IP Scholars conference, second parallel session

Session 2, Reconceptualizing IP

Trotter Hardy, Copyright and Public Goods Revisited. We all know what public goods are. Ex ante, IP law overcomes the public goods problem. Ex post, we in the IP community stress continuing non-rivalrousness. The community exhibits ambivalence: ex ante, we tell authors we want them to create so we give them exclusive rights for practically forever. After it’s created, we say “you shouldn’t control this use, you’re blocking innovation, you’re locking up culture, you’re barring free speech.”

Even our language refers to works as public goods in the present tense. Once works are copyrighted, works are private goods, which was the point of giving property rights in them. As long as copyright hasn’t expired, it’s not a public good. Is this ambiguity in language because we believe works remain half-public? Copyright eliminates free riding, but there’s still non-rivalrous consumption: 100s of people can read the same novel. That view stems from looking at the wrong thing. Copyright doesn’t turn works into private goods, but creates rights, and the rights are private goods. Works can be non-rivalrous in consumption, but rights are rivalrous. If only one person can make copies, that person has something of value to sell. If lots of people can, the original author has a right worth less. It’s functionally equivalent to two people trying to eat the same apple.

The claim of non-rivalrous consumption is wrong. Others can’t reproduce works without “eating into” the original owner’s exercise of rights, even if they don’t interfere with others’ consumption. Current inquiry into damages and market harm thus emphasizes the wrong things – we shouldn’t look at damage to the market for sales of copies of works, but damages to market for the sale of rights – damage to the copyright. Thus, in Napster there were lots of surveys about Napster’s effects on CD sales, but that wasn’t the right question. Instead, we should ask whether the fair market value of the copyright has gone down.

Application to Campbell: The court looked at many markets, though it said there’s no market for parody. The Court would consider the market for satire, rap derivatives, possibly others. That leads to the question of what’s a relevant market. Hardy doesn’t think there are circularity problems but others do. A better way to do it is expert testimony on the value of the copyright, which is easy to do – it’s done in mergers and acquisitions, bankruptcy, etc. to assess the value of an IP portfolio. That would simplify the litigation and lead to more predictable outcomes.

Comment: Some copyrighted works are fashion goods, and their value might go up with the number of users, at least up to a certain point. Hardy isn’t sure that’s true of the right to reproduce copies as opposed to the value of the copies.

Comment: The right to copy isn’t physically rivalrous. The author can still copy without interference. The economic generating power of the rights is rivalrous. But isn’t that circular? The argument’s conclusions assume that the copyright should be generating revenue in these circumstances.

Comment: There are lots of ways you can use pieces of a work to damage its value – a scathing review quoting portions would affect the value of your ability to sell copies. Hardy doesn’t disagree and wouldn’t preclude that – he distinguishes between lowering value by competing and lowering value by pointing out the work is worth less in reality. Response: But that distinction works because courts are focusing on substitution in a particular market, which Hardy doesn’t like. Hardy says he’s not saying courts should ignore particular markets; the defendant can explain that the value of the work has gone down because of criticism, not substitution.

Question: Any implications for statutory damages? Hardy thinks there are none; it’s a way of showing actual damages.

Question: How do you value a copyright without valuing the works that can be produced? Answer: you can’t. Courts now have to look at all those markets themselves, parody, rap, etc., and Hardy wants to put that on the shoulders of the parties’ experts in the first instance.

Comment: The public is trying to maximize use value from the work; focus on value to copyright owner may not reflect total social value. Hardy thinks this will be reflected in the value of the copyright: if people want to hear the song, the market value will increase.

Ariel Katz, Substitution and Schumpeterian Effects in the Life Cycle of Copyrighted Works. A very interesting paper, formalizing ideas about copyright over time and applying them to compulsory licenses for musical covers, restrictive license terms and DRM, and the idea/expression dichotomy.

My comment: Katz’s concept of a prototype stage where the work deserves more protection and more of its value is in its ideas is an intriguing one. Two questions: (1) The value of prototypes may be not in their ideas but in their proponents – TV producers or tenured professors with proven track records, who you can bet on to do a good job. (2) Ideas may simply be in the air, as I believe attribution as a rule in copyright is (as several papers at this conference show) or as reality TV or the shift to season-long narrative arcs before that were. Both these things raise the risks of error if you give very strong protection for the prototype stage.

Katz’s response: Yes, his model could justify idea protection. Attribution norms solve many of these problems for academics, but not elsewhere, creating a gap in protection for early stages of a work. Nonetheless, there might be problems identifying truly victimized authors who were actually copied if we adopted greater protections for early-stage works.

