spy in the house of conservative IP thought

American Enterprise Institute Center for Internet, Communications, and Technology Policy

Copyrights and innovation: Understanding the debate

Moderator: Jeffrey Eisenach, AEI: 80% of market cap of Fortune 500 is from various forms of intangible property.  Different from traditional capital.  (RT: Well, it was never the mills alone; the knowledge of how to run them always mattered a lot.)  What is a free marketer to think?

Panelists:

Jerry Brito, Mercatus Center, GMU: Divides us because seen in moral terms: for/against property.  He doesn’t have strong moral © convictions, more pragmatic.  © is a tool that governs uses to promote a public good: access to expressive works.  Without ©, we’d have movies and poems, but fewer.  Same reaction as to other tools of gov’t to promote a public good: like cap and trade, or taxi medallions. As conservatives, we should apply the same critical thinking to © as to those things.  How do we know that the gov’t when setting the boundaries of the property right isn’t screwing it up?  A central planner has a difficult time getting the right combination of institutional rules.  Public choice: when you have a gov’t tool, interests will organize to ask for boundaries in their own favor. 

First © act after the Constitution was limited to maps, charts, and books.  Framers knew about music and art; just thought that they’d get enough of such works without the subsidy.  Today: fashion designs are excluded; is that the right balance?  First Act had 14 year renewable term, and required registration etc.  Today the term is life + 70. How do we know if that’s not enough or too much?  As conservatives, we should agree that retroactive term extension is bad.

Mark Schultz, George Mason University School of Law: Compatibility of © with free markets, in principle and as applied.

In principle, if you like free markets you should like ©.  As a property right, it supports liberty.  Property rights support independence: when people can own the fruits of their productive labor, they can support themselves and lead a truly productive existence. Owing your existence to others leaves you constantly in peril.  (Oh for a feminist reading of this.)  Finding willing buyers, not gov’t or powerful patrons = independence, allowing development of ideas freely and perfection of craft, flourishing culture. Property rights also free sphere of private action. Rights to exclude etc. help you live a private life: our own homes, phones, churches, businesses, and other private spaces facilitates economic freedom as well as cooperation, or simply being left alone as we choose.  © facilitates millions of mutually beneficial transactions.  Litigation is unfortunate exception to peaceful rule of productive cooperation. Investment/security enables private market where people engage in free expression for their own edification and entertainment (I thought it was for $ if © was the reason, but ok).  Third, property gives you a stake in self-government.  Copyright is an engine of free expression: helps generate the works that lead to reflective democracy and self-gov’t; leads to class of people who support free expression b/c they make a living from it.  Gov’t doesn’t do as well as property rights for liberty.

As applied: the institutional and legal details matter. ©’s scope is actually very narrow, protecting expression and not ideas.  It’s a force multiplier for multiplication of ideas, allowing them to proliferate freely.  © is a narrow property right, as popular entertainment shows.  (Why shouldn’t it be a broad one, given the above?)  Modern © as a product of lobbying: misidentifies the problem; it’s a problem of overregulation—© has too many price controls, compulsory licenses, and people lobby to protect themselves.  Statutory rate for music under 1909 act was 2 cents, and lasted 70 years. We’ve never had a free market in this part of the music industry. When you live under price controls, of course you’re going to lobby in self-defense.  To the extent © deviates from free markets, the problem is not enough property.  (But still a narrow one?  I am confused.)

Tom Palmer, Atlas Economic Research Foundation: Labor/desert theory—he’s skeptical of this. Hard work can lead to nothing deserving of reward if it’s not of value; hard to capture the value of a reputation. Personality theory: artist has claim against patron if art is put in ugly frame. Not a fan.  Utilitarian claims: we get more of something value.  He’s also skeptical. Did IP generate hip-hop? 

Skeptical of liberty claim. Property claim in a song is that Mark can say I can’t sing it. But that infringes on my liberty in a way that saying that you can’t go into Mark’s home and use his typewriter doesn’t. Restricts my body, my own equipment.  That’s not a silver bullet; people can innovate around all the stupid things policymakers do. © law is driven by rentseeking: term extension as clear example. Perpetual extension of right?

