).
7.3 THE CONTRIBUTION OF COPYRIGHT The extent to which our Anglo-Saxon approach to matters of development and culture regards culture as fundamental rather than instrumental is open to question. If the approach of copyright law to what might be described as cultural output is considered as being relevant to determining our mindset on the role of culture in society, then it is very likely that we are flailing uncertainly between the instrumental and fundamental approaches. This is because the law of copyright seems to be caught in some sort of perpetual dilemma which mirrors the instrumental/fundamental division. Is copyright law about encouraging creativity and protecting the output of that creativity or is it about stimulating commercial exploitation of creative/ cultural output? If it is about the former, then it is likely that it bolsters the fundamental role of the aspects of culture to which it relates. If, on the other hand, it is about the latter then it is placing cultural output in an instrumental role. It does not seem controversial to suggest that it is difficult, at least at first blush, to tell just what copyright is about in this context. Refreshingly, this does not really seem to have too much to do with the question of whether one opts for the natural rights rationale or the public benefit rationale.7 While the natural rights rationale seems to line up with a fundamental approach to the role of culture, the public benefit rationale is capable of serving either a fundamental or an instrumental approach. The position of the public benefit rationale all depends upon how one approaches the concept of development. If the notion of development in the public benefit rationale means economic development, then the rationale appears to be subscribing to an instrumental approach; if it means something broader, then the rationale’s approach to cultural product must be a more fundamental one. It is worth noting in this respect that the passage from WIPO’s Guide to the Berne Convention, quoted earlier, refers to ‘social, economic and cultural development’ - although it may be that ‘social’ and ‘cultural’ have been included in order to reflect the position in countries which have adopted the droit d’auteur model of copyright law.
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7.4 COPYRIGHT AND CULTURE Rhetorically, at least, copyright (and intellectual property as a whole) has associated itself with concepts of genius, creativity and culture.8 A closer look, however, reveals that copyright has often failed these concepts. An example of this at the general level might be the very low threshold of the ‘originality’ requirement in relation to literary, dramatic, musical, and artistic works (see, further, Macmillan Patfield, 1997, pp. 118-21). It is relatively clear that the content of this requirement 9 derived from concerns that copyright should confer a monopoly over the form of rather than the ideas in a work and, accordingly, the notion of originality attached itself to differences in form (Chartier, 1994). Nevertheless, copyright law has been left in a situation where it grants monopoly protection to works that have little to do with creativity. Copyright law has also been guilty of considerable arrogance in its failure to take heed of the opinions and expertise of those supposedly most intimately affected by its operation: the creative artists. The visual artist J.S.G. Boggs uses the famous Koons’ ‘String of Puppies’ case 10 as one example of the law’s failure to understand art (Boggs, 1993, pp. 898-900). As is well known, Jeff Koons used an image in a photograph of a couple holding seven puppies as the basis of a sculpture. He was successfully pursued for copyright infringement by the photographer on the basis that the sculpture was a three-dimensional copy of a two-dimensional work of art. One of Boggs’ objections to this case is copyright law’s failure to understand the fact that sculpture and photography are separate disciplines. Accordingly, it is false to treat them as though they were the same thing under the broad heading of artistic works. To Boggs, a visual artist, such treatment is just as meaningless as saying that a written description of the photograph is a breach of the photographer’s copyright. To copyright lawyers, the association of two pieces of visual art under the rubric of ‘artistic works’ may not seem so odd, but arguably this is because not knowing any better we have been sucked in by copyright law’s system of illusory association.11 The ‘String of Puppies’ case also illustrates another way in which copyright fails in a fundamental approach to culture. Boggs in fact described Koons’ sculpture as being a ‘response’ to the photograph (Boggs, 1993, p. 898). The idea of the sculpture as a ‘response’ was mirrored in Koons’ legal argument that he was entitled to the protection of the fair-use doctrine on the basis that his work was a parody for the purpose of criticizing the banality of popular cultural images.12 This argument was unsuccessful. The US Supreme Court held that the fair-use doctrine operated only where the allegedly infringing work criticized the copyright work and not where it used the copyright work to criticize society in general. This is a slippery distinction of the sort that is often described as making bad law. Moreover, the fact that the fair-use
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doctrine did not entitle Koons to engage in an act of cultural pastiche and parody is of concern if one thinks that copyright law should be about the promotion of cultural activity and diversity at the fundamental level. It is of serious concern if one subscribes to the post-modernist view that modern cultural products are all about pastiche or parody or both,13 whether consciously referential or not.14 What is happening here is that copyright is failing to secure what has been described as ‘the intellectual commons’ (Drahos, 1996, Chapter 3; Drahos, 1995a).15 This is because one way of safeguarding the intellectual commons is by strong fair-dealing/fair-use laws.16 A diverse and vigorous cultural development of the sort envisaged by, for example, the World Commission on Culture and Development cannot occur without safeguarding the intellectual commons. A final example of copyright’s failure to address itself to culture as a fundamental value relates to the issues of indigenous cultural property and folkloric works. As already noted, the Report of the World Commission on Culture and Development is very much about the development of pluralistic culture. The Report explicitly ties this to the importance of securing the cultural rights of minorities and indigenous peoples. The law of copyright, however, has not had a good track record here. The problems, for example, in protecting indigenous cultural works under Australian copyright law are well known. They include, in particular, difficulties with concepts of group ownership, issues about duration of rights and about the protection of distinctive styles of work (Blakeney, 1995).17 Some of these issues are on their way to being addressed in Australia (see Commonwealth of Australia, Attorney General’s Department, 1994).18 Nevertheless a rather unsavoury odour hangs around copyright law as a consequence of its problems in relation to protection of indigenous cultural works.19 If the enhancement of indigenous culture is tied in with the process of development, then what does copyright law’s difficulty in adapting to protect indigenous cultural output say about its relationship with culture and development generally?
7.5 COPYRIGHT AND TRADE Copyright may have failed culture at a fundamental level, but its role in relation to culture at an instrumental level has been much more successful. That is, copyright has been well used as an instrument for promoting trade in the cultural output that comes within its purview. The best example of this is probably the negotiation and conclusion of the World Trade Organization’s agreement on ratification of the Trade-related Aspects of Intellectual Property Rights (TRIPs Agreement). The conclusion of the Agreement was, of course, driven by the United States. As Michael Blakeney has shown, the USA used
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two tools, in particular, to drive the negotiations (Blakeney, 1996, Chapter 1). First, it took on the burden of convincing the GATT Council that intellectual property rights were relevant to GATT. In 1983 and 1984, evidence was submitted to Congressional hearings by US trade associations on the economic loss that the members of those associations suffered internationally as a consequence of the non-enforcement or absence of intellectual property laws.20 Amongst other things, evidence was presented at these hearings that the video industry was losing $6 billion annually (Blakeney, 1996, p. 2). The International Intellectual Property Alliance, representing American trade associations in the copyright-related industries, produced a study in 1985 estimating that non-enforcement or absence of copyright laws in Brazil, Egypt, Indonesia, Malaysia, Nigeria, the Philippines, the Republic of Korea, Singapore, Taiwan and Thailand had caused annual losses of $1.3 billion to the US copyright industries (International Intellectual Property Alliance, 1985, 7 21). The second tool used by the USA to drive the TRIPs process was the amendment in 1984 to section 301 of the Trade Act of 1974 to make intellectual property protection explicitly actionable under section 301 (Blakeney, 1996, p. 4). This was followed by the introduction in the Omnibus Trade and Competitiveness Act of 1988 of ‘Special 301’, enabling the US Trade Representative to put countries that failed to protect US intellectual property on a watch-list with a view to investigation and possible trade retaliation (Blakeney, 1996, p. 5). So if we are looking for rhetoric about copyright and trade we know where to find plenty of it. Of course, in this case rhetoric led to something more concrete in the form of the TRIPs Agreement itself. This Agreement might be argued to be the central normative force in global copyright law.22 For those who would want to see copyright bolstering the fundamental rather than instrumental role of culture, some comfort might be taken from the fact that the agreement refers to the trade-related aspects of intellectual property and thereby suggests that there may be some other aspects - but it is cold comfort. The truth is that, at least in the Anglo-Saxon model of copyright law, we had already gone a long way down the instrumental/trade-related road before the USA did us the favour of bringing it all out into the open. We have done this by including provisions within the exclusive rights attaching to copyright that relate to the commercial exploitation of copyright, while at the same time making copyright a completely alienable property interest.23 In the global environment, the particular exclusive rights upon which we should fix our focus in this respect are the commercial distribution rights, especially those which give the copyrightholder control over imports 24 and rental rights.25 We have, so far, avoided the inclusion in the main body of the Berne Convention of much in the way of distribution rights as part of the exclusive rights of the copyright owner. This, however, does not seem to count for much when stronger distribution rights are contained in the TRIPs Agreement,26 the 1996
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WIPO Treaties,27 and in the domestic legislation of many countries. Allied to this commodification of the copyright interest, another significant aspect of copyright law making it an important tool of trade and investment is its duration. The long period of copyright protection increases the asset value of individual copyright interests (Towse, 1999, pp. 98-9).28 Finally, it should also be noted that the pressures that gave rise to the WIPO Copyright Treaty of 1996, have spawned a series of pieces of domestic or regional legislation (or proposed legislation) that tip the copyright power balance even more strongly in favour of the commodifiers. The legislation in question is designed to strengthen the position of copyright owners in the face of the perceived threat to copyright as a consequence of digitization and new forms of communication technology, such as the Internet. One of the ways in which these pieces of legislation typically seek to shore up the position of copyrightholders is by removing or reducing the existence or practical utility of the fair dealing or fair-use exemptions.29 Unless we regard copyright as being just about trade or economics, then there is no overwhelmingly compelling reason why the integrity of copyright law requires these strong forms of rights commodification. It may even be that copyright as a body of law would have greater integrity without such commodification. Justifications of commodification generally seem to hinge around the need to protect the interests of the commodifiers (publishers, film production companies, television and other broadcasting companies, entertainment conglomerates, and so on) and to encourage them to invest in the exploitation of copyright works. Something about this sounds fishy: Where else do we say that it is a matter of equity that investors should make a profit? Usually our view is that investors venture out into any market at their own risk. If a given market happens to be structured in such a way as to yield poor returns, that may be a matter of utilitarian or economic concern, but it is hardly a matter of intervention on grounds of fairness to cover investors’ costs. (Waldron, 1993, p. 854)
On the other hand, it might be possible to justify a degree of commodification by reference to the need for creators to be remunerated in order to encourage them to create and by reference to the need for cultural works to be disseminated in order to reap the benefits of their creation. This latter point would fit in with the argument that an important aspect of copyright is its communication role (van Caenegem, 1995). Whether some degree of commodification is essential to the integrity of copyright law or not, the point is that we have allowed the process of commodification to take over copyright without really asking what the costs and consequences of this commodification are.
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7.6 THE ACQUISITION OF PRIVATE POWER A consequence of commodification of the copyright interest is the way in which it permits the build-up of private power over cultural output (see also Bettig, 1996, especially Chapter 3; and Towse, 1999). The way in which the distribution rights attaching to copyright might be used by a multinational corporation to carve up the international market (see further, Macmillan, 1998) is a small part of a much bigger story about the way in which commodification can lead to global domination of the market for cultural output. The capacity to achieve a position of global power is a combination of the international nature of intellectual property rights, the fact that many of the corporations owning the rights operate on a multinational level, and the fact that many of the media and entertainment corporations are conglomerates that display a high degree of horizontal integration by operating in a number of different areas of cultural output (see also Towse, 1999, pp. 97-8). Some are also vertically integrated, with a high degree of control over the entire distribution process. The degree of horizontal and vertical integration amongst media and entertainment corporations is a consequence of the fashion for mergers and acquisitions in the media and entertainment sector that began in the 1970s. It seems that one force that has driven these mergers and acquisitions is the desire to acquire ownership of copyright interests (see Bettig, 1996, pp. 37-8). Certainly such interests can have a significant asset value.30 Of course, this process of horizontal and vertical merger and acquisition concentrates corporate power over cultural output. An example of this type of power, analysed by Anne Capling (Capling, 1996), is the power that six international entertainment corporations hold over the Australian market for contemporary music.31 The companies in question are CBS (Sony), WEA (Time Warner), Polygram (NV Philips), EMI (Thorn EMI), BMG (Bertelmanns Music Group) and Festival (News Limited). All of these corporations operate as international conglomerates, some with substantial media interests, and between them they control 70 per cent of the world’s recorded music market.32 Furthermore, in Australia they also have control of the distribution system - EMI and CBS do this by virtue of a joint venture, as do BMG and WEA; Polygram and Festival have subsidiaries which act as their distributors (Capling, 1996, p. 21). The specific copyright tool that they used to orchestrate their oligopoly was their control over the import of works to which they own the copyright (Capling, 1996, p. 21). The right to control parallel imports with respect to recorded music was removed from Australian copyright law in 1998.33 However, this appears to have done little so far to alter patterns of control and distribution in the Australian recorded music market. Recently, we have also seen the major music labels and music publishers
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leaping to the defence of their market control in a series of cases in the USA directed at preventing the distribution of music on the Internet by the use of MP3 files.34 Despite the fact that recording artists Metallica and Dr Dre have also been involved in these actions, the primary concern of the industry appears to be defence of the stranglehold over distribution,35 even if this is at the expense of provisions of the Digital Copyright Millennium Act designed to ensure that the Internet is not crippled through attacks on service providers.36 Of course, the most likely upshot of these proceedings is that the recording labels will enter into distribution arrangements with online music providers.37 Another possible consequence is the amendment of the Digital Copyright Millennium Act in order to bolster the position of the recording labels in relation to the online music providers.38 Another recent controversy that appears to have created similar alarm in the ranks of the media and entertainment corporations was the release of the DeCSS (Decrypted Content Scrambling System) source code. This source code allows the copying of digital video disks and their transmission via the Internet. Not only did the eight major studios take an action against the publisher of the site that originally disclosed the code, 2600 Magazine; they also took an action against Copyleft for reprinting the code on a T-shirt.39 On 17 August 2000, US District Court Judge Lewis Kaplan handed down a decision preventing 2600 Magazine from continuing to publish the DeCSS Code on its website.40 There is, however, a reasonable argument to be made that merely posting and linking the DeCSS code, as opposing to making use of it, is purely expressive. If this is so, then injuncting such behaviour raises serious free-speech concerns.41 It is reported that 2600 Magazine will appeal.42 For the media and entertainment corporations, much appears to hang on the ultimate conclusions of the various actions brought to preserve their exclusive distribution rights. The same, however, might be said for those would argue for a reduction in the oligopolistic power of these corporations. Despite the concern engendered by the new technologies, the general rule appears to be that the position of power which is enjoyed by media and entertainment corporations is self-reinforcing. By having such considerable power they are able to acquire more. This is a consequence of the interdependence in most Western economies between the public and private sector. The economic health of nations is dependent on the success of the corporate sector. As Warren put it in Curtis Publishing Company v. Butts: Increasingly . . . the distinctions between governmental and private sectors are blurred. Since the depression of the 1930s and World War II there has been a rapid fusion of economic and political power, a merging of science, industry and government, and a high degree of interaction between the intellectual, governmental and business worlds . . . [P]ower has also become much more organised in what we have commonly considered to be the private sector.43
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This puts corporations in the position to demand of government that it take steps to protect their interests and thereby to reinforce their positions of private power.44 It is important in this context not to forget that it was the US corporate sector that the US government was seeking to protect when it engaged in its various strategies to force the progress of the TRIPs Agreement. Not only has the US government protected the media and entertainment corporate sector; its actions have also allowed the sector to substantially increase their stranglehold over international cultural output protected by copyright (see also Capling, 1996, p. 23 and Drahos, 1995b). The fact that the government is so willing to act in the interests of the corporate sector - even if for its own reasons - shows the power which the sector wields.45 It is not unreasonable to suggest that the degree of the power of the private sector compares with that of government (if not exceeds it) (see further, Chayes, 1959). One significant difference is that the power of government, at least in democratic societies, is legitimated through accountability mechanisms such as elections and the rules of administrative law (see further, Macmillan Patfield, 1995, pp.7-15). The private sector has a free hand to use power in a way that government can only dream about.
7.7 THE SIGNIFICANCE OF PRIVATE POWER How does this copyright-facilitated aggregation of private power affect society and its development process? Returning, first, to the example of the contemporary music industry and the way it operates in Australia, according to Ann Capling, even though the big six corporations control 70 per cent of the global market for music, they only release around 20 per cent of this music in Australia. Not only does this mean that these corporations act as a cultural filter, controlling what we can hear; it also means that the music offered for retail sale has ‘about as much cultural diversity as a Macdonald’s menu’ (Capling, 1996, p. 2):46 The domination by these global entertainment corporations of the Australian market facilitates the globalisation of a mass culture of mediocrity in a number of ways. It ensures, for instance, the prevalence of the top sellers to the detriment of other less mainstream overseas music . . . Pop and rock account for close to ninety per cent of the Australian music market and, with the exception of a handful of Australian acts which have won an international following, this market is overwhelmingly dominated by North American and British artists. (Capling, 1996, p. 2)
Of course, Australia is hardly likely to be the only market where this happens. The processes which produce cultural homogeneity and mediocrity are global (cf. Moran, 1998). It is interesting in this respect to note that one of the
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arguments that is made on behalf of the activities of MP3 Internet music-file trading services, such as Napster, is that they give exposure and airplay to smaller artists and small independent labels.47 If this is so, then it is a benefit likely to be lost if the major labels gain a distribution grip over the online music providers. It is not just the music industry where the corporate sector controls what filters through to the rest of us. The economic power of publishers has, in its wake, conferred a broader power on publishers to determine what sort of things we are likely to read. Richard Abel is eloquent on this topic: Book publishers decide which manuscripts to accept; form contracts; dictate terms to all but best-selling authors; editors ‘suggest’ changes; and marketing departments decide price, distribution and promotion. Sometimes publishers go further . . . The Japanese publisher Hayakawa withdrew a translation of The Enigma of Japanese Power because the Dutch author had written that the Burakumin Liberation League ‘has developed a method of self-assertion through “denunciation” sessions with people and organizations it decides are guilty of discrimination’. Anticipating feminist criticism, Simon and Schuster cancelled publication of Bret Easton Ellis’s American Psycho a month before it was to appear. (Abel, 1994a, p. 52)
Ironically, in attempting to publish the monograph Speech and Respect, the text of his Hamlyn Lectures, in which the above passage appears, Abel himself was to feel the brunt of his publisher’s attempt at censorship (Abel, 1994b). He has subsequently identified this as an attempted exercise of private power to control speech (Abel, 1994b, p. 380).48 There are a number of other current examples of the same phenomenon in publishing. For example, it has been reported that HarperCollins (UK), a member of the Murdoch Group, declined to publish Hong Kong Governor Chris Patten’s memoirs in breach of contract because it was alleged that the memoirs included commentary on the Beijing government that might threaten Murdoch’s substantial business interests in China.49 It has also been suggested that the takeover of the British publisher, Fourth Estate, by HarperCollins (UK) was in some way related to a forthcoming biography of Rupert Murdoch contracted to be published by Fourth Estate. It seems that the biography will not now be published by Fourth Estate.50 On the other hand, a development that may have the effect of breaking down some of the power of publishers is the advent of electronic self-publishing.51 It seems, however, that any inroads that this makes in the power of publishers will be confined to publications by the very few authors who command sufficient market power to dispense with the promotional services of the publishers. So the media, entertainment and publishing moguls control and homogenize what we get to see, hear and read. There is more, however. The sector also asserts control over the use of material assumed by most people to be in the intellectual commons. The irony is that the reason people assume such
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material to be in the commons is that the copyright owners have force-fed it to us as receivers of the mass culture disseminated by the mass media. The more powerful the copyright owner the more dominant the cultural image, but the more likely that the copyright owner will seek to protect the cultural power of the image through copyright enforcement. The result is that not only are individuals unable to use, develop or reflect upon dominant cultural images; they are also unable to challenge them by subverting them.52 This is certainly unlikely to reduce the power of those who own these images. As an example of this type of concern, Waldron (1993) uses the case of Walt Disney Prods v. Air Pirates.53 In this case, the Walt Disney Corporation successfully prevented the use of Disney characters in Air Pirates comic books. The comic books were said to depict the characters as ‘active members of a free thinking, promiscuous, drug-ingesting counterculture’ (Waldron, 1993, p. 842).54 Note, however, that the copyright law upon which the case was based does not prevent this depiction only; it prevents their use altogether. Waldron comments: The whole point of the Mickey Mouse image is that it is thrust out into the cultural world to impinge on the consciousness of all of us. Its enormous popularity, consciously cultivated for decades by the Disney empire, means that it has become an instantly recognizable icon, in a real sense part of our lives. When Ralph Steadman paints the familiar mouse ears on a cartoon image of Ronald Reagan, or when someone on my faculty refers to some proposed syllabus as a ‘Mickey Mouse’ idea, they attest to the fact that this is not just property without boundaries on which we might accidentally encroach . . . but an artefact that has been deliberately set up as a more or less permanent feature of the environment all of us inhabit. Waldron (1993, p. 883)
This seems to be a good point at which to return to the World Commission on Development and Culture’s concept of development as being about the enhancement of effective freedom of choice of individuals. As may be recalled, some of things that matter to this concept of development are ‘access to the world’s stock of knowledge . . . access to power, the right to participate in the cultural life of the community’ (World Commission on Culture and Development, 1996, Introduction). The edifice of private power that has been built upon a copyright law which seems to care more about money than about the intrinsic worth of the cultural product it is protecting, has deprived us all to some extent of the benefits of this type of development. ‘The private appropriation of the public realm of cultural artefacts restricts and controls the moves that can be made therein by the rest of us’ (Waldron, 1993, p. 885). It seems worth noting that increases in duration of copyright protection, such as the recent increase in the European Union countries,55 are hardly helping (see also Towse, 1999). Things look no better if we focus on the World Commission on
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Development and Culture’s fundamental approach to culture, which is the handmaiden of its wide concept of development. As previously noted, a fundamental approach to culture means valuing cultural output as an end in itself, a commitment to diversity and multiculturalism, and the control of power in the form of cultural domination. Not only has copyright failed to effect these very things in relation to cultural output; it is also arguable that it has effected their opposite. In other words, copyright law’s approach to culture is not fundamentalist. Since copyright law dictates the treatment of at least some types of cultural product, its failure to take a fundamentalist approach to culture may be regarded as a significant reason for our failure to achieve development in the wide sense. What is more, the unaccountable and selfreinforcing power of the media and entertainment conglomerates means that this process of development failure is accelerating.
7.8 CONCLUSION: WHAT DO WE DO NOW? The private power of the corporate sector - and in the context of this chapter, the entertainment and media corporations - is a fact of life as we know it. At this stage in the history of the industrialized world there is little that can be done to break it down. In any case, it is likely that any attempt to do so would cause massive economic and social destabilization. There are two things, in general, that might be more sensibly done. One is to remove some of the props on which the power rests so that it loses some of its ability to self-perpetuate and grow exponentially. The other is to look for ways of making private power more publicly accountable. As this chapter has attempted to argue, the excessive commodification of the copyright interest in works protected by copyright has been one of the foundations of the power of the media and entertainment sector. Other aspects of copyright law that tend to bolster this power are the weakness of the fairuse/fair-dealing exemptions, especially in relation to parody, and the duration of commodified copyright. All of these are issues that fall within the direct purview of intellectual property academics, practitioners and policymakers. It is also important that we start thinking across the artificial boundaries of different areas of law. The Report of the World Commission on Development and Culture recommended the promotion of media competition, access and diversity at an international level, and also suggests an international clearing house for national media and broadcast laws (World Commission on Development and Culture 1996, International Agenda, Action 5). These types of things are essential to reducing the power that the media and entertainment corporations exercise over cultural output. This means that being serious about making inroads into private corporate power means thinking about the role of
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media and competition law. However, this very small leap across boundaries is not enough on its own. If we want to legitimate the power of the corporate sector then we have to introduce mechanisms of accountability. The area of law that needs work here if we are to have accountability in any structured and comprehensive fashion is, of course, corporate law. Thinking across intellectual property law, media law, competition law and corporate law sounds like a tall order, but it has been the failure of legislators, regulators, lawyers, economists, academics and other commentators to do just that which has brought us the present era of cultural homogenization and domination.
NOTES 1. I would like to thank Birgitte Andersen, Michael Rushton and Ruth Towse for their insightful comments on this paper. 2. Culture is, of course, a contested concept: see, generally, Gaines (1991). 3. Although this may well be the case. 4. See, for example, the excellent discussion in Waldron (1993), pp. 850ff. 5. Some value it more than others. ‘Admittedly, there are groups in rich societies that reject indefinite or infinite growth and consumerism in favour of a modest standard of sufficiency and adequacy: they consist of some academics, some ministers of religion, members of certain action groups, of some communities’, World Commission on Culture and Development (1996), Introduction. 6. The World Commission on Culture and Development puts it in the following words. ‘The basic principle should be the fostering of respect for all cultures whose values are tolerant of others. Respect goes beyond tolerance and implies a positive attitude to other people and a rejoicing in their culture’, World Commission on Culture and Development (1996), Analytical Chapter 9. 7. Although it may cast some further light on the general bankruptcy of both rationales. 8. ‘[T]he life of the law is not logic, and the fact that there is no test of talent or genius does not prevent the resonance of those ideas from influencing the rhetoric which sustains intellectual property doctrine as a whole’, Waldron (1993), p. 853. 9. As laid down in, for example, University of London Press v. University Tutorial Press (1916) 2 Ch 601, 608 per Peterson, J. 10. Rogers v. Koons, 751 F Supp 474 (SDNY 1990), aff’d, 960 F 2d 301 (2d Cir), cert denied, 113 S Ct 365 (1992). 11. Boggs (1993), p. 905, later notes that ‘the visual arts have not fared as well in societies born of the English aesthetic, where literature is the supreme form of expression’. 12. On the issues and problems posed for copyright law by Koons’ artistic contribution, see Bowrey (1994), esp. p. 311-16. 13. This is somewhat of an oversimplification. See, for example, Hutcheon (1989) and Polan (1993). 14. With respect to postmodern art and copyright law, see Bowrey (1994), Wood (1996), Rimmer (1998). 15. The concept of subconscious copying may be another good example of copyright’s failure to secure the intellectual commons: see Waldron (1993), p. 882ff. 16. It is doubtful that our fair dealing laws can be described as strong: see, further, Macmillan Patfield (1997) and Macmillan Patfield (1996), pp. 222-32; see also Waldron (1993), pp. 859-60. Campbell v. Acuff-Rose, 114 S Ct 1164 (1994) may be regarded as a step in the right direction. On the need for strong fair dealing exemptions in the digital environment, see van Caenegem (1995).
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17. On the issue of copyright’s failure to protect distinctive styles of work and the way in which this demonstrates the law’s failure to understand visual art, see also Boggs (1993), pp. 895-8. 18. Also, the introduction of a moral rights regime will address some of the problems in this area: see Aplin (1995), pp. 22-5. 19. See, further, Blakeney (2000). 20. Possible Renewal of the Generalised System of Preferences - Hearing Before the Subcommittee on Trade of the US House of Rep Comm on Ways and Means, 98th Cong 1st Sess (1983); and Unfair Foreign Trade Practices, Stealing American Intellectual Property: Imitation is Not Flattery, 98th Congress, 2nd Session (1984), both cited in Blakeney (1996), p. 2n. 21. Cited in Blakeney (1996), p. 2 and p. 2n. 22. Although the Berne Convention has made a recent comeback with the WIPO Copyright Treaty, 1996 and the WIPO Performances and Phonograms Treaty, 1996. 23. For a brief comparison of the Anglo-Saxon, droit d’auteur, and socialist models in this respect, see Owen (1996). 24. For example, Australian Copyright Act, 1968 (Cth), s 37. 25. For example, Australian Copyright Act 1968 (Cth), s 31(1)(c) and (d). See also Articles 11 and 14(4) of the TRIPs Agreement, which enshrine rental rights in relation to computer programs, films and phonograms. 26. See n. 25, above 27. WIPO Copyright Treaty, 1996, Article 7; and WIPO Performances and Phonograms Treaty, 1996, Articles 9 and 13. 28. Towse also argues that the other effect of the duration of copyright is to allow copyright owners to get pure economic rent in the event that the market value of a particular copyright interest increases in a way that was not predictable at the time the copyright holder acquired the interest: Towse (1999), p. 99. 29. See, for example, the US Digital Millennium Copyright Act of 1998 and see, for example, McCullagh (2000); the Australian Copyright Amendment (Digital Agenda) Bill, 2/9/99; and the EU Directive on the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society, COM (1999) 250 final. See further, Macmillan (1999). 30. So it was, for example, that Chrysalis, the music and broadcasting group, raised £60 million against its music publishing catalogue, which comprised 50 000 copyrights valued for the purpose of the securitization at £150 million and generating a revenue stream of £8 million per year: ‘Chrysalis in £60m fundraising’, The Times, 9 February 2001. 31. For an analysis of the cinema industry that makes a similar point, see Bettig (1996), pp. 38-42. 32. Ibid., p. 22. The oligopolistic tendencies of this market will now be exaggerated as a consequence of the joint venture between Warner and EMI, and also the merger between AOL and Time Warner. In particular, there is a concern that this merger will stifle competition with respect to broadband access (AOL controls access to its high-speed cable lines) and digital music distribution on the Internet. 33. Copyright Amendment Act (No 2), 1998. 34. The most recent of which is the RIAA/Napster litigation. For the texts of the preliminary documents, see http://www.riaa.com/Napster_legal.cfm. The injunction against Napster issued by US District Court Judge Marilyn Patel on 26 July 2000 was vacated by the 9th US Circuit Court of Appeals on 28 July 2000: see A & M Records, Inc v. Napster Inc, Case Number C 99-5183 MHP (ADR), US District Court, Northern District of California, San Francisco, 26 July 2000. On 12 February 2001 the 9th US Circuit Court of Appeals handed down a decision affirming that the unauthorized distribution of copyright works by Napster was a copyright infringement and remanding the case back to the District Court for modification of the injunction so that liability arises only where Napster fails to prevent the distribution of copyright works after being notified that the work is on its system. On 6 March 2001, US District Court Judge Marilyn Patel issued a modified injunction to reflect the decision of the 9th US Circuit Court of Appeals. Since then, the parties have been engaging in periodic legal skirmishing over the monitoring and enforcement of the
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36. 37.
38. 39. 40. 41. 42.
43. 44. 45. 46.
47. 48. 49
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injunction: see, for example, ‘Judge steams; Napster cooked?’, Wired News, 10 April 2001, http://www.wired.com/news/print/0,1294,42963,00.html. A Sony executive, Steve Heckler, has been reported as saying that the case is all about the control of ‘revenue streams’ and that Sony will, in any case, ‘take aggressive steps’ to develop technology to stop Napster: see Smith, ‘We will block Napster at source - Sony exec’, The Register, 29 August 2000, http://www.theregister.co.uk/content/1/12780.html. Digital Copyright Millennium Act, 1998, s 512. Sony has now settled with My.MP3.com in the wake of a successful infringment action by RIAA, on behalf of the five major labels (EMI, Warner, BMG, Sony and Universal), which held that MP3’s virtual jukebox allowing users to stream music from the database on its servers was infringing. This left Universal as the only one of the original plaintiffs not to reach a settlement with MP3: see ‘MP3.com: Four down, one to go’, Wired News, 21 August 2000, http://www.wired.com/news/print/0,1294,38352,00.html. Subsequently, in a decision on 6 September 2000, US District Judge Jed S. Rakoff held that MP3’s infringements were wilful and assessed damages at $25 000 per CD, which is likely to cost MP3 about $18 million. Judge Rakoff said that MP3 must establish a licensing agreement with Universal. However, MP3 has accused Universal of refusing to settle because it wants to drive MP3 out of business due to the fact that it has an equity stake in Musicbank, a potential MP3 competitor: ‘MP3.com must pay the piper’, Wired News, 6 September 2000, http://www.wired.com/news/print/0,1294,38613,00.html. See the amendments suggested in Ham and Atkinson 2000. See The Wizard, 7 August 2000, http://www.wizardfkap.com/page6.html and http://www.copyleft.net. For the text of the judgment, see http://www.techlawjournal/com/courts/decss/ 20000817fj.asp. ‘Studios Score DeCSS Victory’, Wired News, 17 August 2000, http://www.wired.com/ news/print/0,1294,38287,00.html. ‘Movie industry wins piracy trial’, MSNBC, http://www.msnbc.com/news/447634.asp. The case also demonstrates an interesting, but temporary, chink in the intellectual property armoury of the media and entertainment corporations. An Australian website displaying the code has rejected studio claims that it is subject to US jurisdiction. However, its ability to continue displaying the code is open to doubt under the provisions of the new Copyright Amendment (Digital Agenda) Act 2000: ‘DVD piracy code still online’, MSNBC, 17 August 2000, http://www.msnbc.com/news/448215.asp?cp1=1. 338 US 130, 163 (1967). See, further, Patfield (1993), pp. 299-300. This is the reason that it is not unlikely that end results in the various Internet distribution cases, discussed above, that do not favour the interests of the majors may provoke a legislative intervention. In Australia the oligopoly controlling the contemporary music industry appears to have been instrumental in maintaining a legislative environment favourable to its continued existence; see Capling (1996). The issue of release and promotion of recorded music is a big issue for many popular composers and performers. For example, popular music composer Michael Penn is quoted as saying: ‘People disappear in this business not through drug abuse but because record companies sign them and then mess them around . . . They’re very vengeful people. If you protest, like George Michael and Prince did, you’re a whining rock star. In our case you’re simply a loser . . . Epic put my album out but they won’t spend a cent on promotion. The business is incredibly narrow now. The opportunities for flukes are zero. To escape this multinational hell, your only recourse is stuff like MP3’, The Evening Standard, London, 12 July 2000. See, for example, ‘Napster’s Good? Bad? Er, what . . . ?’, Wired News, 15 June 2000, http://www.wired.com/news/print/0,1294,37018,00.html. Note also the quote attributed to US popular music composer, Michael Penn, in n. 46 above. Nevertheless, Moon has criticized Abel for his lack of concern ‘about the abuse of private power’, Moon (1994), p. 392. ‘Londoner’s Diary’, The Evening Standard, London, 11 July 2000.
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50. Ibid. 51. It was recently reported that Stephen King was publishing his latest horror story, The Plant, on his own website. The work was to be published in installments and each person downloading an installment has been asked to send King US$1. Provided 75 per cent of people downloading each installment pay their dollar, King undertook to keep the installments coming. King, in doing this, was bypassing the online publishing division of his long-time publisher Simon & Schuster. This was seen as challenging the e-publishers to show they add value: ‘King writes off the middleman’, The Weekend Australian, 22-23 July 2000. It now seems that this has proved a hollow challenge as King has been reported as ‘aborting his attempt to publish a book on the Internet’: Metro, London, 30 November 2000. 52. See also, the discussion of Rogers v. Koons in the text above; Chon (1993); Koenig (1994); Macmillan Patfield (1996), pp. 219-22. 53. 581 F 2d 751 (9th Cir, 1978), cert denied, 439 US 1132 (1979). 54. Quoting Wheelwright (1976), p. 582. The fact that the Disney Corporation regarded all these aspects of the depiction of its characters as negative may be regarded as saying something about the concept of imposed cultural homogeneity. 55. This was as a result of Council Directive 93/98/EEC, 1993 OJ L290/9.
REFERENCES: Abel, R. (1994a), Speech and Respect, London: Stevens and Sons/Sweet and Maxwell. Abel, R (1994b), ‘Public freedom, private constraint’, Journal of Law and Society, 21, 374. Aplin, T. (1995), ‘Aboriginal Art and Moral Rights Law’, in M. Pederson (cur.), burran-gur ang: Women and the Law, p. 25. Bettig, R.V. (1996), Copyrighting Culture: The Political Economy of Intellectual Property, Boulder, Colorado and Oxford: Westview Press. Blakeney, M. (1995), ‘Protecting expressions of Australian aboriginal folklore under copyright law’, European Intellectual Property Review, 9, 442. Blakeney, M. (1996), Trade Related Aspects of Intellectual Property Rights, London: Sweet and Maxwell. Blakeney, M. (2000), ‘The protection of traditional knowledge under intellectual property law’, European Intellectual Property Review, 6, 251. Boggs, J.S.G. (1993), ‘Who owns this?’, Chicago-Kent Law Review, 68, 889. Bowrey, K. (1994), ‘Copyright, the paternity of artistic works, and the challenge posed by postmodern artists’, Intellectual Property Journal, 8, 285. Capling, A. (1996), ‘Gimme shelter!’, Arena Magazine, February/March 1996, p. 21. Chartier, A. (1994), ‘Figures of the Author’, in B. Sherman, and A. Strowel (eds), Of Authors and Origins: Essays on Copyright Law, Oxford: Clarendon Press and New York: Oxford University Press, p. 15. Chayes, A. (1959), ‘The Modern Corporation and the Rule of Law’, in E.S. Mason (ed.), The Corporation in Modern Society (reprinted 1980), New York: Atheneum , p. 25. Chon, M. (1993), ‘Postmodern “progress”: reconsidering the copyright and patent power’, DePaul Law Review, 43, 97. Commonwealth of Australia, Attorney General’s Department (1994), Stopping the Rip Offs: Intellectual Property Protection for Aborigine and Torres Strait Island Peoples, Canberra: Australian Government Publishing Service. Drahos, P. (1995a), ‘Community and creativity: the role of copyright’, Copyright Reporter, 13 (1), 4.
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Drahos, P. (1995b), ‘The visual artist in the global information economy’, Communications Law Bulletin, 14 (3), 1. Drahos, P. (1996), A Philosophy of Intellectual Property, Aldershot and Brookfield: Dartmouth. Gaines, J. (1991), Contested Culture: The Image, the Voice and the Law, The University of North Carolina Press. Ham, S. and R.D. Atkinson (2000), Napster and Online Piracy: The Need to Revisit the Digital Millennium Copyright Act, Progressive Policy Institute Report, May 2000, http://www.ppionline.org/ndol/print.cfm?contentid=646. Hutcheon, L. (1989), The Politics of Postmodernism, London: Routledge. International Intellectual Property Alliance (1985), Piracy of US Counterfeited Works in Ten Selected Countries. Koenig, D.M. (1994), ‘Joe Camel and the first amendment: the dark side of copyrighted and trademark-protected icons’, Thomas M. Cooley Law Review, 11, 803. Macmillan, F. (1998), ‘Copyright and culture: a perspective on corporate power’, Media and Arts Law Review, 3, 71. Macmillan, F. (1999), ‘Striking the copyright balance in the digital era’, International Company and Commercial Law Review, 10, 350. Macmillan Patfield, F. (1995), ‘Challenges for Company Law’, in F. Macmillan Patfield (ed.), Perspectives on Company Law: 1, London: Kluwer, p. 1. Macmillan Patfield, F. (1996), ‘Towards a Reconciliation of Free Speech and Copyright’, in E. Barendt (ed.), The Yearbook of Media and Entertainment Law 1996, Oxford: Clarendon Press, p. 199. Macmillan Patfield, F. (1997), ‘Legal policy and the limits of literary copyright’, in P. Parrinder, and W. Chernaik (eds), Textual Monopolies: Literary Copyright and the Public Domain, London: Office of Social Sciences and Humanities Publications, p. 113. McCullagh, D. (2000), ‘Digital copyright law on trial’, Wired News, 18 January 2000, http://www.wired.com/news/print/0,1294,33716,00.html. Moon, R. (1994), ‘Richard Abel’s Speech and Respect’, Journal of Law and Society, 21, 383. Moran, A. (1998), Copycat TV: Globalisation, Program Formats and Cultural Identity, Luton: University of Luton Press. Owen, L. (1996), ‘Publishers and Copyright in Europe: A Comparative Survey’, Paper presented in the International Workshop on Legislation for the Book World, Warsaw, 13-15 November 1996, http://culture.coe.fr/clt/eng/eculiv0.9.html. Patfield, F. (1993), ‘Defamation, freedom of speech and corporations’, Juridical Review, p. 294. Polan, D. (1993), ‘Postmodernism and Cultural Analysis Today’, in E.A. Kaplan (ed.), Postmodernism and its Discontents, London: Verso, p. 45. Rimmer, M. (1998), ‘Four stories about copyright law and appropriation art’, Media and Arts Law Review, 3, 180. Towse, R. (1999), ‘Copyright, risk and the artist: an economic approach to policy for artists’, Cultural Policy, 6 (1), 91. van Caenegem, W. (1995), ‘Copyright, communication and new technologies’, Federal Law Review, 23, 322. Waldron, J. (1993), ‘From authors to copiers: individual rights and social values in intellectual property’, Chicago-Kent Law Review, 68, 841. Wheelwright, T. (1976), ‘Parody, copyrights and the First Amendment’, US Federal Law Review, 564.
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Wood, L. (1996), ‘Copyright and postmodern artistic practice: paradox and difference’, Media and Arts Law Review, 1, 72. World Commission on Culture and Development (1996), Our Creative Diversity: Report of the World Commission on Culture and Development, Paris: UNESCO Publishing, 2nd edn. World Intellectual Property Organization (1978), Guide to the Berne Convention for the Protection of Literary and Artistic Works, Geneva: WIPO Publication No. 615(E).
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8. The abolition of copyrights: better for artists, Third World countries and the public domain Joost Smiers We would like artists, in rich and poor countries alike, to get fair remuneration for their work. We usually think that copyrights are one of their most important sources of income, notwithstanding the fact that we know better. The reality, however, is that copyrights, commonly referred to on the European continent as author’s rights, are becoming one of the most important commercial products of the twenty-first century. This phenomenon makes it unlikely that the system of copyrights protects the interests of the majority of musicians, composers, actors, dancers, writers, designers, visual artists or filmmakers any longer. At any rate, the public domain is losing ground with the ongoing privatization of the creative and intellectual commons. There is urgent reason to try to find other ways of ensuring that artists can make a living from their work. We should make sure that their creations and performances truly get the respect they deserve. We must also realize that we harm the social and cultural development of our societies when we continue to neglect our public domain of knowledge and creativity.