Alissa Centivany, Copyright & DVR: Implications of Timeshifting, Commercial Skipping, and Networking. Decentralized DVRs don’t violate copyright law because they’re just timeshifting. Commercial skipping has been challenged as copyright infringement in the ReplayTV case, but not persuasively so. Currently, no DVR uses automatic commercial-skipping, only manual. By contrast, centralized network DVRs provided by satellite and cable companies probably need to be licensed. This is a tangle of copyright, FCC regulation, privacy, and DRM.

Critics of DVRs: Posner in Aimster suggested commercial-skipping creates an unauthorized derivative work that reduces the copyright owner’s income since free TV is financed by commercials. Others say similar things – eliminating commercials is an attempt to escape the true price of TV.

Is a program with commercials a protectable compilation? Or is a program one copyrighted work and each commercial separate? On compilations, the question is whether selection and arrangement constitutes an original work of authorship as a whole. But there’s no real indication that selection and arrangement occur on a conscious or sustained basis, or matter to people. An audiovisual work is protected to the extent the displayed images are related – but economic relatedness is insufficient, according to case law.

What exclusive rights are implicated by ad-skipping? Time-shifting of course makes a reproduction, but fast-forwarding never creates a fixed ad-free display. An unfixed derivative can’t be substantially similar to the original, otherwise thinking about altering a work would violate the statute. Also, bathroom breaks would infringe. I think the fact that the so-called derivative recreates a separate copyrighted work, the underlying program (which has a separate economic existence as sold on DVDs, on iTunes, and in syndication), also should affect the analysis. Suppose someone creates a new stereoscopic view of the Mona Lisa, and that stereoscopic view is a creative, copyrightable work. If I put the stereoscope image together and recreate the Mona Lisa, shouldn’t that be back in the public domain? I don’t think “others are free to copy the original, but they are not free to copy the copy” applies when my copying produces the original, just as if I copied a public domain work out of an otherwise copyrightable anthology – even if that decreases the demand for the anthology. The work I create is not “based on” the compilation, it’s “based on” a work to which the compilation copyright owner has no rights. If we take as given that copying the underlying work for time-shifting is fair use, then extracting it from a larger work should also be fair use.

Ad-skipping may affect the value of the work to advertisers, but product placement compensates.

There are also possible § 102(b) implications involving methods of operation.

Question: Can’t the copyright owner just argue infringement based on reproduction, and use commercial-skipping as the reason to distinguish Sony? Also, wouldn’t it be great if all the commercial content was bundled with the rest of the content, so copyright owners wouldn’t care if anyone watched on YouTube? Centivany agrees, that would be great.

Who is the copyright owner of this so-called compilation? The local TV station that puts in a bunch of the ads? If you start to think about the owner, that helps you see how it isn’t really a compilation.

Question: Will this create a wasteful arms race between advertisers and consumers trying to push and avoid ads? Centivany doesn’t think we should have only product placement, but it is a successful method, showing that we don’t need litigation or legislation. (I’m not sure we’re better off in a world where free TV only has shows that allow good product placement. I like Star Trek and there are people who like historical shows.)

Suggestion: Consider analogies to pop-up blockers and other ad suppressors, which might expand the doctrinal scope of the piece.

Julie Cohen’s work and Kelly v. Arriba Soft deal with attempts to control/manage post-purchase consumption, and might provide useful lines of analysis.

Sara Stadler, Copyright as Trade Regulation. Stadler’s focus is on works that are intended to exist in multiple copies, not works of fine art. She wants to use copyright as a regulation of unfair competition and avoid the incentive trap, where authors always demand more control to add creative incentives. Stadler would allow private distribution of copies, and only regulate public distribution. This solves the problem of personal copying. It also solves problems of DRM, which would only be justified to control public distribution. And it would take pressure off of fair use, as in the Google Book Search case, where the wholesale copying would no longer be an infringement.

Comment: Line between public and private copying is pretty vague. Response: The video distribution/hotel cases show that courts can work it out. The main problem is P2P, but everyone agrees that’s public distribution.

Consider other countries’ laws, which have exceptions for private copying.

Even if the private copying destroys the total value of the copyright, is that okay? Imagine a Ponzi scheme where everyone makes 5 copies for each friend and passes it on. Answer: Yes, her argument is a utilitarian one about the value of private copying even given harms to copyright owner. Also, in reality, the viral distribution isn’t going to reach everyone through that type of limited distribution.