Doesn’t believe patent promotes innovation either, where patent mills are shaking down companies systematically. Forced to sign nondisclosure agreements after shakedowns.  Does not promote innovation.  Not much evidence it works in the arts either.  Asian meeting with lobbyists from Hollywood etc., trying to convince them that US IP law was essential to economic growth—but the one plausible thing they didn’t talk about was TM law, which is important because it protects against bad drugs. Not so much Hollywood and Silicon Valley—protectionism.  Software industry/Hollywood arguments about lack of US standard laws—harm is calculated on unreasonable basis, their market price rather than what would have been paid in reality. What we really need is good model for price discrimination, not US IP. Extending ©—there’s little evidence supporting that.

Stan Liebowitz, University of Texas at Dallas: Not sure why he’d view interference w/use of © work as any different than not being able to drive my car. Either way, it’s something you want to do that I don’t want you to do.  Free marketers do have surprising divergence on these.  Markets are better than government; should © be treated differently than real property? It always has been. But it’s not clear that it needs to be.  © is just property, relatively recent property.  People still look at it as new and created by gov’t. But we take for granted the fact that the gov’t protects property; without gov’t protection of property we’d have anarchy/chaos.  (Cf. claim a few sentences ago: markets are better than gov’t.) 

© as monopoly: fact is that © doesn’t provide any more monopoly than owning my car provides me a monopoly. Just owning a particular piece of IP. 

© as restriction of creativity: people want to use other people’s work, but you can create a work from scratch and then you don’t need to worry. If you want to borrow someone’s characters, ideas, or thoughts, you shouldn’t be allowed to use it for free any more than you should be allowed to use someone else’s land.  (Yes, he said ideas, though I presume that was a slip of the tongue, possibly a Freudian one.)

© as for corporations: Sure, some corporations benefit. Small guys benefit as well, just as in most other markets.

© as lasting forever: Crazy. Lasts longer than it used to, but it won’t reach infinity, and that wouldn’t necessarily be a bad thing anyway.

© as limiting free speech: No, it just eliminates plagiarism. (I’m embarrassed for AEI.)  You can use others’ ideas, just not their words.

Brito: There wasn’t much disagreement, though Liebowitz’s argument about the song/car ignores rivalry.  There’s still a song left over to sing.  Still broad agreement that © is property and generating innovation is good.  What we need to get deeper into is the contours.  Compatible with the free market, but what’s the difference between © and taxi medallions, also property?  Restricts people who don’t have them from driving; inheritable/transferable; lobby gov’t to protect it.  Sure they’re compatible with the free market, but why are we more skeptical of medallions than of ©?

Schultz: That’s not hard. No one created taxi medallions; they’re a gov’t entitlement. People create expressive works through expressive labor. (BUT NOT COPYRIGHT; people do create taxis too.) When one labors, all labor is ultimately productive intellectual labor when we create something new in the world.  We say people deserve to own copyrighted works because they contributed something and because they need to own that thing to live flourishing lives.  Ownership as rivalry—but all property rights impose burdens on others’ liberty. Your ownership of land makes me walk around it.  Proves too much.  Liberty is not “I do what I want”; grown up understanding is ordered liberty, reconciling competing claims/rights, and that’s what property/copyright does.

Palmer: Rivalrous v. nonrivalrous: good reason to have property, because it avoids conflict over rivalry. When there’s no property as in developing world, people fight over claims.  Property allows us to live together in peace. But that doesn’t carry over to someone in another country singing a song I wrote.  Comes down to a theory of labor as desert. People work hard in the fashion industry; how horrible they don’t get IP protection—why not?  We didn’t have © protection for foreigners until late in history, but Dickens made a bunch more in the American market than in Britain anyway through contracts.  Similar story with Tolkien, who didn’t register.  People could support him as a living by buying an authorized edition, and they did.

Free speech: Scientology showed that copyright claims can suppress free speech by controlling texts.

Liebowitz: you can sing a song without violating ©, but you can’t record it. (Um… Why is the lack of a private performance right/exception for certain noncommercial public performance ok to him, anyway?)  Nonrivalry: true, it doesn’t get used up, but the question is whether that should be crucial.  Let’s say your car depreciates over time, and not by use.  Should someone be allowed to use your car while you’re sleeping because there’s no interference with your use and no harm to you? 

Palmer: the option to use a car at any time is valuable because of the rivalry.  (E.g., you wake with an emergency!)  Embedded in sleeping is the possibility that you awake.  (Liebowitz really does insist you must sleep in his hypothetical, because that is what makes his hypothetical work, or not work, in that once the car is entirely nonrivalrous it is difficult to see why this magic car is indeed any different from copyright.)