8.1 THE TWENTY-FIRST CENTURY’S MOST VALUABLE COMMODITY Information and cultural conglomerates embrace the entire Earth with waves and cables. These superhighways serve not only as vehicles for business data, news and contracts, but also as carriers of entertainment, which is partly a trade product in and of itself, as well as a stimulus for the purchase and consumption of various other products. Entertainment, or what we once liked to call the arts, has moved from the sideline of society right into the middle of the so-called New Economy. This is one of the explanations we see for a repeated rat race of mergers in the cultural field including, for example, the merger of AOL and Time Warner. 119
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It does not make much sense oligopolistically to possess nearly all the information pipelines of the world yet not to own the ‘content’ being delivered by those new technologies. Therefore, Janine Jacquet stipulates that content is king at this present moment in history. Content holds value because many thousands of hours of music, pages of text, and visual images are needed to fill those pipelines. The best way to acquire rights on huge quantities of entertainment and other artistic materials is through mergers. Synergy is the rationale for media conglomerates snatching up as much copyrighted material as they can. ‘Today’s mergers aren’t just about grabbing more of the market share by buying yet another record label or movie studio or book imprint. They’re also about acquiring the rights to music, movies and books. It’s an investment in intellectual capital, i.e. creative expression, the twenty-first century’s most valuable commodity’.1 The consequence of those mergers is that in the near future, only a handful of cultural conglomerates will have the property rights on nearly all artistic creations of the past and present. The fact, for instance, that, in 1999, Bill Gates’ company Corbis owned the digital rights to 25 million photos and paintings, including those from the Smithsonian in Washington, the National Gallery in London, the Hermitage in St Petersburg, and the collections of two of the most important French photo agencies, Gamma and Sygma, was only the beginning.2 In March 2000, Corbis already possessed 65 million images, 2.1 million of which are available online.3 The owner of intellectual property rights on artistic materials wants to see them used, exhibited, performed, registered and distributed as much as possible, on all the available channels, and in entertainment-related vehicles like computer games, gadgets, video juke-boxes, and interactive media of all kind. We are, as a result, more or less pushed into a closed circle of influence from which it is difficult to escape. Most of the artistic creations from past and present are becoming the property of a limited number of cultural conglomerates, which try to confront us, in one way or another, any moment of the day, with the cultural content they own. TRIPs, the intellectual property treaty of the World Trade Organization, makes it possible for this intellectual land-grab of buying copyrights to take place all over the world, without restrictions or borders. The once sympathetic concept of copyright is turning into a means of control over intellectual and creative commons by a very limited number of cultural industries. This is not an abuse that can easily be repaired. The monopolistic control of copyright is a widespread practice. The Canadian anthropologist and copyright scholar Rosemary Coombe observes that, ‘in consumer cultures, most pictures, texts, motifs, labels, logos, trade names, designs, tunes, and even some colours and scents are governed, if not controlled, by regimes of intellectual property’ (Coombe, 1998, p. 6).
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The consequence of this monopolistic control is terrifying. The few remaining huge cultural industries only pump through their channels the artistic fare and entertainment to which they own the rights. This is done in a sphere and on a scale which is commercially attractive to them. They collect the melodies and images they are spreading from all corners of the world, adapting them to Western ears and eyes. The property of copyrights gives them the opportunity to promote a few ‘stars’ almost exclusively, investing heavily in them and earning additional amounts of money from gadgets that are identified with the star. The investments and risks are high, and cultural industries like to earn their investments back manifold. Marketing to every citizen of the world is therefore aggressive to the degree that alternate cultural options will be pushed away from many people’s mental map. Those cultural industries own the means of production, as well as the distribution channels, of the cultural fare. This vertical integration gives extra cause for alarm.
8.2 ONLY A FEW STARS The logical consequence of concentration on only a few ‘stars’ is that less worldwide attention can be devoted to a diversity of artistic expressions, which we need desperately in a democratic perspective. Stardom is a monolithic system, which leaves no room for the possibility of cultural diversity being viewed as a treasure to be cherished. Artists who are not famous, and most of them cannot be so in the present system, have a hard time relating to a public. Their latent curiosity is not very resistant against the dominant ideology that happiness follows buying the latest gadgets of ‘your’ favourite star. Regardless of whether we like it or not, the system of copyrights, one purpose of which has been to provide fair rewards for artists, is rapidly being taken away from artistic creation and being brought into the hemisphere of big business. We also see a complete penumbra surrounding every creation. The big cultural conglomerates buy rights all over, enclose them with extremely detailed property regulations, and have their interests defended by highly specialized lawyers. Consequently, every artist who has created or performed something must take care that his or her work will not be taken away by a cultural industry. So, the artist must take care that his/her work will demonstrably receive copyright status immediately after the creation or performance. The chance that there will be a dispute over this property title is becoming greater than ever. Therefore, even the average artist is increasingly obliged to hire lawyers to defend his or her case, which he/she obviously cannot afford on such a specialized level as that acquired by industries. This ‘juridification’
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places the intellectual and creative commons in a weaker position than is desirable, because the cultural world becomes a world of private property rights and a domain of lawyers. A striking example of this juridification is the claim to copyright of an artist such as Daniel Buren for the fountains he designed for the Place des Terreaux in Lyon.4 He insists that everybody who creates a picture of the Place des Terreaux should pay him a royalty. Has he not already been paid for the design of those fountains? Probably generously! He made a contribution to the square, to the cultural heritage of centuries, no more and no less. What has gone wrong in our society, that artists like Daniel Buren have the gall to claim rights over the whole square?
8.3 PIRACY There are several other trends which make clear that the system of copyrights is nearing its end. Think, for instance, of the piracy that takes place on an industrial scale and the piracy that ‘democratizes’ the use of music and other artistic material in the home. Cultural industries make their fortune by the ownership of copyrights. We live in a world in which the free entrepreneurial attitude is very much desired, and control of commercial traffic and capital movement is summary. This makes it understandable that piracy of all those copyrighted and profit-making works is tempting. Anyone who tries to follow the debates on intellectual rights must get the impression that there is only one real issue spoiling the atmosphere of a booming and socially and culturally useful business! This is piracy, the turnover of which actually surpasses at least two hundred billion dollars annually.5 One of the reasons that mass-scale piracy is so easy is the increase in excess production capacity of CDs, DVDs and so on. There is currently more than double the manufacturing capacity available worldwide than is needed for legitimate production. The cost of new and second-hand machinery is falling. For example, the new ODME mainliner costs $500 000 and has the capacity to produce five million CDs a year. The major rights holders are actually causing this excess capacity themselves. They operate in very tense and nervous markets that ‘oblige’ them to have instantly sufficient production capacity.6 Richard Barnet and John Cavanagh observe, with a light sense of humour, that stars now count on being seen and heard somewhere around the world many times a day. But the bigger the hit, the more likely it is that its creators and owners will have to share the profits with pirates. While intellectuals and politicians in poor countries denounced the ‘cultural imperialism’ of the global media giants, underground entrepreneurs did something about it. (Barnet, 1994, p. 141)
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There is no reason to imagine that the ‘struggle’ against this mass-scale piracy can be won, not even by the invention of very sophisticated safety measures against copying and by the introduction of police brigades against piracy, which, by the way, will cost Third World countries more than they can afford. These kinds of struggles do not work in the case of drugs either, which accounts for three to five hundred billion dollars of illegal trade.7 Piracy and drugs capital merge easily with the illegal commerce of weapons. Why not fight the trade in weapons and why not eliminate the problem of piracy and drugs by liberalizing both of them? The condition would be a very good control on the quality of the drugs, and in the case of copyrights, I will propose a better system at the end of this chapter, which guarantees respect and income for the work of a variety of artists.
8.4 MP3, NAPSTER, GNUTELLA The struggle against home copying seems to be at a dead end with the invention of Napster and Wrapster. First there was MP3 for downloading music without permission. This took a lot of time and did not always deliver superb quality. In 1999, a 19-year-old school boy invented a program, called Napster, which costs nothing and which makes it possible to share music files on the MP3 format with other websurfers. Computers with Napster on board, together form something like a virtual juke-box on a world scale. In a couple of seconds, one can find any piece of music one wishes there. Napster has been refined, meanwhile, by stronger and more decentralized programs like Wrapster and Gnutella. Those programs can not only afford to share even bigger quantities of music, but also videos, films, software programs, games, or complete databases, which until now only could be transferred by very powerful computers. Obviously the record industry, and especially the RIAA (the Recording Industry Association of America), has tried to get Napster and its follow-ups forbidden in court. Yves Eudes comments in the French newspaper, Le Monde, ‘Without any doubt, we shall witness the emergence of a powerful system of references and sharing of digital products of different kinds, which will develop uncontrolled behind the scenes of the Web. Even if the original site of Napster is forced to close soon, the spirit is out of the bottle.’8 There is another aspect of the continuing digitalization that makes it less likely that the copyright system can be maintained. The computer and the Web provide artists with the unique ability to sample their works using materials from all corners of artistic landscapes past and present. Obviously, the observation can be made that critics who are competent to judge what is worthwhile and what is nonsense should come into those new fields of artistic activity.
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Another observation we might make is that artists are not doing anything other than what Bach, Shakespeare, and thousands of other artists in other cultures did before them. It has always been customary in all cultures to use ideas and segments borrowed from the works of predecessors. Only the system of copyrights hampered this self-evident process of ongoing creation. It freezes the ongoing creation and pretends that there is a cultural end station; that is, a specific artistic work, which has been made on a specific moment of history and which should not be changed any more. An infringement on this static situation is what we call plagiarism. Artists, however, do not feel that they are doing anything wrong when they sample the work of another artist. We now see that the concept of plagiarism is disappearing out of the consciousness of many artists, even more quickly than it appeared some centuries ago in Western culture.
8.5 ORIGINALITY The practice of artistic digitalization is more and more in conflict with the existing system of copyrights. The philosopher Jacques Soulillou has an interesting theoretical comment on the phenomenon of plagiarism: The reason why it is difficult to prove plagiarism in the field of art and literature is that it is not only necessary to show that B has been inspired by A without acknowledging this, but proof also has to be delivered that A was not inspired by someone else. Plagiarism assumes that the trace back to A exhausts itself in A, because if one could prove that A himself has been inspired by someone else, thus committing plagiarism from an “X” situated in a chronologically anterior position, A’s complaint falls to pieces. (Soulillou, 1999, p. 17).
His analysis reminds us that the system of copyrights is not only becoming less and less tenable, but also that it has been grounded on a concept, which is less self-evident than it appears to be. Is it possible to imagine a poem without preceding poems? Our modern culture lets us easily forget that the author or performer uses many different sources: language, images, sounds, rhythms, colours, movements, or sensations, which are part of our common heritage. It is difficult to claim absolute originality. Roland Barthes has already explained in The Death of the Author, that in ethnographic societies the responsibility for a narrative is never assumed by a person, but by a mediator, shaman or relater whose ‘performance’ - the mastery of the narrative code - may possibly be admired but never his ‘genius’. The author is a modern figure, a product of our society insofar as, emerging from the Middle Ages with English empiricism, French rationalism and the personal faith of the Reformation, it discovered the prestige of the individual, or, as it is more nobly put, the ‘human person’.9
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Historically nothing is less true than the idea that it is self-evident to give exclusive rights of exploitation to someone who has created a work of art. It refreshes our cultural perspective to listen to the communication scholar Roland Bettig reminding us that, traditionally, ‘Asian authors and artists have viewed the copying of their works as an honour’ (Bettig, 1996, pp. 213-19). Such copying was, in fact, a necessity. Jean-Pierre Babylon calls copying one of the grounding instruments of our civilization, it having served to transmit so many values that otherwise would have been lost. This has caused the cultural heritage of former generations to serve as sources of inspiration for those cultural workers of subsequent generations newly arrived on the scene.10 The Dutch painter Rob Scholte is convinced that everything that has been created ultimately derives from us all. This does not mean that all hereby has turned gratuitous. That would be an error of reasoning. People still experience something for the first time, authenticity continues to exist, and certain images keep their power of expression. As a postmodernist, however, I fight the idea of originality, of intellectual property, of copyright.11
He brings up the phenomenon of ownership connected to the assumed originality. There is reason enough to accept that the system of copyrights is based on a Romantic concept of the author as someone who creates something out of nothing that is completely original. Therefore Rosemary Coombe wonders how much a star’s celebrity image, for instance, and its value are due to the individual’s own efforts and investments. Celebrity images must be made, and, like other cultural products, their creation occurs in social contexts and draws upon other sources, institutions, and technologies. Star images are authored by studios, the mass media, public relations agencies, fan clubs, gossip columnists, photographers, hairdressers, body-building coaches, athletic trainers, teachers, screenwriters, ghost-writers, directors, lawyers, and doctors.12
The Marx Brothers, for example, took what they wanted from the history of the burlesque and the vaudeville. Madonna evokes and ironically reconfigures several twentieth-century sex goddesses (Marilyn Monroe, obviously, but also Jean Harlow, Greta Garbo, Marlene Dietrich, Gina Lollobrigida, and perhaps a touch of Grace Kelly). Let us furthermore not forget the role of the public in the creative process, about which Marilyn Monroe said herself, ‘if I am a star - the people made me a star; no studio, no person, but the people did’ (Coombe op. cit.).
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8.6 THEY CONTINUE TO CREATE Do we need to have a system of intellectual property rights to promote the continuing creation of works of art and science? This is one of the arguments in defence of copyrights that has been used many times; for instance, in policy documents in the Western world. However, we are aware that in history and in many cultures marvellous creations have been made without the existence of anything like an author’s right system. Also, many artists currently earn virtually no money through copyrights - no more than a dinner a year with some friends. Nevertheless, they continue to create. Economists from different universities, like Ruth Towse (Erasmus University, Rotterdam), Roger Wallis (City University, London), Martin Kretschmer (Bournemouth University) and Wilfred Dolfsma (Technical University Delft) emphasize the fact that research generally indicates that the expansion of copyrights favours investors over creators and performers. Artists are getting only a couple of thousand French francs a year on average from copyrights. Meanwhile, copyrights are one of the main sources of gross national products worldwide. Second, the distribution of income within groups of artists from copyrights is highly skewed. It is not uncommon for only 10 per cent of the members of a collective society to receive 90 per cent of the revenues. Martin Kretschmer concludes, that ‘the rhetoric of author’s rights has been largely carried by third parties: publishers and record companies, i.e. investors in creativity (rather than creators) who also turn out to be the chief beneficiaries of extended protection’.13 Aymeric Pichevin analyses the example of music, asserting that the copyrights system is profitable for the capitalistic entrepreneur while limiting his investment (because the work does not have to be bought). The artist takes a part of the risk on his shoulder, which is associated with the unpredictability of musical success. Actually, the copyright system favours a minority of ‘stars’, but it keeps the huge majority of artists in a precarious situation. (Pichevin, 1997; p. 41)
8.7 A WESTERN CONCEPT Copyrights do not benefit Third World countries any more than those in the West. The individual appropriation of creations and inventions is a concept alien to many cultures. Artists and inventors are paid for their work, the success of which is obviously dependent on their fame and on other circumstances. They may be highly respected for what they have created. However, there is no concept in many cultures of an individual exploiting a
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creation or invention monopolistically for many decades. After all, the artist or inventor proceeds with the work of predecessors. A good example of this type of artistic continuity is Algerian raï music. Other examples are traditional and popular music cultures such as calypso, samba, rap, and so on. Regarding the raï, Bouziane Daoudi and Hadj Miliani emphasize ‘that the same theme may know as many variations as there are performers’. The base is shared knowledge, which refers less to a repertoire of existing ‘texts’ but more to a whole of social signs (el mérioula, el mehna, el minoun, e z’har, etc.) (Daondi and Miliani 1996, pp. 126-9). It is difficult to recognize the true author - in the Western sense of copyrights. Raï has no author. Until some years ago, with their entrance into the Western market, the singers ‘borrowed’ songs or refrains from each other. The public added words spontaneously to a song. Theft, pillage, and plagiarism of texts does not exist as far as these singers, known as the chebs and the chebete, are concerned. It is a form of music that depends heavily on influence from the immediate circumstances, period, place, or audience. Daoudi and Miliani describe the raï as ‘a continuum of a strongly perturbated social imagination’ (ibid.). The idea of paid copyrights is also foreign to Japanese culture. Japan had to change its copyright law in 1996 under pressure from the USA. The International Herald Tribune reported at the time that, ‘current Japanese copyright law does not protect foreign recordings made before 1971, meaning that Western record companies, by their estimates, are losing millions of dollars a year in royalties from the copying of tunes that are still highly popular’. The headline of an article on this matter in the International Herald Tribune read: ‘U.S. Takes Music-Piracy Charge Against Japan to WTO.’14 A cultural difference; that is, a different opinion about how long rights should hold; has been interpreted as ‘piracy’. Tôru Mitsui explains that the basic conception of copyright has become familiar in Japan mainly through newspaper coverage of copyright issues concerning records, tapes and computer programs. ‘But still the Japanese people do not take well to copyright, or more properly, to the idea of the individual right. Generally speaking, to claim one’s right is regarded as dishonourable or undignified, especially when the right involves money’ (Mitsui, 1993, pp. 141-2). Even when copyrights are applied in many non-Western cultures, it soon becomes clear that the ideology sustaining the system is not fit for the complexity of the creative process. In the Western world there exists a sharp division between, in the case of music for instance, the composer and the performer. This is not the case in African music, which, according to John Collins, is usually associated with specific dances. Thus,
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in the African case royalty-accruing components should, in the name of creative equity, be divided into four: the lyrics, the melody, the rhythm and the dance-step - with the melody further divided into the various contrapuntal or cross melodies and the polyrhythm into its multiple sub rhythms.
However, this is not all: ‘in African performing arts the audiences often have a creative role too, as they chant, clap and perform dance-dialogues with the musicians’. It is clear that the individual allocation of copyrights cannot work. After all, ‘how does one measure the degree (and value) of “originality” in a continually reworked piece of music?’ (Collins, 1993, pp. 149-50). Rosemary Coombe perceives the comparable impossibility of applying copyright law to the Native people of Canada. The law rips asunder what First Nations people view as integrally related, freezing into categories what Native peoples find flowing in relationships that do not separate texts from ongoing creativity production, or ongoing creativity from social relationships, or social relationships from people’s relationship to an ecological landscape that binds past and future generations in relations of spiritual significance. (Coombe 1998, p. 229)
Does this mean, Rosemary Coombe wonders, that artists and authors of First Nations ancestry do not wish to have their works valued on the market, or that they would eschew royalties for works produced as commodities for an exchange value on the market? Obviously not, but what she wants to suggest is, that in the debate surrounding cultural appropriation, Native peoples assert that there are other value systems than those of the market in which their images, themes, practices, and stories figure and that these modes of appreciation and valuation are embedded in specific histories and relationships that should be accorded respect. (Coombe, 1998, p. 381)
This observation brings us to the old issue of collective rights. This very notion is mentioned in Our Creative Diversity, the Report of the World Commission on Culture and Development published in 1996. The report states, ‘that traditional cultural groups possess intellectual property rights as groups. This leads to the radical idea that there can be an intermediary sphere of intellectual property rights between individual rights and the (national or international) public domain.’ This raises the issue of what is to be protected. ‘The simple notion provided by an imagined primeval cultural source is obviously inadequate here: the Navajo rug, for instance, contains influences which can be traced, though Mexico and Spain, to North Africa’ (Pérez de Cuellar, 1996, p.196). The Commission thinks that it is more promising to suggest ‘that the word
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“folklore” should be applied to living creative traditions shaped by powerful ties to the past’. It has also been pointed out by the Commission that ‘intellectual property’ is perhaps not the right juridical concept to be used at all. A case can be made for a new concept based on ideas inherent in traditional social rules. This might be more constructive than trying to make the forms of protection fit within a framework which was never designed for them and where the existing users and developers of copyright notions resist strenuously any such development’. (Ibid.)
Krister Malm describes how, in 1996, the same year that Our Creative Diversity was published, the question of international copyright protection of folklore was again put on the agenda by a number of Third World governments, this time in the context of preparations for the World Trade Organization meeting that took place in Geneva in January 1997. ‘The move to get the issue onto the agenda of the WTO meeting failed’, he reports. ‘Again, the failure was due to resistance from powerful industrialized countries and the cultural industries to any introduction of “collective” or “cultural property” rights into the present system of intellectual and industrial property rights.’ With the support of many countries, the decision was made that a meeting organized jointly by UNESCO and WIPO in Phuket, Thailand would take place in April 1997. There was a consensus among some participants, namely from the Third World countries, that an international legal instrument ought to be worked out and corresponding agreement on how this, in principle, should be effected. This did not at all please the American and British delegates. One might fairly surmise that this is because the biggest international entertainment industries are found in their countries. Krister Malm reports that tension rose when the U.S. delegate said that since most of the folklore that was commercially exploited was U.S. folklore and Third World countries would have to pay a lot of money to the U.S. if an international convention should come about. The Indian lawyer Mr. Purim answered that this was already the case with existing conventions and that, by the way, all U.S. folklore except Amerindian was imported to the U.S. from Europe, Africa and other countries. Thus, the money should go to the original owners of that folklore. (Malm, 1998, pp. 26-9)
In April 1998, Krister Malm noted that nothing thus far has come out of the Phuket meeting and that his expectations of collective rights being taken as a serious issue by the Western countries in the near future are not very high. The fact that Western countries earn enormous amounts of money from intellectual property rights, which Third World countries must transfer to them, may be an important consideration for Third World countries. James
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Boyle illustrates, with some well-chosen examples, how cynically this situation works out for poor and powerless countries. The author’s concept stands as a gate through which one must pass in order to acquire intellectual property rights. At the moment, this is a gate that tends disproportionately to favour the developed countries’ contributions to world science and culture. Curare, batik, myths, and the dance ‘lambada’ flow out of developing countries, unprotected by intellectual property rights, while Prozac, Levis, Grisham, and the movie Lambada! flow in - protected by a suite of intellectual property laws, which in turn are backed by the threat of trade sanctions. (Boyle, 1996, pp. 124-8)
The transformation of ideas and raw materials, and the exploitation of markets, are rewarded with intellectual rights; but raw materials, including music and images, are given very little consideration in the area of intellectual rights. Jutta Ströter-Bender gives an example in the field of design. ‘For Western designers the whole universe of decorations and images of artists from the Third World constitutes an inexhaustible reservoir by which they serve themselves shameless and for sure without adequate payment to the source of their ‘inspiration’ (Ströter-Bender, 1995, p. 45). It is obvious that more research should be done to get a clearer picture of the harm being done to the cultures of Third World countries. Noam Chomsky may not be far from the truth when he observes ‘that American companies stand to gain $61 billion a year from the Third World if U.S. protectionist demands are satisfied at GATT (as they are in NAFTA), at a cost to the South that will dwarf the current huge flow of debt service from South to North’ (Chomsky, 1993, p. 3). A portion of this sum of money concerns copyrights on cultural ‘products’. Which part this is, however, is difficult to calculate due to the enormous difference in commercial statistics between countries. One may assume that the amount of money poor countries must pay for copyrights is growing, partly because Southern and Eastern countries feel pressure from the West to fight piracy. This places a drain on the already scarce resources of their police forces.15 Transactional cultural conglomerates penetrate those countries more effectively with their entertainment and other cultural products. Consequently, those countries must transfer the scarce hard currency they have to Western and Japanese cultural industries. It is not so surprising that Third World countries did not perceive that the intellectual commons of their societies would be brought under the umbrella of the World Trade Organization and its new Treaty on Trade-related Intellectual Properties (TRIPs), by which they would be hindered in developing their own policies in this sensitive field. Friedl Weiss gives this overview of the struggle between North and South, which took place in the years before 1993:
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Although there is considerable antecedent and multilateral treaty practice on industrial and intellectual property rights (IIPRs), the subject matter, as is well known, became a matter for multilateral negotiations in the Uruguay Round only upon the insistence of industrially advanced countries (IACs), especially the United States. Developing countries (DCs) were at first extremely reluctant to enter into such negotiations as there were scarcely any common grounds between them and IACs, in economic philosophy, objectives or regulatory tradition. Leading DCs, for instance, considered it inappropriate to establish within the framework of the GATT any new rules and disciplines pertaining to standards and principles concerning the availability, scope and use of intellectual property rights.
What happened? Consequently, they emphatically rejected any idea of integrating the TRIPS Agreement into the GATT itself which, they claimed, played only a peripheral role in this area precisely because substantive issues of IPRs are not germane to international trade. On the other hand, DCs were content with the integration of substantive standards of the major IPR treaties into the TRIPS Agreement. In the end the deadlock in IPR negotiations was overcome through a combination of allowing DCs and LDCs more transitional time for achieving higher standards of IPR protection and of concessions in other areas, notably textiles and apparel trade. (Ibid.)
More research is needed in order to know what the precise considerations were, and still are, of Third World countries concerning intellectual rights in the cultural field. In The Challenge to the South, a report written under the chairmanship of the former president of Tanzania, Julius Nyerere, bitter words have been spoken about TRIPs. The objective clearly is to install a system that would oblige developing countries to restructure their national laws so as to accommodate the needs and interests of the North. This initiative seeks to expand the scope of the system governing intellectual property rights, extend the lifetime of the granted privileges, widen the geographical area where these privileges can be exercised, and ease restrictions on the use of granted rights. (Nyerere, 1990, pp. 254-5)
8.8 DIALOGIC PRACTICE It becomes more and more obvious that the system of copyrights takes too many creative and intellectual sources out of the public domain. It may hamper future creation, and it does not really support artists and Third World countries. Meanwhile, only a small number of cultural conglomerates, which hold rights on enormous quantities of intellectual and creative expressions, take profits from copyrights. Martin Kretschmer summarizes this in a lucid tentative conclusion: ‘It is perhaps the cardinal weakness of Western style
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copyright that it tries to balance the interests of creators, investors and consumers and regulate the industry all in one conceptual and legislative effort’ (Kretschmer, 1999, p. 21). Considering the infeasibility of the present copyright system, it makes sense to look at whether a system can be developed which is more advantageous for the diversity of artistic creation and for the protection of the public domain. A clear idea of our goal should be developed before suggesting such a system. Rosemary Coombe describes the contradiction that needs to be resolved, when she makes the analysis that culture is not embedded in abstract concepts that we internalise, but in the materiality of signs and texts over which we struggle and the imprint of those struggles in consciousness. This ongoing negotiation and struggle over meaning is the essence of dialogic practice. Many interpretations of intellectual property laws quash dialogue by affirming the power of corporate actors to control meaning by appealing to an abstract concept of property. Laws of intellectual property privilege mono-logic forms against dialogic practice and create significant power differentials between social actors engaged in hegemonic struggle. (Coombe, op. cit., p. 86)
The central concept, thus, is dialogic practice. This should once again be given the chance to flourish in the cultural expressions that are produced and used in our societies. The essence of our communication as human beings - the whole gamut of words, signs, tones, images, colours and movements of the body should be liberated from control by the corporate holders of the property rights to those words, signs, tones, images, colours and movements of the body. The cultural heritage from past and present should be part of the public domain again, so that it can be used collectively and can serve as a source of inspiration for future creations. Intellectual property issues should be subordinated to the preservation of human rights, specifically freedom of expression and freedom of information. The second important purpose that should be established is that many artists, in rich and poor countries alike, get a decent income from their creative work. Culturally, it is also important that their creations and performances be treated with great respect during the process of creation. We have seen many reasons why keeping the present copyright system is not a feasible or desirable option. It is not realistic to think that the power of the cultural conglomerates, which finds its base in the ownership of as many intellectual property rights as possible, can be broken by an improvement of the present system. It should also not be forgotten that the copyright system is rooted in a Romantic concept of originality, which is disadvantageous for the public domain. Remarkably, the direct relation between the individual artist and the right that was originally meant to be the basic philosophy of the concept of
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copyrights, no longer exists in a number situations. Many artists can get their work distributed and promoted only when they hand over most or all of the rights to a producer or other kind of rightholder. What we observe is that the individualistically oriented philosophy of the European copyrights system has been diluted considerably. We also observe that people are increasingly starting to comprehend that the present system of authors and copyrights is not the best way to deal with the public domain or the interests of the mass of cultural workers any more. Good examples are Linux and the Free Software Society, both of which create free places in the digital domain. They do this, not because they like free places in an otherwise benign system of authors and copyrights, but because the only possibility of replacing copyrights by better approaches is to shape free domains. The ideal is to replace the whole system of copyrights and authors’ rights by approaches that better respect the public domain and give improved payment to those who are actually doing the work.16 Why shouldn’t we implement the next step and abolish the whole system of author copyrights, replacing it with an approach that provides better payment to artists in Western and Third World countries alike, that gives due respect to their work, and that brings the public domain back again into the centre of attention?
8.9 A SUBSTANTIAL REMUNERATION FOR ARTISTS The claim that the average artist, in both Western and Third World countries, will improve his or her situation without the system of authors’ rights may appear to be a contradiction at first glance. However, there is enough reason to consider this a serious option. Where will this take us? The most radical aspect of this proposal is that the attention cultural industries currently give to superstars will fade away. It makes no sense to invest heavily in such eye- and ear-catching phenomena any more if companies cannot exclusively exploit them (which is, after all, the basic principle of copyright). Even piracy on an industrial scale is no longer interesting, because one pirate can do the same as the next, making an investment in piracy considerably less attractive! This has far-reaching consequences. The situation of the average artist will return to what it once was; undisturbed by the market domination of ‘stars’, artists will again find markets and different audiences for their work, both locally and on a global scale using the Internet. Thousands of artists could make a fair income from their performances and by the sale of their work. The influence of so many artists will contribute to the rise of meaningful cultural diversity as well. After all, in a situation where copyrights no longer exist there
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will be no monopolistic cultural industries determining the common taste through the promotion of their stars. The abolition of copyrights will free enterprises and other users of artistic materials from the payment of royalties and from bureaucratic paperwork that is unavoidably connected to this. Collecting societies will no longer have any reason to exist, which will mean substantial savings. This does not mean that there should not be payment for the use of artistic work. Of course there should be substantial remuneration for artists. After all, enterprises and other commercial users of artistic creations and performances provide music, images, designs, texts, parts of films, dance movements, paintings, multimedia performances and so forth in order to radiate a desired ambience and, consequently, to enlarge their profits. There should therefore be a tax levied on a certain percentage of the turnover of those enterprises that use or sell artistic materials in one way or another. One may reasonably guess that this applies to nearly all enterprises. The money collected from such a tax will be put in a special, legally regulated fund. Three kinds of recipients can be distinguished. One part of the money could be designated for the further development of artistic life in the concerned society. This, together with subsidies and other financial means, will be an important source for financing artistic initiatives, institutions, festivals and the like in the fields of film, video, visual arts, design, music, dance, theatre, literature, photography, multimedia, and so on. Obviously, the money should go to varied artistic purposes and not merely to those who are considered to have traditionally a ‘high’ cultural background. The basic idea should be a democratic one. This means that all different voices, images and imaginations should have the chance to present themselves and to be financially supported in case profit making is not (yet) possible. The second part of the collected money will go to individual artists representing the different fields of the arts. It will make it possible for them to receive a salary during the period of the creation or production of a work of art; perhaps half a year, a year, or two years. This part of the money makes the development of artistic works possible outside the institutional framework of cultural initiatives, institutes, festivals and so on. The basic principle here is that care should be taken to develop a broad range of artistic works in all the cultural fields. The third part of the money should be destined for artistic life in nonWestern countries. The reason why should not be difficult to understand. It is clear that most of the profits from the use of artistic materials will be made in Western countries, but many of the sources of those artistic creations have a non-Western origin. This should be recognized. Those countries are currently suffering from a massive brain drain. It is important that artists are able to make a living in their own country and contribute to the artistic life of their
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indigenous society without being dependent on Western producers, agents, and so forth. By proposing such a tax on the use of artistic materials, there is no longer any direct connection between the actual use - measured in quantities, minutes, and such like - of the work of a certain artist and the remuneration that he or she receives. This is reasonable. After all, there are many predecessors and sources that have contributed to the creation and production of any work of art, including the cultural richness that the public domain provides for free! There is too much attachment to the Romantic ideal of originality to take this as the starting point for the distribution of levies for the use of artistic material.
8.10 RESPECT Another issue connected to copyrights is moral rights, which nowadays have a stronger base in the European authors’ rights system than in the AngloSaxon copyright approach. Moral rights protect the integrity of a work of art and science against infringement. However, if we recognize that the copyright concept is a romantic one, and if we are also aware that the moral rights aspect freezes works of art in quite unnatural ways, then a logical conclusion would be to get rid of moral rights as well, as these have been defined in our legal contexts. Of course, we can admire the work of a certain artist enormously, as Roland Barthes has indicated, and we can agree that we should deal with a certain work of art carefully. This observation does not necessarily lead to the conclusion that the artist or a ‘rightholder’ may be the absolute ruler on ‘his’ or ‘her’ creation, performance, or interpretation for decades. In our Western society we have created the bizarre situation in which we automatically end up in court if we claim that the ownership, or copyright, of an artistic creation has been violated. However, if we conclude that there is no ownership in the absolute sense, then there is nothing to be violated or brought before a court. Nevertheless, in our Western culture we have placed the judicial authorities in the role of cultural arbiters. The judge is the guardian of ‘originality’; the person who says that digital sampling without permission is liable to penalty. It is the judge who seems to know that cultural adaptations, or ‘dialogic practice’ (to quote Rosemary Coombe again), are inappropiate; the judge who can evaluate the continuation of cultural life only in terms of a felony; and the judge who has the power to freeze the ongoing cultural creation for decades and decades. There is no escape. We should get accustomed to the fact that we, the people, the bearers of the public domain, should again discuss in cultural terms
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the value of ongoing artistic creativity. There is no reason to pass over to the judicial authorities cultural judgements that we should make ourselves. Central in our cultural debates should be questions such as the following. Is the use of (parts of) works of other artists carried out with respect and creativity, or is such use slovenly, boring, or even objectionably lazy? Does it make our culture a poorer or a richer resort of human existence? An artist who borrows too easily from a predecessor or contemporary will be stigmatized as a minor god. Pity for him, or her. Let us imagine, however, an artist who copies the work of another artist and pretends that it is his or her own work. Let us imagine that there is no adaptation, cultural comment on another work of art, parody or trace of creativity on the part of the copying artist. What should we think of such a situation? Obviously, this is not difficult to answer. This is outright stealing and should be dealt with under criminal law. Anyone who deliberately copies the work of another artist in word, text, image, music, or any other tool of artistic expression without the intent to adapt, enrich or parody it should be duly punished. It should be clear that my propositions concerning the abolition of copyrights are only a start. There is much intellectual work needed in order to refine the basic philosophy and to ameliorate the practical consequences of the proposal, especially with regard to the arts. The goal must be to set up a system in which artists and their intermediaries have full confidence, and that provides cultural workers in Western and Third World countries alike with better remuneration, allowing the public full opportunity to debate the value of artistic creations and performances. Such a system needs to safeguard the public cultural domain, and ensure that there are sufficient sources available for future artistic creations. In short, it needs to break the stranglehold currently exercised by cultural conglomerates through the existing system of copyrights.
NOTES 1. Janine Jacquet, ‘Cornering Creativity’, The Nation, March 17, 1997. 2. ‘Corbis, une collection de 25 millions de clichés’, et ‘Les agences photographiques françaises pourraient changer de mains’, Le Monde, 9 April 1999. 3. C. Alberdingk Thijm, ‘Websurfen? Trek je creditcard’, Het Parool, 7 March 2000. 4. Michel Guerrin and Emmanuel de Roux, ‘Pour les photographes, la rue n’est plus libre de droits. La défense du droit d’auteur, comme celle du droit à l’image des propriétaires de bâtiments, entraîne des procès coûteux et rend difficiles les métiers de l’image et de l’édition’, Le Monde, 27 March 1999. 5. Christian de Brie, ‘Etats, mafias et transnationales comme larons en foire’, Le Monde Diplomatique, April 2000. 6. Symposium on the Struggle Against Piracy, organized by the Stichting Auteursrechtsmanifestaties, 11 December 1997, Amsterdam.
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7. Christian de Brie, o.c. 8. Yves Eudes, ‘Un nouveau système de distribution sauvage de produits numériques’, Le Monde, 18 April 2000. 9. In Newton (1988), p. 155. Originally, Roland Barthes, ‘La mort de l’auteur’, Manteia, No. 5, 4e trimester 1968; published also in: Roland Barthes, ‘Oeuvres complètes’, Tome II, 1966-73, Paris 1994 (Editions du Seuil), pp. 491-5. 10. Jean-Pierre Babylon, ‘La culture par la copie’, Le Monde, 27 October 1999. 11. Interview with Rob Scholte in De Groene Amsterdammer, 18 December 1996. 12. Rosemary Coombe, op cit., pp. 94-7. 13. Martin Kretschmer, ‘Intellectual Property in Music. A Historical Analysis of Rhetoric and Institutional Practices’, Paper, City University Business School, London 1999, p. 2. 14. International Herald Tribune, 10/11 February 1996. 15. See Herman Cohen Jehoram, Petra Keuchenius, Lisa M. Brownlee (ed.) (1996), Traderelated Aspects of Copyright, Deventer: Kluwer, p. 44. 16. See also Bernard Lang, ‘Des logiciels libres à la disposition de tous. Contre la mainmise sur la propriété intellectuel’, Le Monde Diplomatique, January 1998.
BIBLIOGRAPHY Barnet, Richard J. and John Cavanagh (1994), Global Dreams: Imperial Corporations and the New World Order, New York: Simon & Schuster. Bender, Wolfgang (1992), La musique africaine contemporaine: Sweet Mother, Paris: L’Harmattan. Bettig, Ronald V. (1996), Copyrighting Culture: The Political Economy of Intellectual Property, Boulder: Westview Press. Bharucha, Rustom (1993), Theatre and the World: Performance and the Politics of Culture, London and New York: Routledge. Boyle, James (1992), ‘A theory of law and information: copyright, spleens, blackmail, and insider trading’, California Law Review, 80 (6), 1529-30. Boyle, James (1996), Shamans, Software, and Spleens: Law and the Construction of the Information Society, Cambridge, MA/ London: Harvard University Press. Burnett, Robert (1996), The Global Jukebox: The International Music Industry, London/New York: Routledge. Caughie, John (ed.) (1996), Theories of Authorship, London: Routledge. Chomsky, Noam (1993), ‘Notes on Nafta’, in Kristin Dawkins (1993), Nafta: The New Rules of Corporate Conquest, Westfield, New Jersey: Open Magazine, Pamphlet Series: 1-6. Cohen Jehoram, Herman, Petra Keuchenius and Lisa M. Brownlee (eds) (1996), Traderelated Aspects of Copyright, Deventer: Kluwer. Collins, John (1993), ‘The Problem of Oral Copyright - Ghana’, in Simon Frith (ed.) (1993), Music and Copyright, Edinburgh: Edinburgh University Press. Commission of the European Communities (1995), Copyright and Related Rights in the Information Society, Green Paper, Brussels, 19.07.1995 (COM(95) 382 final. Commission of the European Communities (1996), Follow-up to Green Paper on Copyright and Related Rights in the Information Society, Brussels, 20.11.1996 (COM(96) 568 final. Coombe, Rosemary J. (1998), The Cultural Life of Intellectual Properties: Authorship, Appropriation, and the Law, Durham and London: Duke University Press. Daoudi, Bouziane, and Hadj Miliani (1996), L’aventure du raï: Musique et société, Paris: Éditions du Seuil.
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Dyson, Ester (1998), Release 2.1: A Design for Living in the Digital Age, New York: Broadway Books. Frith, Simon (ed.) (1993), Music and Copyright, Edinburgh: Edinburgh University Press). Frow, John (1996), ‘Information as gift and commodity’, in New Left Review, 219, 89-108. Gray, John (1998), False Dawn: The Delusions of Global Capitalism, London: Granta Books. Hamelink, Cees J. (1994), The Politics of World Communication, London: Sage Publications. Hamelink, Cees J. (1994a), Trends in World Communication: On Disempowerment and Self-empowerment, Penang: Southbound/Third World Network. Kretschmer, Martin (2000), ‘Intellectual property in music: historical analysis of rhetoric and institutional practices’, special issue: ‘Cultural Industry’ (ed. P. Jeffcutt), Studies in Cultures, Organizations and Societies, 6, 197-223. Kurkela, Vesa (1993), Piracy as Innovation in Post-communist Popular Music: the Cultural Meaning of Unauthorized Copying Revised, conference paper, Moscow. Lury, Celia (1993), Cultural Rights: Technology, Legality and Personality, London: Routledge. Malm, Krister and Roger Wallis (1992), Media Policy and Music Activity, London/New York: Routledge. Malm, Krister (1998), Copyright and the Protection of Intellectual Property in Traditional Music, Stockholm: Music, Media, Multiculture, Musikaliska akademien. Mann, Charles C. (1998), ‘Who will own your next good idea?’, The Atlantic Monthly, September 1998. Mazziotti, Nora (1996), La industria de la telenovela: La producción de ficción en America latina, Buenos Aires/Barcelona/México: Paidós. Mitsui, Tôru (1993), ‘Copyright and Music in Japan’, in Simon Frith (ed.) (1993), Music and Copyright, Edinburgh: Edinburgh University Press. Nayer, André and Suzanne Capiau (1991), Un statut pour les artistes: Dossier domentaire et propositions, Bruxelles: Communauté Française de Belgique/ CERP. Newton, K.M. (1988), Twentieth-century Literary Theory: A Reader, London: Macmillan. Nyerere, Julius K. (chairman) (1990), The Challenge to the South. The Report of the South Commission, Oxford: Oxford University Press. Pan-African Colloquium (1994), The Living and Working Conditions of the Artists: Final Report, Brazzaville, 20-23 July 1994, p. 14. Pérez de Cuellar, Javier (1996), Our Creative Diversity: Report of the World Commission on Culture and Development, Paris: Unesco Publishing. Pichevin, Ameyric (1997), Le disque à l’heure d’Internet: L’industrie de la musique et les nouvelles technologies de diffusion, Paris: L’Harmattan. Primo Braga, C.A. (1990), ‘The Economics of Intellectual Property Rights and the GATT: A View from the South’, in Connie T. Brown and Eric A. Szweda (eds), Trade-related Aspects of Intellectual Property, Nashville. Raghavan, Chakravarthi (1990), Recolonization: GATT, the Uruguay Round and the Third World, London/Penang, Malaysia: Zed Books/Third World Network. Schneier-Madanes, Graciela (Dir.) (1995), L’Amérique Latine et ses télévisions: Du local au mondial, Paris: Anthropos. Shiva, Vandana (1995), Captive Minds, Captive Lives: Ethics, Ecology and Patents on
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Life, Dehra Dun, India: Research Foundation for Science, Technology and Natural Resources. Shiva, Vandana (1997), Biopiracy: The Plunder of Nature and Knowledge, Boston, MA: South End Press. Shuman, Michael (1994), Towards a Global Village: International Community Development Initiatives, London/Boulder, CO: Pluto Press. Simon, E. (1994), ‘The Integration of Intellectual Property and Trade Policy’, Paper presented at the Alai Conference, Geneva, 27-28 June 1994. Smiers, Joost (1998), État des lieux de la création en Europe: Le tisse culturel déchiré, Paris: L’Harmattan. Soulillou, Jacques (1999), L’auteur, mode d’emploi, Paris: L’Harmattan. Spoor, J.H. (1990), De gestage groei van merk, werk en uitvinding, Zwolle: Tjeenk Willink. Stallman, Richard (1993), The GNU Manifesto, Free Software Foundation. Sterling, Bruce (1992), The Hacker Crackdown: Law and Disorder on the Electronic Frontier, London: Penguin. Ströter-Bender, Jutta (1995), L’art contemporain dans les pays du ‘Tiers-monde’, Paris: L’Harmattan. Webster, Frank (1995), Theories of the Information Society, London/New York: Routledge.
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9. Copyright societies do not administer individual property rights: the incoherence of institutional traditions in Germany and the UK1 Martin Kretschmer 9.1 INTRODUCTION Copyright collecting societies occupy a dominant market position in at least two respects: first, towards the users of protected works who may have just one legitimate supplier of licences; and second, towards the individual owners of protected works who may have no alternative provider of a rights administration infrastructure. In consequence, market prices cannot form either for licenses to users or for services to rightholders.2 This appears to leave copyright collecting societies in control of the terms of access to ‘the world repertoire’ in their particular rights domain. Most Western legislators have subjected the collecting societies to close regulatory scrutiny in order to mitigate the temptations of monopolistic behaviour. This chapter suggests that collecting societies in their historical shape are highly fragile. It is argued that there is no convincing rationale for the existence of collecting societies (as we know them) from a premise of copyright as an individual, exclusive and transferable property right. However, this premise appears to underlie most recent attempts at legislative and structural reform, such as the GEMA decisions of the European Commission (OJL 134, 20 June 1971; OJL 166/22, 24 July 1972), the SABAM (Case 127/73, BRT v. SABAM, 1974 ECR 313) and SACEM (Case 395/87, Tournier, 1989 ECR 2521) rulings of the European Court of Justice, the investigation by the British Monopolies and Mergers Commission into the trading practices of the UK Performing Right Society (PRS) (MMC, 1996), the ‘Cannes Agreement’ between the major multinational music firms and the European Collecting Societies (1997) (cf. Wallis et al., 1999) and the analyses emanating from the Single Market and Competition Directorates of the European Commission (for example Green Paper: Copyright and Related 140
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Rights in the Information Society, 19 July 1995, COM (95) 382 final;3 Temple Lang, 1997). An alternative premise is suggested, which would relegitimise the collecting societies as an award mechanism for creative activity. The chapter is structured in five parts. First, I shall critically introduce the conventional economic rationale for collective administration as a response to market failure in the individual contracting over property rights. It will be argued that this rationale does not account easily for the historical shape of collecting societies as membership organizations uniting the conflicting interests of publishers and authors. Second, some illustrative material for this argument will be provided with a brief detour through the origins of two regimes of collective administration. Third, the concept of private property is revisited from legal, economic, and philosophical perspectives. Fourth, some characteristic features of collective administration are discussed in more detail, these being at variance with the concept of individual, exclusive, transferable property rights; that is, the distribution formulae for fees collected, compulsory representation, compulsory licences, cultural and social deductions, and the organizational dynamics of bureaucracy. Finally, and tentatively, some principles for the reform of collective administration are formulated. For reasons of parsimony, the exposition will be limited to the collective administration of one particular domain, music copyright, in two different institutional settings: the copyright approach prevalent in Common Law jurisdictions, exemplified by the UK societies PRS and MCPS - and the author rights approach prevalent in Civil Law environments, exemplified by the German society GEMA.4
9.2 THE POSITION OF AUTHORS AND PUBLISHERS IN COLLECTIVE ADMINISTRATION According to copyright society folklore, the invention of collective administration was a straightforward response to a problem of transaction costs. An evocative story often cited recounts the visit of Ernest Bourget, a French composer of popular musical chansons and chansonettes comiques, to the Paris café Ambassadeurs in 1847 where, among other pieces, his music was being played without permission. He then refused to settle the bill for his drink of sugared water, at the time a fashionable beverage. In the resulting brawl, M. Bourget argued ‘you consume my music, I consume your wares’ an argument he won before the Tribunal de Commerce de la Seine which upheld a revolutionary law of 1793, recognizing a right to public performance for the first time (cf. Melichar, 1983; Kretschmer, 2000b). Ernest Bourget understood that as an individual composer he should not
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devote his life to chasing unauthorized performances of his music. Vice versa, each établissement performing popular music would incur considerable costs in tracking the various holders of the relevant performing rights. The solution to the failures of individual contracting was collective administration, combining a comprehensive monitoring service of music usage with a facility to issue licenses; that is, permissions to play against remuneration. Ernest Bourget, his colleagues Victor Parizot and Paul Henrion, as well as the publisher Jules Colombier, founded an Agence Centrale, the direct predecessor of the first modern collecting society Société des Auteurs et Compositeurs et Editeurs de Musique (SACEM). SACEM, established in 1851, became the European model, collecting at times even in Switzerland, Belgium and the UK. Its characteristic features include the representation of both authors (composers and lyricists) and publishers - enforced by a governance structure under which changes to membership and distribution rules could only be implemented by mutual consent of both groups - and some functions of a socio-cultural charity. These will be discussed in Section 9.3 below. Although there may be good economic arguments for mutual membership organizations (for example, spreading the risk of ill fortune) and even charitable activity (support of music education; for example, securing the supply of future members and users), it is less than obvious why these sociocultural activities should be performed under the umbrella of rights administration. Thus, economists tend to accept the transaction cost rationale as a remedy to market failure only for the rights representational element of collecting societies (for example, Kay, 1993; Towse, 1997; Thorpe, 1998). The transaction cost argument does indeed support some form of collective administration but not remotely in the shape of a traditional, membershipbased collecting society, even if we strip out all the socio-cultural functions. Consider the role of publishers and authors respectively, in the words of the World Intellectual Property Organization (WIPO 1998, 6.144-6.145, pp. 374-5); a UN agency based in Geneva: Under a publishing contract signed with an author, the publisher is authorised to reproduce the work and to sell copies to the public. He will also try to have riders written into the contract granting him the rights of performance and broadcasting, in the hope that this ‘second serving’ of rights will add to his income. If music publishers are kept out of the collective management of rights of performance and broadcasting, the collective management organization will not have access to the music publishing rights, which are in the nature of ‘extras’ in the hands of publishers. This makes for serious gaps in the collective management, because published works have a vastly greater audience than handwritten works. Experience has shown that collective management without the incorporation of publishers quickly stagnates and loses its meaning. All the copyright societies of Europe and North America have therefore incorporated publishers who - as
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members or clients - assign all these ‘extra’ rights to their collective management administration.5
From an economic perspective this is a strange argument. Either the publisher offers commercial value to the author and thus acquires his/her performance and broadcasting rights in a market transaction (then the publisher should be free to administer these rights as s/he sees fit), or the author sees no commercial value in employing a publisher for the management of his/her performance and broadcasting rights (in which case publishers should have no say on (and share in) the collective administration of those rights).6 As the marketplace for music has evolved over the last 250 years, the latter case (of the composer as self-publisher) has remained the exception. The puzzling question then becomes not: ‘What is the position of publishers in collective administration?’ but ‘What is the position of authors in collective administration?’ The changing interests of publishers in music copyrights may be summarized pointedly: an eighteenth-century publisher sold sheet music; a progressive nineteenth-century publisher sought to promote performances for the music s/he published; an entrepreneurial early twentiethcentury music publisher attempted to secure recordings (and broadcasts) for the music s/he published; a typical late twentieth-century music publisher is a small part of a media group (that is, the composer conducts his first commercial transaction with what used to be secondary exploitation, a recording company, a broadcaster, a TV or film producer).7 In each case, the publishing company would seem to add enough value to command a full transfer of copyrights, perhaps sweetened by a royalty arrangement.8 A good example of the poor position of the author towards market intermediaries is the current practice of media companies to make the commissioning of media music, such as sound tracks, conditional on the assignment of copyrights to a ‘publisher’ set up solely for this purpose. This publishing house is not ‘publishing’ anything; rather it is a passive vehicle, owned by the media company, for receiving royalties, mainly from public performance and broadcasting rights.9 Composer Associations have termed this practice ‘Copyright Coercion’ (cf. British Academy of Composers and Songwriters, www.britishacademy.com), though it is done freely, merely reflecting the actual bargaining power of the parties involved in bringing a piece of music to the market. The media company adds most value in this process, and will thus command a transfer of property rights. In market economies, bargaining power is not necessarily coercion. I am not defending this practice here. My point is that it is a natural consequence of conceiving of copyright as individualized property, a view I later seek to expose as at variance with the tradition of author societies. In order to further develop material for the contention set out in this section that
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the currently prevalent forms of collective administration are not built on a property premise of copyright, I shall now give two case studies of the origins of the German and British regime of music copyright societies.
9.3 PERFORMING AND MECHANICAL RIGHTS FROM AN HISTORICAL PERSPECTIVE: GEMA, PRS AND MCPS Music copyright was first recognized in law following an English court case of 1777. It was ruled that music was ‘a writing within the Statute of the 8th of Queen Anne’, the first statutory copyright of 1710 that protected newly published books from unauthorized reprinting for 14 years (renewable once). The French law ‘sur le droit d’auteur’ of 1793 included for the first time a right to public performance, following a persuasive intervention by Pierre Augustin Caron Beaumarchais. Prussian (1837) and British (1842) legislation acknowledged such a performing right in principle, but failed to provide for suitable enforcement mechanisms. The Prussian Act of 1837 made a crucial distinction between works of art and lesser products,10 which received weaker protection. The successor legislation of the Norddeutscher Bund (1870) distinguishes between unconditionally protected dramatic works of music (operas, musicals) and musical work (symphonies, songs, dances, marches) for which performing rights had to be explicitly reserved. The German Law of 1901 clarifies an automatic exclusive public performance right. In 1903, a Genossenschaft Deutscher Tonsetzer (GDT) was established under the chairmanship of Richard Strauss. Its explicit aims were ‘to preserve and enhance the professional interests of composers’ which, apart from political lobbying, included providing legal advice and social services to members. In practice, the formation of a composers’ interest group and national representation was an attempt to counter moves by some publishers to set up an ‘agency for the collective exploitation of musical performance rights’ in Leipzig.11 GDT set up a composer-dominated Anstalt für musikalisches Aufführungsrecht (AFMA), incorporated on the same day as GDT (7 April 1903). Richard Strauss, a star composer with considerable market leverage, had cleverly coopted four influential German publishers: Bock (Strauss’s own publisher), Challier, Lienau and Simrock, with a promise of royalties from collected licence fees. Unsurprisingly, the publishers were not impressed with distribution rules which insured that 10 per cent of licence fees collected went directly into the social funds of the composers’ association GDT. Publisher Hugo Bock eventually challenged Strauss with the establishment of a rival society: GEMA
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(Genossenschaft zur Verwertung musikalischer Aufführungsrechte, 1915), opening membership to three groups; composers, lyricists and publishers. In 1916, Bock persuaded the Austrian composers’ society, AKM, which administered the works of countless famous and successful names (including Brahms, Bruckner, Korngold, Léhar, Mahler und Johann Strauß) to have its repertoire represented in Germany by GEMA. In 1929, AFMA/GDT’s performing rights income barely covered its administration costs and finally agreed to a merger with GEMA.12 The new society incorporated in 1930 as STAGMA (Staatlich genehmigte Gesellschaft zur Verwertung musikalischer Urheberrechte) functioned for only three years before becoming an instrument of national-socialist Gleichschaltung in 1933. It is noteworthy that Richard Strauss, when Goebbels offered him the presidency of the Reichsmusikkammer, couldn’t resist the temptation to reassert (albeit briefly: 1933-35) his influence over copyright policy (cf. Kater, 1997, pp. 203ff.). For mechanical copyrights (that is, the right to record a work of music - a sub-category of the reproduction right), publishers have always had the upper hand. Until the Copyright Act of 1901, publishers had routinely asked composers to sign a Urheberschein in which all copyrights, including publishers’ rights (that is, publication, reproduction and distribution) and performing rights ‘for all countries and states of the earth’ were fully assigned against a one-off fee (Ulmer, 1997, p. 206). The record industry enjoyed a privilege that permitted the recording of protected music without permission or remuneration of the rightholder. With the commercial value of recorded music rising sharply, the publishers lobbied successfully for a change in the Act of 1901 (revision of 1910) and entered inter-industry negotiations with record producers. Although many composers had become accustomed to royalty arrangements for public performances (particularly for the droit grand of dramatic works performed in Germany’s more than 80 opera houses), the culture of the Urheberschein meant that the composers’ association GDT did not have sufficient repertoire for its mechanical collecting arm Mechanische Abteilung, founded in 1910. The publishers’ society Anstalt für mechanischmusikalische Rechte (AMMRE) of 1909 carried the day. In 1938, AMMRE transferred its shares to STAGMA, the predecessor of post-war GEMA. Mechanical and performing rights however retained a different distribution formula. For performing rights, the composer would receive 8/12 and the publisher 4/12 of collected licence fees, minus administration costs and deductions of 10 per cent for the socio-cultural fund. For mechanical rights, the split was 50:50 between composers and publishers until 1954; thereafter a 6/10 versus 4/10 formula was adopted in favour of the composer. Works of art received a significantly higher distribution per performance or mechanical reproduction than popular music.
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The story in the UK shows significant parallels but also significant differences. Similar to the German experience, the public performance right to musical works (granted with the Copyright Act of 1842) was not in fact exploited outside the field of staged works. For most of the nineteenth century, concerts, often promoted by the publishers themselves, served as a stimulant to sheet sales. Since the performing right was not normally enforced, the Copyright (Musical Compositions) Acts of 1882 and 1888 required the explicit reservation of the right on the title page of every printed copy. With Britain’s accession to the Berne Convention in 1886, works published in foreign (Berne member) countries received the same protection as was granted to nationals - the so-called principle of national treatment (cf. Ricketson, 1987). The French collecting society, SACEM, soon employed an agent in the UK to collect royalties for the performance of French repertoire. British publishers continued to use the right to public performance in a purely defensive manner to prevent performances from unauthorized copies of sheet music. This should safeguard opportunities for profit from concert promotions. In April 1905, the British Music Publishers Association (MPA) dramatically announced that they would accept no more music for publication until the law afforded more adequate protection, in particular summary penalties against piracy. This was accompanied by strenuous lobbying ‘to drive the fact into the heads of the general public, and simultaneously into the heads of several very dense Members of Parliament, that composers were not able to live upon suction but required as much nourishment to keep body and soul together as any other member of the community’ (Boosey, 1931, p. 115). The publishers’ effort eventually resulted in the Copyright Act of 1911 and the setting up of the Performing Right Society (PRS), the UK pendant to SACEM in 1914. Note that, contrary to the German experience, the campaign was led by publishers (William Boosey became president of the PRS) who used the rhetoric of authors’ ‘nourishment’ to foster their own ends (cf. Kretschmer, 2000b). Although earlier contractual practices, similar to the German Urheberschein, required composers to assign the whole of their copyright to the publisher, publishers agreed to share the revenues collected by the PRS. The British distribution formula amounts to a 50:50 split between the combined share of the creative parties (composer/lyricist) and the share of publisher and sub-publisher. The PRS did not make any official socio-cultural deductions but recognized different distribution weightings for different kinds of music.13 The minimum standards of the Berne Convention initially did not protect the mechanical reproduction of copyrighted works. The notion was tested in the English Appeal Court in 1899, which concurred with that notion. The Berlin revision of the Berne Convention in 1908 eventually required
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signatories to protect musical works against reproduction by mechanical means. In Britain, this was implemented with the notorious Section 19 of the Copyright Act of 1911, which required rightholders, if they had granted a licence to record a work, to grant a licence to any other person to record the same work upon payment of a statutory royalty. In 1914, the level of the compulsory licence was set at 5 per cent of the ordinary retail price of the record. This was raised in 1928 to 61/4 per cent.14 Mechanical licences were administrated from 1924 by the Mechanical Copyright Protection Society Ltd. (MCPS); a publishers’ agency.15 No fixed formula was set for the distribution of mechanical royalties between composers and publishers. The composer’s share depended on his or her individual contractual arrangements. This led to the formation of separate composers’ organizations, such as the Composers’ Guild and Songwriters’ Guild, promoting ‘approved’ contracts for their members. Today, a 60:40 split of mechanical royalties in favour of the composer is seen as standard. In 1998, MCPS and PRS formed a joint venture, the Music Alliance, with a view to sharing the cost of administration through common information systems.
9.4 PROPERTY CONCEPTIONS REVISITED We all have some conception of ownership. This enabled me to conduct much of the introductory discussion with a concept of individualized or private property without giving a satisfactory definition, or any definition at all. Indeed, legal, economic and philosophical discussion appears to be unduly certain about a unified notion of property modelled on ‘things’ - a reification of property relations.16 Surveys of anthropological and ethnographic studies on property regimes have indicated that ‘although property rights exist everywhere, what is necessary about them is just that some exist. It appears that many specific systems of ownership are compatible with any set of environmental conditions and social structures’ (Becker, 1980, p. 200). In this section, I shall briefly sketch concepts of property as they are prevalent in three disciplines. 9.4.1 Legal Conceptions The most prominent expression of property concepts in law is the constitutional guarantee to private property, as we find it for example in Germany, France and Spain. Anglo-Saxon-influenced common law appears to have converged on an equally strong concept of liberal private ownership as ‘possession, enjoyment of use, and transfer’ (Story, 1998, p. 189). There is a suspicion that this is tautological, since property is a legal construction; that is,
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it may not be definable apart from the concrete entitlements it gives rise to. Property is that to which we afford protection, not vice versa. This is not sophistry but of immediate practical importance. Consider the ownership of a piece of land. Does that include the entitlement to build on it? Does the redefinition of a stretch of land into Green Belt constitute expropriation, that is a violation of private property rights (cf. Marbach and Riva, 1995 [1989], p. 70)? Does a legal ban on possession (for example, handguns), on trade (for example, fireworks), or on use (for example, chlorofluorocarbons (CFCs), landmines) infringe constitutional or fundamental conceptions of private property (cf. Story, 1998, pp. 189-90)? The legal classification of copyrights as intellectual property has opened the door for claims of expropriation; for example, for exemptions to copyright, such as fair dealing (UK), fair use (US) or Schranken (Germany), that is, limits to the rightholder’s control of review and criticism, private use, educational use, current-affairs reporting, time limits to the terms of protection, compulsory licences and so on. In a landmark decision of 7 July 1971 (BVerfGE 31, pp. 240f.), the German Constitutional Court tried to strike a balance between what it conceived of as core property entitlements (the allocation of the basic economic value of creative endeavour to the author and his/her freedom to determine the mode of exploitation) and the privilege of legislators to determine in a social context what that should mean.17 9.4.2 Economic Conceptions In economic history, the standard explanation for the evolution of welldefined, secure, individualized property rights is that they are an efficient response to scarce resources (North and Thomas, 1973; North, 1981). Private property rights prevent the overexploitation of a resource by those with no incentive to conserve it (the so-called ‘tragedy of the commons’).18 Private property rights allow the formation of prices, and make resources travel to their most valuable use. The characteristics of private property implied by these economic functions are: exclusivity (that is: whoever has a property claim over something can prevent others from using it), transferability (that is: whoever has a property claim over something can pass on that title to anyone of his or her choosing), universality (that is: a complete set of property relationships between all people is specified) and enforceability (that is: these rights can be reliably asserted and are not subject to rapid or arbitrary changes).19 The legal expressions of intellectual property exhibit these features to varying degrees. The underlying economic rationale, however, is more doubtful. While land, human labour and machinery are scarce in that if they are put to some purpose they may not be used for any other, knowledge, ideas
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and information will proliferate with usage. The main economic justification for intellectual property rights, therefore, has to be a market-failure argument. In the case of copyright, it has been claimed that without the artificial scarcity introduced by property concepts, the costs of production of creative works will remain above the costs of copying. Creative production thus would not take place.20 9.4.3 Philosophical Conceptions The economic notion of private property suggests that one particular regime of individualized rights is the most efficient. This view has, in philosophical terms, utilitarian and contractarian roots. Contractarian, in that each individual might have an interest in having a system of private entitlements rather than no system at all. (This rationale, however, does not determine the concrete shape of the system.) Utilitarian, in that society as a whole appears to be best off if it agrees on a particular system of individual, transferable rights (the ‘general welfare’ approach). In liberal political philosophy, a third rationale for private property rights derives from John Locke’s concept of ‘natural’ property as arising from ‘mixing’ one’s labour with the products of nature (under the condition that one leaves ‘enough and as good’ for others) (Second Treatise of Government, 1690, Chapter 5, section 27). Many have thought Locke’s notion to be incoherent, denying for example the social character of labour. In the case of intellectual property rights, a ‘natural’ entitlement to the fruits of one’s labour (if it exists) may take either the form of exclusive, transferable rights or of a system of equitable rewards. A fourth philosophical conception of private property evolved in German idealism. It derives from Kant’s notion of rights as the expression of one’s personality (Persönlichkeitsrechte) and was further developed in Hegel’s philosophy of law. It is rather elusive but the thought runs roughly like this: Property connects a person to his or her freedom. Without property, a person is not conceivable at all.21 Again, it is not clear whether this notion should give raise to legal expressions of intellectual property which are exclusive or transferable, but we may observe that the continental European development of authors’ right (with its inseparable connection between the author and the work through a droit moral) owes much to Hegelian thought.22 Finally, the coherence of the notion of property itself may be contested. This may arise from an alternative ‘communal’ premise (closely associated with Karl Marx), or it may take the form of a reduction of property to bilateral relations (an ambition pursued by the American legal theorist W.N. Hohfeld). From a Hohfeldian perspective, there is to be no underlying, unified concept of private property apart from its concrete expressions; some exclusive, others
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not; some transferable, others not. Property, here, is shorthand for a bundle of rights, privileges, powers, immunities, duties and liabilities that can be made explicit in various relational settings (cf. Hohfeld, 1919). From a Marxist perspective, land and the means of production will be assigned to the community as a whole after the system of private ownership under which labour has been treated as a commodity - alienated and exploited in search of surplus - has collapsed (cf. Marx, 1867).23 In the following section, it will be argued that the collective administration of music copyrights does not straightforwardly reflect a single underlying concept of private property - perhaps not even a notion of copyright as property.
9.5 PROPERTY CONCEPTIONS UNDERLYING THE COPYRIGHT SOCIETIES The most thorough study of the internal workings and competitive environment of a collecting society was conducted by the British Monopolies and Mergers Commission in 1994-95, following a complaint by members of the pop group U2 that they were forced, under the terms of membership, to assign all performing rights to the PRS. As a result, U2 had to pay performing right fees for concerts where they performed their own music, leading, for example, to dual deductions for live performances abroad (one to the foreign society linked by reciprocal agreements and one to the PRS). Other composers complained about a new distribution formula for live performances favouring popular music, administrative inefficiency and high administrative costs. The MMC report in effect recommended that the administration of copyright, and by implication copyright itself, be moved towards a conception based on exclusive transferable property rights. For example, the distribution of revenues should directly reflect the actual usage of copyrighted material; the costs of administration should be more directly allocated to the cost incurred in collecting revenues for particular works; and members should be free to administer particular categories of rights themselves. European Law has intervened in a number of cases involving collecting societies under the Treaty of Rome (1957, the founding treaty of the European Community which overrules national legislation). The so-called ‘rules of competition’ are embedded in two articles, concerning agreement and concerted action (Article 85) and concerning the acquisition and exercise of market power (Article 86). (Following the Amsterdam Treaty of 1997, the Articles have been renumbered: Article 85 is now 81, and Article 86 has become 82.)
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In the GEMA decisions (OJL 134, 20 June 1971; OJL 166/22, 24 July 1972), the European Commission ruled (among other points) that, under Article 86, members should be free to assign only particular categories of rights and to withdraw their administration if they so wish. In particular, individual rightholders should be able to join foreign societies to manage their rights in countries where the national society merely acts through a reciprocal contract. In Belgische Radio en Televisie v. SABAM (Case 127/73, BRT v. SABAM, 1974 ECR 313), the question before the European Court of Justice (ECJ) was whether the Belgian copyright society was acting contrary to Article 86 by requiring assignment of all present and future copyrights as a condition of admitting a potential member to collective administration. The Court explicitly stated that a copyright society is not entrusted by any public authority with giving ‘services of general economic interest’ (which might have exempted it from the EC competition rules: Article 86(2) [ex 90(2)], EC Treaty). A copyright society purely manages private, individual property interests. Collective administration has to leave maximum freedom to right holders to manage their rights. To retain rights for five years after a member withdrew was ruled to be ‘unfair’. In a dispute between some French discotheques and SACEM (Case 395/87, Tournier, 1989 ECR 2521), the French collecting society was accused of imposing excessively high licence fees and insisting on a blanket license; that is, refusing to license separately only the (foreign) repertoire that the discos were interested in. The ECJ held that the refusal of a licence for some rights only would restrict competition if there was an efficient way to administer such groups of copyrights separately. It was, however, for national courts to decide whether this was the case.24 The new regulatory emphasis on a market analysis of individual property rights has already had practical consequences. The five major media companies, accounting (as rightholders and users) for 80 per cent of royalties collected and distributed by European collecting societies, have discovered a commercial logic for withdrawing from the current regime of collective administration altogether. Polygram (now part of Universal) reported in 1996 that it had identified potential savings of $2.5 million per annum if royalties payable from Polygram Records to Polygram Publishing were processed directly (Music & Copyright, No. 94, 17 July 1996). In South East Asia, multinational music publishers have signed a Memorandum of Understanding which allows the major players to collect mechanical royalties themselves without having to support a system of copyright societies along European lines (MBI copyright societies report, 1996, p. 17). In Europe, the multinationals’ strategy has been to tilt the current system slowly in favour of the major players by making societies compete against
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each other for so-called Central European Licensing (CEL) deals. CEL Agreements allow any record company to acquire a licence from a central point (that is, one collecting society) for all the European shipments of international products. Under the GEMA decisions, rightholders are free to assign their repertoire to the society offering the best terms. Faced with this threat, the European collecting societies agreed at the Midem trade fair in 1997 to cut administrative charges for handling mechanical royalties from CEL from 8 per cent to 6 per cent (the so-called Casino or Cannes Agreement). According to industry sources, this has led to a sharp increase in commission on royalties collected from smaller record labels (Wallis et al. 1999, p. 23). Since the most valuable uses of music are now quite easy to monitor (for example, record sales for the mechanical reproduction right; broadcasters’ play lists for the performing rights), there is no reason why the trend should stop here. It may be simply too costly to monitor niche repertoire and process small sums of royalties.25 Large rightholders individually will choose where and when it is economic to license; vertically integrated media companies may even grant free licences to themselves. John Temple Lang, director in the Competition Directorate of the European Commission (1998): The assumption that no member or group of members of a society could negotiate licences is no longer true, if it ever was, of big sound reproduction companies which can and do enter into individual negotiations, in particular reproduction rights, when the size and importance of the licensee makes it worthwhile to do so . . . It seems unlikely that the Commission would allow any arrangements which denied rightholders the substantial benefits of direct distribution.
In short, the transaction cost argument for collective administration from the cost of individual contracting may support not a universal rights administration system (to which all rightholders have access on similar terms), but a system where the major rightholders selectively decide, supported by sophisticated information technology, whether collecting licence fees is worthwhile. I shall now discuss five features of the current membership system of collective administration that will resist reform along the lines of exclusive transferable property rights. 9.5.1 Publisher and Author Members In Section 9.2, I suggested that it is surprising that authors have any say in the collective administration of copyrights since the publishing company, as market intermediary, should have asserted its bargaining power to achieve a
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full transfer of rights. In a submission of 1976, German avant-garde composer Peter Ruzicka (who later became a well-known impresario) turned this argument on its head. Copyright societies, he said, are necessarily associations whose members can only be those that are ‘right owners’ (Berechtigte). Since GEMA’s terms of membership require the assignment of all future rights, publishers normally have no rights left to assign to the collecting societies unless a contract was initiated before a composer applied for membership. In a formal representation, Ruzicka asked the patent office as regulator to exclude publishers from full membership, thus enabling changes to GEMA’s distribution formula that would run counter to the publishers’ economic interest (cf. Ulmer, 1977, p. 214; Hübner and Stern, 1998, p. 231). Ruzicka’s request was refused on complex legal grounds (decision of Deutsches Patentamt, 6 June 1977). How, though, could Ruzicka have thought that such an intervention on the market distribution of property rights was what the legislator had intended in the 1965 German Acts defining copyright (Urheberrechtsgesetz - UrhG) and regulating the copyright societies (Urheberwahrnehmungsgesetz - UrhWG)? In its promotional literature, GEMA claims that its aim ‘is nothing less than securing the economic, social and cultural existence of all creators’ (Geyer, 1997, pp. 647-8).26 More specifically (Kreile and Becker, 1997b, p. 628): In article 7 and 8 of the Urheberwahrnehmungsgesetz, the legislator expects of collecting societies - due to their character as a solidaric community (Solidargemeinschaft) - to perform cultural and social tasks: through their charitable pension and subsistence funds and through the support for culturally important works and contributions. In Germany, therefore, collecting societies are not only royalty-processing centres (Inkassoorganisationen) but have a statutory duty to foster and protect creators (schöpferische Menschen). They take on a considerable part of the state’s social and public responsibility.27
The Common Law tradition of freedom of contract upon individual property rights clashes with this interventionist understanding of the role of the state.28 9.5.2 Compulsory Representation, Compulsory Assignments and Compulsory Licenses Collecting societies typically will represent any rightholder above a minimum threshold. For a composer to become a member of the PRS, for example, s/he must have three works either commercially recorded, broadcast within the past two years, or performed in public on at least twelve occasions within the past two years (and be commercially published). In Germany, the law
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regulating collective administration even prescribes a so-called ‘compulsory representation’ (Wahrnehmungszwang, §6 Abs1 UrhWg). In providing a service to all rightholders, the larger players in effect subsidize the system, since it is more costly to set up accounts, collect and distribute small amount of royalties. If right owners wish to be represented by a collecting society, they typically have to assign all rights in the relevant domain; that is, they cannot ‘cherry pick’, for example administering high turnover products themselves while leaving cost-intensive licensing to the society. Again, this practice is sanctioned by the German Urheberwahrnehmungsgesetz (cf. Kreile and Becker, 1997b, p. 640). The new opt-out clause for certain categories of rights adopted by the PRS after the MMC enquiry requires right owners to carry the costs of their opt-out to the system.29 For some legally granted rights (such as the German blank-tape levy §54 UrhG), the only exploitation available is via collecting societies. In collectively administered right domains, again, the collecting society is obliged to license any user under equitable conditions (§11 UrhWG). In these cases, collective administration overrides the right to exclusivity. 9.5.3 Socio-cultural Deductions Collective administration may also be viewed as a form of unionization. Composers no longer enter the market as individuals (cf. Peacock and Weir, 1975, p. 41). This enables them to extract better terms than contracting individually with music publishers. The step to provide other collective services to the profession is therefore small. Under the guidelines of CISAC (Confédération Internationale des Sociétés d’Auteurs et Compositeurs), the international umbrella organization of the performing right societies, up to 10 per cent of collected licence fees may be channelled into socio-cultural funds. The German law regulating copyright societies (Urheberwahrnehmungsgesetz) explicitly demands that they should foster ‘culturally important works and contributions’ (§7) and set up pension and social funds (§8). Anglo-American rightholders are enraged by these deductions. They feel that their exported property subsidizes foreign social and cultural policy. 9.5.4 Distribution Formula At GEMA, so-called ‘evaluation committees’ weight the distribution of royalties to authors from considerations of length of membership, past income, artistic personality and overall contribution of an œuvre. In the UK, the classical-music subsidy in the royalty distribution formula was finally phased
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out following the MMC report of 1996. In 1999, a PRS foundation was established for the support of new music, regardless of genre. 9.5.5 Self-Organizing Actors and Governance Organizations are self-organizing actors that develop their own dynamic. If an organization is to act in the conflicting interests of third parties, complex principal-agent problems arise (Hutter, 1995, p. 181). For collecting societies, there has been a tendency towards empire building and inefficient bureaucracy. The cost of collection in many areas of usage amount to a quarter of revenues distributed - while for other complex services (such as health insurance) administrative deductions of 5 per cent are seen as high (cf. note 22). Governance structures are often less than transparent. Notorious is §14 of GEMA’s terms of association according to which the ‘board’ may consist of only one person (under this clause, Vorstand Erich Schulze ruled GEMA from 1947 to 1995 when he awarded himself an annual pension of DM 546 000).30 Another doubtful practice must be hereditary succession (the French society SACEM has been controlled by the Tournier dynasty for most of the twentieth century). The five examples in this section show that collecting societies in their current form cannot be analysed as an efficient response to the problem of individual contracting over property rights. Other powerful rationales are at work, more prominently in the Civil Law countries of continental Europe, but irreducibly also in Common Law environments. In summary, membershipbased collecting societies offering a universal service appear to lean towards a ‘reward’ rationale of copyright (and an uncertain conception of property), rather than a notion of market-efficient administration of exclusive, transferable rights. It is an entirely different question whether the collecting societies actually fulfil their ambition to be a ‘league for the protection of creators’ (GEMA’s self-description: Schutzorganisation für den schöpferischen Menschen). Figures provided in the Monopolies and Mergers Commission report on the PRS (MMC, 1996, pp. 65-7) show that 80 per cent of author members earned less than £1000 from performance royalties for 1993 received in 1994, and that 10 per cent of author members receive 90 per cent of the total distribution. According to GEMA’s Yearbook 1996/7 (pp. 50f. reporting figures for 1995), 5 per cent of members received roughly 60 per cent of the distribution. As Breyer (1970) suggested, copyright appears mainly to benefit high turnover products which would have been commercially viable anyway. In the final section, I shall propose some principles for the reform of collective administration.
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9.6 REFORMS This chapter has argued that the transaction cost approach to collective administration begs many questions that go to the heart of the Western copyright regime itself. The current emphasis on copyright as an exclusive and transferable property right has led to an inherently unstable situation, littered with governance problems. Reform may come through a more thorough application of economic analysis and competition law (accepting a private property premise) or through a rethinking of the rationale for copyright protection (cf. MacQueen, 1995, p. 23). The first position requires that cultural aims and the reward of creativity should not be pursued within the framework of rights management.31 This would leave collective administration as much as possible to the market, perhaps allowing publisher-dominated societies and competition for the services of rights administration. Since under the private property approach, the dominant justification of intellectual property rights is as a response to market failure in the production and distribution of creative products, the terms of exclusive, transferable protection would have to be shortened following detailed empirical analysis of the supply of creative products. The product cycle of the cultural industries appears to suggest a term of protection somewhere between five and twenty years (cf. Kretschmer, 1999b; Kretschmer, 2000b). This policy option has been finally closed with the Agreement on Traderelated Aspects of Intellectual Property Rights (TRIPS, 1994) integrating copyright into the global free trade zone. Any shortening of the copyright term now appears illusory.32 An alternative solution would refocus collecting societies on a different rationale for copyright under a principle that, wherever commerce is generated through the use of creative content, a share of revenues should flow back into creative production. (For example, it appears inequitable that the only parties earning substantial revenues from Internet usage are hardware and software companies, telephone companies and Internet Service Providers)33. Such a principle may be built on a non-exclusive reward concept of private property or, more radically, may nudge copyright away from the sphere of property altogether. The effect of this approach would be something akin to a tax system on the users of culture. It may entail a complete reassessment of the membership, licence and distribution rules of the collecting societies, and a review of their statutory supervision. Certain culturally desirable categories of copyright usage, such as live music, may have to be exempted.34 Licensing tariffs, which encourage the use of low-quality ‘muzak’ material not administered by collecting societies, should be revisited (Lupton and Drahos, 1996). The collection basis could be broadened to include works out of
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copyright (domaine public payant) (Dietz, 2000). Already there is legislation pending in several European countries extending an existing copyright levy on ‘blank tapes’ to flat fees on computer components that can be used in copying, such as hard disks, scanners, CD burners and printers. Details of these proposals are highly contentious. Yet all in some ways go beyond the private property premise of copyright. The arguments in this article suggest that these proposals should be part of a coherent move, transforming collecting societies into regulatory instruments.35
NOTES 1. An earlier version of this paper was presented at the International Conference on Copyright and the Cultural Industries: Economics, Law and Management, Erasmus University, Rotterdam, 11-12 September 2000. Thanks to Ruth Towse for a thoughtful editorial process, to two reviewers for comments, and to Dominic McGonigal (MCPS-PRS) and Roger Wallis (SKAP) for help in obtaining collecting-society information. Library support provided by the Max-Planck-Institute for Foreign and International Patent, Copyright and Competition Law, Munich during the summer 2000 is gratefully acknowledged. A version of this article is forthcoming in the European Intellectual Property Review (Issue 24:03, 2002). 2. Collecting societies have been characterized in these terms by numerous national competition authorities: cf. the language of the German Bundeskartellamt (Verfügung vom 18.11.1960: GEMA as ‘marktbeherrschendes Unternehmen’; Hübner and Stern ([1978] 1997), p. 225); and the British Office of Fair Trading (OFT) (referral of the PRS to the Monopolies and Mergers Commission, 30 November 1994, Managing Intellectual Property, Feb. 1995, pp. 10-11). 3. The ambition to incorporate the regulation of copyright societies into the Information Society Directive was dropped from the Proposed Directive ‘on the harmonisation of certain aspects of copyright and related rights in the Information Society’ (COM (97) 628 final, December 10, 1997) and its later incarnations. 4. Music copyrights are the oldest and most valuable domain of rights to be administered collectively. Germany’s GEMA is the world’s biggest collecting society, with annual revenues exceeding !500 m. Germany and the UK are the third and fourth largest global music market. The UK is the largest net exporter of music: royalties to the size of $100m per annum are repatriated via the international collecting society network linked by reciprocal agreements (MBI, 1997). 5. WIPO preferred terminology for ‘collective administration’ is ‘collective management’. 6. In industry jargon, ‘performing right’ refers to both the exclusive rights to perform, show or play a work in public (UK Copyright, Designs and Patents Act [CPDA], 1988, section 19) and to broadcast a work or include it in a cable programme (CDPA, 1988, section 20). See Appendix I for a comparative list of exclusive rights and their administration in the UK and Germany. 7. I have discussed this transformation elsewhere in more detail (Kretschmer et al., 1999a; Kretschmer, 2000b). Of course, there remain pockets of independent promotional publishers. But 80 per cent of the fees being processed by the major music-collecting societies come from or flow to only five media companies: Universal (including what was Polygram), Warner, Bertelsmann, EMI and Sony (Kreile and Becker, 1997a). 8. See Towse (1999, p. 376) for a lucid analysis of the circumstances under which royalty schemes may be an economically efficient arrangement. 9. In a large study on the global music industry, conducted between 1996 and 2000, we found this practice to be prevalent in Japan and the Common Law countries, especially the US and the UK (Kretschmer et al., 2001). Some Civil Law countries appear to avoid it by a contested
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10. 11. 12. 13. 14. 15.
16. 17.
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Copyright in the cultural industries clause in the terms of membership to collecting societies administering the performing rights. Membership or mandate terms might require an author to assign their rights to future works from the moment of membership, thus guarding against possible contractual pressures from third parties. Pressure from media producers, for example, will not work since the composers have no valuable rights left to sign away. From a competition perspective, however, the assignment of future rights must be problematic. In the UK, for example, exclusive publishing and recording contracts for ‘prolonged periods’ have been found to be ‘in restraint of trade’: ZTT Records Ltd and another v. Holly Johnson, Independent Law Reports, 2 August 1989 (the Holly Johnson or ‘Frankie Goes to Hollywood’ case); Silvertone Records v. Mountfield and others, Zomba Music Publishers v. Mountfield and others, 20 May 1991, unreported (the Stone Roses case). ‘Zeichnungen und Abbildungen, welche nach ihrem Hauptzwecke, nicht als Kunstwerke . . . zu betrachten sind’ (§ 18, quoted from Kawohl, 2001). See also Wadle (1988). ‘Zentralstelle zur Verwertung der musikalischen Aufführungsrechte’: Zentralstelle is a German translation of Agence Centrale, pointing to the French model. My account of the early days of collective administration in Germany draws on material provided by Schulze (1995) and Kreile and Becker (1997b). For more details on the history of the PRS, see Peacock and Weir (1975), MacFarlane (1980) and Ehrlich (1989). The compulsory licence was revoked with the Copyright, Designs and Patents Act of 1988 and left to tariff negotiations. In the UK, the chief practical difference between an assignment and an agency agreement is that the assignee can legally act to protect his/her rights. In Germany, great play has been made of a ‘monistic’ theory of Urheberrecht according to which author rights cannot be transferred, only rights of use (Nutzungsrechte) (for example, Schack 1997, pp. 140-41). In my view, this debate is a red herring. The copyright industries are structured in much the same way in the UK and Germany, whether the sale of rights is based on rights to exploitation or full copyrights. Vaver (2000, p. 633) describes the process of reification as ‘treating intellectual property as a thing and deducing principles from its “thing-ness”’. For a critique, see Maughan (2001). These are the relevant passages: Art. 14 Abs 1 Satz 1 GG [Eigentumsgarantie] gewährleistet zunächst das Privateigentum als Rechtsinstitut, das im wesentlichen durch die Privatnützigkeit und grundsätzliche Verfügungsfähigkeit über das Eigentumsobjekt gekennzeichnet ist . . . Das bedeutet für das Urheberrecht: Zu den konstituierenden Merkmalen des Urheberrechts als Eigentum im Sinne der Verfassung gehört die grundsätzliche Zuordnung des vermögenswerten Ergebnisses der schöpferischen Leistung an den Urheber im Wege privatrechtlicher Normierung und seine Freiheit, in eigener Verantwortung darüber verfügen zu können. Das macht den grundgesetzlich geschützten Kern des Urheberrechts aus. Diese grundsätzliche Zuordnung der vermögenswerten Seite desUrheberrechts an den Urheber zur freien Verfügung bedeutet aber nicht, dass damit jede nur denkbare Verwertungsmöglichkeit verfassungsrechtlich gesichert sei. Die Institutsgarantie gewährleistet einen Grundbestand von Normen, der gegeben sein muss, um das Recht als ‘Privateigentum’ bezeichnen zu können. Im einzelnen ist es Sache des Gesetzgebers, im Rahmen der inhaltlichen Ausprägung des Urheberrechts nach Art. 14 Abs.1 Satz 2 GG sachgerechte Massstäbe festzulegen, die eine der Natur und sozialen Bedeutung des Rechts entsprechende Nutzung und angemessene Verwertung sicherstellen.’
18. The phrase ‘tragedy of the commons’ was coined by biologist Garrett Hardin in an article of the same title (1968). 19. A thoughtful analysis of the economics of property rights along these lines may be found in Maughan, 1995. See also Maughan and Kingi, 1998, and Maughan, 2001. 20. The orthodox expression of this argument is by Landes and Posner (1989).
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21. Hegel (1820, § 41): ‘Die Person muß sich eine äußere Sphäre ihrer Freiheit geben, um als Idee zu seyn’ and ‘Form . . . ist . . . eben ein Zeichen, daß die Sache mein sein soll’ (quoted in Kawohl, 2001). See also Waldron, 1988; Hughes, 1988. 22. The droit moral was introduced internationally with the Rome revisions (1928) of the Berne Convention: Article 6bis provides for the right to claim first authorship of a work (paternity right) and the right to object to any distortion, mutilation or other modification which would be prejudicial to the honour or reputation of the author (integrity right). The droit moral is distinct from copyright in that it cannot not be transferred or waived, reflecting the somewhat mysterious Hegelian bond between the author and his/her work. The UK’s ideosyncratic implementation of moral rights with the CPDA 1988 (ss 77-83) states that the paternity right must be asserted, and both the paternity and integrity rights can be waived, introducing and removing Hegelianisms at the same time. 23. For other reviews of property theories in the context of intellectual property, see Drahos (1996) and Fisher (2001). 24. The collecting society rulings of the ECJ are discussed in Cherpillod (1995), Stamatoudi (1997) and Temple Lang (1997). 25. Performing right income is roughly equally split between income from broadcasting and from general performance (that is, music at pubs, clubs, shops, aircrafts, concerts). The costs of collecting, however, are much higher for the latter. For 1999, the PRS reported income of £75.54m from general licensing (of which 24.5 per cent disappeared as administrative commission) and £79.58m from broadcasting (with 14.6 per cent deducted for administrative expenses), leaving a net distribution of £57m and £68m respectively (PRS Yearbook 2000/01). 26. ‘Prinzipiell ist heute der Schutz des geistigen Eigentums gesellschaftlich unumstritten und insbesondere in Deutschland in beispielhafterweise auch gesetzlich verankert. Sein Ziel ist nichts Geringeres als die Sicherung der wirtschaftlichen, soziale und kulturellen Existenz aller kreativen Menschen.’ 27. Translated by the author from the original: der Gesetzgeber [weist] in §§7 und 8 UrhWG den Verwertungsgesellschaften in ihrer Eigenschaft als Solidargemeinschaften kulturelle und soziale Aufgaben zu, die diese, namentlich durch ihre Vorsorge- und Unterstützungseinrichtungen sowie durch die Förderung kulturell bedeutender Werke und Leistungen erfüllen. Verwertungsgesellschaften sind deshalb in Deutschland nicht nur Inkassoorganisationen, sondern sie haben darüber hinaus auch den gesetzlichen Auftrag, die schöpferischen Menschen zu fördern und zu schützen. Dem Staat nehmen sie damit einen nicht unbeträchtlichen Teil seiner sozialen und öffentlichen Verantwortung ab. 28. Note that the current chief executive of the MCPS-PRS music alliance is a former VISA executive with an understanding of collecting societies as efficient collection and distribution agents. Still the statutes of the PRS regulate the position of publishers in a similar way to the continental societies (see Section 9.2). 29. It may be possible to characterize compulsory representation and compulsory assignments as efficient following, for example, a model of component pricing (Baumol and Sidak, 1994). Bypassing a system of collective administration would be a socially efficient solution only if the saving in costs in the collecting society was greater than the increase in costs that would have to be incurred if the individual owner was to deal directly with the user (that is, ‘cherry picking’). This would be an instance where economic reasoning overrides individual property rights for desirable outcomes. Enlightened economics does not simply take a unified notion of private property as given. 30. GEMA Yearbook 1996/7, p. 67. 31. At the parliamentary reading of the new Swiss copyright law in 1989, the government advised explicitly that the ‘material needs of creators’ ought to be satisfied not through copyright legislation but direct subsidies (Kretschmer, 1998, p. 13); a suggestion supported by Plant (1934), Hurt and Schuchman (1966) and Breyer (1970). Contrast Dietz (1972).
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32. Arguably, the existing international copyright obligations under the Berne (1886) and Universal (1952) conventions were hardly open to fundamental renegotiation. 33. In the language of GEMA executives Kreile and Becker (1997a): ‘The Commission as well as the European Court of Justice must ensure that not only the major producers and the users benefit from the digital boom in Europe, but in particular the creative community, without whose works the digital highways would remain mere spectral, empty ghost tracks.’ 34. Some publishers initially argued against an exclusive right to public performance. William Boosey: ‘I considered that the payment of a fee for the performance of new music, and even established music, was calculated to injure seriously the sales of established favourites, and was very detrimental to the popularizing of new works.’ (Novello, Musical Times, 1 December 1929, p. 1072): ‘As the chief object of the publication of music is to ensure performance, it does not seem reasonable to tax the performer for doing the very thing the publisher wants him to do. Messrs Novello therefore do not belong to the Performing Right Society.’ Both statements are quoted in Peacock and Weir (1975, p. 46 and p. 72). Again TRIPS poses an obstacle here, confining exceptions to exclusive rights to cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the rightholder (Article 12, taken from Article 9(2) of the Berne convention (Stockholm revision, 1967) where it defines possible limitations to the reproduction right). 35. A similar argument is implicit in Drahos (2000) who proposes the creation of a Global BioCollecting Society (GBS) which would act as a repository for community registers of indigenous knowledge, monitor the use of indigenous knowledge by, say, pharmaceutical firms in the development of new products, and facilitate and mediate contractual negotiation between indigenous groups and third parties. Such a society would not administer individual property rights but foster, as a regulatory mechanism, the distribution and reward of indigenous knowledge. Compare also Graff and Zilberman’s proposal (2001) for an intellectual property clearing house for agricultural biotechnology.
REFERENCES Baumol, William J. and J. Gregory Sidak (1994), Towards Competition in Local Telephony, Cambridge, Mass: MIT Press and American Enterprise Institute for Public Policy Research. Becker, Lawrence C. (1980), ‘The moral basis of property rights’, in special issue: ‘Property’ (ed. Pennock and Chapman), Nomos xxii. Boosey, William (1931), Fifty Years of Music, London: Ernest Benn. Breyer, S. (1970), ‘The uneasy case for copyright’, Harvard Law Review, 87, 281-351. Cherpillod, Ivan (1995), ‘Die Aufsicht über die Verwertungsgesellschaften im Gemeinschaftsrecht’, in Hilty, pp. 33-45. Dietz, Adolf (1972), ‘Die sozialen Bestrebungen der Schriftsteller und Künstler und das Urheberrecht’, GRUR, 11. Dietz, Adolf (2000), ‘Term of protection in copyright law and paying public domain’, European Intellectual Property Review, 11, 506-11. Drahos, Peter (1996), A Philosophy of Intellectual Property, Aldershot: Dartmouth. Drahos, Peter (2000), ‘Indigenous knowledge, intellectual property and biopiracy: is a global bio-collecting society the answer?’, European Intellectual Property Review, 6, 245-50. Ehrlich, Cyril (1989), Harmonious Alliance: A History of the Performing Right, Oxford: OUP Fisher, William (2001), ‘Theories of Intellectual Property’, in Stephen R. Munzer (ed.), New Essays in the Legal and Political Theory of Property, Cambridge: CUP.
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Geyer, Hans-Herwig (1997), GEMA-Kommunikation’, in Handbuch der Musikwirtshaft, Starnberg and München: Joseph Keller, pp. 648-61. Graff, Gregory and David Zilberman (2001), ‘An Intellectual Property Clearing House for Agricultural Biotechnology’, background paper prepared for workshop, Intellectual Property Clearinghouse Mechanisms for Agriculture, University of California, Berkeley, February 16, 2001 (proceedings available at http://www.cnr.berkeley.edu/csrd/technology/ipcmech/Summary-Berkeley-2-162001-Agbio-IP-Clearinghouse-Workshop.pdf, visited 7 January 2001). Hardin, Garrett (1968), ‘The tragedy of the commons’, Science, 162 (December), 1243-8. Hegel, Georg Wilhelm Friedrich (1818-31), Vorlesungen über Rechtsphilosophie (ed. K.-H. Ilting), Vol II: Die ‘Rechtsphilosophie’ von 1820. Hilty, Reto M. (ed.) (1995), Die Verwertung von Urheberrechten in Europa, Basel and Frankfurt: Helbig & Lichtenhahn. Hohfeld, W.N. (1919), Fundamental Legal Conceptions as Applied in Judicial Reasoning (ed. W.W. Cook, 1966), New Haven: Yale University Press. Hübner, Heinz and Klaus Stern (1978), ‘Zur Zulässigkeit der Aufsicht des Deutschen Patentamtes über die Verwertungsgesellschaften’ (reprinted in Schulze and Meirer (1997), pp. 223-50). Hughes, Justin (1988), ‘The philosophy of intellectual property’, Georgetown Law Journal, 77, 287-366. Hurt, R. and R. Schuchman (1966), ‘The economic rationale of copyright’, American Economic Review, 56, 421-32. Hutter, Michael (1995), ‘On the construction of property rights in aesthetic ideas’, Journal of Cultural Economics, 19, 177-85. Kater, Michael H. (1997), The Twisted Muse: Musicians and Their Music in the Third Reich, New York: Oxford University Press. Katzenberger, Paul (1995), ‘Die verschiedenen Systeme des Aufsichtsrechts über die kollektive Verwertung von Urheberrechten in den Europäischen Staaten’, in Reto M. Hilty (ed.), Die Verwertung von Urheberrechten in Europa, Basel and Frankfurt: Helbig & Lichtenhahn, pp. 1-15. Kawohl, Friedemann (2001), ‘Music Copyright in the Prussian Copyright Act of 1837’, in Jim Samson and Bennett Zon (eds), Nineteenth-century Music: Selected Proceedings of the Tenth International Conference, Aldershot: Ashgate Publishing. Kay, John (1993), ‘The economics of intellectual property rights’, International Review of Law and Economics, 13, 337-48. Kreile, Reinhold and Jürgen Becker (1997a), ‘Collecting Societies in the Information Society: Economic and Legal Aspects’, in GEMA Jahrbuch 1996-7, Baden-Baden: Nomos Verlagsgesellschaft, pp. 621-47. Kreile, Reinhold and Jürgen Becker (1997b), ‘Wesen der Verwertungsgesellschaften’, in Handbuch der Musikwirtschaft, Starnberg & München: Josef Keller. Kretschmer, Martin (1998), ‘Die Mythen des Urhebers: geistiges Eigentum in der Musik - ein historische Übersicht und Kritik’/‘Le Mythe de L’Auteur: La propiété intellectuelle dans la musique: aperçu historique et critique’, Dissonanz, 57 (August), pp. 4-13. Kretschmer, Martin (2000a), ‘Datenpakete im Netz der Paragraphen’, Neue Zürcher Zeitung, 04/08/00. Kretschmer, Martin (2000b), ‘Intellectual property in music: a historical analysis of rhetoric and institutional practices’, special issue: ‘Cultural Industry’ (ed. P. Jeffcutt), Studies in Cultures, Organizations and Societies, 6, 197-223.
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Kretschmer, M., G.M. Klimis and R. Wallis (1999a), ‘The changing location of intellectual property rights in music: A study of music publishers, collecting societies and media conglomerates’, Prometheus, 17 (2), 163-86. Kretschmer, M., G.M. Klimis and C.J. Choi (1999b), ‘Increasing returns and social contagion in cultural industries’, British Journal of Management, 10, S61-S72. Kretschmer, Martin, G.M. Klimis and R. Wallis (2001), ‘Music in electronic markets’, New Media & Society, 3 (4), 417-41. Landes, W. and R. Posner (1989), ‘An economic analysis of copyright law’, Journal of Legal Studies, 18, 325-66. Locke, John (1690), Two Treatises of Government, London. Lupton, Peter and Peter Drahos (1996), Copyright Collecting Societies: Towards a Regulatory Balance of Public and Private Interests - A Response to the Simpson Report, Australian National University, Canberra, August 1996. MacFarlane, Gavin (1980), The Development and Exercise of the Performing Right, Eastbourne. MacQueen, Hector L. (1995), Copyright, Competition and Industrial Design, Edinburgh: Hume Papers on Public Policy, 3 (2), 1-11. Marbach, Eugen and Enrico Riva (1989), ‘Zur sogenannten 10% Regel im Urheberrecht’, Rechtsgutachten bezüglich des bundesrätlichen Entwurfs vom 19. Juni 1989 für ein neues Urheberrechtsgesetz, reprinted in Reto M. Hilty (ed.) (1995), Die Verwertung von Urheberrechten in Europa, Basel and Frankfurt: Helbig & Lichtenhahn, pp. 59-91. Marx, Karl (1867), Das Kapital. Maughan, C.W. (1995), ‘The economics of property rights’, New Zealand Business Law Quarterly, 1 (2), 78-91. Maughan, C.W. (2001), ‘Property and Intellectual Property: Foundations in Law and Economics’, Paper presented at Symposium ‘A New Feudalism of Ideas?’, Centre for Intellectual Property Policy and Management, Bournemouth University, 26 June 2001 [available at www.cippm.org.uk]. Maughan, C.W. and T. Kingi (1998), ‘Te ture whenua maori: retention and development’, New Zealand Law Journal, 27, 27-31. MBI (Music Business International) (October 1996 and 1997), ‘The Collecting Societies’ (special reports). Melicher, Ferdinand (1983), Die Wahrnemung von Urheberrechten durch Verwertungsgesellschaften, München: Schweitzer. Monopolies and Mergers Commission (MMC) (1996), Performing Rights, London: HMSO Cm 3147. North, Douglass C. and Robert Thomas (1973), The Rise of the Western World: A New Economic History, Cambridge: CUP. North, Douglass C. (1981), Structure and Change in Economic History, New York: Norton. Peacock, Alan and Ronald Weir (1975), The Composer in the Market Place, London: Faber. Plant, Arnold (1934), ‘The economic aspects of copyright in books’, Economica, 1, 167-95. Performing Right Society (PRS) (2001), Yearbook 2000/01, London: PRS. Ricketson, Sam (1987), The Berne Convention 1886-1986, Dordrecht: Kluwer. Schack, Haimo (1997), Urheber- und Urheber-vertragsrecht, Tübingen: Mohr Siebeck.
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Schulze, Erich (1995), Geschätzte und geschützte Noten, Weinheim: VCH Verlagsgesellschaft. Schulze, Erich and Dieter Meirer (eds) (1997), Im Auftrag der GEMA: Gutachtensammlung 1952-1985, Marburg: Elwert. Stamatoudi, I.A. (1997), ‘The European court’s love-hate relationship with collecting societies’, European Intellectual Property Review, 19 (6), 289-97. Story, Alan (1998), ‘Compensation for banned handguns: indemnifying “old property”’, Modern Law Review, 61 (2), 188-206. Temple Lang, J. (1998), ‘Media, Multimedia and European Community Antitrust Law’, Fordham International Law Journal, 21 (1296). Thorpe, Jeremy (1998), ‘Regulating the collective exploitation of copyright’, in special issue: Trade and Intellectual Property (ed. P. Drahos), Prometheus, 16 (3), 317-29. Towse, Ruth (1997), ‘Copyright as an economic incentive’, in ‘Innovation, Incentive and Reward: Intellectual Property Law and Policy’, David Hume Papers on Public Policy, 5 (1), 31-45. Towse, Ruth (1999), ‘Copyright and economic incentives: an application of performers’ rights in the music industry’, Kyklos, 52 (3), 369-90 Ulmer, Eugen (1977), ‘Zur Rechtsstellung der Musikverlage in der GEMA’, Rechtsgutachten, reprinted in E.Schulze and D. Meirer (eds), Im Auftrag der GEMA: Gutachtensammlung 1952-1985, Marburg: Elwert, pp. 203-21. Vaver, David (2000), ‘Intellectual property: the state of the art’, Law Quarterly Review, 116 (October), 621-37. Wadle, Elmar (1988), ‘Das preußische Urheberrechtsgesetz von 1837 im Spiegel seiner Vorgeschichte’, in Robert Dittrich (ed.), Woher kommt das Urheberrecht und wohin geht es?, pp. 55-98, Wien (reprinted in E. Wadle (1996), Geistiges Eigentum, Weinheim). Waldron, Jeremy (1988), The Right to Private Property, Oxford: Clarendon. Wallis, Roger, C. Baden-Fuller, M. Kretschmer and G.M. Klimis (1999), ‘Contested collective administration of intellectual property rights in music: the challenge to the principles of reciprocity and solidarity’, European Journal of Communication, 14 (1), 5-35. World Intellectual Property Organization (WIPO) (1998), Intellectual Property Reading Material, Geneva: WIPO.
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APPENDIX Table 9A.1 Collective administration of music copyright in the UK and Germany Exclusive rights (UK): Copyright, Designs and Patent Act (CDPA) 1988
Collective administration music (UK)
To copy the work (reproduction) CDPA 1988, s17
For two sub-categories, MCPS acts as exclusive agent: Mechanical reproduction Synchronization (music copied on to film) (save to the extent that the right is administered by PRS, whose writer Members assign to it ‘the film synchronisation right in every work composed or written by the Member primarily for the purpose of being recorded on the soundtrack of a particular film or films in contemplation when such work was commissioned …’). To issue copies of the work (distribution), s18 MCPS acts as exclusive agent To rent or lend the work to the public, s18A MCPS acts as exclusive agent (where mandated by copyright owners) To perform, show or play the work in public assigned to PRS (with the exception of (public performance) s19 certain staged works - Grand Rights) To broadcast the work/include it in a cable assigned to PRS (with the exception of programme, s20 certain staged works - Grand Rights) To make an adaptation of the work, s21 Verwertungsrechte (exclusive rights) (D) Urheberrechtsgesetz UrhG 1965
Collective administration music (D)
Vervielfältigungsrecht (reproduction) §§15-16
Two sub-categories: (1) Mechanisches Vervielfältigungs- und Verbreitungsrecht (mechanical reproduction and distribution right) (2) Filmherstellungsrecht (synchronization) assigned to GEMA (subject to a resolutory condition ‘if the rights owner informs GEMA in writing that he wishes to exercise the rights in his own name’) Assigned to GEMA: Angemessene Entlohnung (equitable remuneration) - cf. §27
Verbreitungsrecht (distribution) §17
Vermietrecht (rental) §17II,III Ausstellungsrecht (exhibition) §18 Vortrags- und Aufführungsrecht; Vorführungsrecht (public performances) §19 Senderecht (broadcasting, including cable and satellite) §20 Zweitverwertungsrechte (secondary exploitation, e.g. repeat performance, music box) §§ 21-22 Bearbeitungsrecht (adaptation) §23 Vergütungsrechte (equitable remuneration rights) Audio and Video Vermietung und Verleih (rental) Bibliothekstantieme (library levy) §27 Geräte, Leerkassetten - und Betreiberabgabe (blank tape levy) §54
assigned to GEMA (with the exception of certain staged works - Grand Rights) assigned to GEMA (with the exception of certain staged works - Grand Rights) assigned to GEMA
assigned to GEMA assigned to GEMA
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10. Music licensing in the digital age Michael A. Einhorn1 10.1 INTRODUCTION In the past six years, the US government twice modified its Copyright Act to deal with issues posed by the digitization of music. Digital technology is now transforming the recorded music business into an open marketing network where audiophiles may instantly access music from signed and unsigned artists without needing to visit local record stores. (For an overview of issues, see Fisher (2000) and Reese (2000).) According to a recent study performed by Jupiter Media Metrix (2001), sales of digital downloads are anticipated to increase from $25 million in 2001 to $700 million in 2006. Subscription revenues will increase from $4 million to $1.2 billion in the same period. An Internet user may deploy either of two general technologies downloading and streaming - to transmit recordings from a provider server to a home computer. With downloading, a buyer may transfer a music file to a computer hard drive that can be subsequently accessed at his or her own personal discretion. The downloaded file can remain on the hard drive or be transferred to a server (music locker) that can be remotely accessed. With streaming, the user may buffer and play in real time bits that are instantaneously received with no need for permanent storage. Depending on whether the choice of material is exercised at user or provider discretion, file streaming can be non-interactive or interactive. Non-interactive streaming (webcasting) makes songs available to listeners without allowing personal consumer choice and is therefore similar to radio broadcasting. By contrast, interactive streaming provides ‘juke-box’ capabilities that allow users to select favoured tunes. In greatly improving consumer options, interactive streaming may more readily substitute for downloads and store sales. The present copyright system separately protects sound recordings and the words and lyrics of the underlying musical compositions. Copyrights are now separately conveyed from the performer to the label that produces his or her sound recording and from the writer to the music publisher who promotes and lisenses his/her composition. Each copyright owner has distinct rights for the 165
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mechanical reproduction (for example, imprinting, derivation and distribution) and the public performance of his/her respective works. Depending on the statutory context, each right can be exlusively controlled or made subject to compulsory fees established by an arbitration panel or administrative body. There are a number of problems in the present copyright regime. Because administration is fragmented, regulation and negotiation often entail parallel efforts that should be integrated to improve efficiency. Furthermore, with no staff economists or technical literature in any copyright administration, there is no commonly accepted economic method for pricing related rights in different copyright domains. Because copyright definitions are legally ambiguous, contending beneficiaries of mechanical and performance rights have claimed that the same digital transmissions are under their respective licensing authorities. Finally, songwriters and composers who create music sometimes lack standing in administrative hearings and are not directly compensated for mechanical reproductions. An economic analysis of music copyright would consider market performance, as reflected in allocative efficiency, transactions costs and technological progress. This would implicate four principles. First, the relative price ratio between two substitutable distribution technologies should not be distorted by the presence of asymmetric copyright surcharges. Distortion is most likely to occur when one of the two technologies is made subject to a particular copyright surcharge, while the other is not. Second, transactions and monitoring costs should be reasonably economized by ‘one-stop shopping’ and reduced administration. Third, higher copyright fees benefit labels and publishers but are among the costs that concern providers of new technology. Fourth, a copyright system that does not directly protect creators may pose dangers with regard to their abuse. This chapter will advocate a number of reforms for streamlining the American copyright system to protect the people who create music, the marketers who promote it and the comsumers who buy it. I shall make four points. First, all licensing rights concerning digital audio transmissions of sound recordings and music compositions should be integrated under the respective administration of record labels and music publishers, who may license music to users through exclusive or compulsory licences (as legally specified). Second, payments due to each can be monitored through one independent organization charged with the responsibility of tracking music usage and assessing due amounts. Third, songwriters and publishers should be guaranteed an equitable share of digital royalties. Fourth, societies that have been established to collect performance royalties in musical compositions can be limited or proscribed from licensing digital transmissions.
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10.2 THE STRUCTURE OF MUSIC COPYRIGHT Copyright in the USA is now protected by the Copyright Act of 1976, which became effective on 1 January 1978.2 There are two statutory domains implicated for any musical work. The underlying lyrics and music of a particular work compose the musical composition, with rights that songwriters and composers convey to the music publisher who markets their material to artists and labels.3 The actual sounds of an imprint implicate sound recording rights, which artists convey to the label that produces the record. There are two separate categories of rights for compositions and recordings: mechanical rights for reproduction, distribution and preparation of derivative works, and the separate right of public performance (17 U.S.C. 106(1)-(6)). The reader may find Table 10.1 useful in following the discussion of these rights in sound recordings and musical compositions. Table 10.1 Copyright for audio, non-dramatic uses of music* Right Mechanical Owner Collection agent Fee units Exclusive Compulsory Fee oversight
Performance Owner Collection agent Fee units Exclusive Compulsory Fee oversight
Musical compositions
Sound recordings
Publisher Mechanical rights organization Physical imprints First-time uses Subsequent uses Copyright Office for compulsory licenses
Record label Store or club Conveyed in record price Always Not in use Not applicable
Publisher Performing rights organization Generally revenue Writers may directly license
Record label Sound exchange Label discretion Downloading, interactive streaming Eligible streaming
Juke-boxes, distant retransmissions Rate Court
Copyright Office for compulsory licenses
Note: *Chart excludes uses for dramatic performances, soundtracks, music subscription services and digital satellite radio.
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10.2.1 Mechanical Copyright (Sound Recordings and Musical Compositions) Reproduction rights for sound recordings now remain under the exclusive ownership and control of the record label, which has the sole authority to licence reproductions, distribution and derivations. Licence fees here are not directly assessed to the buyer as a separate identifiable amount, but rather are implicitly conveyed as part of the product price that is charged The corresponding mechanical rights to imprint and distribute the underlying musical composition are controlled by the work’s publisher, who is compensated by the record label for an amount that can be negotiated or fixed in a compulsory licence. Mechanical payments for compositions are based on the number of physical imprints made and are collected from labels by publisher agencies (called mechanical rights organizations).4 Collected royalties for musical compositions are then passed back to individual publishers, who return writer shares (generally 50/50) per the terms of their individual contracts (Shemel and Krasilovsky, 1995, p. 240). The degree of protection for mechanical rights in musical compositions differs, depending on whether the composition had been recorded previously. The music publisher has exclusive control for licensing of first-time reproductions of the composition and can negotiate appropriate fees with prospective users or their agents. However, once a composition is recorded, performers and labels may appropriate the work for subsequent uses under compulsory mechanical licenses that are established by the US Copyright Office, 117 U.S.C. 115. Compulsory licensing ensures that artists and labels have the legal authority to record new renditions of compositions at ‘fair’ licence fees without needing express permission. Compulsory licensing of second reproductions may benefit the emerging Internet market, where new artists and providers would be legally enabled to perform and transmit musical compositions (Potter, 2000). 10.2.2 Public Performance (Musical Composition) The performance right for musical compositions now covers live public uses, as well as broadcast and transmitted performances of recorded music. Outside of music used for dramatic presentation (musicals, operas, concert excerpts), movie soundtracks, or programme themes, performance rights for compositions are almost universally conveyed through blanket licences granted by the nation’s three performing rights organizations (ASCAP, BMI and SESAC), which provide access to all registered works in their respective catalogues. Blanket licences have been justified as appropriate instruments
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when customer usage is difficult to negotiate and monitor, as was the case for live musical performances when ASCAP originated in 1914. Representing 97 per cent of all catalogued musical compositions, ASCAP and BMI licences enable the user to perform all catalogued material either unconditionally or for specified programmes. Performance licences in the USA are non-exclusive, meaning that the writer also has authority to licence his or her individual work directly for any particular use. Both collecting agencies enter into multiyear contracts with individual licencees, or negotiating agents appointed by members of a particular industry. Due amounts are generally established through negotiations that pass (after sixty days) before an administrative Rate Court that operates under the terms of two Consent Decrees that are independently negotiated with the US Department of Justice.5 In parallel regulation in an administered duopoly, the two performing rights organizations have entirely separate - and largely duplicative - Consent Decrees, Rate Courts, negotiation procedures and administrative overheads. Other than Brazil, there is no other country that allows more than one organization to collect and distribute licence revenues for public performances. Confined in an analogue era to mechanical and performance rights that were altogether different, the Rate Courts and the Copyright Office never had the need to establish common or analogous rate-making procedures. However, copyright administration in digital markets now presents three complicating problems. First, the present administration of public performance rights for musical compositions currently represents a regulatory substrate that operates independently of the Copyright Office. Second, the respective domains for mechanical and performance rights - as claimed by their collection agents - may overlap when the same digital transmission could be conceivably classified as both a performance and a reproduction (discussed below). Third, musical performances can be monitored by the same organization that is empowered to collect royalties for webcast sound recordings. The market for performing rights is complicated further by antitrust considerations reviewed elsewhere (Nye, 2000; Einhorn, 2000a, 2000b). Concerned about antitrust issues in the performing rights industry, the US Department of Justice negotiated a modified Consent Decree with market leader ASCAP, which a District Court approved in June 2001. In a supporting memorandum, the Department alluded to an impending resolution of the performing rights issue in the digital era: Technologies that allow rights holders and music users to easily and inexpensively monitor and track music usage are evolving rapidly. Eventually, as it becomes less and less costly to identify and report performances of compositions and to obtain licenses for individual works or collections of works, these technologies may erode many of the justifications for collective licensing of performance rights by PROs. The Department is continuing to investigate the extent to which the growth of these
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technologies warrants additional changes to the antitrust decrees against ASCAP and BMI, including the possiblity that the PROs should be prohibited from collectively licensing certain types of users or performances. (US Department of Justice, 2000, footnote 10)
10.2.3 Public Performance (Sound Recording) Unprotected in the USA until 1995, performance rights for sound recordings have been extended to non-broadcast digital audio transmissions, which include music subscription services, satellite digital radio and Internet transmissions6 (17 U.S.C. 106(6), 114(d)(1)-(3)). For Internet uses (the subject of this chapter), licensing authority for sound recordings is exclusively granted to the copyright owner for all downloaded, interactively streamed, and certain non-interactive transmissions that allow some degree of user selection and which therefore may displace store and club sales (17 U.S.C. 114(d)(3)). Under Copyright Office administration, a compulsory licence is now granted to other non-interactive streamed transmissions of sound recordings when user selection is not allowed and uses are less expected to displace sales (17 U.S.C. 114(d)(2)).7 Eligibility for a compulsory licence entails complicated specifications to limit displacement and to promote the sales of the performed record; the rates and terms of the licences to be arbitrated should represent the corresponding rates and terms that would be negotiated in the marketplace between a willing buyer and a willing seller (17 U.S.C. 114(f)(2)(B)(i)). US radio broadcasters maintain a performance exemption for digital broadcasts and do not pay royalties for sound recording performances (17 U.S.C. 114(d)(1)).8 In November 2000, the Recording Industry Association of America, which is the trade association for the five major record labels, unveiled the online arm of its Sound Exchange royalty payment system, which now collects digital royalties for sound recordings broadcast over digital satellite and music subscription services.9 The Sound Exchange system would monitor online performances of all sound recordings and distribute royalties between record labels and artists. Alternatively, the Copyright Office may appoint an alternative independent agent, such as Music Reports Inc., to collect and allocate sound-recording royalties. However appointed, the collecting agency for performance royalties for sound recordings can be efficiently empowered to collect licence revenues for performances of the underlying musical compositions as well.
10.3 DIGITAL DOWNLOADS We shall now describe the structure of an economically efficient framework
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for the collection of copyright fees for sound recordings and musical compositions. Digital downloads are permanant deliveries of sound recordings that can be expected to displace sales at stores and record clubs. Digital downloads are particularly convenient substitutes in a number of key respects. First, digital technology can provide access to a wider selection of material than any store can do. Second, digital songs can be individually purchased. Third, digital technology enables ‘click-through’ buying and instant product delivery. Fourth, digital music files can be conveniently stored on hard drives without the need for cabinet space. Fifth, music portability is easier if digital files are made playable in portable players. Sixth, owners may store digital music on server-based ‘storage lockers’ that can be reached from any web-access device, including wireless. Seventh, digital downloads enable personalized suggestions and present opportunities to advertise and sell related merchandise. On the downside, downloads on hard drives are not immediately compatible with home stereo equipment and the convenience of family room listening. Consequently, users must buy additional equipment to ‘burn’ CDs to enable these additional uses.10 10.3.1 Sound Recordings If store sales and downloads are reasonable substitutes, equal copyright payments for both would be efficient. Symmetric charges would make the copyright owner financially whole for owed royalties regardless of which medium the listener chose. With exclusive control over mechanical rights in all reproduced sound recordings, record labels could be expected to aim to balance profits that result from price changes and to avoid distorting prices that would asymmetrically affect consumer choices. With integrated rights for substitute technologies, the outcome would be administratively efficient and economically rational. 10.3.2 Musical Compositions The same balance between copyright payments for imprints and downloads can be expected to hold for first-run reproductions of musical compositions, which are exclusively licensed and priced by the publisher. That is, a publisher who controls integrated rights would reasonably be expected to avoid price distortions and preserve an efficient balance between two substitute means of distribution. For compulsory licences that are affixed on second reproductions, efficiency could be served by attaching symmetric fees to imprints and reproductions, as is now the case.11 If mechanical copyright payments for imprints and downloads can be
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balanced, it would be inefficient to affix any additional charge upon the latter that could distort a symmetric price relationship. Such an outcome may result if performance rights for compositions are implicated in wired transmissions of downloaded music. The argument involves a legal interpretation (or misinterpretation) of section 101 of the Copyright Act, which is discussed more fully below.
10.4 NON-INTERACTIVE STREAMING We now turn to the non-interactive streaming services that may be eligible for compulsory performance licences for sound recordings that are established through arbitration at the Copyright Office (that is, ‘webcasting’) (17 U.S.C. 114(d)(2)). To be eligible for such a compulsory licence, users must comply with a complex set of regulations that were designed to limit displacement and promote sales of records. 10.4.1 Sound Recordings Actual ownership of sound recording rights for non-interactive streaming remains under the control of the recording label. As a basic strategy, streams made subject to the compulsory licence must be used in a restricted manner that is broadly suggestive of radio broadcasting. Among the key requirements for eligibility is non-interactivity, no advanced publication of record playlists, a complementary-use rule that limits number of plays in a particular time period, and a stipulation that title, artist, writer and label names be posted for viewing (17 U.S.C. 114(d)(2)(A)-(B)). The rates and terms to be fixed in compulsory licences should represent the corresponding rates and terms that would be negotiated between a willing buyer and seller in a fair market transaction (17 U.S.C. 114(f)(2)(B)(i)). 10.4.2 Musical Compositions Performance rights for musical compositions are now licensed by ASCAP and BMI, who negotiate or arbitrate contracts with webcasters under the appellate jurisdiction of their respective Rate Courts. However, Rate Court procedures are hierarchical and exclusive, and performance royalties can be recovered in other manners that are more administratively efficient. To the first point, Consent Decrees can be changed only with the consent of the signing parties and permit full legal standing only to the collecting society and the Justice Department.13 Only the Department and signing organization may petition for an interpretation of a Consent Decree and the court’s reading
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must be within the narrow confines of the Decree’s wording. Ironically, the writers, licencees and publishers (who actually write, use music and own copyright) have standing in court only within the terms of the Decree and cannot appeal against any judgment. A much-needed openness could be had if digital performance rights for musical compositions were removed from the jurisdiction of the Consent Decrees and reassigned to the Copyright Office, where the neighbouring rights in webcast sound recordings are now administered and arbitrated. Under its administrative structure, the Copyright Office could issue Notices of Inquiry and Proposed Rulemaking that would invite comments from all affected parties, and necessarily grant equal legal standing to each in administrative hearings. Licence fees for statutory licences could be determined periodically in arbitrations at the Copyright Office. ASCAP, BMI and SESAC could still be permitted to negotiate and collect the performance fees that the Copyright Office would administer, but there are more efficient options for these appointments. Transactional economies would be possible if one monitoring contractor (such as Sound Exchange or Music Reports Inc.) were empowered to administer ‘performance rights’ for both compositions and sound recordings and to split royalties per administrative rules among respective claimants. To promote fairness, the Copyright Office should stipulate what information the appointed monitor must gather, as well as rules for sharing royalties.
10.5 INTERACTIVE STREAMING With interactive streaming, digital users may interactively select and, in real time, play music tracks of their own choice. Interactive streaming then preserves the option value (Griffin, 2000) of owned discs without the need for storage in cabinets or hard drives. In this respect, interactive streaming embodies a market value that CD sales and digital downloads now lack. This gain in market value will increase as music transmission migrates to cellular technologies and streaming users enjoy greater portability. A number of different business models may accommodate interactive streaming services, which can be financed through per-unit charges, subscription fees, advertising revenues or e-commerce revenues. Streaming services may be used to substitute for or complement the sale of records and downloads. For example, interactive streaming may offer to subscribers access to entire catalogues in a manner that could displace needs for permanent ownership. Alternatively, users may use streaming services to help identify preferred tracks that can subsequently be downloaded. With the prospective development of trusted systems (Stefik, 1999, Chapter
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3), interactively streamed digital bits will be made increasingly available for temporary storage. Prices may vary by number of permitted plays, duration of access, quality of access and the number of computers on which the work may be played. The resulting business model will enable labels to distinguish different intensities of use through price discrimination (Gordon, 1997). Digital music made available along a continuum of usage options will further confound attempts to classify transmissions as reproductions or performances (Ginsburg, 2000). The current copyright domain for interactively streamed recordings and compositions is as follows: 1.
2.
Sound Recordings: Labels now control the exclusive right to make recordings available for interactive streaming. As integrated providers of store records, downloads and interactive streams, recording labels can be expected to internalize all economic trade-offs between substitute technologies and to avoid distorting relative prices. Musical Compositions: The copyright stucture for musical compositions is more complicated. The respective legal domains of mechanical and performance rights for interactive streams are now called into conflict in a jurisdictional matter that was never really solved.
Pointing to ambiguous definitions of ‘perform’ and ‘publicly’ in the Copyright Act (17 U.S.C. 101), performing rights organizations assert that all streaming transmissions are public performances and subject to copyright protection as such. Not to be outdone, the mechanical rights organizations assert that all streaming transmissions involve temporary reproduction in random access memory, however temporary, and therefore implicate mechanical rights. One distinguished authority terms the outcome ‘double dipping’ (Kohn, 1998, p. 10). For a review of the discussion, see National Information Infrastructure Task Force (1995, p. 213), Kohn and Kohn (1996, p. 1236) and Kohn (1998). From a perspective of economic efficiency, the legal debate is irrelevant as long as relative prices between substituted goods are not distorted and transactional efficiencies are preserved through an integrated administration. In fact, interactive streaming services can often be expected to serve as substitutes for store sales and downloads. It would then be reasonable for the interactive streaming right to be licensed by the same copyright owner that licences imprints and downloads; that is, the publisher. Publisher fees for interactive streams can be based upon number of attempts, subscriptions, or collected revenues. With integrated administration of imprints, downloads and streams, owners of compositions and recordings will have the incentive to maintain balanced prices and avoid distorting
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technological choices. Savings in transactions costs would also result as digital providers could negotiate for these rights in a ‘one-stop’ negotiation.
10.5 CONCLUSION This chapter, then, advocates the institution of an integrated digital right that would subsume reproductions in CDs, permanent downloads, interactive streaming and digital music made available for timed use. The right would have separate domains for sound recordings and musical compositions. Rights to use recorded works would be conveyed appropriately through exclusive or compulsory licences that can be negotiated or arbitrated between labels, publishers, users, or their agents. The Copyright Office would appoint an independent authority to monitor use and to allocate royalty payments, and enforce protections for songwriters. Songwriter and composer rights can be protected through digital rights management technology and the surveillance of an integrated monitoring agent. The reform would have two key benefits. Respective rights for all substitute uses of a sound recording could be bundled and conveyed in a one-stop arrangement between labels and their users (or agents thereof) in a manner that economizes on transactions costs. A similar arrangement holds for publishers of musical compositions. Sellers of rights would have the incentive to balance rates in a manner that would not distort relative prices of substitute technologies. Non-interactive streaming lacks the option value of sales, downloads, or interactive streams. The performance rights for sound recordings and musical compositions here can be grounded in a different legal domain with independent administrative procedures. Nonetheless, it seems entirely sensible to empower the same collection agency to gather and disperse revenues for both recordings and compositions. We should be particularly wary of admitting performance rights organizations into the digital theatre, as these organizations involve a redundant regulatory stratum that is best avoided. Their present administative structures are hierarchical, and the performing rights industry is a continued source of antitrust concern.
NOTES 1. Principal: LECG, LLC, 675 Third Avenue, New York, NY 10017 (www.lecg.com). Telephone: 1 (212)468-7878; Fax 1 (212)-468-7879. Email:
[email protected]. The views expressed herein are personal and do not necessarily reflect the opinions of any other expert at LECG. I wish to thank June Besek, Whitney Broussard, Jane Ginsburg, Seth
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2. 3. 4.
5. 6.
7. 8. 9. 10. 11.
12.
Copyright in the cultural industries Greenstein, Justin Hughes, Adam Jaffe, Lew Kurlantzick, Bruce Lehman, William Landes, Mark Lemley, Darrell Panethiere, Tony Reese, Michael Riordan, Ruth Towse and Robert Yerman for discussions and critical comments. All errors are my own. Copyright Act, H.R. Rep. No. 94-1476, reprinted in 1976 U.S. Code Cong. and Admin. News 5659, 5680. A writer enlists the services of a publisher to promote her song, to whom the copyright is passed. The publisher markets songs, administers the copyright, collects mechanical royalties (discussed below) and sometimes edits the music and lyrics. The largest is the Harry Fox Agency (HFA). Unlike the performance rights organizations (discussed below), HFA is only a collection agency and does not negotiate individual contracts. It files petitions and appears in arbitration hearings in the Copyright Office that involve compulsory mechanical royalties. U.S. v. ASCAP, 1950-51 Trade Cases (CCH) 62, 595 (S.D.N.Y. 1950); U.S. v. BMI and RKO General, Inc., 71 Court Decisions 941 (S.D.N.Y. 1966). The Digital Performance Rights in Sound Recordings Act of 1995 (DPRSRA) amended Sections 106 and 114 of the Copyright Act to extend sound recording rights to non-broadcast digital audio transmission, such as music delivery services that charge subscription fees. Pub.L. No. 104-39, 109 Stat.536. The Digital Millenium Copyright Act of 1998 further amended Section 114 to include digital audio performances on the Internet and satellite radio. Pub. L. No. 10-304, 112 Stat. 2860. Protections appear in 17 U.S.C. 114(d)(2)(A)-(B) and were made consistent with existing limits on radio play to ensure that broadcast transmissions do not displace record sales. Exempt retransmitters must receive signals over-the-air, may not electronically reprocess them to deliver separate signals, and may extend service only to their respective local communities. At http://www.thestandard.com/article/display/0, 1151, 20422,00.html (visited 9 January 2001). The user must purchase and become proficient at using additional equipment for ‘burning’ music files on to CDs. The Copyright Office now recovers compulsory fees for second reproductions at the same unit price, which is the larger of 7.55 cents per song or 1.45 cents per recording time. Mechanical and Digital Phonorecord Delivery Rate Adjustment Proceeding, 64 Federal Register, 26, 6221 (9 February 1999). The matter of mechanical rights for second reproductions will be revisited in 2001. Licensee standing was denied in U.S. v. ASCAP, 208 F. Supp. 896 (S.D.N.Y. 1962); affirmed 331 F. 2d 117 (2d Cir. 1964); U.S. v. ASCAP, 708 F. Supp. 95, 1989-1 Trade Cases, 10 U.S.P.Q. 2d 1866 (S.D.N.Y. 1989). Writer standing was denied in U.S. v. ASCAP, 708 F. Supp. 95 (S.D.N.Y. 1989); U.S. v. ASCAP, 739 F. Supp. 177 (S.D.N.Y. 1990); U.S. v. ASCAP, 914 F. Supp. 52 (S.D.N.Y. 1996).
BIBLIOGRAPHY Einhorn, M.A. (2000a), ‘Intellectual property and antitrust: music performing rights in broadcasting’, Columbia Journal for Law and the Arts, forthcoming. Einhorn, M.A. (2000b), ‘Transactions Costs and Administered Markets: The Case of Music Performance Rights’, unpublished manuscript. Fisher, W. (2000), ‘Digital Music: Problems and Possibilities’, Harvard University, unpublished paper. Ginsburg, J. (2000), ‘From Having Copies to Experiencing Works: the Development of an Access Right in U.S. Copyright Law’, in Hugh Hansen (ed.), U.S. Intellectual Property: Law and Policy, London: Sweet and Maxwell. Gordon, W. (1997), ‘Intellectual property as price discrimination: implications for contract’, Chicago-Kent Law Review, 73, 1367.
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Griffin, J. (2000), Statement, ‘The Future of Digital Music: Is there an Upside to Digital Downloading?’, Senate Judiciary Committee, Washington, DC, 11 July 2000. Jupiter Media Metrix (2001), ‘Online Music Sales will grow 520% to $6.2 Billion in 2006’, press release, at http://bix.yahoo.com/prnews/010723/nym035.html (visited 24 July 2001). Kohn, R. (1998), ‘A primer on the law of webcasting and digital music delivery’, Entertainment Law Reporter, 20 (September), 10 Kohn, A. and R. Kohn (1996), Kohn on Music Licensing, Englewood Cliffs, New Jersey: Aspen Publishers Inc. National Information Infrastructure Task Force (1995), Intellectual Property and the National Information Infrastructure, Washington, DC: Information Infrastructure Task Force. Nye, W.W. (2000), ‘Fable in Another Key: Path Dependence and the Licensing of Music Performance Rights’, Economic Analysis Group Discussion Paper, US Department of Justice, Washington, DC. Potter, J. (2000), Testimony, ‘Copyrighted Webcast Programming on the Internet’, Committee on the Judiciary, US House of Representatives, Washington, DC. Reese, A. (2000), ‘Copyright and Internet Music Transmissions: Existing Law, Major Controversies, Possible Solutions’, unpublished paper, University of Texas, Austin Texas, presented at Telecommunications Policy Research Conference, Alexandria, Virginia, 24 September 2000. Shemel, S. and M.W. Krasilovsky (1995), This Business of Music, New York: Billboard Books. Stefik, M. (1999), The Internet Edge, Cambridge, Mass.: MIT Press. US Dept. of Justice (2000), Antitrust Division, Memorandum, U.S.A. v. ASCAP, Civ. Action No. 41-1395, Washington, DC. Veronis, Suhler and Associates (2000), Communications Industry Forecast, Chapter 3, New York: New York.
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11. Copyright protection, appropriability and new cultural behaviour Joëlle Farchy and Fabrice Rochelandet 11.1 INTRODUCTION Digital technologies1 facilitate almost immediate, costless and perfect reproduction as well as easy modification of copyright content. More generally, they have contributed towards the emergence of digital networks, which significantly increase communication and data exchanges. In this context, the producers2 of protected content emphasize the risk of widespread unauthorized copying like piracy and consequently very high commercial losses. Digital private copying is the non-commercial, perfect reproduction by individuals of musical, audiovisual, literary, multimedia and software copyrighted works. They can be digitized and some are digital by nature. Copiers can obtain them from already existing physical carriers. They can also download them from Internet sites on their hard disk and engrave the files on recordable CDs (CDRs). This chapter investigates whether this causes market failure, and considers possible solutions. As with analogue private copying, and in contrast to industrial piracy, digital private copying is non-commercial and allowed by law when it takes place within a ‘family circle’.3 However, several essential features distinguish the two forms of private copying: the widening of the field of copiable works, the diversification of the sources from which copies may be obtained, the same hardware and media and the perfect reproduction of originals (‘cloning’). The legal principle of the exception for private copying is applied in nearly all European countries. In France, an author cannot oppose ‘the copies or reproductions strictly reserved to the private use of the copyist and not intended for a collective use’ (L.222.5, CPI) except for databases and software. It differs somewhat from the fair use doctrine since its purpose is essentially to respect privacy rather than to favour access to works.4 Two major options are possible with respect to digital private copying: prohibiting private copying or authorizing it. This second possibility may be 178
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broken down into three alternative institutional arrangements: authorizing copying without restriction, authorizing it with a blank-tape levy or its equivalent5 (the receipts from which are distributed to copyright owners) or authorizing it with subsidies to the producers of copied content. The purpose of this chapter is to compare the various regulations on digital private copying and to determine which one is preferable in each case. We suggest that the adoption of an optimal regulation must take into account the capacity of appropriation by the rights holders of the value of the copies made from originals. Appropriability may be achieved through various mechanisms (exposition, higher prices, complementary products) or via the new techniques of appropriability like digital encryption, electronic traceability and anticopying devices.
11.2 DIGITAL PRIVATE COPYING IN FRANCE: SOME DATA 11.2.1. The Markets of Recording The sectors currently concerned with copying are the markets of recording equipment and carriers as well as the markets of copied protected contents: records, video games, multimedia and software.6 As for the former, the following table shows the different types of blank CDs. Table 11.1 Classification of blank CDs Types
Capacity
Type of data
CDR Data (CD 650Mb Audio, video, recordable data) software CDRA (CD recordable 74' Audio audio) CDRW (CD rewritable) 650 Mb74' Audio, video, software MiniDisc 74' Audio DVDR Data (DVD 4,7 Gb Audio, video recordable data) software DVDR Video (DVD 180' Video, audio recordable audio) Source: Farchy and Rochelandet.
Hardware Computers, CD player CD player Computers, CD player Sony MiniDisc player DVD computer player DVD player
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Traditionally, the market of recording carriers is that of analogue blank tapes. This market is declining compared to the digital recordable carriers (that is, CD Recordable Data for general use, CD Recordable Audio and MiniDisc for music).7 Table 11.2 Audio tapes and CDR sales in France (millions of units, SNSE 8) Audio tapes 1994 1997 1999 2000
53 42 35 27
CDR data and audio – 10 101 154
Source: Syndicat National des Supports d’Enregistrement (SNSE, French association of manufacturers of recordable cassettes and CDs).
The sales of blank audiotapes decreased from 53 million units in 1994 to 27 million in 2000. However, since 1997 this fall is compensated by the increasing sales of recordable CDs.9 An explanation of these trends is the constant reduction in prices of CDR: the average price of a CDR was 22.86 euros in 1990 and fell around 1.52 euros in 2000 (source: Moulages Plastiques de l’Ouest, the major French manufacturer of CDs). The household ownership of equipment for recording is quickly growing. The reproduction of musical and software contents could be made from two main sources: CD writing from originals and downloading of MP3 files. Concerning the first possibility, 29 per cent of French households and 49 per cent of households with children had a computer in 1998 (source: Médiamétrie/ISL, 2000). According to the French Ministry of Economy, 60 per cent of equipped households currently have a multimedia computer, 25 per cent have a modem and only 15 per cent a scanner. About 5 per cent of them have a CD-writer in 2000 (2 per cent in 1999) (source: Médiamétrie/ISL, 2000). 11.2.2 Nature of Recordings and Reasons for Recording Works games. music, France survey private
copied on digital recording carriers are primarily music and video Of the 35 million CDR sold in 1998, 8 million are used for copying that is approximately 5 per cent of the sales of recorded CDs in (source: the French association of record producers SNEP 10). A of the collecting society in charge of administration of audio copying fees (Sorecop) shows that half of the copies on CDR are
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intended for personal data backup, 23 per cent for musical reproductions and 25 per cent for video games. Cultural and educational software are pirated much less. Table 11.3 Features of copying Personal data backup Musical reproductions Video games Other uses
50% 23% 25% 2%
Source: Sorecop.
Copiers are mainly students and young people.11 The prices of copied originals appear to be too high compared to their willingness to pay and to the price of CDR: the average price of a video game is 37.3 euros and the price of a record oscillates between 15.24 and 22.86 euros in 1999. Apart from the increased practice of CDR writing, the record industry is confronted with a new form of piracy with the multiplication of the websites devoted to music. One of the main reasons for connecting is the downloading of software (55 per cent of the cases), whereas the less important kind of use is the online purchase (33 per cent). Table 11.4 Reasons for connecting Information search News consulting Software downloading Electronic mail Online shopping
95% 55% 55% 39% 33%
Source: KPMG.
However, a study carried out in American music Newsgroups by MP3.com shows that only 16 per cent of people downloading MP3 files substitute copies for originals and 66 per cent claim to buy the original afterwards. Many do this because they do not like downloaded work. Therefore, the promotional effect of networks should not be underestimated. A recent French survey confirms the idea according to which online downloading of MP3 files does not substitute the sales of records.12
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11.2.3 Losses of 680 Million Euros estimated by French Software Publishers! Due to these changes, the various associations of French publishers and producers report considerable losses. In the field of the non-professional software, the French association of ‘ludotainment’ software publishers SELL13 estimates that commercial losses would amount to about 680 million euros in 1998. This sum represents the equivalent of the software market for consoles and computers. SELL arrived at this figure by taking the number of recordable CDs intended for copying (about half of the software market), which it then multiplied by the average price of the most pirated software.14 For the record industry, the French association of record producers considers losses caused by digital private copying to be 8 million units (5 per cent of the sold units). Without denying the possibility of these losses, such arguments should be called into question. The evaluation of the losses neglects some important facts. First of all, in the absence of copying, nothing proves that producers would be able to sell the same number of copies at the same price for originals (see below). Secondly, online music offers new opportunities compared to traditional distribution. The Internet can thus modify the economic equilibrium of the industry. As argued by Ramello and Silva (1997), illegal copying in the record industry can also be interpreted as a natural reaction of consumers confronted with a highly concentrated market, in which copyright law essentially protects the monopoly of the major companies. In the same way, copying does not constitute a dead-weight loss for the producers, because some of these firms are subsidiaries of industrial groups producing recording material and online services. Lastly, associations of consumers claim that copying does not reduce the sales of originals, but rather that it corresponds to various complementary uses such as compilations and reproductions of collectors’ items.
11.3 THE PROS AND CONS OF THE PRIVATE COPYING EXCEPTION 11.3.1 Arguments of the Prohibitionists 11.3.1.1 Reduced direct appropriability of short-term incomes The most immediate impact of private copying without restriction is primarily supposed to deprive the producers of part of their earnings from the sales of originals. In extreme cases, even the packaging is reproducible, in which case some speak about ‘cloning’. The cost of originals is completely borne by
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direct purchasers whereas the copiers pay only the costs of making copies. In consequence, the demand for originals is proportionately reduced, depending on the degree of substitutability between originals and copies. Therefore, the profits of the producers necessarily decrease with copying. To determine precisely the nature of the damages undergone by the rights holders, Besen and Kirby (1989) stress that the losses can be evaluated by the change in the profits of producers before and after the introduction of copying. There would be no damage unless private copying causes any short-term fall in their profits, and consequently no legal restriction is justified. However, a broader definition of the damage is possible: ‘harm occurs if the new uses reduce profits below the level they would have reached had the producer been able to exploit the market served without authorization’ (Besen and Kirby, 1989, p. 273). In this case, prohibition or compensation measures can be justified. 11.3.1.2 Reduced diversity of works in the long run The negative effects of free private copying seem less questionable in the long run. Lower profits deprive producers of additional financing capacities for new creations. Not only producers but also consumers see their welfare decrease. For the former, a smaller number of produced works is synonymous with less employment, fewer possibilities of expression, less diversification of risk, and perhaps a fall in the number of firms (Johnson, 1985). As for the consumers, they have less choice and thus less opportunity to satisfy their desires. Finally, according to Johnson, all longterm effects of private copying on social welfare depend on three factors: the elasticity of the supply of originals (a decrease in the earnings of producers due to copying involves a reduction in the supply of works and in the collective surplus, even if dissemination is broader), the value of diversity to consumers and the impact of copying on the demand for originals compared to its effect on the overall consumption (the increase in social welfare due to copying can be higher than the loss due to the fall in sales of originals). According to Novos and Waldman (1984), a reinforcement of copyright law (prohibition of private copying) can induce a net increase in the social welfare in terms of productivity and creativity. It would be all the more necessary since the losses undergone by the producers may result from a double constraint on pricing. First, producers must decrease their prices to induce copiers to buy originals and, second, they can be confronted with a reduction in the demand for originals corresponding to potential buyers, who anticipate a reduction in prices.15 Finally, if we agree with these arguments, private copying should be prohibited or, at least, considerably restricted.
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11.3.2 Arguments in Favour of the Copyright Exception for Private Copying The economic models that favour free private copying recommend a laissezfaire approach on the grounds that the producers of originals can indirectly appropriate the value of the unauthorized copies. According to Liebowitz (1986), prohibitionists consider only the direct appropriability of incomes by rights holders, whereas copying has two other effects. On one hand, the widespread adoption of copying technologies increases the dissemination of works and so the probability of purchases of originals. This exposure effect improves in fine the income of rights holders (see also Takeyama, 1994). On the other hand, there exists a multiple-uses effect: the rights holders can appropriate fully or partly the value corresponding to the unauthorized copies by increasing prices of the originals acquired by the purchasers from which the copies are made (see also Besen and Kirby, 1989). The impact of copying on the income of copyright owners is the result of these three effects: ‘The substitution effect reduces appropriability, the multiple-uses effect increases appropriability and the exposure effect does not affect appropriability per se, but will influence the well-being of copyright holders’ (Liebowitz, 1986, p. 191). 11.3.2.1 Indirect appropriability and price discrimination This approach stresses the possibility for producers to operate price discrimination between users. Liebowitz (1985, 1986) shows that copying can be profitable to rights holders if they indirectly appropriate the value of unauthorized copies: ‘The users of unauthorized copies . . . may be indirectly paying the copyright owner for their unauthorized copies if the owner of the authorized copies takes the “resale” value of the authorized copies into account when they purchase them’ (1985, p. 947). In other words, the initial purchaser of an original agrees to pay a higher price, for he or she anticipates earnings that s/he will derive from the ‘sale’ of copies to secondary users. To support this idea, Liebowitz analysed photocopying in libraries and showed that publishers of academic journals in the USA have increased the price of subscriptions taken out by the libraries more than the price of individual subscriptions. Thus, the prohibition of private copying seems to be called into question by the possibility of price discrimination. The main criticism here is the limited scope of this analysis: the copying of academic journals is a very specific case of price discrimination, which is practicable without significant costs. This practice is almost impossible to apply to analogue private copying. Identifying those purchasers of originals who make copies for other individuals is simply not feasible.16
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11.3.2.2 Existence of complementary goods and services Another form of indirect appropriability is the existence of complementary goods and services. When the use of easily reproducible content is associated with strictly complementary products, the consumer cannot derive any utility from the consumption of the work alone. The producers then can hope to recover the value of the unauthorized copies in two different ways. Either they also produce the complementary product and fix their prices so that their total receipts offset their losses, or they negotiate with the producers of the complementary product, while possibly benefiting from a mutual dependence between them. Novos and Waldman (1988) take the example of software and computers necessary to their use. A firm producing the two goods has the incentive to increase the price of its computers while decreasing the price of its software and thus reduce the social loss of their underutilization. However, its market power must be sufficient in the market of computers. This can constitute a new source of welfare loss, since sales of computers will be suboptimal.17 This approach generally supposes that software publishers are also producers of computers, which is far from being currently the case. Similarly, the record producers generally do not manufacture recording equipment, even if the majors are often subsidiaries of firms producing these goods. On the other hand, the video game consoles are a good example, since Sony, Sega and Nintendo are both manufacturers of consoles and publishers of video games. 11.3.2.3 Network externalities Takeyama (1994) shows that unauthorized reproductions of protected content can involve not only higher profits for the publishers but also an improvement of social welfare. In the presence of positive consumption externalities, unauthorized copies can be a means of price discrimination of consumers. If the copies (‘sold’ at price zero) do not generate short-term incomes, they contribute to developing consumption habits and to large-scale diffusion of the product. Even in the absence of copyright protection, the advantages related to the size of the network can cause profits to increase beyond the level they would be without copying. Takeyama takes the example of the software market and competition between publishers. The winning publisher can expect profits in the medium run thanks to sales of software updates and maintenance. For an incoming publisher, private copying can be perceived as a means of creating important pre-emptive installed bases of users. However, once their software is widely adopted, dominant publishers claim the suppression of the exception for private copying.18 The promotional effect of private copying is much more debatable in the cultural industries. Bands like the Rolling Stones do not need to create an ‘installed base’ of fans, but rather to appropriate short-term
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incomes from their production. Their objective is thus to maximize the rents derived from fame. Moreover, the problem does not arise for bands of lesser importance because a majority of copied works are those produced by stars. By contrast to software products, competition between cultural works is not so subject to competing technologies, and digital private copying would represent potential high losses in an industry depending on few talents. 11.3.3 The Middle Way: Free Private Copying with Compensation to Rights Holders Beyond the debate on the authorization or otherwise of private copying, regulation has generally consisted of an intermediate solution, which is to authorize private copying in exchange for a compensation paid to the rights holders. Governments create taxation, which consists in fixing a levy on the prices of blank tapes and redistributing its receipts among rights holders through collective rights organizations.19 Confronted with private copying, the majority of European countries have adopted this Pigovian device. However, with the development of digital technologies, a Coasean solution should soon be practicable. Indeed, negotiations between private parties will be made possible by anticopying and identification devices while significantly increasing the direct appropriability. Thus, their efficiency is decisive to determine the optimal regulation. 11.3.3.1 Expected effects of a private copying levy The solution adopted by many countries has been the Pigovian one: taxation. The private copying levy corresponds to a second-best solution, because it authorizes copying – considered to have a negative net impact on sales of works – and goods subject to the tax may be used for other uses than the copying of copyrighted content. A first-best solution then would be to apply a levy to the very act of copying, but its implementation would obviously give rise to prohibitive costs. This is why the levy is applied only to the complementary goods like blank tapes and recording apparatus. The following table shows the different levels of the levy on recording tapes, MiniDiscs and CDs in four European countries. There is no such levy in the United Kingdom, Ireland, Portugal and Luxembourg. It is necessary to evaluate the impact of the private copying taxation on social welfare in order to justify or to criticize it. From this point of view, Baker (1992) proposes a study of its effect on the record industry. According to him, the economic objective of such a levy is threefold: (1) to recapture royalty income ‘lost’ to copyright owners when blank-tape purchases represent a direct switch from record purchases; (2) to capture the ‘rightful’ copyright income which, it is claimed, is lost when tape is used to record from
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Table 11.5 Private copying levies in European countries (euros per hour) Audio tapes
MiniDiscs
CDR Audio
CDR Data
0.06 0.29 0.23 0.04 0.43
0.06 0.56 0.32 0.26 0.43
0.06 0.56 0.52 0.10 0.43
0.06 0.33 0.14 0.00
Germany France Netherlands Italy Denmark Source: Le Monde.
records and so on, which would not otherwise be purchased at the full retail price; and (3) to maintain the demand for records and so enable the record industry to sustain its publishing activity (p. 6). Consequently, the levy must be established by considering the characteristics of the record market: royalty rates, record prices and supply diversity. If the levy is correctly established, it can increase both the incomes of the copyright owners and the number of the published titles beyond the level prior to the development of private copying. On the other hand, a tax level that is too high compared to the royalty rate would reduce the number of published titles and then the earnings of artists. Besen and Kirby (1989) start from the interesting idea according to which it is necessary to reason in terms of the use of works. Originals or copies are only means by which the consumers make use of works. Extending this reasoning, producers of recording tapes and CDs are supposed to sell potential uses to copiers and to some extent they compete with the producers of originals while benefiting from a comparative price advantage. On the basis of such a reasoning, it is possible to favour a system of compensation based on the transfer of some part of the sales of recording material to the producers of originals. Besen and Kirby try to determine optimal royalties according to two criteria: direct appropriability (the demand for originals reflects only their value for direct purchasers) with imperfect substitutability between originals and copies, and indirect appropriability (the demand for originals reflects the demand for copies) with perfect substitutability. The first case corresponds to analogue private copying of records. Indeed, the prices of originals are rigid in the short run, the marginal cost of copying being constant, the capacity of indirect appropriability from copiers low, and the quality of copies lower than that of originals. The more the cost of a copy increases, the weaker is the substitutability between an original and a copy: the willingness to pay for originals thus increases. Therefore, if the substitution of purchases for copying can be compensated by higher prices imposed on the
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consumers of originals, producers and consumers see their welfare increase. However, it is more likely that the producers are obliged to decrease their prices to encourage copiers to buy originals. Their profits decrease and the effect of copying on social welfare is indeterminate, since only the welfare of copiers and buyers increases in the short run. In this case, the introduction of a levy on copying can be justified. The producers of originals then become multiproduct monopolists in markets of originals and copies. On the latter, their profits correspond to the levy receipts: they increase with its rate, which is fixed on the prices of recording media. Finally, when exclusively direct appropriability is present, fixing a private copying levy has positive effects on the short-run profits of the producers.20 The second case can be applied to video games. Originals and copies are supposed to be perfectly substitutable and copiers form ‘clubs’ to share the purchasing cost of originals. The formation of clubs of copiers constitutes a specific form of indirect appropriability. As a matter of fact, producers can extract from the organizers of clubs (buyers of originals) the full surplus generated by exchanges within the clubs. Given that the cost of the purchase is shared between copiers, they can increase the price of originals. Private copying thus allows the producers to appropriate the surplus generated by the existence of clubs and therefore copies replace originals that are too expensive.21 In this case, the optimal royalties on copying must be either zero or fixed at a prohibitive level because the producers can appropriate the value of uses from both purchasers and copiers. On the one hand, producers may find it beneficial not to restrict copying by increasing the price of recording media if this practice makes it possible to increase their profits. On the other hand, they may prefer to prevent copying through a prohibitive price of blank tapes or CDs, if the surplus generated in clubs is not high enough to compensate them. The degree of substitutability between originals and copies is essential to understand this alternative. In the case of perfect substitutability (video games), the producers have no interest in the setting of a levy, but they prefer to fix a monopolistic price in order to maximize their profits on the two markets and then to appropriate the entire value of the use made of their works. Three criticisms can be addressed to Besen and Kirby (1989). First, their model neglects a third case according to which originals and copies are perfect substitutes and the marginal cost of copying is constant (online copying). According to them, the producers of originals would prefer to sell one copy at a price that allows them to appropriate the profits of the initial copier from the ‘resale’ of unauthorized copies. This debatable assumption takes into account neither the transaction and information costs, nor the fact that individuals cannot generally bear such a cost on their own. Moreover, the producer of a work likely to be distributed online would hesitate to sell it in this way
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considering the risk of fast dissemination of copies. Second, their analysis is for the short run and does not consider the long-run effects like the reduction of diversity. Lastly, Besen and Kirby consider the legal monopoly of an author or a publisher on their works as an economic one: these are supposed to be able systematically to fix a price, enabling them to indirectly appropriate the value of the ‘use’ made of their productions. However, competition between producers of originals restricts their pricing strategies and it makes indirect appropriability difficult. This argument then justifies the prohibition of private copying or the adoption of compensatory mechanisms. 11.3.3.2 From criticisms of the levy on private copying to alternative solutions The taxation is subject to many criticisms. It hampers the growth of the industry of recording tapes and CDs whereas the uses of these products do not always correspond to private copying of protected content. Levy receipts primarily benefit dominant publishers and stars. In the case of the digital private copying, this inefficiency would be exacerbated, for the main beneficiaries are also the publishers and artists who have the capacities to differentiate both technically (anticopy devices) and commercially (by creating promotional events). These criticisms justify the adoption of alternative solutions to mitigate the negative effects of private copying on copyright owners. Since the ratio between the prices of originals and copies, and their substitutability, appear to be the decisive factors for consumers, these variables must be cut down, for instance through advertising strategies. Rather than making the price of recording media as dissuasive as possible by increasing the royalties rate, the prices of originals could be reduced through a reduction in VAT or by subsidizing producers of originals. Subsidies that are financial transfers between the administration and the producers are incentives. An immediate advantage of these subsidies compared to taxation is the ease of setting and control of the results through the relatively low costs of identification of the producers of copied works and the possibility of price statements. However, Johnson (1985) raises two problems concerning this solution. First, it is necessary to take into account the opportunity cost of such a use of public funds. From a social point of view, a tax cut or the financing of another activity could be more beneficial than a reduction in the prices of originals (which does not benefit directly all consumers). Second, such a subsidy scheme can be inequitable, since small consumers will subsidize the large-scale consumers of works. Three criticisms can be added. The first concerns international trade: governments generally subsidize national firms or those located in their territory. The subsidy thus can induce a price distortion vis-à-vis the other producers. Second, informational asymmetry is likely to exist between the administration and the
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producers, who can obtain rents from this situation. Third, subsidizing record producers is likely to provide a disincentive for them to innovate and find other methods of appropriation such as self-help technological systems. Though this solution would not always (and easily) be applicable, it appears in certain specific cases more efficient than taxation.
11.4 OPTIMAL POLICIES TOWARDS DIGITAL PRIVATE COPYING Two main cases are to be considered when government is considering the regulation of digital private copying: perfect appropriability and vulnerable technologies. 11.4.1 Efficient Technologies and Market Solution If anticopying techniques prove to be efficient, then appropriability would be perfect and mainly direct. Most uses would result from the purchases of originals and copying would disappear or become significantly marginal. Therefore the recording media should be intended only for the storage of personal data. In relation to prohibition, the market solution is to presume private copying to be authorized, except where rights holders object (in which case they have to notify this explicitly to potential copiers). Thus, copyright owners must balance remuneration through possible technical devices of protection against the receipts of the private-copying levy. Indeed, like prohibition, this (more flexible) arrangement requires traceability of the use of contents by an appropriate technical device and therefore, it involves costs. From the point of view of many economists, new technologies allow an important reduction of transaction costs. Therefore, this major change should favour an electronic disintermediation between economic agents. Market exchange would prevail over hierarchy and institutional intermediation (Malone, Yates and Benjamin, 1987). Cultural markets tend to structure on this contractual model. So detractors of copyright law claim its complete revision on the grounds that it harms contractual freedom and hampers the emergence of new ways of distributing and commercializing cultural goods (Meurer, 1997; Varian and Shapiro, 1998). This vision is an oversimplification because of opportunistic behaviours and prohibitive costs of implementation of technologies (Farchy and Rochelandet, 2001; see also Cohen, 2000). For a few years, the main rights holders (especially the majors) and the collecting societies (in collaboration with governments and international organizations) have mounted a major campaign to fight against piracy. Some
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technical experiments are currently managed through some committees like the SDMI or the IMPRIMATUR project and with the development of products like the Digibox software (Farchy and Rochelandet, 2000). Two kinds of technical devices may be distinguished: on the one hand, mechanisms that prevent unauthorized reproduction by controlling both access and use of protected contents and, on the other hand, techniques of identification of works through electronic meters integrated into sites or personal computers. Nevertheless, this type of control will not be fully operational for many years.22 More importantly, this could have a negative impact on cultural diversity by preventing potential creators from wide access to protected works (Cohen, 2000). 11.4.2 Vulnerable Technologies and Intermediate Solutions Supposing inefficient technical devices is more realistic in the medium run, given current consumption habits, the vulnerability and short lifespan of anticopying systems as well as the struggle between manufacturers of recording apparatus and producers’ associations. Taxation and subsidization remain major compromises. However, these solutions must be adapted to each situation by taking into account two facts. On the one hand, the CD has become a universal standard: implementing a private-copying levy in one case would be considered an injustice or a competitive distortion from the point of view of the non-recipients. On the other hand, appropriability varies according the industry: it is both direct and indirect in the cases of software and video games, whereas it is essentially direct for most producers and publishers in cultural industries. 11.4.2.1 Free private copying in case of high indirect appropriability In the case of video games and utility software, private copying should be entitled by law without compensation due to high indirect appropriability. As a matter of fact, it causes important network externalities and so is a key factor enabling a software or a video game producer to dominate the market. Given the positive correlation between the current market dynamics, the high price level and the rate of piracy, we can neither deny these network effects, nor claim that private copying would cause important losses. Moreover, the existence of complementary products (consoles, derived products and online game sites) allows publishers to negotiate percentages on the prices of hardware and to grant rights to online producers. Finally, bundles and online sales of updates permit publishers to appropriate a large part of the value of copies. Prohibiting private copying of software or implementing compensatory or prohibitive levies involve a reduction in indirect appropriability by increasing the cost of copying without necessarily increasing purchases of
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originals. On the contrary, free private copying permits the increase of the two kinds of appropriability through positive effects such as exposure and sales of complementary products. 11.4.2.2 Targeted subsidies in case of low indirect appropriability By contrast, in the case of records where indirect appropriability is low,23 authorizing private copying while paying subsidies to the most harmed rights holders appears to be a more efficient solution in the medium run. Given the cloning and the widespread adoption of CD-writers, methods of indirect appropriability are difficult to set up, except the important case of vertical integration between majors and manufacturers. A VAT reduction could be a short-run solution that benefits publishers by making originals more competitive in comparison to copies. Nevertheless, the quantitative effect of such a policy is limited and it essentially benefits major companies. The losses borne by producers can be as well compensated by state-financed subsidies. The levy on private copying or the implementation of subsidies are more or less equivalent solutions from the point of view of the copyright owners. Nevertheless, the welfare of consumers and the economic interests of software publishers (using the same standard; that is, the CD) imply that the second solution is less inefficient: notwithstanding the difficulty of implementing subsidies (asymmetric information, conflicts among administrations, and so on), the advantage of such a solution is that it does not create a variety of regulations and it can be targeted towards those copyright owners who really suffer from digital private copying. Subsidies would enable the profits of the two industries of protected contents and recording hardware to be maintained, even if it creates a slight competitive distortion. By contrast to a levy, this solution makes it possible to avoid a uniform tax on blank CDs and so preserves the social benefit of free private copying (for example, maintaining CDs’ demand when they are intended for personal compilation). Moreover, consumer welfare would be maintained because of the possible choice between purchasing and copying that prohibition or prohibitive taxation does not allow. In the long run, subsidies could protect smaller producers and publishers by enabling them access to costly new anticopying technologies (Farchy and Rochelandet, 2001).
11.5 CONCLUSION Digital technologies could be both a poison enabling consumers to free ride and a cure preventing them from making unauthorized copies. If anticopying technologies prove to be efficient, establishing a repressive regulation represents unnecessary social costs and therefore free private copying appears
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as the most efficient solution. However, technological protection mainly favours dominant producers and publishers and, therefore, traditional copyright turns out to be in users’ best interests (Cohen, 2000; Farchy and Rochelandet, 2001). Resolving market failure created by private copying in the digital era amounts to comparing various institutional arrangements, given that none of them is a priori efficient.
NOTES 1. This topic has been developed in a previous publication in the French review Réseaux, 2001. 2. In this study, ‘producers’ is a general term including authors, publishers and producers. 3. The distinction between industrial piracy and private copying is often blurred. Meurer (1997) prefers the dichotomy industrial piracy/unauthorized sharing, but he admits the limits of his own distinction. 4. First of all, private copying as a consumer practice is to be distinguished from the legal exception of private copying that allows individuals to reproduce works for their own usage and that of their family. So the consequences of the French legal exception and fair use are identical. However, the French private copying exception and fair use do not have the same spirit and purposes. In contrast to fair use, the French private copying exception does not aim to facilitate dissemination of cultural goods, discovery or criticism by authorizing private copying. Rather, this exception results from the protection of the privacy of individuals and the impossibility of controlling each potential copier given the prohibitive costs of such an enforcement. 5. Several terms are used to qualify the taxation of blank CDs or tapes in order to compensate copyright owners for their losses. From our standpoint, the less suitable is ‘tax’ and the more adequate is ‘royalty’ (see Davies and Hung, 1993). However, we use the term ‘levy’ (in French, redevance), which avoids a confusion with other forms of royalty in the field of copyright earnings. 6. Multimedia is distinct from software. It includes electronic contents, such as interactive encyclopaedias, educational products or new cultural goods, published on CD Rom and DVD Rom (‘Rom’ for Read Only Memory). 7. Likewise, DVDR should ring the knell of blank videotapes. 8. Syndicat national des supports d’enregistrement, French association of manufacturers of recordable audio and videotapes, CDs and MiniDiscs. 9. The share of CDR Audio in terms of sold quantities remains marginal (5.7 per cent in 2000) and therefore the CDR Data should predominate in the future since computer equipment of households is largely higher than that of living-room CD-writers. 10. Syndicat National des Producteurs de phonogrammes, which represents the major record companies. 11. In 1998, more than 50 per cent of those aged 15-24 years state that they have copied at least once on their own equipment or via someone elses (source: SNEP, 1999). 12. According to the IPSOS/Libération/Powow.net survey carried out in June 2000, only 10 per cent of the 682 probed people claim to buy less records since they download MP3 files on the Internet. 13. Syndicat des éditeurs de logiciels de loisirs. 14. In 1997, losses of earnings was 0.23 billion euros (half of the market of leisure software). 15. This argument is from Takeyama (1997) who argues nevertheless in favour of free private copying. 16. Nevertheless, in the case of digital private copying, this analysis can prove to be relevant, thanks to new technologies of encryption and identification (Meurer, 1997; Bell, 1998). 17. Moreover, it must be determined whether prices of software come under a predatory strategy.
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18. For instance, Microsoft has obtained the adoption of NET Act. 19. These sums represented, in 1995, 120 million ECUS in France and 75 million in Germany. In France, perceptions extend to the Mini Disc and CDR Audio, but not to the CDR Data. The widening of the fee to all kinds of digital recording media is called for today by the collecting societies. 20. Of course, the rate must be fixed in such a way that the producers of originals do not benefit from rents from this regulation. 21. However, the marginal cost of copying increases with the size of the club, since additional ‘members’ raise congestion and transaction costs. Therefore, the optimal size of a club is an increasing function of the price of originals. 22. Moreover, governments will have to take care of the respect of privacy by regulating uses made by the rights holders from the data they collect. 23. The same arguments will apply to video in the future.
REFERENCES Baker, Alan J. (1992), ‘Economic analysis of a levy on sales of blank audio tape’, British Review of Economic Issues, 14 (34), 55-73. Bell, Tom W. (1998), ‘Fair use vs. fared use: the impact of automated rights management on copyright’s fair use doctrine’, N.C. Law Review, 76, 557-620. Besen, Stanley M. and Sheila N. Kirby (1989), ‘Private copying, appropriability, and optimal copying royalties’, Journal of Law and Economics, 32 (2), 255-80. Cohen, Julie E. (2000), ‘Copyright and the perfect curve’, Vanderbilt Law Review, 53, 1799-819. Davies, Gillian and Michèle E. Hung (1993), Music and Video Private Copying – An International Survey of the Problem and the Law, London: Sweet & Maxwell. Farchy, Joëlle and Fabrice Rochelandet (2000), ‘Protection of authors and dissemination of works in the digital universe. The case of the French film industry’, Communications & Strategies, 39, 37-58. Farchy, Joëlle and Fabrice Rochelandet (2001), ‘La remise en cause du droit d’auteur sur Internet: de l’illusion contractuelle à l’émergence de nouvelles barrières à l’entrée’ (forthcoming). GFK/SELL (1999), Loisirs Interactifs - Bilan Annuel, Paris. IPRC (1999), ‘Global Software Piracy Report’, http://www.bsa.org. Johnson, William R. (1985), ‘The economics of copying’, Journal of Political Economy, 93 (1), 158-74. Liebowitz, Stan J. (1985), ‘Copying and indirect appropriability: photocopying of journal’, Journal of Political Economy, 93 (5), 945-57. Liebowitz, Stan J. (1986), ‘Copyright law, photocopying, and price discrimination’, Research in Law and Economics, 8, 181-200. Malone, Thomas W., Joanne Yates and Robert I. Benjamin (1987), ‘Electronic market and electronic hierarchies’, Communication of the ACM, 30 (6), 484-97. Médiamétrie/ISL (2000), Enquête 24000 Multimédia. Meurer, Michael J. (1997), ‘Price discrimination, personal use, and piracy: copyright protection of digital works’, Buffalo Law Review, 45, 845-89. Novos, Ian E. and Michael Waldman (1984), ‘The effect of increased copyright protection: an analytic approach’, Journal of Political Economy, 92, 236-46. Novos, Ian E. and Michael Waldman (1988), ‘Complementary and partial nonexcludability: an analysis of the software/computer market’, Journal of Institutional and Theoretical Economics, 144, 443-61.
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Ramello, G. and F. Silva (1995), ‘Competition, Prices and Piracy’, in F. Benhamon, J. Farchy and D. Sagot-Duvauroux (eds), Approches Comparatives en Économie de la Culture, Paris: Ministère de la Culture-DEP./ADDEC, pp. 658-69. SESSI–SJTI–INSEE (1999), Technologies et Société de l’Information, Ministère de l’Economie, des Finances et de l’Industrie, Paris. Shapiro, C and H. Varian (1998), Information Rules: A Strategic Guide to the Network Economy, Harvard Business School Press. SNEP (1999), L’Economie du Disque 1999, Musique Info Hebdo, Paris. Takeyama, Lisa N. (1994), ‘The welfare implications of unauthorized reproductions of intellectual property in the presence of demand network externalities’, Journal of Industrial Economics, 42 (2), 155-66. Takeyama, Lisa N. (1997), ‘The intertemporal consequences of unauthorized reproduction of intellectual property’, Journal of Law and Economics, 40 (2), 511-22.
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12. Performers in the digital era: empirical evidence from Japan Shinji Matsumoto 12.1 PERFORMERS AND PERFORMANCES IN JAPAN 12.1.1 Introduction This chapter presents evidence collected by GEIDANKYO, which is the Council of 61 performers’ organizations in Japan. GEIDANKYO has four main functions: the study of and research on performers to promote the performing arts in Japan; improving the social and economic status of performers; welfare provision for performers; and the administration of neighbouring rights of performers and advocating their expansion. GEIDANKYO has collected general data concerning performing arts and published the White Paper on Performing Arts every two years since 1997; these data form the basis of this chapter, which compares performers’ incomes from live performance with those from neighbouring rights and considers the effect of digitalization. 12.1.2 Performers in Japan According to the national census 1990, the number of musicians was 114 000 and the number of actors, dancers and traditional entertainers was 64 500, so in total 178 500 performing artists were living in Japan.
• • •
Of the 114 000 musicians, 22 000 earned their living mainly from public performance and the ratio of men to women was seven to three. Of the 64 500 actors, dancers and traditional entertainers, 50 000 earned their living mainly from public performance and the ratio of men to women was seven to three. As far as musicians who earned their living from teaching activity were concerned, the ratio of men to women was one to nine. This was a very interesting figure and it reflected the actual situation of small private piano schools, which were very popular among Japanese people. 196
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GEIDANKYO has researched the actual working and living conditions of performers every five years since 1974 in order to inform performers of both their own situation and that of performers in different fields. The aim is to facilitate understanding of common problems and issues, and to help performers to contribute in building up policy that will improve their status and working conditions. Alongside this, it enables GEIDANKYO to raise questions and make suggestions in drafting arts promotion schemes for the government, local authorities and private companies. One of the most remarkable characteristics of the latest research was the pronounced impact of prolonged economic recession on performers orchestral players, actors and traditional entertainers in particular. These performers tended to devote themselves more to performing live on stage or through media than other performers, and the number of days these performers reported being out of work increased steadily. On the other hand, performers in the field of traditional music, traditional theatre, singers, solo instrumentalists and dancers were little influenced by the recession, because they spend more time in teaching performance. Table 12.1 presents figures for 1998 on the average annual income of performers from various types of performance (there are approximately 122 Japanese yen to the US dollar). The average amount of annual income from performance was 4.8 million yen. However, as Table 12.2 shows, the distribution of incomes is uneven. Table 12.3 shows the sources of income; note that remuneration derived from Neighbouring Rights accounted for only 0.9 per cent of performance income. Table 12.1 Average annual income, 1998 (million yen)
All Traditional Japanese music Classical music Traditional theatre Contemporary drama Traditional Japanese dance Contemporary dance, ballet Variety Others Source: GEIDANKYO.
Male
Female
Total
6.084 6.456 7.145 7.362 4.222 5.875 4.233 5.545 7.057
3.252 3.063 3.685 2.907 3.524 3.274 3.059 2.885 3.800
4.765 3.899 5.357 6.772 3.937 3.716 3.154 5.086 6.722
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Table 12.2 Distribution of annual income, 1998 Band of income (yen)
Performers (per cent)
Total of household income (per cent)
0-999 999 1 000 000-1 999 999 2 000 000-2 999 999 3 000 000-3 999 999 4 000 000-4 999 999 5 000 000-5 999 999 6 000 000-6 999 999 7 000 000-7 999 999 8 000 000-8 999 999 9 000 000-9 999 999 10 000 000-14 999 999 15 000 000-19 999 999 20 000 000-29 999 999 30 000 000 and above
13.68 15.79 17.89 12.63 8.42 7.37 4.21 4.21 3.16 3.16 5.26 2.11 1.05 1.05 100.00
2.63 5.26 9.21 10.53 11.84 9.21 7.89 7.89 6.58 6.58 11.84 5.26 2.63 2.63 100.00
Source: GEIDANKYO.
Comparing with the figures for 1989, the average amount of annual income increased only 1 per cent, while the consumer price index rose 15 per cent; thus annual income decreased in real terms. 12.1.3 Public Performance in Japan As stated earlier, GEIDANKYO has collected general data concerning performing arts every two years since 1997. According to the latest edition (1999), there were approximately 100 000 stage performances in Japan in 1997, with a total audience of 56 million. A breakdown of figures on public performance shows that contemporary drama accounted for 53 per cent, traditional entertainment performances for 13 per cent, classical music concerts for 12 per cent and popular music concerts for 8.5 per cent of the total (see Table 12.4). Of the total number of audience members, 46 per cent attended contemporary drama, 24 per cent attended popular music concerts, 12 per cent attended classical music concerts but only 5 per cent watched traditional entertainment performances.
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Sources of annual income by genre, 1998
Public performances Film, video, commercial film Broadcasting Recording Conducting, directing, choreography Plannning Royalty, remuneration Teaching Pension Real estate Other business Others
36.0
Traditional Western Traditional Contemporary Traditional Contemporary Variety Others Japanese music theatre drama Japanese dance, music dance ballet 16.8
2.0 3.2 0.7 3.0
0.4 0.2 0.1
2.6 0.9 24.4 6.5 1.7 5.7 13.5
27.2 15.1 4.1 6.5 29.3
38.2
48.0
41.8
7.4
17.0
70.6
9.6
0.3
0.3
8.7
0.2
0.2
0.9
1.9
1.2 4.6 3.2
0.8 0.3
9.8 0.4 1.3
0.3 0.2 3.1
4.7
5.6 0.2 0.3
2.2 0.1 19.9
1.7 1.5
0.1 0.3
6.9 0.4
0.4 0.6
0.4 0.1
0.8 0.8
10.1 6.5
36.5 3.2 0.6 2.8 5.7
22.9 13.1 1.2 5.2 7.6
4.9 2.9 0.7 7.4 14.5
45.3 9.7 6.4 9.1 17.7
54.7 2.1 0.9 5.1 15.8
3.3 3.7 0.5 4.4 7.8
17.9 6.8 1.4 6.3 18.6
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Income source (percentage)
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Table 12.4 Public performances in Japan, 1997 Performances
Noh, Kyogen Bunraku Kabuki Folklore Contemporary drama Traditional Japanese music Classical music Jazz, pop music Contemporary dance, ballet Variety Total
Audiences
Numbers
%
Numbers
1 524 487 2 272 2 430 52 939 2 821 9 536 8 555 3 674 12 879 97 117
1.5 0.5 2.3 2.4 52.8 2.8 12.1 8.5 4.2 12.9 100.0
641 322 204 943 2 073 264 213 621 24 705 275 1 148 213 6 326 043 13 104 878 2 359 661 23 720 482 53 497 702
% 1.2 0.4 3.9 0.4 46.2 2.1 11.8 24.5 4.4 5.1 100.0
In addition to public performances, performers in theatrical and musical fields were involved in the activity known as ‘performances in school’ and the total number of such performances was estimated at 28 000. 12.1.4 Financial Support for Performing Arts The total budget of the Japanese Agency for Cultural Affairs in the fiscal year 1997 amounted to 82.8 billion yen but this was only 0.1 per cent of the total budget of the government. Of the total budget of the cultural agency, 28.5 per cent - 23.6 billion yen was spent to promote performing arts, but this amount included the budget for fine arts and crafts, and the administration cost for cultural facilities, so the actual amount of the budget spent on promoting performing arts was 6.7 billion yen. Other ministries and agencies of the government also had a small amount of budget for arts and culture in 1997. In addition to this, the Japan Arts Fund provided subsidies of 1.3 billion yen, and the Japan Foundation also gave financial support to performing activities. In the case of local authorities, 667 billion yen in total was spent in the fiscal year of 1995 but the greater portion of the amount was diverted away for building and administering cultural facilities. Only 8.6 per cent (57 billion yen) was spent on promoting performing arts. The amount has tended to decline since 1993. According to the results of the questionnaire conducted by the Association
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for Corporate Support of the Arts in the fiscal year 1998, 266 companies supported 1800 performing activities financially and the total amount of financial support was 21.5 billion yen. Seventy-two per cent of these 1800 activities were stage performances, though this percentage did not reflect the proportion of allocation. Companies designate this kind of expenditure as ‘advertisement cost’ or ‘contribution’ in their accounts. The same survey has shown another result; that is, 55 Foundations established by enterprises carried out and/or supported performing activities, the total amount of expenditure being 1.3 billion yen.
12.2 PROBLEMS FOR PERFORMERS CAUSED BY DIGITAL TECHNOLOGY AND MULTI-CHANNELS What is Digital Technology? Digital technology has the following features:
• • • • • •
it has caused multi-channelization and changed the concept of use of performances in media completely; all performances can be changed into digital data and can integrate different information or works such as sounds, images and moving images; compared with analogue systems, digital systems prevent recordings of performances and even their copies from deterioration in quality; performances transformed into digital data can be handled simultaneously and easily processed on a computer; computers make it easy to transmit digital information; it is possible to identify the use of artistic works and performances with digital technology, administer information of Copyright and Neighbouring Rights derived from such uses and prohibit illegal copies.
These facts benefit users of artistic works and performances, but authors and performers cannot welcome them with equal enthusiasm. 12.2.1 Problems in Digitalization and Multi-channelization Both digitalization and multi-channelization pose a threat to performers in terms of employment. Synthesizers, for example, may threaten the jobs of session musicians and the popularization of computer graphics may similarly
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encroach upon job opportunities for actors. Multi-channelization has led to an increase in the number of old films being broadcast and programmes repeated, particularly on satellite and cable channels. Satellites have also made possible live broadcasts of concerts and sporting events, but this too may detrimentally impact on employment, since large media companies that dominate the market are able to gain exclusive rights, thus pushing up the cost of broadcasting. There is a further problem in relation to performers’ rights in the field of audio-visual fixation, such rights not being protected in the case of cinematographic works, although this issue was due to be addressed in December 2000 by the WIPO. Digitalization has made it easy to make unauthorized copies of original sound recordings and images, and thus to infringe the moral rights of performers. The problem has been made all the more acute by the rapid growth of the Internet. It is important that such issues are addressed as quickly as possible.
12.3 COPYRIGHT IN JAPAN The following rights are defined in Japanese Copyright Law: the rights of reproduction, musical and theatrical performance, transmission, communication, recitation, exhibition, lending, cinematographic presentation and distribution, translation and adaptation, and the right of the original author in the exploitation of a derivative work. These, however, are property rights of authors. Performers only have rights of making sound or visual recordings, broadcasting and wire transmission, making works transmittable, and lending, and the right to secondary-use fees from commercial phonograms, remuneration for lending commercial phonograms and compensation for private recording of sounds and images. When multi-media came on the entertainment stage in the 1990s, this new way of using artistic works, which was restricted within the network sphere, became a matter of controversy. Those people and organizations concerned discussed what kind of new rights should be applied in the multimedia field. However, only the performer’s right of making available was provided for in the WPPT, the WIPO Performances and Phonograms Treaty, adopted in 1996. Provisions were included instead in WPPT and WCT, the WIPO Copyright Treaty adopted at the same conference as WPPT’s; provisions to make use of digital technology for rights management information and copy protection, and to settle legal sanctions against infringement of such rights.
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12.4 EXPLOITATION AND REMUNERATION: WHAT IS THE APPROPRIATE REMUNERATION? 12.4.1 Exploitation of Sound Fixation It is very difficult to calculate the accurate amount of remuneration because types of use and times of use may possibly increase without limitation. Take the example of a sound fixation. At first, the fixation is reproduced as CDs or MDs in shops. The CDs or MDs may then be used for broadcasting or wire (cable) broadcasting; they may be rented in rental shops and many of them are recorded at home for private use. They may also be used as ‘digital data’ for digital sound broadcasting via satellite. They are used as ‘theme music’ or ‘background music’ in broadcast programs, video packages, TV advertisements and cinematographic works, and as a background music on a video clip that is communicated all over the world through satellite broadcasting. Of course, CDs and MDs are used in aircraft, trains or buses. The business of selling master data of sound fixations through the Internet has just started in Japan. CDs and MDs that have been sold through shops are possibly used for private homepages or up-loaded and used on the Internet by individuals. Karaoke music has its own requirements: when a sound fixation is accompanied with vocals, only the music part of the fixation may be reproduced then used for broadcasting and transmission to Karaoke bars and homes. But these are just a few of numerous types of digital use. It is predicted that broadcasting stations in the near future will not use CDs for their programs but access databases of master sound fixations directly. However, even an estimate of future types of digital use is very difficult because technology is developing so rapidly. 12.4.2 Present Situation of Remuneration for Secondary Use or Use Other than the Original Purpose of Fixed Performance Remuneration for rebroadcasting of broadcasting programmes is fixed on the basis of the remuneration for first audio or audio-visual fixation (recording), because such programmes will be rebroadcast just as they are. Remuneration for broadcasting programmes in video format is fixed on the basis of the number of the products reproduced and their retail price. The amount of secondary use fee for commercial phonograms is fixed on the basis of the total revenue of each broadcasting company. Remuneration for lending is fixed under negotiation, and compensation for audio or audio-visual recording for private use is fixed on the basis of the wholesale price of devices such as tape recorders and blank tapes as the result of negotiation. It is difficult to settle the appropriate amount of remuneration (not only
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remuneration for the first stage but also remuneration for re-use of performances) because there are many different types of users (for example, individual users in the case of point-to-point use, and mass users in the case of broadcasting or communication of performances to the public and by largescale broadcasting). It is important that performers should limit the scope of authorization at the time of agreeing a written contract on first fixation, because at that point secondary-use data can be collected very easily (see Table 12.5). Table 12.5 Remuneration for rental and secondary-use fees for commercial phonograms, 1998 (musicians) Band of distributed remuneration Yen 0-999 1 000-4 999 5 000-9 999 10 000-49 999 50 000-99 999 100 000-499 000 500 000-999 999 1 000 000-4 999 999 5 000 000-9 999 999 10 000 000 and above Total of numbers Amount of remuneration Median
Rental fee
Secondary-use fee
Numbers
%
Numbers
%
475 474 235 473 197 374 108 97 4 0 2 437 377 720 132 10 276
19.49 19.45 9.64 19.41 8.08 15.35 4.43 3.98 0.16 0.00 100.00
1 102 1 224 496 927 250 334 27 9 0 0 4 369 151 774 661 4 153
25.22 28.02 11.35 21.22 5.72 7.64 0.62 0.21 0.00 0.00 100.00
12.5 COPYRIGHT ADMINISTRATION USING DIGITAL TECHNOLOGY We can include copyright management information in the data of each artistic work or performance and can administer rights of authors and performers easily by reading that information each time the work or performance is used. As a result, it becomes possible to solve the problem of imbalance between the cost of collecting remuneration and the amount of remuneration from such use. There has been a tendency among producers so far to hesitate in giving performers new rights or even to force performers to transfer rights to producers of films or phonograms. This was because they believed it was
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difficult to administer performers’ rights and difficult to secure authorization when a number of performers were involved in making a fixation. This situation no longer applies. However, other problems have become the subject of discussion. For example, some say collective societies and performers’ organizations are unnecessary because digital data on performers’ rights can be easily administered through a computer. This argument, however, is flawed. The more such information is administered on the individual level, the more a powerful performers’ organization is needed to fix the amount of remuneration and to make collective agreement for secondary uses that favour individual performers. Establishing rules for various types of use will ensure a smooth authorization process without trouble, which is what users need. In Japan, a system is being perfected that will collect and collate data on performers who take part in each recording, at the time of the recording. As far as CDs are concerned, a system has already been adopted that administers various data of performances using an ISRC code number as the key. This system was organized with the cooperation of authors, performers and phonogram producers, and their respective organizations. It is expected that this ISRC data will be able to be combined with actual data of secondary use in broadcasting companies in order to collect and distribute remuneration due to authors, performers and phonogram producers efficiently. Another merit of digital technology is facility in transmission. Performers can communicate performances directly to the public through their Homepages. Using new technology, one person can act as author, performer and producer; thus the role of each is becoming ambiguous. However, there are still major differences between the protection of rights given to authors, performers and producers respectively. For example, authors have the right of communication to the public, but performers have only the right of making available their performances fixed in phonograms. Another example: an author has exclusive right of any re-use of his or her works, but once a performer has consented to the incorporation of his or her performance in a visual or audio-visual fixation, rights of the fixation, reproduction and broadcasting have no further application. The difference between these rights makes their administration difficult and complicated. Making rights equal would facilitate the administration of rights.
12.6 TRENDS SEEN IN THE MEDIA SURVEY CONDUCTED BY GEIDANKYO GEIDANKYO has recently researched ‘Media and Performances in the Digital era - Actual Conditions of the Exploitations of the Fixed Performances
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in the Media’, commissioned by the Japanese Agency for Cultural Affairs. The years of publication of CDs used for broadcasting programmes and rental have been analysed in the research, and a remarkable difference was found between CDs used in TV broadcasting and those used in radio broadcasting (see Table 12.6). Table 12.6
Year CDs published and their use, 1997
Year published
Rental Number
Radio (AM) %
Number
This year 391 604 86.96 One year ago 41 005 9.11 Two years ago 5 643 1.25 Three years ago 3 281 0.73 Four years ago 3 029 0.67 Five years ago 1 583 0.35 Six years ago 1 138 0.25 Seven years ago 877 0.19 Eight years ago 661 0.15 Nine years ago 598 0.13 More than nine 918 0.20 years ago Total 450 337 100.00
781 623 156 166 91 95 112 86 129 89 23
Radio (FM)
TV (VHF)
%
Number
%
Number
%
30.46 24.30 6.08 6.47 3.55 3.71 4.37 3.35 5.03 3.47 69.20
624 350 160 85 87 44 40 187 28 17 49
37.34 20.95 9.58 5.09 5.21 2.63 2.39 11.19 1.68 1.02 2.93
280 1 345 732 540 391 283 275 163 76 75 141
6.51 31.27 17.02 12.56 9.09 6.58 6.39 3.79 1.77 1.74 3.28
2 564 100.00
1 671 100.00
4 301 100.00
In radio programmes, most CDs used were published in the year of research, and the number declined with the year of publication. In TV programmes, most CDs used had been published a year before the research and the number decreased gradually until the year of publication was six years before the date of the research. Almost all rented CDs had been published in the year of the research. As for remuneration and frequency of rental, 7 500 titles were rented approximately 450 000 times in 1997, but the top 50 titles accounted for 35 per cent of these times (see Table 12.7). Table 12.7 Rank of rental and share of remuneration, 1997 Rank 50 100 200 300
Share (%)
Rank
Share (%)
Rank
Share (%)
35.4 53.7 74.3 82.4
400 500 600 700
86.6 89.2 90.9 92.0
800 900 1000
92.9 93.6 94.2
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As for CD sales in the popular music field, there were three big-hit titles in 1997 - three million of each were sold within a year, though total annual sales stayed on the level of the previous year.
12.7 THREE RECENT TOPICS IN DIGITALIZATION The first topic is a lawsuit in Japan concerning Copyright Law. Twenty-fourhour digital broadcasting of music by Communication Satellite started in April 1997. Subscribers to this service can enjoy 100 channels of music broadcasts. Phonogram producers brought a court action against the digital broadcaster in pursuit of suspension of the broadcasting and compensation for loss on two grounds. The first was that the broadcaster was not a broadcasting business but a transmission service of phonograms, and the second was that home recording of such broadcasts exceeded the scope of Article 9, paragraph 2 of the Berne Convention. The decision of the first trial was given on May 2000 and the appeal of the phonogram producers was dismissed. According to the judgment, the business was not a transmission service but a broadcasting company and the recording of the broadcasts by the members was not illegal because it was a kind of ‘reproduction for private use’. However, the court admitted that phonogram producers were certainly disadvantaged by a situation not caused by the current copyright law. The court also ruled that phonogram producers should not seek compensation for their disadvantage through interpretation of existing law but should rather appeal for more favourable laws or insist on compensation when settling secondary-use fee allocation. The court thus effectively suggested that rights-protection for neighbouring rightholders, given the advance of digital technology, was insufficient. I think it notable that the lawsuit caused the above-mentioned references by the chief judge, even though the phonogram producers lost their case. However, a famous jurist, specialized in Copyright Law, commented that this judgement was in conflict with Japanese copyright law. That is, the exclusive right of phonogram producers was provided for in the case of music transmission through the Internet, while only the right to remuneration was provided for in the case of broadcasting. He also observed that it was unreasonable to subdivide the neighbouring right into categories such as rights of wire transmission and wireless transmission or rights of broadcasting and transmission, such a classification was becoming meaningless with technological development, and making a new conception of neighbouring rights. The digitalization schedule of broadcasting in Japan has been announced, and both satellite and terrestrial broadcasting will inaugurate the digitalization process from 2000 and 2003 respectively, digitalization of all kinds of
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broadcasting in Japan to be completed by 2010. This issue is a matter of vital importance for performers. A second topic relating to digitalization is ISRC, mentioned above. The RIAJ (Recording Industry Association of Japan) and a certain domestic FM station are preparing to carry out a practical experiment with ISRC in order to supplement the current system of collecting information on artistic works of music used for broadcasting programmes. This experiment will be put into practice at the beginning of 2001. The precision of collecting information on the phonograms used for broadcasting programmes as well as the efficiency of rights administration will be improved to a great extent if the attempt is completed successfully, and then every broadcasting station will put phonograms on air along with their ISRC data. The last topic is concerned with the present situation of music distribution through the Internet; that is, the service through which digital data of phonograms is transmitted on demand to personal computers at home. SME (Sony Music Entertainment), which is the biggest phonogram producer in Japan, first set up this business in December 1999 and now several phonogram producers and Internet providers are running this service. Although the homepage for the service is accessed 600 000 times a month in the case of SME, only 10 000 visitors to the site commit themselves to purchase. At present, it seems to take three or more years before such a business becomes profitable, the principal reasons being that it takes over four times the actual playing time of a recording to receive music data over the Internet, and that high-quality sound is not currently ensured through the telephone circuit. However, it is hoped that this service will become a new way of music distribution if such problems are solved in the near future.
12.8 CONCLUSION The dawn of an advanced information society based on digital technology has changed people’s attitude towards the media and entertainment. Due to these changes, performers are finding themselves in a new situation, whether they like it or not. Digital technology influences various aspects of performers’ activities - not only in the field of stage performances or the production of TV programmes and cinematographic works, but also in the ideal contract format, the rights of performers to be protected, remuneration to be collected and the collection/distribution system. Performers need to unite to deal with these issues. Performers and their organizations have to deal with new ways of using their performances. Some people say it is difficult to respond to such changes, but I am sure that new technology will solve such problems. The important
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task, even in this digital era, is to promote development of live performance and to preserve traditional and unique cultures in each part of the world. In standing for performers’ rights, GEIDANKYO recognizes the interests of users too. Mutual respect for differing roles in societies of intellectual property rights and harmonization of rights protection will contribute to the happiness of all citizens. But fair rules for the use of fixed performances are needed. The purpose of Japanese Copyright Law is to provide rights for authors, performers, and producers of phonograms and broadcasters, and to secure their protection, having regard to a just and fair exploitation of their cultural products, and thereby to contribute to the development of culture. Copyright law is obviously important to provide a legal framework for creating new works. Cultural products, such as music, film and drama, will be precious property for the new digital society. The lofty purpose of copyright is not diminished but instead growing ever more important in the twenty-first century.
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13. Creativity without a copyright: music production in Vienna in the late eighteenth century Peter Tschmuck The devil should take the music business! It is not my aim to profit from the arts, in order to become rich by composing. Good Lord, no! Nevertheless I love an independent life. (Ludwig van Beethoven)
13.1 INTRODUCTION The existing copyright system currently faces challenges brought about by recent developments in new media technologies, especially by the emergence of the Internet. These changes have affected all creative industries, though perhaps none more drastically than the music industry, which currently fights a bitter war with the proliferation of music piracy on the Internet.1 For instance, the industry’s recent lawsuit against Napster, an Internet service that allows anyone with a computer to download music for free, displays the industry’s desperate attempt to deal with technological inventions that appear to have outpaced the development of copyright laws. Likewise, the industry’s enforcement of its lobbying efforts to prepare an EC-Directive on the harmonization of certain aspects of copyright and related rights in the information society 2 further suggests how seriously the new media challenges the industry’s understanding of existing copyright law. These and other intensive efforts of the music industry tellingly indicate the dramatic changes affecting the music business - changes that have been accelerated by the emergence of the Internet. Campaigning against Internet music piracy, the industry’s majors have always recourse to the same type of arguments. In their opinion, copyright provides the necessary economic incentive for artistic creativity. According to their logic, the practice of internet-piracy negatively affects artists’ pecuniary 210
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interests. Therefore copyright protection should also be enforced on the Internet. In addition the economic justification for upholding and enforcing existing copyright law claims that the market for music compositions would presumably be undersupplied in the absence or ignorance of such laws. This, in turn, would deprive music composers of the incentive to produce music (see O’Hare, 1982), thus ultimately leading to a market failure and a welfare loss.3 However this argument does not account for the fact that an effective music copyright protection was enforced for the first time only at the beginning of the twentieth century.4 In light of the absence of any copyright protection of artistic production during some of the most productive and creative periods in music history, we must investigate the alleged necessity of copyright law for the possibility of artistic creativity to occur. Beginning this investigation, I will analyse the extremely creative classical era of Viennese music around 1800; an epoch without any effective copyright protection for compositions. Traditionally, music historians did not treat the question of intellectual property from an economic point of view. In an attempt to fill in this scholarly gap, this article will therefore examine the economic implications of the absence of an effective copyright in relation to artistic creativity. This chapter will show that the interests of composers and music publishers had conflicted precisely because composers had to fight for copyright protection against publishers’ strong resistance.
13.2 HISTORICAL OVERVIEW A copyright system for music was first developed by Renaissance composers in order to set themselves apart from merely reproducing musicians. During the Middle Ages, a period when artistic production was considered a communal rather than an individual process, most of the music was composed by authors who remained anonymous. Only with the burgeoning process of individualization and the growing self-confidence of artists since the Middle Ages did the composers begin to sign their works in order to prove their authenticity. Consequently, Renaissance composers tried to protect their intellectual property rights by ‘authoring’ their productions lest their authentic creations were confused with, or even accused of, plagiarism. Hence, in the seventeenth century it was common practice for a composer of a cited work to be named in the score in order to protect himself from being accused of having plagiarized someone else’s work. Expressing this crucial shift in music production, the composer and music theorist Johann Mattheson ([1740] 1910) tried to distinguish between plagiarism on the one hand and citation or parody on the other. At the end of the eighteenth century, the artistic claims to
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authenticity were so commonplace that even unauthorized citations led to claims of plagiarism, as in the case of the quarrel between Gluck and Piccinini, the protagonists of the Paris Opera War (Pohlmann, 1962, pp. 97-8). The conflicts between artists about copyright centred on the question of artistic authenticity, though economic interests increasingly entered the debate as well. In fact, the economic implications of copyright have gained in significance since the late fifteenth century when the invention of letterpress printing and the emergence of international trade enabled the commercialization of intellectual works. Thus, publishing treaties and royalty agreements can be traced back to the early sixteenth century. In most of the cases, the composer sold his works to a publisher. As the owner of the compositions, the publisher then produced the scores and sold them on his own account and risk. However, successful composers, such as the Munich Court composer Orlando di Lasso, tried to exploit their compositions by themselves.5 In essence, the existence of protection rights of intellectual property provided the basis for an effective commercialization of music. In the German Empire, for instance, only the Emperor could guarantee intellectual property rights. In the sixteenth and seventeenth century, more than a thousand imperial publishing rights were granted (Pohlmann, 1966, p. 1168). However, the imperial act protected authors from unauthorized reprints by confiscating the pirated editions and by penalizing the publisher. The imperial intellectual property rights’ protection was enforceable only in the German Empire, thus leaving German composers susceptible to illegal appropriations in other countries. Not surprisingly, German composers tried to find protection against piracy from other rulers, such as the kings of France, Sweden, Poland and so on (Pohlmann, 1966, pp. 183-6). After the Thirty Years War (1618-48), the systematic imperial protection against music piracy in Germany could no longer be enforced because of the decrease in imperial power. Furthermore, composers were strongly tied up in the Baroque Court. In the middle of the eighteenth century, composers were commonly forced by contract to compose exclusively for the prince and his court. Therefore a composer was not allowed to publish his works without the prince’s consent. This practice was usual in the Habsburg Empire, especially at the Imperial Viennese Court, until the late eighteenth century. As a result, a commercial music publishing industry could not be established in Vienna before the late 1770s.
13.3 MUSIC PUBLISHING IN VIENNA ABOUT 1800 ‘Before 1770, there was no publishing industry specialized in music printing. The music publishing was an unimportant branch of book publishing’
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(Weinmann, 1972, p. 15). In the years from 1700 until 1778, less than 60 music compositions were published in Vienna. However, the number of publications dramatically increased after 1778, when the Parisian engraver Antoine Huberty started to print music works in his company located in the Viennese Alserstrasse.6 In August 1778, the book-publishing company Artaria, which was founded in 1769 by Carlo and Francesco Artaria, also started to publish music compositions.7 Subsequently, a series of musicpublishing companies were founded by Christoph Torricella, Joseph Eder, Ignaz Sauer, Hieronymus Löschenkohl, Carlo and Pietro Mechetti, Tranquillo Mollo, Ignaz Pleyel, Siegmund Anton Steiner, Tobias Haslinger and Anton Diabelli (see Weinmann, 1956). Around 1820, the Viennese musicpublishing industry was so important that the companies published music not only by composers of the Habsburg Empire but from composers all over Europe. The music-publishing process included the acquisition of compositions, the production of the scores, the marketing of the publication as well as the storage and shipping of the pieces of music. However, the management of intellectual property rights, which is the most important task of a modern publishing house, did not yet play any significant role, because of the nonexistence of a codified legislation of copyright. On the one hand, this lack of a codified copyright system was disadvantageous for composers because each publisher could pirate their works. On the other hand, composers benefited from being able to sell one and the same composition to different publishers. Predictably, this led to serious conflicts between publishers and composers. Composers fought against the publisher’s unauthorized reprinting of their works by insisting on their copyright, whereas the publishers argued that music became a public good once it had been composed and entered the marketplace. Based on this argument, publishers believed that they could exploit the compositions without having to compensate the artists any further.8
13.4 THE CASE OF JOSEPH HAYDN The case of the publication of Joseph Haydn’s works illustrates these conflicting interests. In 1764, when Haydn served as a Vice-Chapel-Master at the Esterhazy Court, the Parisian publisher La Chevardière released ‘six symphonies ou quartuors dialogués de M. Haydn, maître de musique à Vienne’ (six string quartets Hob.III:1-6). In the same year, Vernier published Haydn’s symphony Hob.I:2 in Paris. Further, a series of Haydn’s symphonies, quartets and trios were released in rapid succession by Hummel in Amsterdam and Berlin, as well as by Bremner,
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Longman and Broderip and by Foster in London (Brosche, 1982, pp. 270-75). All these publications occurred without Haydn’s consent. In terms of musicology, these publications cannot be claimed as Haydn originals, because their publication lacked the composer’s authorization. Thus, in terms of their authenticity, they remain artistically problematic because the publishers substantially changed the original composition. Furthermore, the pirated publications negatively affected Haydn because he did not receive any money from his creative work. However, the publishers’ piracy positively affected Haydn’s status as a composer, since these pirated publications introduced him to a larger audience outside of Vienna. As the Vice-Chapel-Master of Prince Esterhazy, Haydn had no opportunity to publish his works without the Prince’s consent, as point four of Haydn’s employment contract clearly states: The said Vice-Capel-Meister shall be under permanent obligation to compose such pieces of music as his Serene Princely Highness may command, and neither to communicate such new compositions to anyone, nor to allow them to be copied, but to retain them wholly for the exclusive use of his Highness; nor shall he compose for any other person without the knowledge and gracious permission [of his Highness].9
Haydn’s employment contract was nothing special in an era of music production dominated by the practices of the aristocratic court. Court composers were obliged to write new works almost daily for their masters, who became the owners of the compositions (Pohlmann, 1962, pp. 124-30). Hence Haydn and most of his colleagues socially and economically depended on an income provided by the aristocratic court. Yet, precisely because the court was not necessarily interested in pursuing international promotion of their composers, it was crucial that works were pirated in other European countries for composers such as Haydn to become internationally renowned.10 Tellingly, Haydn started to fight against the piracy of his works only when he had become an established composer allowed by Prince Esterhazy to exploit his compositions. From that time on, Haydn systematically exploited his own work. He sold one and the same work to different publishers, which led to numerous disputes with them. For instance, the long-standing business relationship and friendship with his London publisher William Foster ended because Haydn sold three editions originally published by Foster to publishers in Vienna, Leipzig and Paris. The economic loss resulting from this dispute with Foster was negligible for the composer, because he immediately found other publishers in London who were willing to pay far more money for his works.
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13.5 THE CASE OF WOLFGANG AMADEUS MOZART At the end of the eighteenth century, it was considered common practice for a successful composer to sell his works to different publishers at the same time. For example, in 1778 Mozart sold his symphony in D major KV 297 to the Parisian publisher Sieber after he had sold the same work to Le Gros in Nancy during his concert tour in France. In a letter to his father Mozart wrote: ‘he [Le Gros] believes he exclusively owns it [the symphony KV 297], but that’s not true; I can remember it note by note; hence I will compose it once more as soon as I arrive home in Salzburg’.11 During his concert tour in France in 1778, Mozart behaved like a smart businessman. After a series of lengthy negotiations, Mozart sold six sonatas for violin and piano for 15 Louis d’Or to the publishing house Sieber in Paris. A few months earlier, he had tried to sell the sonatas in Mannheim, but the deal was rejected by Mozart because the Mannheim publishers had offered him only a 50 per cent share of the sales.12 In this respect, the Parisian publishers were much more generous and Mozart could therefore sell his variations for piano KV 179, KV 180 and KV 354, as well as the three sonatas for piano KV 309-311. Mozart’s example shows us that the more established a composer became, the more independently he could act. Leopold Mozart, Wolfgang’s father and agent, made use in advance of the scope of freedom he was conceded by Archbishop Schrattenbach for exploiting his son’s compositions. In 1764/65, Leopold published the early works (KV 6-15)13 of his then eleven-year-old son. In 1766, he sold Wolfgang’s works KV 23-3114 to publishers in the Netherlands, and in 1768 he successfully ensured that the works KV 5215 and 5316 were printed by Gräffen in Vienna. Furthermore, Leopold Mozart tried to establish a publishing house in Salzburg in order to print Wolfgang’s works without having to share the income with the publishers.17
13.6 PUBLIC CONCERT LIFE IN VIENNA ABOUT 1800 In the eighteenth century, the publishing of music was primarily used to make compositions known to a broader audience. The composer was only secondarily interested in trying to increase his income by publishing his works. In this respect, publishing was a kind of marketing instrument aimed at stirring music enthusiasts to visit public concerts. Therefore the public concert life that was established in Vienna at the same time as the music-publishing industry, was much more important for increasing composers’ income than the sale of their works. Public concert life in Vienna was established in the last third of the eighteenth century and
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emerged from the aristocratic lifestyle of the Ancien Regime. In the mideighteenth century it was common for an aristocratic household to employ a court orchestra. Even the smallest households employed a handful of musicians working as ordinary servants during the day and performing for their master and his guests in the evening. From 1750 until 1770, this kind of aristocratic music representation peaked. Orchestras with more than 24 musicians constituted the standard for a medium-sized court to meet all the requirements of the early classical music style. In the late 1770s, when an ordinary court orchestra had become a very costly matter, those aristocrats who enjoyed music organized salons for lunch and evening entertainment and engaged the best ensembles they could afford. During the 1780s, most of the court orchestras were dissolved; even the wealthy Prince Anton von Esterhazy dissolved his famous orchestra and dismissed his Chapel-Master Joseph Haydn, paying him a lifelong pension of about 1400 fl18 annually. That does not mean, however, that the concert life in Vienna came to an end. Instead, the concert life in the last decade of the eighteenth century was based in the salons of the haute bourgeoisie, who profited from the emerging process of industrialization and the rise of commercial banking. The aristocracy followed the trend of private and halfprivate music academies, and even Emperor Joseph II visited music performances in bourgeois soirées. The music entertainment in the Viennese salons at the end of the eighteenth century was accessible to anyone who could afford the admission fee. Indeed, the Yearbook of Music in Vienna and Prague 179619 names and describes 25 music salons in Vienna. In the long run, however, the music salons could not meet the requirements for the performance of new music forms like symphonies and instrumental concerts. In addition to the music salons, a public concert life was established in Vienna. A series of public concerts was founded in 1772 by the Tonkünstlersocietät during each Lent and Advent, when all stage plays were forbidden for religious reasons, thus forcing the city’s theatres20 to remain closed. The society’s main purpose was to establish a retirement fund on behalf of deceased members’ widows and orphans. The performing musicians and the composers donated their services; other expenses were sometimes paid by a noble patron. In the summer of 1781, a private concert entrepreneur named Philipp Jakob Martin organized the first public concert series at a Viennese dance hall called Mehlgrube. In the following summer, Martin moved his enterprise to the Augarten, a pleasure garden on the edge of the city. In a letter to his father, Mozart wrote about that event.21 On several Sundays during the summer of 1782, he reported, twelve concerts and four Notturnos (night music) were performed by dilettante orchestras22 for a subscription fee of 2 fl for all concerts.
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Mozart was one of first composers who dared to organize subscription concerts for his own profit. In 1784, he rented a room at the Trattnerhof, intending to give three concerts, for which he managed to assemble 174 subscribers (Morrow, 1989, p. 50). From these he earned about 1000 fl, which was more than twice what he had earned annually as a Court Organist in Salzburg (Braunbehrens, 1990, p. 150). During Lent the following year, Mozart gave a famous series of six concerts in the Mehlgrube, to which over 150 of Vienna’s aristocratic and bourgeois music-lovers subscribed (Morrow, 1989, p. 51). Such concerts can be considered virtuoso benefits. ‘Virtuoso benefits were set up independently by the individual performer, who made all the arrangements, assumed all the expenses, and received all the profits’ (Morrow, 1989, p. 50). That is why we can call Mozart one of the first music entrepreneurs. In the early days of such artistic entrepreneurship, the musician acted as virtuoso, playing among other things his own compositions, but later concerts were organized by composers to present their works to the public for the first time. After 1781, Mozart made his living as a freelance musician in Vienna, earning most of his income from public concerts like most of the successful composers working in Vienna around 1800 (see Baumol and Baumol, 1994). For instance, Ludwig van Beethoven not only boosted his career as a composer by organizing public concerts but also gained a high income from doing so. Likewise Haydn, after he had been dismissed by Prince Esterhazy in 1790, earned his living as a composer by participating in concerts. During his concert tour in England (1790-92), Haydn realized a net profit of about 15000 fl (Sandgruber, 1982, p. 79).
13.7 THE COMPOSERS’ FIGHT AGAINST PIRACY Because of the lack of an efficient royalty system, composers had to organize concerts by themselves if they wanted to profit from their creativity. However, after the emergence of a public concert life improved their economic position, they self-confidently started to claim copyright for their works. Primarily, they fought against piracy of their compositions by publishers, who, predictably, were not very enthusiastic about the demand for the implementation of an efficient copyright system, and who tried to establish market entrance barriers by controlling the distribution channels. Furthermore, publishers were not interested in long-term protection of compositions because music fashions were constantly changing in the late eighteenth and early nineteenth century (Hunter, 1986). These conflicting interests between successful composers (such as Ludwig van Beethoven, Johann Nepomuk Hummel, Carl Maria von Weber and Louis
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Spohr) and their publishers led to important consequences. For instance, the Austrian composer Hummel renounced friendship with his publisher Peters in Leipzig. In April 1825, Hummel and a few other famous composers (including Beethoven) submitted a petition to the Bundesversammlung of the German Empire in order to call for a ban of unauthorized publishing of their works.23 Hummel’s activities disgruntled Peters so much that he tried to bring about a publishing boycott by all German publishers against Hummel (Benyovszky, 1934, p. 135). However, Peters was unable to organize this boycott because Hummel’s market position was so strong that publishers did not want to stop exploiting his works. A few weeks before Beethoven died in 1827 he repeated the unsuccessful 1825 petition to the German Bundesversammlung. This time more prominent composers than in 1825 signed the petition. In 1829, the publishers met the claims of the petitioners and founded the Association of German Music Publishers24 The main task of the association was to establish a register for music works in order to control the publishing rights and to forestall pirated prints. In 1832 the Bundesversammlung codified the publishers’ resolution of 1829. From that time on, a legal basis existed for the prosecution of music piracy in Germany.25
13.8 CONCLUSION My discussion has shown that an effective copyright was enforced because of the composers’ increasing market power against the strong opposition of the music publishers. However, the composers’ main reason for demanding copyright protection cannot primarily be found in their economic interests, since their principal income came from public concerts. Instead, it was their moral right that drove them to protect the authenticity of their works. In other words the composers of the Classical Era fought primarily against unauthorized reprinting. They strongly believed in their moral right exclusively to decide about any alterations to their works. What does the history of copyright in the late eighteentth century suggest about the present copyright debates? Although the music life of 1800 was completely different from today’s, the historic perspective provides the crucial insight that creativity does not necessarily need copyright protection. From this perspective, it appears that at any given time there will be an oversupply of creative output, such output not primarily being dependent on economic motives, as mainstream economic theory assumes. The lack of copyright therefore does not lead to any undersupply of artistic output. The Classical Era was perhaps the most creative period of music innovation, although no effective copyright protection was in place.
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NOTES 1. To this end, the International Federation of Phonographic Industry (IFPI) runs a campaign with the title ‘Action for Legal Music on the Internet’. On its homepage www.ifpi.org, IFPI regularly reports about its fight against music piracy. 2. The first proposal of the EC-Commission for a Directive on the harmonization of certain aspects of copyright and related rights in the information society (COM 97, 628 final; December 10 1997) was explicitly based on the treaties that were adopted by the World Intellectual Property Organization (WIPO) on December 20 1996. Subsequently, the music industry intensified its lobbying by influencing the preparations of an amended proposal for a Copyright-Directive in May 1999, which will be the basis for a final Directive this year. 3. This is also argued in the 1995 Green Paper, ‘Copyright and Related Rights in the Information Society’, COM (95) 382, by the European Commission. 4. There existed no effective intellectual copyright protection before 1900. Copyright was only enforced on a regional basis, such as the ‘Statute of Queen Anne’ passed by the English Parliament in 1710 and the ‘Sociéte des Auteurs et Compositeurs Dramatique’, which was founded in France during the course of the French Revolution in 1791. In 1793, the intellectual property right (IPR) was for the first time legally established by the French revolutionary parliament (propriéte litteraire et artistique). In the early twentieth century, a copyright law was enforced in most industrial countries - for example, 1909 (US Copyright Act), 1911 (UK Copyright Act) - and most of the collecting societies were founded: 1909 (AMMRE in Germany), 1915 (NCB in Scandinavia), 1914 (PRS in the UK), and 1927 (Harry Fox Agency in the USA). 5. Orlando di Lasso was born around 1532 in the Netherlands but spent his life at courts in Germany and Italy until he died in 1594. 6. See Wiener Diarium, 11 April 1778. 7. In 1769, the Italian brothers Carlo and Francesco Artaria founded a book-publishing company in Vienna, which was named Artaria & Comp in 1771. In October 1777, the company was renamed in ‘Kunst-, Kupferstich-, Landkarten- und Musikalienhandel’. Artaria’s announcement in the Wiener Diarium (12 August 1778) that it would publish music of Viennese composers marks the starting point of one of the most important music publishers of the world. 8. The Austrian composer Johann Nepomuk Hummel (1778-1837) forcefully argued in a memorandum to the German Bundesversammlung against the publishers’ ‘public good’ argumentation: ‘Der von dergleichen lebenden Nachstechern schon bis zum Ekel aufgestellte Grundsatz, das ein bereits im Druck erschienenes Werk das Eigenthum eines Jeden sey’ verdient gar keine Berücksichtigung und ist höchst lächerlich’ (Benyovszky, 1934, p. 131). 9. Translated by Somfai (1989, p. 272). 10. The sonatas for pianoforte Hob.XVI:21-26 were Haydn’s first compositions published by Kurzböck with the composer’s consent. Since 1779, Artaria had been Haydn’s main publisher, releasing 159 authorized editions of Haydn’s works. 11. Mozart’s letter to his father from 3 October 1778 (Müller von Asow, 1942, Vol. 1, p. 544). Translation by the author. 12. See Mozart’s letter to his father from 28 February 1778 (Müller von Asow, 1942, vol 1, p. 423). 13. These are the two sonatas for piano and violin in C major and D major (KV 6 and 7) and the two sonatas for piano and violin B major (KV 8) and G major (KV 9), which were published as Mozart’s Opus 1 and 2 in Paris in 1764. Further, Leopold published the six sonatas for piano and violin (KV 10-15) as Opus 3 in London. 14. The variations for piano in G major (KV 24) and D major (KV 25) were published in The Hague in 1766. In 1766, the six sonatas for piano and violin (KV 26-31) were published in The Hague and Amsterdam. 15. The work KV 52 is an arrangement by Leopold Mozart entitled ‘Daphne, Deine Rosenwangen’ of the aria ‘Meiner Liebsten schöne Wangen’ from Wolfgang’s opera ‘Bastien and Bastienne’.
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16. This is the song with the title ‘An die Freude’. 17. The establishment of a publishing house in Salzburg was mentioned by Leopold Mozart in a letter to his son from 10 December 1778 (Müller von Asow, 1942, vol 1, p. 563). 18. The main currency in the Habsburg Empire was the gulden (fl = florin). A gulden (florin) was equivalent to 60 kreuzer (kr). 19. Translation for ‘Jahrbuch der Tonkunst in Wien und Prag’, pp. 259. 20. The Kärtnertortheater and the Burgtheater. 21. Mozart’s letter of 8 May 1782. See Bauer, Deutsch and Eibl (1962-75, p. 10). 22. Dilettante musicians were amateurs who enjoyed a professional music education. 23. Besides Hummel and Beethoven, the composers Mayseder, Czerny, Spohr, Ries, Moscheles, Kalkbrenner, Pixis, Klengel, Fisca and Carl Maria von Weber signed the petition. 24. In German: ‘Verband der deutschen Musikalienhändler’. 25. This preliminary copyright legislation was passed by the German Reichstag in 1870.
REFERENCES Bauer, Wilhelm A., Otto E. Deutsch and Joseph H. Eibl (eds) (1962-75), Mozart: Briefe und Aufzeichnungen (7 vols), Kassel: Bärenreiter. Baumol, William J. and Hilda Baumol (1994), ‘On the economics of musical composition in Mozart’s Vienna’, Journal of Cultural Economics, 18 (3), 171-98. Benyovszky, Karl (1934), J.N. Hummel: Der Mensch und Künstler. Bratislava: EOS-Verlag. Braunbehrens, Volkmar (1990), Mozart in Vienna, New York: Grove Weidenfeld. Brosche, Günter (1982), ‘Das musikalische Verlagswesen zur Zeit Joseph Haydns’, in Gerda Mraz (ed.), Joseph Haydn in seiner Zeit, Eisenstadt: Amt der burgenländischen Landesregierung, Abt. XII/1, pp. 270-75. Hunter, David (1986), Music Copyright in Britain to 1800, London: Music & Letters. Mattheson, Johann (1740), Grundlage einer Ehrenpforte, woran der Tüchtigsten Capellmeister, Componisten, Musikgelehrten, Tonkünstler etc. erscheinen sollen, reprinted 1910, Berlin: Schneider. Morrow, Mary Sue (1989), Concert-Life in Haydn’s Vienna: Aspects of a developing musical and social institution, Stuyvesant, NY: Pendragon Press. Müller von Asow, Erich H. (ed.) (1942), Briefe Wolfgang Amadeus Mozarts (3 vols), Berlin: Metzner. O’Hare, Michael (1982), ‘Copyright and protection of economic rights’, Journal of Cultural Economics, 6 (1), 33-48. Pohlmann, Hansjörg (1962), Die Frühgeschichte des musikalischen Urheberrechts (ca. 1400-1800), Kassel, Basel, London and New York: Bärenreiter. Pohlmann, Hansjörg (1966), ‘Urheberrecht’, in Friedrich Blume (ed.), Musik in Geschichte und Gegenwart, Kassel, Basel, London and New York: Bärenreiter, pp. 1162-71. Sandgruber, Roman (1982), ‘Wirtschaftsentwicklung, Einkommensverteilung und Alltagsleben zur Zeit Haydns’, in Gerda Mraz (ed.), Joseph Haydn in seiner Zeit, Eisenstadt: Amt der burgenländischen Landesregierung, Abt. XII/1, pp. 72-90. Somfai, Laszlo (1989), ‘Haydn at the Esterhazy Court’, in Neal Zaslaw (ed.), The Classical Era, London: Macmillan. Weinmann, Alexander (1956), Wiener Musikverleger und Musikalienhändler von Mozarts Zeit bis gegen 1860, University of Vienna: PhD dissertation. Weinmann, Alexander (1972), Der Alt-Wiener Musikverlag im Spiegel der Wiener Zeitung, Tutzingen: Schneider.
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14. Exploiting museum images Babette Aalberts and Annemarie Beunen 14.1 INTRODUCTION1 Images play a very important role as a communication tool in the present-day business world.2 Through images it is possible to convey information at a fast pace. Images are often collected and stored in databases. An image database is a collection of images sometimes combined with text or sound and such like in paper or electronic form. Image databases can be used for various purposes. Editors of newspapers or magazines often search for relevant photographs in archives, agencies are always on the lookout for photographs of beautiful fashion models, and producers go in search of television pictures in the archives of broadcasting corporations. As a result of new information technology, image databases can be stored in a digital form, both offline (for example, on a CD-ROM) or online on the Internet. This chapter addresses the role of museums in the new multimedia business world.3 Museums are aware of the possibilities of gathering and storing information electronically.4 Large museums are already promoting and selling CD-ROMs from their collections for educational and entertainment purposes. The digital developments have also tempted museums to present themselves on the Internet.5 Through the Internet, they can interest a worldwide public in images of their collection. Moreover, museums are also increasingly being approached by database producers, software companies and other firms, which invest large amounts of money obtaining the rights in the images of the museum. The opportunity of digital image exploitation was noticed at an early stage by commercial firms such as Corbis, Getty Images and Kodak.6 They approach museums and photograph archives, offering to digitize their images and put them up for sale on the Internet. For this purpose, they develop image databases with search engines, which enable potential buyers to search the museum images. Images of museum objects are in great demand. However, museums cannot exploit them at will, since the images or the objects they depict may be copyrighted. In that case, the museum needs permission from the maker of the object and of the photographer to reproduce and publish the image. 221
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Section 2 uses a case study to discuss the copyrightability of museum objects and photographs of these. In Section 3, we will consider the problems that museums may encounter if they do business with companies that want to sell their images on the Internet. The traditional analogue exploitation of images is the focus of Section 4. In Section 5, the rights and obligations of a museum are discussed in relation to the exploitation of the images. In this respect, competition law will also be dealt with. Section 6 considers the intellectual property rights that museums may enjoy on new products containing images of museum objects. Finally, Section 7 gives a conclusion.
14.2 COPYRIGHT IN IMAGES We will discuss the rightholders and rights that are at issue in relation to images of museum objects through the following example. Consider a museum that has a large collection of works of art and other objects. A software company shows interest in the museum collection and wants to obtain a licence to sell images from it on its website. 14.2.1 Objects from the Collection; Copyright of the Maker The decision to publish images of objects originating from museum collections on the Internet implies the reproduction and publication of these objects. These activities require the permission of the maker if the object is protected by copyright.7 The object is under copyright if its originality can be sufficiently proved and its maker has not died more than seventy years ago. Museums with collections of objects the creator of which has died more than seventy years ago usually do not need permission to publish the objects on the Internet.8 Most artists in the Netherlands are affiliated to the Stichting Beeldrecht, the Dutch copyright collecting society, which represents all sorts of artists; for example, painters, designers, architects and so on. This collecting society ensures that the affiliated artists or their heirs receive royalty payments for the use of their copyrighted work by third parties. The amount depends on the size of the reproduction of the work, the edition number and the aim of the publication. The foundation cashes all royalty payments and subsequently pays the artist whose work was published. The users of a work of art are obliged to include the name of the artist, the title of the work and the copyright sign (©) in every reproduction. The Stichting Beeldrecht has continuing contracts with bulk users of works of art, such as museums, newspapers and publishers. Via these contracts, the users pay a one-off allowance, rather than a fee every single time they publish a work of art.
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From the moment an artist joins the Stichting Beeldrecht, this collecting society is exclusively licensed to negotiate the terms of use of his or her work of art on his/her behalf. As long as the artist is affiliated to the foundation, s/he is not allowed to negotiate these terms independently.9 14.2.2 Photographing Museum Objects; Copyright of the Photographer Apart from the object itself, an image (for example, a photograph, transparency, or such like) of the object can also be eligible for copyright. An accumulation of rights could then occur. It is possible for the photographer who took pictures of the collection to make a claim for his or her own independent copyright on his/her photographs, irrespective of whether the object is itself protected by copyright. However, not every photograph is, by definition, protected by copyright; only photographs that are original in the sense of having an individual, original character and bearing the personal mark of the maker enjoy copyright protection.10 In this respect, the American case Bridgeman Art Library, Ltd v. Corel Corporation is of importance.11 The Judge decided that transparencies of paintings that aim to be perfect reproductions do not qualify as works that are entitled to copyright. These transparencies are not original, since they simply reproduce the paintings as precisely as technology permits. The Bridgeman judgment has recently been confirmed by the British case Antiquesportfolio.com plc v. Rodney Fitch & Co Ltd.12 It was decided here that photographs of two-dimensional objects (for example, a painting or drawing) will generally not qualify for copyright since they lack originality. This is different, however, with photographs of three-dimensional objects. These will be more likely to have an original character, as the photographer has to make several creative choices (such as angle of shot, lighting, focus and composition). Thus, photographs of three-dimensional objects can easily be considered original,13 whereas photographs of two-dimensional objects often go without copyright protection. In principle, the person who has performed the actual creative work in order to create an object is entitled to the copyright. Therefore, the photographer could, in general, claim copyright. However, the Dutch Copyright Act contains an exception for works made in the course of employment;14 for example, if a photographer is hired by a museum for the purpose of taking photographs of the collection, then the copyright belongs to the museum.15 However, this exception is supplementary law, so that the museum and the photographer may deviate from it in an agreement. If a photographer takes photographs while working as a freelancer, then s/he is the owner of the copyright on his/her photographs, since s/he did not enter into an employment contract with the museum.
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To conclude; when a photographer takes an original photograph of a copyrighted object, a ‘double copyright’ may exist; namely, copyright of the artist who made the object and copyright of the photographer who took the photograph of the object. 14.2.3 Digitization of the Images Images need to be digitized (or scanned) before they can be put on a CD-ROM or on the Internet. Digitization involves reproducing the original objects or photographs of them. The question may be posed as to who is entitled to the copyright in these scanned reproductions. Many companies that specialize in the scanning of objects claim copyright on these scanned images. As a precaution they place a copyright sign on them, but is this practice correct? Again, the main question is whether these scans show originality of their own. If they are merely copies of existing photographs, then the copyright claim of scanning firms does not hold. However, when the scans are made directly from the original museum objects, then the Bridgeman case applies. Thus, the copyrightability of the scans must be decided on the same grounds as the copyrightability of photographs. We therefore refer to the discussion in paragraph 14.2.2.
14.3 COMMERCIAL FIRMS EXPLOITING MUSEUM IMAGES ON THE INTERNET 14.3.1 Problems in Practice; a German Case An illustrative example, which shows how scanning firms work in practice, is provided by the negotiations that took place in 1993 and 1995 between the Deutsches Museum in Munich and Corbis.16 This firm, owned by Bill Gates,17 attempted to purchase exclusive digital rights with respect to the photograph collection of the Deutsches Museum. The negotiations between the museum and Corbis started in 1993 but were unsuccessful at first, as Corbis claimed far-reaching rights with respect to the images, while the financial advantages for the museum were too slight. Moreover, the museum did not agree with the affixation of a bar code on original photographs and the transport of the originals and negatives to an external scanning firm. The second round of negotiations took place in 1995 when the museum had become convinced of the commercial possibilities of digital image exploitation and wanted to have a digital image database developed. The negotiations between both parties were more successful than in 1993, as the Deutsches Museum managed to negotiate a 10-year-term (normally Corbis
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uses a 20-year-term) and free use of its own images for its activities and archive (normally, Corbis tries to stipulate exclusive licensing, so that it is exclusively entitled to supply the images). Eventually, however, the museum did not enter into an agreement, since it was not satisfied with the low compensation Corbis offered per ordered image. Furthermore, the museum did not support Corbis’ claim of copyright on the scanned images. This example shows that there are several drawbacks to doing business with commercial firms. They have their own contracts, which they try to force upon museums. In turn, the museums get little room for negotiating the conditions.18 In these contracts, the companies firstly try to stipulate exclusive licensing, meaning that they are exclusively entitled to supply the images,19 so that the museums are no longer allowed to do this. Furthermore, they try to secure this competence for a very long term (for example, Corbis stipulates 20 years) in exchange for a relatively low compensation for the museum. The firms want to be able to apply the images for their own use for free. They also claim copyright on the scanned images. Moreover, they often affix a digital watermark to every image, and limit the quality of the images by lowering their resolution. The judgments in the Bridgeman case and the Antiquesportfolio case have shown, however, that this claim is often invalid. Indeed, there is no copyright in digitized transparencies or photographs that reproduce, near-perfectly, old master paintings. The same will be true for scanned images of other two-dimensional works of art, such as drawings and etchings. Nevertheless, museums are in a weak position facing powerful and commercial firms such as Corbis, which have their own legal department.20 These companies try to profit as much as they can from their contracts with museums. On the other hand, they can offer some advantages to museums, as they pay for the digitization of the images and the production of the database, and actively promote the museum images on the Internet. 14.3.2 Alternative Ways of Exploiting Images on the Internet There are several alternative ways in which museums can market their images on the Internet without invoking the services of commercial firms. They could handle the exploitation themselves, but in most cases they do not possess the human resourses or expertise to do so. In that case, this can be undertaken by a non-profit organization such as a copyright collecting society.21 The advantages of placing museum images with a collecting society are twofold. First, if there is copyright on the image then the buyer can clear this with the collecting society together with ordering the image. Otherwise, he or she still has to go to the collecting society to pay the royalty after ordering the image from the museum. Second, a non-profit organization will not try to make a
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profit at the expense of the museums. A museum can still set its own prices for its images, as the collecting society is only acting as an intermediary. However, such societies may not all promote the images as actively as commercial firms do. Another possibility for museums is to establish their own organization for the digital exploitation of the images held in museums across their country (or even in the whole world).22 In this way, they are able to serve their own interests. An advantage for the buyer is that s/he can order the images of all Dutch museums from one organization, which charges fixed prices. This is called one-stop-shopping. For such an organization to be effective, it is necessary that all museums should join. However, uniting the museums would not be easy: for example, images of art museums are in great demand and some museums might very well prefer to settle orders themselves in order to make a larger profit. Consequently, art museums may not want to join a coordinating organization. Furthermore, research should be carried out to learn if there is sufficient demand for museum images before investing in the establishment of such an organization.
14.4 DIGITAL VERSUS ANALOGUE EXPLOITATION Analogue exploitation of museum images still takes place on a large scale. Indeed, museums still supply images of their objects in the form of photographs, transparencies, ectachromes, and so forth. Sales of these sorts of images have always been made by museums as they are able to supply such images themselves. Therefore, they have not before felt the need to farm out this service. This has only changed since the possibility of supplying images via the Internet presented itself, as this requires museums to have images scanned. The scanning stage is absent with the traditional analogue exploitation of museum images. Nevertheless, the same copyright problems occur. As with scanning, analogue exploitation involves reproducing museum objects, since these have to be photographed. Thus, the copyright of the maker of the object could be involved (see paragraph 14.2.1). If such an object is indeed original enough to enjoy copyright, then only the author/maker of the object is entitled to grant licences to reproduce his or her work, and not the museum. Furthermore, the copyrightability of the photographed object does not touch upon the possibility that these photographs are themselves protected by copyright (see paragraph 14.2.2). Suppose that they are, then it does not follow that the museum is the rightholder. This is only true if the photographer who took the photograph is employed by the museum; a freelance photographer keeps his/her own copyright.
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Museums charge a reproduction fee for photographs or other analogue images in exchange for the museum’s consent to publish them. This amount comes on top of the charge for the production costs of the photograph. Dutch museums call this fee ‘reproduction right’ or ‘use right’. These terms remind one of the royalties that are claimed on the basis of copyright. Thus, they are confusing terms, as the museum is usually not the owner of the copyright in the museum object or in the photograph of the same object. To avoid confusion, it would therefore be preferable to call this amount a ‘reproduction fee’ instead of ‘reproduction right’.
14.5 RIGHTS AND DUTIES OF MUSEUMS IN RELATION TO THEIR IMAGES 14.5.1 Museums as Owners or Custodians of their Collection The size of the publication fees that museums charge in exchange for their consent for the publication of their images varies widely throughout the world. This is due to the fact that every museum is able to fix its own price, since each is the sole supplier of images from its collection. This gives a museum a monopoly on its image material. This monopoly is in most cases not based on copyright (in conformity with the Bridgeman case) but on the fact that the museum has the ownership or custody of its collection. The control that a museum is able to exercise on this basis is restricted to the building in which the collection is housed. The museum can set its own conditions on access to its building. It can, for example, prohibit visitors from taking photographs of the objects, thus forcing them to buy postcards, transparencies, CD-ROMs and such like, or order images for further publication from the museum. However, once such an image is published (for example, in a book, or on the Internet) it may be used unrestrictedly by everyone, without infringing the rights of the museum as the owner or custodian of the collection. The best way to keep control of the reproduction of the objects and to make money out of their exploitation seems to be for a museum to issue a prohibition on photography by visitors. Furthermore, it should stipulate in a contract with the person who orders images that he or she may only use them for the specific form of use which is set in the contract. However, once the images have been published, a museum cannot prevent their further use by those other than the person who ordered them. This is because the contract only binds the person who ordered the images, while it does not apply to others. Thus, the control that a museum can exercise on the basis of ownership or custody is limited.23 This is very different from copyright, which gives the maker complete control over the use of his or her works, since his/her consent
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is needed for each time his/her copyrighted work is reproduced or published. However, the museum may take technical measures to protect its images from being copied or from distortions by digital watermarks. 14.5.2 Competition Law The consequence of a prohibition on photography in a museum is that people can only purchase images of its objects from the museum itself. In theory, a museum may ask any price for its images. In practice, however, the museum runs the risk of abusing its dominant position, as it is the sole supplier of goodquality images of its objects. If museums ask very high prices for these images, they may infringe competition law. The European Union has issued strict rules of competition law as a consequence of its common market policy. These European competition rules have to be observed in all Member States. In the Netherlands, the observance of competition law is supervised by the Nederlandse Mededingingsautoriteit (NMa). Anybody can lodge a complaint here against others who allegedly abuse their dominant position. It follows from jurisprudence of the European Court of Justice that companies or other institutions that have a dominant position, being the sole source of material in demand, have to put their material at the disposal of others on fair and non-discriminatory terms.24 This means for museums that they may not set too high prices for their images. Nevertheless, museums are allowed to differentiate their pricing according to the parties that order their images; for example, it is fair to charge a publisher who wants to produce an encyclopaedia of art on a CD-ROM a higher price than an art historian who wants to publish the image in a scholarly journal. Two more arguments apart from competition law can be put forward against high prices for museum images. The first is that the constitutions of museums often include the goal of making their collection widely known to the public. This goal is also laid down in self-regulation issued by the International Council of Museums (ICOM).25 Charging high prices for museum images would go against this goal. Second, one could object to museums asking high prices for images of objects which have been purchased with public money.
14.6 MUSEUMS AS RIGHTHOLDERS As we stated above, the control which a museum can exercise over the re-use of its images on the basis of its ownership or custody of the collection is limited. If these images are not in copyright, everybody may use them freely.
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However, museums can enjoy strong intellectual property rights on new products in which they incorporate images of their objects. These products get protection, regardless of whether the included images are in copyright. Examples are exhibition catalogues, CD-ROMs, art encyclopaedias, websites, photography collections, and so on. These products are all called databases according to the European Database Directive from 1996.26 Whether they are in paper or digital form is irrelevant for the legal definition of a database. According to the Directive, a database is ‘a collection of independent works, data or other materials arranged in a systematic or methodical way and individually accessible by electronic or other means’.27 Copyright in separate images is not affected by the protection for the database as a whole. The Database Directive grants two sorts of rights to two different parties. Firstly, the maker of the database enjoys copyright on the condition that he or she has arranged the contents of the database in an original way. Chronological or alphabetical orders generally do not qualify as original. The maker of the database is the person who has collected and arranged the contents. If he or she made the database as an employee, then his/her employer enjoys copyright. Secondly, the producer of the database can get protection by the so-called sui generis right or database right. This is a new right, which is granted to the producer on the condition that s/he substantially invested in the production of the database. This requirement of a substantial investment will easily be met; for example, financing the scanning of images will meet this requirement. The database right protects the producer against others who re-use the whole database or a substantial part of it. Museums will enjoy both copyright and the database right if they produce databases in-house; for example, an exhibition catalogue written by the keepers and printed by the museum’s own publishing service. However, it is more customary for museums to farm out the production of databases such as catalogues, websites or CD-ROMs. In that case, who is entitled to the rights granted by the Database Directive? The role that a museum plays in the production of the database is important in answering this question. A museum holds the copyright on the database if the original selection or arrangement of the contents is made by one of its employees. However, if an employee of the commissionee furnishes this selection or arrangement - even though the whole contents of the database (for example, a CD-ROM) may be supplied by the museum - the copyright is vested in the commissionee. In this way, the commissionee can enjoy copyright on databases such as CD-ROMs or online databases containing museum images that are exploited on the Internet; for example, a commissionee like Corbis.
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The situation is less clear with the database right. This right is granted to the producer that has substantially invested in the obtaining, verification or presentation of the contents of the database. If this content is completely furnished by the museum (which will be true in most cases), then it is justified to state that the museum is entitled to the database right. However, the commissionee (for example, a CD-ROM or catalogue publisher) must also make substantial investments to produce the database, which means that in many cases the museum and the commissionee are the joint owners of the database right on their database (for example, a CD-ROM containing images of a museum’s prize exhibits or an exhibition catalogue). However, a database cannot be efficiently exploited when the copyright and the database right rest with different owners. It would therefore be wise to transfer both rights to one party by contract. Progressive museums try to be that sole party. It is important to note that only European producers or producers that have their registered office, central administration or principal place of business in Europe can profit from the database right.28 Thus, American database producers are only entitled to the database right through their subsidiary companies in Europe. For example, Corbis has offices in London and Paris. Bridgeman, the plaintiff in the American case Bridgeman Art Library, Ltd v. Corel Corporation referred to in paragraph 14.2.2, is based in the United Kingdom. Therefore, the company could have invoked the protection by the database right,29 but it omitted to do so. If Bridgeman had indeed invoked its database right, it would have had a chance of success. Corel had allegedly re-used 120 images from Bridgeman’s image database. If Bridgeman had succeeded in proving that this amount represented a substantial part of its collection, it would have won the case. Whether the Bridgeman images were separately protected by copyright is irrelevant for protection by the database right.
14.7 CONCLUSION Digital technology offers museums new possibilities for the exploitation of images of objects in their collection. However, they must be aware of the traps that are set by copyright law and commercial opportunity seekers such as Corbis. In many cases, museums do not own the copyright in the images of the objects they display.30 Nevertheless, being the owner or custodian of its collection, every museum holds a monopoly on its images. Furthermore, museums can acquire intellectual property rights on new products that consist of these images. However, competition law and self-regulation forbid museums to assume too commercial an attitude in their price-setting when marketing their image collections.
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NOTES 1. This chapter was presented as a paper on 12 September 2000 at the conference ‘Copyright and the Cultural Industries’ organized by the Erasmus University in Rotterdam, the Netherlands. 2. Beunen, A. (1997), Digitale manipulatie van beeldmateriaal: grenzen aan de grenzeloosheid, Samsom, Alphen aan den Rijn/Diegem (ITeR-series nr. 6), p. 3 3. This chapter is partly based on Beunen, A. and M. de Cock Buning (2000), ‘Auteursrecht en musea’, in Annemarie Beunen (ed.), Museumrechtwijzer, Amsterdam: Boekmanstudies. 4. The Dutch State Secretary of Culture, Rick van der Ploeg, has made digital access to museum collections one of the major spearheads of cultural policy in the next four years (2001 until 2004). In his memorandum Cultuur als Confrontatie, he propagates the idea that museums act as cultural entrepreneurs, among other ways by exploiting their collections through the new media. See page 59 of this memorandum, which is available on the Internet at www.minocw.nl/cultuurbeleid/cultuurnota. 5. See, for example, the website of the Rijksmuseum in Amsterdam at www.rijksmuseum.nl. 6. See on the Internet, www.corbisimages.com, www.gettyimages.com and www.kodak.com. 7. See Art. 1 jo. Art. 12 jo. Art. 13 of the Dutch Copyright Act 1912. 8. However, see on the editio princeps right Beunen, A. and M. de Cock Buning (2000), ‘Auteursrecht en musea’, in Annemarie Beunen (ed.), Museumrechtwijzer, Amsterdam: Boekmanstudies, pp. 292-4. 9. See ibid. p. 287. 10. Gendreau, Y., A. Nordemann and R. Oesch (1999), Copyright and Photographs. An International Survey, London/The Hague: Kluwer Law International (Information law series nr. 7), p. 207. In Europe, a harmonized criterion applies for photographs. Photographs have to be original in the sense that they are the author’s own intellectual creation, according to Article 6 of the Council Directive 93/98/EEC of 29 October 1993, harmonizing the term of protection of copyright and certain related rights, Official Journal of the European Communities, 1993, L 290/9. 11. Bridgeman Art Library, Ltd v. Corel Corporation, 25 Federal Supplement 2d 421 (S.D.N.Y. 1998) and 36 Federal Supplement 2d 191 (S.D.N.Y. 1999). See also Hoffman, Barbara (ed.) (1999), Exploiting Images and Image Collections in the New Media: Gold Mine or Legal Minefield?, London: Kluwer Law International, pp. 40-42, 67. 12. High Court of Justice Case No. HC-00-0028, Chancery Division 10 July 2000. 13. See Gendreau, Y., A. Nordemann and R. Oesch (1999), op. cit., p. 206. 14. Article 7 of the Dutch Copyright Act. 15. See Gendreau, Y., A. Nordemann, and R. Oesch (1999), op. cit. p. 206. 16. See Füßl, W. (1999), ‘Bildverwertung im Internet. Erfahrungen mit einem kommerziellen Bildverwerter’, Kunstrecht und Urheberrecht, 9, 257-60. 17. See www.corbisimages.com. 18. See Füßl, W. (1999), ‘Bildverwertung im Internet. Erfahrungen mit einem kommerziellen Bildverwerter’, Kunstrecht und Urheberrecht, 9, 257-60. 19. If the images are protected by copyright and the museum is the rightholder, then the firms also need to acquire the right of (exclusive) sub-licensing from the museum in order to be entitled to license the copyrighted images to others. 20. Its lawyers actively pursue alleged illegal users. 21. This service is offered by the Dutch copyright collecting society Stichting Beeldrecht, mentioned in section 2.1. The Gemeentemuseum in The Hague is, as yet, the only museum to have employed it. The Stichting Beeldrecht only acts as an administrative go-between and the images of the Gemeentemuseum are not (yet) offered on the Internet. 22. See the report ‘Administering Museum Intellectual Property’ on the website of the Canadian Heritage Information Network (CHIN) www.chin.gc.ca. 23. Although the technique is able to provide solutions against undesirable re-use of digital images by means of digital watermarks, low resolution, pay-per-use systems, and so on.
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24. For example, European Court of Justice, 6 April 1995, Common Market Law Reports (1995), 4: 718 (RTE, ITP v. Magill TV Guide Ltd). 25. Compare the definition of a museum in the Code of Professional Ethics of the ICOM. This Code is accepted by museums all over the world. Article 1.2 reads: ‘A museum is defined as a non-profit making, permanent institution in the service of society and of its development, and open to the public which acquires, conserves, researches, communicates and exhibits, for purposes of study, education and enjoyment, material evidence of people and their environment.’ See, on the Internet, www.icom.org/ethics.html/. 26. Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the legal protection of databases, Official Journal of the European Communities, 1999, L 77/20. 27. Article 1 paragraph 2 of the Database Directive. 28. Article 11 of the Database Directive. 29. The American judge applied British copyright law. 30. Unless the images are original and the photographer is an employee of the museum.
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15. Copyright in the digital age: opportunities and drawbacks for scientific research Emanuela Reale 15.1 COPYRIGHT AND SCIENTIFIC RESEARCH The national science system - that is, the set of all the institutions, organizations and laboratories that perform research activity - is an essential component of the so-called ‘culture industry’, and contributes, like other economic activities, to the creation of the nation’s wealth. Public institutions - universities and public research institutes in particular - are also characterized by the fact that, on account of their institutional nature, the results and innovations they produce are normally disseminated to the public freely. This means that the pursuit of profit through the economic use of results is not one of the fundamental objectives of such institutions.1 This approach, in which differences in conduct between public and private research depend on the national identity of their players, is countered by that of national innovation systems, which focus attention not on the single player but on collective players, considering the greater or lesser propensity to appropriate results as the distinctive element of the different networks. Following the pattern of national innovation systems, therefore, the stress is laid not on whether subjects belong to the public or private sphere, but on the degree to which they are prepared to circulate knowledge (for which specific science policy provisions ought to be made).2 Empirical evidence on the Italian science system does not allow us at the moment to establish the prevalence of one approach on the other.3 Whatever the approach adopted for the study of scientific systems, there is wide agreement that, over the last decade, the dissemination of research results has been greatly jeopardized by cuts in financial resources, which have forced some organizations to try to obtain at least partial coverage of costs sustained for research through the exploitation of intellectual property rights, thus limiting the free circulation of the results produced. Incidentally, the economic benefits that result from this activity happen to be extremely limited; 233
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compared to the total amount of resources deployed to undertake a project, the share covered by returns in terms of exploitation of intellectual property is still very low. However, in view of the possibilities offered by new information and communication technologies (ICTs), interest is growing for the free sharing of scientific information - especially information organized in electronic format and disseminated on the Internet - at the lowest possible cost. As a result, research establishments and individual researchers are trying out new methods for the publication and dissemination of scientific results to allow authors to maintain the distribution of their own work. Notwithstanding the trends described at system level, however, the circulation of the products of research, the possibility of making them known and subjecting them to criticism, while still maintaining security vis-à-vis the attribution of their authorship, continues to be the essential, predominant aspect of the scientific profession.4 In the case of research, copyright thus has to address a sector of activity which requires rules that differ somewhat from the general framework. To respond to this and other special cases, the legislator has to resort to special norms, which are configured as exceptions to general legislation and which permit forms of conduct different from those generally expected of all the players concerned.5 The difference between the limitations of the law and exceptions lies in the fact that the former mark the boundaries of effectiveness of a norm and qualify its content, whereas the latter identify legal paradigms in which the author’s right of economic exploitation is restricted to favour certain given activities. This distinction, which is not always easy to determine, becomes important when it is necessary to establish whether a certain legal framework can be sidestepped through private bargaining. The answer is undoubtedly negative in the case of limitations, the elements on which the very notion of law is founded. However, not all authors are prepared to exclude the possibility that agreement between the parties may envisage rules other than exceptions/limitations, unless that is, they are explicitly declared compulsory, in which case, if they form part of an agreement, they are considered non-deliberate.6 Exceptions and limitations are, arguably, the set of norms most in need of international and European harmonization. Making special provisions in the legal system for the protection of works, in fact, needs to be controlled to prevent the creation of situations of excessive favour to some nations as opposed to others, thereby altering the functioning of the market. The protection offered by copyright is justified by the need to ensure the exploitation of the rights of the authors of original works; without this guarantee, cultural industries would lose incentives, since it would not be possible to offer authors adequate remuneration for their creative efforts,
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thus producing economic damage. Determining whether the exception is effectively a cause of economic damage, and what the magnitude of that damage actually is, is a problem for economic analysis (though the outcomes are not always univocal).7 The Berne Convention envisages the possibility for Member States to introduce exceptions to the exclusive right of reproduction granted to the authors on the basis of three conditions (Art. 9, para. 2): (a) the forms of conduct authorized must not clash with the normal exploitation of the work; (b) use must not prejudice the author’s interest unreasonably; and (c) in any case, use must be proportional to the aim for which the limitation is permitted and, if possible, the author of the work or the source of the information used must be indicated. Article 10 of the WIPO Treaty on Copyright, signed in Geneva in December 1996,8 also contains a general norm allowing Member States to introduce exceptions only in certain special cases which, in compliance with the Convention itself, do not clash with the normal exploitation of the work and do not unreasonably jeopardize the author’s interests. The article cited reiterates that exemptions to copyright cannot negate the author’s right to maintain control over the uses of his or her work. The extension of this norm to digital products, and likewise the extension to the digital environment of Art. 9, para. 2, are indicated in a separate agreement, which not all the Member Countries that signed the Berne Convention have adopted.9 In this sense, the application of the rules referring to digital products is still to some extent uncertain, even though the need to maintain a balance between the rights of authors and the interests of the general public - especially as far as education, research and access to information are concerned - constitutes a principle which is recognized by the Treaty. An analogous system is used by the European Union. In some directives, such as those on software and data banks, it establishes absolute exceptions which, albeit part of an agreement, produce no effect. More generally speaking, it envisages limitations, invariably optional for states, which may acknowledge legislation to govern certain special cases. Exceptions and limitations intervene on the recognized exclusive rights of the author or copyrightholder, replacing the power to authorize given uses with the right to a fair remuneration. The European Union has yet to perfect a system of rules valid for digital products, but the directive proposal formulated by the European Commission ‘on certain aspects of copyright and related rights in the Information Society’ is destined to fill this gap, establishing fixing common norms for the entire European Union. Some points in the proposal were recently amended and the package is being reviewed once more by the Commission. The aim of this chapter is to analyse the changes to the exceptions and
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limitations contained in the Commission’s amended proposal (paragraph 2) and compare these norms with the changes to the free uses introduced to Italian law by recent provision (n. 248, paragraph 3) of 19 September 2000, with special regard to the consequences for scientific research performed in the public ambit. It also examines trends in methods of working, publishing and disseminating the results that are emerging in the scientific community (paragraph 4). The conclusions stress the idea that the regulation of copyright in the Information Society may create more opportunities than drawbacks for scientific research if the legislation of the European Union and national legislations introduce a general principle in favour of this activity backed by given conditions.
15.2 THE AMENDMENTS INTRODUCED IN THE EUROPEAN DIRECTIVE PROPOSAL FOR THE HARMONIZATION OF ASPECTS OF COPYRIGHT AND RELATED RIGHTS The European Union has always considered the building of a supranational normative system of copyright as one of the most important factors for the proper functioning of the common market. Many of the numerous initiatives undertaken in the last decade have been geared to discussion of the problems that emerge as a result of technological innovations in the field of information. The most recent was the European Union Directive Proposal for the harmonization of some aspects of copyright and related rights, adopted by the Commission in December 1997 and designed to build regulation of the new products and new forms of exploitation of original products made possible by ICTs. Following the procedure established by Art. 251 of the Treaty of the Union, many parts of the proposal were altered by the European Parliament, and the Commission thus amended its original proposal and submitted a new version in May 1999. On 20 October 2000, the Commission outlined its position on the Directive, taking into account the position expressed by the Council of the European Union in September.10 The present draft of the provision may thus be regarded as consolidated. The chapter considers positive reactions and criticisms of the regulatory framework designed within this provision as a general analysis of the kinds of legislative choices, regardless of whether that draft version will be adopted. The amended text contains a series of noteworthy new features which consolidate some of the trends that had already emerged and perfect new ones. More specifically, it is necessary to point out that the norms on exceptions (Art. 5) and on technological provisions for the protection of works (Art. 6)
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were the cause of sharp conflict in so far as they are unanimously regarded as crucial for determining the scope and effective protection of rights. The economic literature highlights how exceptions and limitations are justified by the need to compensate some users for the high costs demanded by rightholders. They are thus influenced by the possibility that the good requested may be replaced by other similar ones; that is, by the relative cost of the original and of photocopies or, above all, by transaction costs with respect to the value of the copy for the user. If the value is low, use may be subject to exception.11 In this respect, ICTs modify cost ratios and make transactions quicker and cheaper, consequently reducing permitted uses and broadening individual bargaining. According to some authors, the exceptions might even become pointless in all cases in which new technologies allow the legitimate use of works and direct transactions with users to be controlled.12 The modifications connected with the general principles and the system of exceptions and limitations to rights of reproduction, distribution and communication to the public may be summarized as follows: 1. The content of the compulsory exception with regard to temporary reproductions that form an integral part of a technological process is specified through the indication that: (a) copies have to be incidental and temporary and result from acts that form an essential part of the process itself; (b) the sole aim of reproductions must be to render possible a networked transmission between third parties through an intermediary or else to exercise a permitted use; and (c) the copies must not be of economic value per se (Art. 5, para. 1). The text of the Directive specifies that the permitted use comprises the viewing of a product on a computer screen (so-called cache copies), including those which enable transmission systems to work effectively, and, finally, all uses authorized by rightholders or not forbidden by the law. 2. The principle is asserted whereby, if introduced, some exceptions must be accompanied by the provision to the copyrightholder of a fair payment: this is, the case of exceptions for the reproduction on paper, by hand or using any photographic technique, for private copying made using any instrument, without distinction between analogue and digital copying. In other cases, such as reproduction or communication to the public for educational and scientific research activities (Art. 5, paras 2 and 3), this payment is not explicitly envisaged.13 The Directive also specifies the criteria that must govern the determination of the payment,14 establishing that it may be introduced by states in all cases of optional exceptions, even where not expressly required by European legislation (see Arts 35 and 36). The nature of the payment remains uncertain when it is configurable
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as an indemnity for the economic loss undergone by the holder of the exclusive rights. 3. Exceptions may be envisaged for acts of reproduction made by libraries accessible to the public, teaching institutes, museums or archives in relation to their specific cultural function and not only, as initially envisaged, for archive and conservation purposes (Art. 5, para. 2). 4. Exceptions are also introduced to the right of reproduction and communication to the public, with or without the right to fair remuneration, for many uses, including: use by the disabled; those connected with public safety or parliamentary, administrative and legal procedures; uses connected with the reporting of public events and citation for critical and review purposes, indicating, where possible, the source of information and the author of the work; and within the limitations required by the purpose of illustration or criticism to be pursued (Art. 5, para. 3). 5. Exceptions are permitted for ephemeral fixations performed by telecommunications organizations using their equipment and for their telecommunications, as well as for reproductions of transmissions made by social institutions without commercial purposes, such as hospitals or prisons, upon fair payment. Finally, it is worth recalling the assertion that, if states envisage an exception to the right of reproduction for one of the reasons permitted, they must at the same time envisage a corresponding exception to the right of distribution within the limitations established by the act of authorized reproduction (Art. 5, para. 4). Also substantially amended is Article 6 on the obligations connected with the introduction of technological provisions and sanctions against all the activities the purpose of which may be traced in some way to the avoidance of systems of protection of works. The application or otherwise of technological provisions is an element that impinges upon the determination of fair payment. The problem of this article concerns the possibility, as yet unrecognized, of envisaging that some categories of players may be authorized by opportune exceptions to enjoy works freely in view of their specific public-interest purposes. The most recent text of the Directive considers all limitations as exhaustive (Member States are not supposed to introduce exceptions and limitations in cases other than those explicitly envisaged in the Directive), but optional (Member States may or may not acknowledge these exceptions and limitations in their national legislations). The exceptions permitted are also limited by respect for the so-called ‘three-step-test’, introduced in the Berne Convention and explicitly referred to in the European Directive, on the basis of which the exceptions must be applied only to certain special cases, and must not be
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interpreted in such a way as to allow uses that are unreasonably detrimental to the holder of the exclusive rights or that clash with the normal exploitation of the work. In this sense, the Directive follows a traditional pattern, leaving the various countries free to adopt or otherwise the limitations or exceptions that best suit their own national traditions or prevailing public interests, while avoiding establishing differences on the basis of the different importance of the interests that are being protected. An attempt to grade limitations cannot be found in the provision (or otherwise) for fair payment, since, in all cases, the payment may be introduced by the Member States. The exception for incidental copies to protect the public interest in promoting the proper functioning of information and communication systems - in which technologies cannot operate without producing such copies - is instead considered compulsory. The main purpose of the Directive is to balance the opposed interests of the rightholders and users of works; in economic terms, this means establishing a point of equilibrium between an optimal use of resources through market mechanisms and the social needs that cannot be met through the spontaneous functioning of the market itself. The main criticism that can be levelled at the Community text is that the solution adopted fails to allow for the level of harmonization necessary to regulate the question in the digital environment. The possibilities offered by information and communication technologies allow for the diffusion, manipulation and reproduction of totally new works and prompt the need to confine the ambit of limitations to very well-defined, explicitly determined cases. This need ought to have been accompanied by a classification of the exceptions permitted on the basis of their social importance and economic value. Exceptions, in fact, do not always entail a loss of earnings. In the case of scientific research, for example, the reputation which derives for scientists from the diffusion of their work and the possibility of career advancement constitute economic advantages much greater than those resulting from the sale of a high number of originals.15 On the contrary, the Directive allows for a very large number of exceptions, all optional and all susceptible to being accompanied by the provision for reduced payment, as well as any quantitative limitations. The acknowledgement of the obligatory nature of some expressly established limitations connected to the protection of rights of freedom might, instead, constitute a body of legislation for minimum protection to be guaranteed, in any case, for such uses in all the countries of the Union, thus fostering more harmonized legislation at European level. Aims connected with scientific research could fit into the category of rights that require compulsory exceptions. A second motive for criticism is the fact that the Directive proposal leaves
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intact and fails to impinge upon provisions regarding the protection of software, databanks, the right to hire and lend and the duration of protection. Since all these norms exist side by side in different texts, it is hard to understand what type of conduct is permitted for all those who are not experts in legal problems connected with the protection of copyright.
15.3 CHANGES AND TRENDS IN ITALIAN COPYRIGHT LEGISLATION In Italy, the law on copyright (Law No. 631 of 1941) has been in force now for many years. Substantially speaking, it has always maintained its fundamental structure and inspiring principles, though many notable changes were introduced in the 1990s, especially on account of the acknowledgement of European Directives.16 For reasons of lack of space, it is impossible here to list all the changes that have been made. I shall therefore focus attention on the transformations undergone by exceptions to copyright. If we examine the system of exceptions and limitations that exist in Italian legislation, it is possible to identify different types of norms. A first group identifies legal paradigms that do not fit into the author’s right of economic exploitation. This is the case of Art. 15, para. 2 of Law 633/1941, which specifies the content of the exclusive right to perform, represent or recite in public, excluding activities within the ordinary circle of the family, school or hospital, provided they are not carried out for motives of profit. Another example is Article 17, para. 2, whereby the gratuitous delivery made or allowed by the holder of examples of works for promotional or for teaching or scientific research purposes does not constitute an exercise of the right of distribution. The forms of conduct cited do indeed specify more clearly the content of the author’s patrimonial right and are thus more akin to limitations of the right itself than exceptions to the right. A second group of articles identifies activities that constitute the exercise of the author’s right of economic exploitation, but that are exceptionally, on account of their social importance, subject to reduced payment. This is the case of Article 15 bis for performances, representations or recitals of works performed in social centres or institutions and voluntary associations at certain special conditions and without a profit motive. Other examples may be found in Article 91, for the reproduction of photographs in anthologies for use in schools and, more generally, in scientific and educational works, and in Article 70, para. 2, for the reproduction of excerpts from or parts of works in the anthologies themselves: both these activities, nonetheless, entitle the holder of the copyright to fair payment.17 Another group of norms is constituted by Arts 64ter, 64quater, 64sexies and
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102ter, para. 3, which identify for computer programs and databanks a series of activities not subject to authorization by the rightholders and, in part, unavoidable by contractual provisions, in so far as, under certain conditions, they give rise to normal use for this type of product. These norms thus achieve different aims: in part, they serve to specify the content of the right of the buyer/user of the product (Arts 64ter and 64quater; Art. 64sexies, paras 2 and 3; Art. 102ter); in part, they identify exceptions to rights for the economic exploitation of the work (Art. 64sexies, para. 1, letts a and b). The last group of norms is the one contained in Paragraph One, Item Five of Law No. 633/1941 entitled ‘Free uses’, in part modified by the recent Law No. 248 of 2000. The exceptions referred to allow for uses to differentiated user typologies, but, at the same time, oblige the rightholder to put up with the conduct of others. Examples of this type of norm are: 1. Article 65, which envisages an exception for news articles published in daily newspapers or magazines: they may be reproduced in other daily newspapers and magazines, unless publication is explicitly reserved. It is, in any case, compulsory to cite the author and the source. Since the purpose of the norm is to facilitate the circulation of information, it fails to cover reproduction for documentation or publicity purposes. 2. Other exceptions tied to the protection of public interests, such as the right to reproduce speeches on subjects of a political or administrative nature and the reproduction of works or excerpts for legal, administrative purposes in magazines and newspapers are envisaged by Articles 66 and 67. 3. Article 68 on the private and personal reproduction of printed material and the free reproduction of works owned by libraries through photocopies.18 4. Article 69, which establishes exceptions to the right to lend works possessed by public libraries for printed exemplars, phonograms and videos - in this case, only after some months from the first act of the exercising of the right of distribution. 5. Article 70, which regulates the free exploitation of summaries, citations, reproductions of excerpts or parts of works for purposes of criticism, discussion and teaching, provided they are accompanied by mention of the title of the work and the names of the author, publisher and translator. All the uses described must also be in proportion to the public purposes for which they are permitted, and thus may not in any case lead to competition with the exercise of the author’s rights of economic exploitation of the work. The provisions cited have been established for analogue products. This means that they cannot be applied to digital products (CDs, CD-ROMs, floppy disks, DVDs and so on) and cannot be interpreted in such a way as to include
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under this protection activities or subjects other than those established by law. In other words, these norms are to be considered exceptional and their interpretation by analogy is not permitted.19 At the moment, the protection of digital products thus derives solely from the provisions contained in cited Articles 9 of the Berne Convention and Article 10 of the WIPO Treaty on Copyright, since Italy is one of the countries that signed the separate agreement. The free exploitation system had no practical intent. It was established to acknowledge a broad space of freedom to some activities of public interest, in the sense that the exercising thereof obliged the holders of the economic rights to support the activity protected. From a science policy perspective, this set of norms has created quite a good environment for scientific research, since there were considerable possibilities for scholars to use and to reproduce scientific papers both from book and from journals using public libraries and university libraries. A few restrictions were introduced in contracts between libraries and publishers, expecially for the electronic versions of journals or for other materials in non-printed form. In these cases, in fact, the existing exceptions did not apply, for analogizing exceptions is not allowed. Nevertheless, the established restrictions did not affect too much the users’ behaviours: the copyright regulatory system as a whole guaranteed many possibilities for the circulation of research products. The new Law No. 248 of 19 September 2000 radically innovates the most important of the free forms of exploitation and, more specifically, Article 68 on the right of reproduction, adds two new paragraphs, the fourth and the fifth, which establish that the reproduction by photocopy, xerocopy or any analogous system of printed works is granted only in some cases (copies may be made exclusively for personal use or for all uses in the event in which the copies themselves are taken from exemplars owned by public libraries), is subject to limits of quantity (no more than 15 per cent of a volume or of an issue of a periodical, advertising pages excluded, may be reproduced), and subject also to the payment of a certain sum of money. For works owned by public libraries, this payment consists of a lump sum and is determined, in compliance with new Article 181ter, on the basis of agreements between SIAE (the Italian association of authors and publishers) and the business associations concerned, or else, if no such agreements are stipulated, by a Decree of the President of the Council of Ministers, after consulting the parties concerned and the new Committee for the protection of intellectual property set up inside the Presidency of the Council. Photocopied reproductions of rare works outside publishers’ catalogues and owned by public libraries are subject only to the payment of a lump sum, whereas the payment is much more onerous for private libraries.
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The legislation establishes that any reproduction may be subject to the payment of a fee. It also recognizes that use of material owned by libraries has a high economic value and subjects reproductions thereof to fair payment with a limit on quantity and without any regard for the purpose (personal, teaching, research) for which copies are made; a factor which has a strong bearing on the value of their use.20 When the European Union Directive is passed and a discipline applied to the digital environment, the Italian system, which differentiated between limitations and exceptions on the basis of the value of the interest protected, will assume an entirely new complexion. All the exceptions envisaged in the paragraph on ‘Free Uses’ may be subject to the payment of a fee, but also to quantitative limitations, and this fact will certainly produce a great impact on the way the science system circulates knowledge.21 It is necessary, finally, to emphasize that there is no guarantee that Italian legislation will introduce all the exceptions and limitations allowed for by the European Directive. In other words, in so far as they are optional for Member States, it is by no means certain that the limitations established for research and teaching will be effectively acknowledged by Italian law. In this respect, it is worth remembering a very important precedent: Community Law No. 128 of 24 April 1998 (Arts 1.2 and 43) and the relative legislative decree (Leg. Dec. No. 169 of 1999), with which the European Directive on Data Banks was applied in Italy (96/9/EC), acknowledge the sui generis right of producers of non-creative data banks, but fail to exploit the possibility offered by the Directive itself to introduce an exception for uses for scientific and didactic purposes.22 This exception is, instead, acknowledged for uses with regard to creative databanks (Art. 64sexies, para. 1, lett. c), whereby the author’s exercising of his or her exclusive rights in the event of uses connected to research purposes may be limited. In this way, the producer’s right will not be subject to the same limitations as the author’s. Moreover, access to noncreative databanks might become more difficult in Italy than in other European countries, and this could create a whole series of further problems for research structures and also increase their running costs.23 As a result of the lack of a compulsory exception for states in a sector essential for the growth of knowledge and characterized by a high level of internationalization, the degree of harmonization is still very low, though, in terms of economic evaluation, the choice is not justified by empirical evidence robust enough to confirm the convenience of establishing of such rigid rules for the protection of copyright.24 Events in Italy also show how the intervention of the European Union may translate, in some cases, into a tightening of national protection to the detriment of the country’s legislative traditions, without measures that take the needs of the free circulation of knowledge into due account.
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15.4 STRATEGIES OF THE PUBLIC RESEARCH SYSTEM FOR THE PUBLICATION AND DISSEMINATION OF RESULTS THROUGH NEW TECHNOLOGIES The traditional system through which scientists disseminate their results is based on the mechanism of publication in specialized journals, which ensures the scientific quality of the content and an inexpensive system of publication.25 This system is nonetheless a butt of heavy criticism, which may be summed up as follows: 1. It often takes a long time to proofread articles for scientific journals, and the time it takes is often incompatible with the urgent need to disseminate the knowledge that accompanies scientific discoveries - especially the most revolutionary. Very often, moreover, rejections of articles are not fully justified. 2. Scientific journals have high costs, are now present in large numbers for each sector on account of the progressive specialization of scientific learning, are often monopolized by the major international publishing houses and their electronic versions are accessible only to subscribers. 3. Journals generate high profit margins, even when they cover very specialized sectors of activity. This phenomenon results from the fact that they have a guaranteed reading community, however small it may be. The fact is that all specialists in the sector have to read the journal to catch up on the results produced by the benchmark community in any sector.26 These drawbacks are offset by the fact that journals offer peer reviewing for articles, an important consideration bearing in mind that the main problem in adopting alternative systems of publication is precisely that of how to cover the costs of scientific revision. New technologies and the advent of the Internet have nonetheless prompted scientists to seek out either alternative ways for publishing the results produced (while at the same time ensuring the scientific revision of articles), or to attempt to persuade universities to eliminate from contracts those payments due for the use of works produced by their own researchers. Both alternatives are designed to cut the costs of agreements with publishers by creating new conditions for application to electronic publications.27 In other cases, special electronic article archives are set up to exchange preliminary versions of research works, which may subsequently be submitted to scientific journals that allow for this procedure.28 Alternative methods of breaking the link between the publication of results and scientific revision have been tried out and others are now being studied. It is impossible to say whether the efforts described will manage to modify the
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predisposition currently exhibited by the majority of scientists towards the exclusive publication of their works in the most famous journals with the longest traditions. Nonetheless, in view of noteworthy attempts in this direction, it is not unreasonable to believe that new systems of publication will ultimately emerge, combining, for example, the free online publication of articles with the payment of a fee by authors whose works are accepted for publication following the peer review process, or other types of agreements with publishing houses allowing authors to maintain the right to disseminate their work through the Internet after publication and to re-use it for any purpose whatsoever.29 Widely felt problems, however, are those of the high price of journals and books that science libraries are obliged to buy and the limited funds they can count upon. The cutting of financial resources has prompted some libraries to broaden cooperation agreements on scientific material with others. Often, alas, the influence of such measures is limited because the cost of subscriptions increases at a faster rate than the saving such agreements make possible. Researchers, moreover, expect their organizations to provide access to all the scientific material produced in their respective areas of competence, even when this expectation, entirely reasonable from a professional point of view, is hard to reconcile with financial resources. Scientists, in fact, are generally more concerned about the restrictions imposed by publishers on free access to and use of published material than about high tariffs.30 Hence the spate of initiatives promoted by libraries and/or their associations to recreate an environment for the free communication of ideas and results. Some initiatives take the form of action on the costs of scientific publications in research organizations. The aim is to convey the idea that all the funding allocated to the purchase of expensive published material could be used for scientific activity instead, thus prompting organizations to guarantee their right in publishing contracts to free use of the works they produce for research and teaching purposes in quantities in compliance with the ‘three-step-test’ of the Berne Convention. It is worth recalling, however, that the innovative strategies in the publication system described above are closely connected with another factor; namely, that of the evaluation criteria of the scientific community. If publication on the Internet through an appropriate system of certification manages to create value comparable to that of an article published in a traditional journal in terms of access to a career in the science profession, it is fair to say that we have come to a turning point in the system of diffusion of scientific results. This change may also have a bearing on the personal strategies of scientists, replacing the present trend towards an overproliferation of scientific articles with a lower number of publications but with a higher control over quality.31
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15.5 CONCLUSIONS The advent of new technologies has a profound influence on the structure of copyright legislation. The traditional objective of protection, aimed at safeguarding the author by allowing him or her to regulate and control the way in which a work is distributed, is at loggerheads with the basic principles of the information society, which presupposes the creation of an environment fostering the free movement of information everywhere and always. The different interests may be balanced by maintaining scope for freedom in some special cases; more specifically, when restrictive measures fail to produce the competitive advantage for which the norms were formulated in the first place.32 The digital environment leads to the limitation of exceptions and limitations only under certain circumstances, differentiated on the basis of the importance of the interests which they protect. Research conducted by public science institutions is aimed mainly at creating new knowledge or new methods of applying existing knowledge. The results produced are generally considered public property, open to criticism by other scientists and, of course, destined to be disseminated everywhere. The end result of every use connected with research activity is new knowledge from which, directly or indirectly, society as a whole benefits. The development of society, in fact, depends increasingly on the quantity of knowledge we have at our disposal, for knowledge creates skilled human resources, technological development and economic progress. Scientific research, the source and powerhouse of knowledge, thus has to be encouraged using every means possible. Within this perspective, the creation of compulsory exceptions in copyright for scientific research purposes is one of the provisions designed to ensure an environment in which scientists feel free to use all works of research in any way, paying fair remuneration and, naturally, acting within the limitations of the aim pursued. This simple provision in European Union directives may help transform the present drawbacks of the legislation on copyright into an opportunity for scientific research and economic development in a harmonious, uniform way in all European countries. The regulation of copyright is, in any case, an essential, irreplaceable guarantee for the protection of the paternity and integrity of the work, the economic content of which must not be underestimated. Paternity and integrity, in fact, are directly threatened precisely by the technologies that offer such huge possibilities for information and communication. For these purposes, it is necessary to increase the harmonization of international and European protection, extending the ambit of application of multilateral conventions and their power of control. Finally, it is necessary to stress once more that, in the case of scientific research more than in others, the
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norms produced must be in keeping with a global evaluation of the interests at stake and the problems that need to be solved, reconciling economic considerations, national policy and the public interest of society.
NOTES 1. Contrariwise, the economic exploitation of results is highly accentuated in the American science system, cf. Nelsen, L. (1998), ‘The rise of intellectual property protection in the American universities’, Science, 279 (5356) (March), 1460-61. 2. In innovation systems, government interventions must no longer concentrate solely on systems of resource allocation, but must seek to make up for market failures by redirecting private-sector players’ choices towards the creation of new knowledge, with incentives and programmes or stronger protection of intellectual property. The state has to guarantee the dynamics of networks by eliminating any hindrances to their interaction and, above all, ensuring the broadest possible circulation and diffusion of results through the imposition of a constraint on the divulgation of the knowledge produced. Callon, M. (1994), ‘Is science a public good?’, Science, Technology and Human Values, 19 (4), 395-420; Steinmueller, W.E. (1994), ‘Basic Research and Innovation’, in M. Dogson and R. Rothwell (eds), The Handbook of Industrial Innovation, Cheltenham, UK: Edward Elgar. 3. See De Marchi, M., B. Potì, E. Reale, M. Rocchi and A.M. Scarda (1999), Final Report. European Comparison of Public Research Systems, TSER Project No. SOE1-CT96-1036, ‘Changing Structure, Organisation and Nature of PSR System, Work Package 3, August. 4. Lundvall, B.A. and B. Johnson (1994),‘The learning economy’, Journal of Industry Studies, 2, 23-42; Whalley, S. (1998), ‘The Internet a Threat to Copyright?’, Copyright World, 76, 29 ss.; de Zwart, M. (1998), ‘The future of the Internet’, Entertainment Law Review, 86. 5. In the systems of the English-speaking world, this group of norms is absorbed in the practices of fair use and fair dealing. 6. Cf. Fabiani, M. (1955), ‘La nozione di uso personale nel diritto d’autore nei confronti delle possibilità offerte dalla tecnica moderna di utilizzazione dell’opera dell’ingegno’, Il diritto d’autore, 165; Ercolani, S. (1999), ‘Limitations and exceptions in the Italian Copyright Legislation’, Entertainment Law Review (10), 1; Guibault, L. (1998), Pre-emption Issues in the Digital Environment: Can Copyright Limitations be Overridden by Contractual Agreements under European law?, Institute for Information Law, University of Amsterdam, pp. 1-21. 7. Litman, J. (1996), ‘Revising copyright law for the information age’, Oregon Law Review, 75, 19 ss. 8. WIPO (World Intellectual Property Right Organization), Copyright Treaty, Geneva, December 1996. 9. The agreed statement concerning Article 10 asserts that it is understood that contracting parties could carry forward and appropriately extend into the digital environment limitations and exceptions in their national laws which have been considered acceptable under the Berne Convention. Similarly, they can devise new exceptions and limitations that are appropriate in the digital networked environment. Article 10 neither reduces nor extends the scope of applicability of the limitations and exceptions permitted by the Berne Convention. The agreed statement concerning Article 1 of the WIPO Treaty states that the reproduction right, as set out in Article 9 of the Berne Convention, and the exceptions permitted thereunder, fully apply in the digital environment, in particular to the use of works in digital form. It is understood that the storage of a protected work in digital form in an electronic medium constitutes a reproduction within the meaning of Article 9 of the Berne Convention. 10. The Commission’s position of October 20 considers the Council’s position balanced and hence regards as acceptable the introduction of further changes to its amended proposal of May 1999.
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11. Landes, W. and R. Posner (1989), ‘An economic analysis of copyright law’, Journal of Legal Studies, 18, 325-66; Gordon, W. (1982), ‘Fair use as market failure educational recodings agency: a structural and economic analysis of the Betamax Case and its predecessors’, Columbia Law Review, 82, 1600-1657. 12. Bell, T. (1998), ‘Fair use vs fared use: the impact of automated rights management on copyright’s fair use doctrine’, North Caroline Law Review, 65, 558-619; Meurer, M. (1997), ‘Price, discrimination, personal use and privacy: copyright protection of digital works’, Buffalo Law Review, 45, 845-98. 13. This is a significant change because, in the amended text passed by the Commission in May 1999, the exceptions for research and teaching had to be accompanied by the envisagement of a fair payment. However, the directive did not rule out the possibility for states to introduce a compulsory fair payment even for legal paradigms in which it was not explicitly required. 14. Among the criteria taken into account is that of the type of work reproduced - whether, that is, it is analogue or digital - in consideration of the different economic damage such works are likely to cause. Another factor to take into account is the presence or otherwise in the product of systems for the technological protection of the work: this type of technique, in fact, certainly makes the payment due less onerous. 15. Liebowitz, S. (1985), ‘Copying and indirect appropriability: photocopying of journals’, Journal of Political Economy, 93 (5), 945-57. From this point of view, limitations designed to protect fundamental rights of freedom ought to be compulsory for states and for the parties in the stipulation of contracts; see Hugenholtz, P.B. (1997), Fierce Creatures. Copyright Exemptions: Towards Extinction?, Ifla/Imprimatur, Conference on ‘Rights, Limitations and Exceptions: Striking a Proper Balance’, Amsterdam, 30-31 October, 1997. 16. De Sanctis, V.M. (1997), ‘Developments in the Italian copyright law’, Rivista Diritto d’Autore, 4, 534-47. 17. Similar to this second group are the provisions contained in Articles 53ff. for works broadcast by radio, which provide for a sort of compulsory licence to allow the broadcast of original works from theatres, concert halls and any other public place on payment of a given fee and in compliance with given conditions. 18. This provision was written when technologies and devices allowing reproductions were very primitive. It presupposes tangible reproductions of the work and a limited capability of devices to make a high number of high-quality copies. All these characteristics have been overridden, even for the reproduction of printed materials, since photocopying provides an excellent copy of the original work. 19. Ercolani (1999), op. cit. 20. The new provision also modifies Article 69, in the sense that, unless the right of distribution has been exercised, government libraries and record libraries and public phonogram and video agencies cannot make loans until 24 months have passed since the production of the works in question. Reproductions of said works in a single exemplar for said library and record library services are permitted. 21. The forms of conduct permitted will depend prevalently on the licence agreements stipulated by libraries, which impose extremely onerous conditions even on public libraries. 22. Cf. Art. 102ter of Leg. Dec. No. 169 of 1999. 23. Cf. Reichman, J.H. (1998), Database Protection in the United States: The Emerging Options and the Challenge for Science, Proceedings of the Fifth International Conference, ‘The Law in the Information Society’, Florence, 2-5 December 1998, Cnr-IDG. 24. Towse, R. (2000), Economic Aspects of Limitations and Exceptions to Copyright, Erasmus University, Rotterdam. 25. Leeflang, K. (1999), ‘Electronic publishing issues’, OECD STI Review, 24, 79-85. 26. ‘Publishing, Perishing and Peer Reviewing’, The Economist, 24 January 1998, pp. 87-8. 27. Muir, A. (1988), ‘Publishers’ view of electronic short-loan collections and copyright clearance issues’, Journal of Information Science, 24 (4), 215-29; Schander, D. (1994), ‘Electronic publishing of professional articles: attitudes of academics and implications for the scholarly communication industry’, Journal of the American Society for Information Science, 45, 73-100; Aubert, J.E. and V. Bayar (1999), ‘Maximizing the benefits of
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28.
29. 30. 31. 32.
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information technology for science: overview and major issues’, OECD STI Review, 24, 7-28. Journals often agree to publish only completely original works not previously diffused in any manner or form. In other cases, the diffusion of provisional or partial versions is permitted even when the work has been published. These differences depend largely on two factors: the policies of large publishing houses and the scientific sector of the work published - which, of course, influences the conduct of scientists and, to some extent, the conditions of publication adopted by journals. ‘Will journal publishers perish?’, The Economist, 13 May, 2000; Costa, S. and J. Meadows (2000), ‘The impact of computer usage on scholarly communication among social scientists’, Journal of Information Science, 26 (4), 255-62. ‘To Publish and Perish’, Policy Perspectives, 1, Vol. 7, N.4, March 1998. Kealey, T. (2000), ‘More is less. Economists and governments lag decades behind Derek Price’s thinking’, Nature, 405, 279. OECD (1998), ‘The Global Research Village’, STI Review, Special Issue, n. 24.
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16. The problems of authors’ property rights administration in Russia Elena Levshina and Natalia Pakhomova 16.1 INTRODUCTION One of the well-known figures in Russian theatrical life of the late nineteenth century, A. Pogozev, has commented: ‘Money can easily spoil talent, but it cannot create it’ (Pogozev, A., On the Centenary of Foundation Imperial Theatres in Moscow (1906), p. 321). This formula, in our opinion, reflects precisely the function of authors’ and performers’ property rights administration: to create a workable intellectual property law that accords with actual cultural processes. The legal basis is very important in this regard. At the same time, one should keep in mind that however perfect the legislation can be, its practical applicability depends on certain conditions being present, such as the preparedness of participants and the development of a proper infrastructure. In this respect, in contemporary Russia a specific balance of interests is being sought by those who are involved in the use of intellectual property in cultural life. In 1993, the copyright and neighbouring rights law based on standards of the Berne convention was adopted in Russia. On the whole, this legislative act makes administration of intellectual property more civilized and puts Russia in line with other countries keeping to the continental copyright principle. Though the legacy of the past is still visible in this law, as we shall discuss in more detail later, its spirit and letter are based on the idea of respect for the author and the results of his creative work. Practical application of the new law in the field of the performing arts faces several sociocultural and socioeconomic problems. We analyse the most important ones. First, there is the collision of monopolistic and anti-monopolistic tendencies in the sphere of authors’ property rights management, due to the absence of the legislative culture on the part of users and owners of intellectual property. The second point is that many elements of the infrastructure are hardly developed; in particular, the necessary data. The third point is the absence of efficient methods of dealing with rights. The first two parts of this chapter analyse ways of 250
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developing and improving the mechanisms of intellectual property application in Russia. At the same time, theatrical practice not only determines the problems of authors’ property rights but also highlights the necessity of improving the legislative basis; in particular, the protection of intellectual property created during the process of collective activity. One possible model for the solution of this problem is put forward in the conclusion of the chapter.
16.2 AUTHORS’ PROPERTY RIGHT: PROBLEMS OF ADMINISTRATION Nowadays, Russian theatres, while trying to choose repertoire that will meet both the aspirations of the company and the requirements of an audience, are often faced with copyright problems. The problems arising in the sphere of legal relations range from the question of the right to use of the work concerned to the acute problem of compensation payment. In Soviet times, copyright legislation placed an author in a dependent position and the administration was based on censorship mechanisms. In particular, the very fact that a play had been published for some time made it freely available to theatres or other users. It was supposed that if a published product had passed censorship, it was authorized for public performance. Apart from that, censorship was enforced for a particular production, therefore theatres couldn’t be confident that the censors and not the author decided whether a certain play would be staged or not. Thus authors’ property rights were regulated exclusively by a specially created body of executive power. According to the new Russian copyright and neighbouring rights law, the author of a play has an exclusive right to authorize use of his work in any form and in any way (Art. 16). Obviously, if the play is published, the author has agreed on its publication in a given edition. The staging of a play is another form of its use. It requires special permission of the author to stage the play in a given theatre. These basic principles, so deeply entrenched in a civilized world, face difficulties in becoming guiding rules of Russian cultural life. Before staging a play, a theatre must contact the author, irrespective of his citizenship and residence, to make an agreement for its use, in which it is necessary to stipulate the ways, terms and territory of use, compensation rate and/or the method of its calculation for every use of the play and terms of payment (Art. 31, Copyright and Neighbouring Rights Law of the Russian Federation). When it is difficult for a theatre to contact the author, it can approach the Russian Authors’ Society (RAS). This is a public association of authors, established with the purpose of collective administration of their property
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rights, which, in a sense, is heir to the former Soviet state body. In the event that this association is designated by the author or foreign copyright organization to make such agreements, it can grant a non-exclusive licence (permit) to perform a play on the stage of a given theatre. If a theatre stages a play without permission, the author can protect his rights judicially. Under the new law he can demand that the infringer stops the violation of his rights (that is, cancels the public performance of a play); reimburses damages, including the lost profit and moral damage; or disburses the compensation, of what can be a considerable sum, at the discretion of the court. If a play of a foreign author has been translated into Russian, the translator owns the copyright of the translation (or any alterations made to it). Therefore, a theatre should also get permission from the translator to use the play. In practice, translators in Russia often act as a link between a theatre and a foreign author, which is probably also typical of other countries. Having read in a book or magazine a translation of an interesting play, directors begin rehearsals of a play, being sure that the fact of its publication itself allows them to do so. It does not even enter their minds that they should ask the author permission to use the play. Thus authorship rights are violated without any malicious intent but as a result of the lack of legal culture. On the other hand, foreign authors have not much worried about the application of their copyrights in Russia for a long time. Staging in Russian (especially provincial) theatres did not transcend the limits of certain Russian regions or Russia at best, and foreign authors were not interested in Russian roubles. Now the situation is changing. An increased interest in Russian theatre, performances abroad, the desire to know our culture better - all this attracts the attention of theatrical figures, including playwrights, and induces them to look out for the legality of their works’ use. There have already been a number of trials concerning the improper use of foreign plays. Strictly speaking, it was the Russian Authors’ Society (RAS) that had to point out the malpractice of the theatres’ actions. Recollect that the RAS is an organization for collective administration of authorship rights. Under the current legislation, copyright owners should transfer the authority to administer rights to the Society. Furthermore, under Russian copyright law, in the absence of direct authorization, the Society has the right to administer the author’s property rights with the aim of protecting his interests, including the receipt of compensation for the work’s use to be paid to the author. This is a vestige of the state monopoly of authors’ property rights administration. In point of fact, today the author has the right not to license his works to the Society; that is, to refuse the services of the RAS. Such refusal must be made in writing. The author can partly refuse RAS services, such as, for example, those dealing with the use of a certain play by the theatre involved. In this
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case, the author makes an agreement for a work’s use directly with the theatre (part 4, Copyright and Neighbouring Rights Law of the Russian Federation). The situation is a bit strange: the RAS can protect authors’ interests without their knowing about it, but the author is limited in the choice of his representative. In the last two to three years, authors have increasingly tried to avoid services of the Society, which were not always beneficial for them. The point is that when granting a theatre a non-exclusive licence to use a play with or without the author’s knowledge, the Society levies compensation in the author’s favour at a minimum rate established by the state. At the same time, Article 31 of the Copyright and Neighbouring Rights Law of the Russian Federation states that the author has the right to define the terms of compensation payment; that is, he can agree with the theatre on a payment rate that is much larger than the state minimum. Certain groups of authors have established alternative public associations for property rights collective administration, some authors looking to agents, others protecting their interests themselves and relying on their own abilities. In all these cases, the authors face many difficulties due to the absence of a developed infrastructure. Both the alternative associations and the newly established agencies have a serious shortage of qualified experts; intellectual property protection is becoming a required specialization in Russia. When the author contacts a theatre directly, he has the right to dictate the conditions under which the right of use is transferred. The absence of experience of such contractual relationship prevents both parties from finding a reasonable compromise. The author wants to see his play staged but, being afraid of making a bad bargain, he demands too large a share. It happens that the theatre, even if it is interested in a play, is simply unable to satisfy unreasonable claims of some authors. As a result, agreements do not develop, which is harmful to the theatrical process. Statistics show a decrease in the number of modern plays in the repertoire of Russian theatres. Theatres prefer to stage plays of unprotected authors. The practical application of copyrights has therefore had a negative influence on the theatrical process. Sooner or later, theatres and authors will have to learn to compromise their interests. The laws of market relations will optimize authorship royalties so that it becomes possible for authors to get just compensation and for theatres to form a repertoire that suits both artistic tasks and audience interests. International experience proves that author’s property rights are best administered by large collective associations. In Russia there is a strong tendency towards the division of such structures. A set of small-sized associations or agencies can hardly protect the interests of authors properly. Trust in the RAS is undermined by its monopolistic conduct, with bureaucratic
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interests more important than the interests of authors, and, here, balance of interests is dictated by necessity.
16.3 EXCLUSIVE RIGHTS FOR COLLECTIVELY CREATED WORKS So far, we have been talking mainly about dramatists but the problems we have discussed are equally important for others whose works are used in the performing arts - composers, artists, choreographers and other creators of original works. The gap existing in the system of exclusive rights is particularly visible in the sphere of the performing arts. Copyright law protects products existing in any objective form or, in other words, it protects the text as fixed on a certain medium. Neighbouring rights are recognized for the performer, if the performance is audio-recorded or recorded by other means. In any case it should be a fixed text. In the theatre, a staged work is created from the director’s concept by the joint efforts of the director and actors and with funds provided by a producer. Thus, intellectual property is created but there is no fixation of the work in any material form. The artistic result created by live performance is consumed and can only be consumed as it is created at the moment of direct contact between the performer and the audience. The production is re-enacted anew at each live performance; its text exists ‘here and now’, to cite a famous expression by Gegel. There are a number of features characterizing this kind of intellectual property. It is a result of collective creativity but is created by means of the expenditure of a separate owner - the producer - without whom it would not be made public. Hence a new special kind of right should be introduced belonging to those who create the performance, which is not fixed in any medium, but is repeatedly performed in different productions either with the same or a substitute staging concept to that developed by a director, cast and other creators. These rights differ from copyrights and neighbouring rights, but nevertheless belong to the sphere of intellectual property protection; that is, they are exclusive rights. The absence of such rights results in numerous conflicts in theatrical practice. The system of labour relations in art collectives also requires a clarification of the rights and responsibilities of both the employees (the artists) and the employer (the theatre). An attempt to find a legal solution to these problems in Russia is being made by the revision of a draft federal law on theatre and theatrical activity. The chapter ‘Exclusive Right on a Live Performance of Theatrical Production’ is included in the draft. This chapter states that those protected by the law on theatrical staging are actors playing roles (parts) in the performance, those
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responsible for the direction of the production (that is, director, choreographer, conductor, designer) and the producer (that is, the theatre or other legal or natural person responsible for organizing and financing the preparation and performance of a staging). Rights of theatrical staging arise at the moment when a decision about its public performance is taken, unless the agreement between those concerned stipulates that they should arise earlier. The producer of a theatrical production must observe the rights of authors, stipulated by copyright and neighbouring rights legislation, and non-property rights of those responsible for artistic direction and the actors. The director and actors engaged in the staging have the right to have their names listed in advertising issues, posters and other informative material related to the production. The director also acquires the right to protect a theatrical staging from distortions. The rights of the actor are effective for the period of his participation in the run of performances, while the rights of the director are effective for the whole life of the production. The contract with the producer for his participation in the staging and/or performance entails the transfer to him of the exclusive right on the theatrical production’s public performance. This right includes the right to set the place and time of performances, to present the performance on behalf of himself, to set ticket prices and the number of performances, to end and renew performances, to determine the conditions of use of the whole staging or its parts in other performances, the conditions of its broadcasting (including broadcasting by cable), recording on any types of carriers and reproduction in accordance with the copyright and neighbouring rights legislation. The producer also acquires the right to permit other persons to reproduce the staging and exercise its public performance rights, unless the contract states the contrary.
16.4 CONCLUSION The protection, in Russia, of collective intellectual property, theatrical productions’ creators and participants’ rights to the product of their creative activity is a novelty in world practice. As mentioned above, it is proposed to protect exclusive rights to the product of collective creative activity by means of an agreement for use between a theatre (producer) and a director, acting on behalf of the collective. The draft law makes the conclusion of such an agreement compulsory. The allocation of exclusive rights and the protection of intellectual property as a value of art is a bilateral problem: its solution contributes to the support of talent and the enrichment of cultural life, our common fortune of art.
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INDEX
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Index access costs of copyright 13 access-incentives balance 85-94 adaptation, right of 14-15 Adler, M. 68 administrative costs of copyright 13-14, 18-19 AFMA (Anstalt für musikalisches Aufführungsrecht) 144 African music, copyright difficulties 127-8 Alfred Bell & Co. v. Catalda Fine Arts 17 Algerian Raï music 127 altering and reselling copyrighted work 20-21 analogue use of museum images 226-7 Anne Bragance v. Olivier Orban and Michel de Grèce 46 appropriability, digital private copying 190-92 appropriation art 9-11, 21-7 A.R.T. 20-21 art works, borrowed images 9-11, 17-27 artistic materials intellectual property rights 120 moral rights 135-6 tax on use of 134-5 artists’ income 12 effect of abolishing copyright 133-5 from copyright 12-13, 126-8, 222-3 as purpose of copyright 132 Artists Rights Society 20 ASCAP 168-9 Atwood, M. 60 Australia, indigenous cultural works 104 authors copyright collecting societies 142-4, 152-3 Internet publishing 4-5 property rights, Russia 250-55 relationship with publisher 69-70
authorship of copyright works 39-40 Babylon, J.-P. 125 Baker, A.J. 186 Barnet, R. 122 Barthes, R. 124 Belgische Radio en Televisie v. SABAM 151 Belgium, copyright society 151 Bell, Alfred & Co. v. Catalda Fine Arts 17 Bensaid, B. 71, 74 Berne Convention exceptions to copyright 235 ownership, cinematographic work 41-3 protected work 33-4 term of copyright 37, 38 Berne Convention for the Protection of Literary and Artistic Works, Guide to the 99 Besen, S.M. 183, 187-9 Bettig, R. 125 Blakeney, M. 104-5 BMI 168-9 Boggs, J.S.G. 103 book publishing, impact of digital technology 77-8 borrowed images 9-11, 17-27 Bourget, E. 141-2 Boyle, J. 56-7, 130 Bragance, Anne v. Olivier Orban and Michel de Grèce 46 Brandeis, Justice 52 Bridgeman Art Library v. Corel Corp. 18 Bridgeman Art Library v. Rodney Fitch & Co Ltd 223 British Music Publishers Association (MPA) 146 Buren, D. 122 257
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Burke, A.E. 70 Campbell Connelly & Co. Ltd v. Noble 45 Canada Safeway Ltd v. Manitoba Food and Chemical Workers, Local 832 57 Canada copyright of corporate symbols 57-8 native culture 128 Catalda Fine Arts 17 Cavanagh, J. 122 CDs broadcasting use, Japan 206 copying 76-7 France 179-82 Chomsky, N. 130 cinematographic work, copyright ownership 41-3 Coase, R.H. 53 collecting societies 92, 140-47 and museum images 225-6 The Netherlands 222-3 property conceptions, Europe 150-55 reforms 156-7 collective rights, native cultures 128-31 collectively created works, Russia 254-5 Collins, J. 127-8 commercial firms, use of museum images 224-5 commodification of copyright interest 104-9 competition law, and museum images 228 complementary products, reducing copying 185 composers property rights 211-18 societies, Germany 144-5 compulsory licensing 89-93 compulsory representation, Germany 153-4 Coombe, R. 120, 125, 128, 132 copying cost reduction 75-80 digital music 76-7, 123-4 digital private 178-93 effect on production of new work 80-81 protection against 14
copyright administration using digital technology 204-5 coercion 143 collecting societies see collecting societies compulsory licensing and incentives 87-93 creation 33-4 and creativity 131-2 digitized images, 224-6 disputes 10-11, 17-27 duration see term of copyright as elegant conception 2-3 government intervention 3-7 and incentives 85-94 as intellectual property 55-6 Japan 202 satellite broadcasting 207-8 law, international issues 32-47 market effects 66-9 in markets with network externalities 70-74 monopoly 119-22 museum images 19-20, 221-30 music see music copyright payment, music 171-2 scanned images, 224-6 scope 14-17, 34-7 software 78-80 and trade 104-6 Copyright, Designs and Patents Act, 1988 33, 37, 40 Copyright and Neighbouring Rights in the Information Society 4 Copyright and Neighbouring Rights law of the Russian Federation 251, 253 Corbis 120, 224-5 Corel Corp. 18, 34-5 corporate power over cultural output 99102, 107-13 corporate symbols 56-8 costs of copyright protection 13-14 of creation 12 of reproduction 12 Creative Diversity, Our 100, 128 creativity as a commodity 119-21 effect of copyright 131-2
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Index cultural conglomerates 120-21 cultural industries, Netherlands 7-8 culture, indigenous 104, 126-31 Daoudi, B. 127 database rights, museums 229-30 Dauman, H. 22-3 Death of the Author, The 124 demand, effect of copying cost reduction 76 Demsetz, H. 55 derivative works right 14-15 Deutsches Museum 224-5 development, and culture 99-102 dialogic practice, as purpose of copyright 132 digital copying museum works 19-20, 221-30 music 76-7, 170-71 private 178-93 public domain works 18-19 digital music downloads 123-4, 170-75 digital rights, music 165-75 digital technology 201-2 and book publishing 77-8 and Japanese performance art 202-9 and music publishing 165-75 digitized images, copyright 224-6 Director, A. 53 downloading music 123-4, 170-74 Duchamp, M. 9 duration of copyright see term of copyright dynamic environment, network effects 72 Easterbrook, F. 21 economic analysis, freedom of expression 53-5 Economic Analysis of Law 55 economic approach to copyright 21-7 economic model of copyright 66-82 Economides, N. 71 employees and copyright ownership 43-4 enforcement costs of copyright 13-14 Enterprising Culture, An 7, 8 Eudes, Y. 123 Europe, copyright societies 150-55 European Database Directive 229-30
259
European Union competition law 228 exceptions to copyright 236-40 exclusive transferable property rights 152-5 expression, protection of 14 fair use doctrine 15-16 fees see payments films, copyright ownership 42-3 financial support see subsidies first-sale doctrine 21 folklore, copyright protection 129-30 France copyright law 46 digital private copying 178-82 term of copyright 38 freedom of expression, economic analysis 52-60 GDT (Genossenschaft Deutscher Tonsetzer) 144 GEIDANKO 196-7 GEMA (Genossenschaft zur Verwertung musikalischer Auffhhrungsrechte) 144-5 Germany music copyright 144-5, 164 Gnutella 123 government policy on copyright, Netherlands 3-7 Hakfoort, J. 72-3 Hammer, P.J. 54 Harper & Row v. Nation Enterprises 51 Haydn, J. music publication 213-14 Hohfeld, W.N. 149-50 Holmes, O.W. 27, 52 Houston, J. 40 Hummel, J.N. 218 images, digital reproduction, museums 221-30 implied consent for copying 15-16 incentives-access balance 85-94 income artists 126, 132-5 impact of copying 184 musicians 144-7, 154-5, 213-17 performers, Japan 197-9
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260
Copyright in the cultural industries
independent duplication of work 14 indigenous cultures, and copyright 104, 126-31 indirect appropriability 184-5 Inen, J. 77 intellectual property rights 55-6, 64, 104-5 artistic materials 120 museums 229 interactive streaming 173-5 International Intellectual Property Alliance 105 Internet music distribution 77, 165, 208 publishing 1, 4-5 museum images 221-6 music 76 ISRC data 205, 208 Italy, copyright legislation 240-43 Itar-Tass 34, 42 Jacquet, J. 120 Japan copyright law 127 performance art 196-209 Johnson, W.R. 189 Jole, F. van 1 Jones, C. 76-7 Kennisnet project 3-4 King, S. 1, 4-5 Kirby, S.N. 183, 187-9 Koons, J. 10, 11, 24-5, 103-4 Kretschmer, M. 126, 131-2 Landes, W.M. 56, 59,65, 66 learning-by-doing externalities 71 Lee v. A.R.T. Co 20-21 Lesne, J.P. 71, 74 licences image copying 25 mechanical rights 168 public performance 168-70 Liebowitz, S.J. 71, 184 Locke, J. 149 logos, and copyright 56-8 LP (Landes & Posner) model 65-8, 70 Malm, K. 129 Margolis, S.E. 71
market power, effect on incentives 91-3 Mattheson, J. 211 mechanical rights 145-7, 165-8 Mechanical Copyright Protection Society Ltd (MCPS) 147 Menell, P.S. 74, 80 metaphorical network externalities 71 Michelin, copyright infringement 57-8 Miliani, H. 127 Mitsui, T. 127 monopolistic control of artistic material 120-22 moral rights 40, 35-6, 135-6 Mozart, W.A. music publication 215 public concerts 216 MPA (British Music Publishers Association) 146 MP3 76-7, 123 multi-channelization, effect on performers 201-2 multiple copies, appropriation art 22-3 museums, digital reproduction of images 19-20, 221-30 music digital copying 76-7, 170-71 copyright 165-75, 210-12 collecting societies 141-7, 150-57 history 144-7 USA 167-70 digital downloading 170-71 industry, effect of private copying levy 186-8 Internet distribution 76-7, 165, 208 publishing, Vienna 212-15 streaming 172-5 Napster 123 Nation, The 51 national limits of copyright 32-47 native cultures, and copyright 104, 12631 Netherlands competition law 228 copyright organizations 5, 222-3 cultural industries 7-8 government policy on copyright 3-7 photograph copyright 223 network externalities and copyright 70-74
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Index and private copying 185-6 Newton, H. 11, 23-4 Nimmer, M.B. 56 non-interactive streaming, and performance rights 172-3 non-Western countries lack of copyright 126-31 subsidies for artists 134-5 Novos, I.E. 183 Nyerere, J. 131 original works, value of 12-13 originality 12, 124-5 Our Creative Diversity 100, 128 owner-biased copyright balances 91-3 ownership rights 41-2, 125 museums 227-30 parody 16, 58-9 Patterson, L.R. 55-6 payments digital music downloads 170-75 sound recording 203-4 see also income; royalty payments Pérez de Cuellar, J. 100 performance, music, Vienna 215-7 performance rights 167, 168-70 digital music downloads 170-72 Germany 144 streaming 172-5 UK 146 performing arts Japan 196-209 Russia 250-55 Performing Rights Society (PRS) 146 Phonographic Performance Ltd (PPL) 92 photographs digital rights 120 of museum objects 223-4, 226-7 Pichevin, A. 126 piracy 70, 122-3 musical composition 217-18 software 78 plagiarism 124 see also appropriation art playwrights, and copyright, Russia 250-55 Pogosev, A. 250 Posner, R.A. 26, 53-4, 55, 56, 58-9, 65, 66
261
price discrimination and copying 184 and copyright level 68-9 prices, and private copying levy 187-9 private copying digital 6, 178-93 levy 186-9 production/utilization balance 86-94 property conceptions 147-50 and copyright societies 150-55 property rights see intellectual property rights public benefit rationale for copyright 102 public concerts, Vienna 215-7 public domain work, copying of 17-20 public performance, Japan 198-200 public performance rights see performance rights publication, definition 19-20 publishers changing roles 75-80 conflicts with composers 217-18 role in collecting societies 142-4, 152-3 publishing, effect of digital technology 75-8 Pusenkoff, G. 11, 23-4 Raï music 127 Rasmussen, E. 54 Rauschenberg, R. 11 record industry, effect of private copying levy 186-8, 192 recording copyright, sound 145-7, 165-8 recording equipment market, France 179-80 Recording Industry Association of America 170 recording rights see mechanical rights Rehnquist, Justice 55 remuneration see payments reproduction rights to works of art, disputes 10-11 and value of works 12-13 see also copying respect for artistic works 135-6 Rogers v. Koons 9-10, 24-5, 103-4 Rosen, S. 68
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262
Page 6
Copyright in the cultural industries
royalty payments digital broadcasting 170 distribution formula 154-5 Rushton, M. 81 Russia, copyright and performing arts 250-55 Russian Authors’ Society (RAS) 251-3 Ruzicka, P. 153 SABAM 151 SACEM 151 satellite broadcasting of music, Japan 207-8 scanned images, copyright 224-6 Scholte, R. 125 scientific research and copyright 233-6, 246-7 Italy 242-4 dissemination 244-5 sculptures, copied from photographs 910, 24-6, 103-4 secondary use of recorded material 2034 Société des Auteurs et Compositeurs et Editeurs de Musique (SACEM) 151 socio-cultural deductions by collecting societies 154 software copyright protection 78-80 digital private copying 182, 191-2 market, network effects 73-4 piracy 78 software publishers, losses due to copying 182 Soulillou, J. 124 Sound Exchange royalty payment system 170 sound recording remuneration 203-4 rights see mechanical rights; performance rights STAGMA 145 stardom 68-9, 121-2 static environment, network effects 72 Stichting Beeldrecht 222-3 String of Puppies case 9-10, 24-5, 103-4 Ströter-Bender, J. 130 subsidies Japanese performing arts 200-201
to non-Western artists 134-5 to producers of copied works 189-90, 192 Takeyama, L.N. 185 tax on private copying 186-9 on use of artistic materials 134-5 Temple Lang, J. 152 term of copyright 16-17, 37-8 effect on trade 106 termination of copyright 37-8 territorial extent of copyright 32-47 theatre, and copyright, Russia 250-55 Third World countries see non-Western countries time, effect on optimal copyright level 68-9 Towse, R.M. 69 trade, and copyright 104-6 trademarks and copyright 56-8 transferability of copyright 44-6 translators, and copyright, Russia 252 TRIPs agreement 104-5 UK copyright law 32-3, 36, 51 music copyright 146-7, 164 term of copyright 37, 38 under-production/under-utilization balance 63-4, 86-94 USA copyright law 34-5, 51 and TRIPs 104-5 user-biased copyright balances 90-91 validity of copyright 38-9 van Jole, F. 1 video games digital private copying 191-2 effect of private copying levy 188, 192 Vienna music publishing 212-15 public concerts 215-7 Visual Artists and Galleries Association 20 Waldman, M. 183 Waldron, J. 59
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Index Warhol, A. 11, 15, 22-3 Weiss, F. 130-31 Willemsen, S. 72-3 WIPO (World Intellectual Property Organization) 142-3
263
WIPO Treaty on Copyright, exceptions to copyright 235 word of mouth externalities 71, 74 World Commission on Culture and Development 128-9