Liebowitz: yes, there are ways around ©, but if you read the work you see British authors’ payment was less than they could’ve gotten by a considerable margin.  Dickens hated it.  Being first to market doesn’t work as well as it used to.

Atkinson (?): we snuck on to plane because it wasn’t full, and snuck into hotel because it wasn’t full, and snuck into movie because it wasn’t full: no harm because nonrivalrous?  Taxi medallion: gov’t could produce a medallion for moviemakers, and you could only make a movie if you buy the medallion. That’s not what we have here.

As a VC if they’re willing to fund a startup without IP. Vast majority are unwilling—no IP, no monetization.

Incentive component v. rights: basically no incentive effect on individuals like him—not writing for money. But has a pro writer friend who supports his family by writing; without © he wouldn’t be an author.  Rights: would be upset if someone were to take his book and publish it under their own name, though he doesn’t make money.  (Why “under their own name”?)  It’s still his property and he has a right.  Seems like a race to the bottom: who can agree to get rid of the most gov’t. He doesn’t like air quality and taxi medallions.  Isn’t less gov’t on © even more libertarian?  No, it’s not, because without it you end up with more gov’t and not less.

Jay Rosenthal, National Music Publishers Ass’n: Songwriters—in Nashville, about 30,000 standalone songwriters 20 years ago. Problems with © and piracy: only a couple hundred. We’ve lost a whole generation. Framers weren’t thinking about amateurs or YouTube—they were thinking about pro authors.  © has come full circle—it’s supposed to protect property, and he believes the empirical story in that a songwriter who gets paid will continue to write songs while one who doesn’t, including by being unsuccessful, will choose another job. You can support a © property interest while being critical of how gov’t has been bought.

We should repeal §115 compulsory license.  Led to incredible disparity of value/undervaluation of musical compositions.  Right now 9.1 cents per record; labels tried to get it down to 6. Labels aren’t subject to compulsory license.  Conservative theory should focus on compulsory licenses.  There might be argument for noninteractive public performance of sound recordings, but in other areas it’s time for the free market to work. We’ve never had a free market, and conservative theory could help here.

Jeff Bloom, Dignetwork: comparisons to car are oversimplifying. We wouldn’t be here for a seminar on trespass. The unique thing is not what © is but how you infringe.  © owners deserve compensation, but look at history of how content community has gone after tech offers very important lesson. They challenged the phonograph, the VCR, the DVR, the remote DVR, the commercial-skipping remote; won only against Aereo; courts recognized there has to be a balance. If the consumer is legitimately paying for content, shouldn’t you have the right to record it when you want? Skip ads? Watch remotely on iPad?  Impact on economics of consumer and tech are really important. 

Tom Sydnor: Would like to see debates moved past tired and inaccurate examples.  © is not like cap and trade.  Congress does not have to act like a central planner—it doesn’t prescribe outcomes/outputs. It’s a tradeable property right. If you create something with value, then you have control over how it’s disseminated. If you create something without value, your © is worthless. (Unless you use it to block someone else, of course.)

Framers protected books of plays and musical compositions—it’s not new.  Also, it was the first market focused copyright act, not the Statute of Anne which had a general compulsory licensing provision.  1790 Act didn’t have compulsory license; Framers trusted markets and we should follow their lead.  (But for life + 70, and with performance rights?)  Framers used international norm for term.  Our current norms for copyright terms are prescribed by treaty—Berne Convention, negotiated by Europeans, not by Hollywood.  US was not party to that treaty.  France & Germany wanted life + 70, so they had a departure from national treatment.  (Note the misdescription about life + 70 versus life + 50.) We can make this system work by ensuring that people have enforceable rights.

Neil Fried, MPAA: Constitutional principle behind © is that it is ultimately good for the consumer: rewarding people who make things gets you more of them. Creating a marketplace. Allows infinite variety of market relationships—consumers, producers, distributors can arrange their own relationships as tech changes. Working remarkably well.  100 online legal video services; consumers accessed 5.7 billion movies in 2013. © drives innovation to generate a marketplace. The notion that we need a balance with consumer welfare is a mistake.

Schultz: Push back against narrative that creative industries are at odds with innovation.  Creative industries’ content serve as a platform for innovation.  Motion pictures are licensing widely (if you can’t beat them…); so are publishers and music industry. Individual creators like George Lucas and James Cameron invest to create new tech to create movies we all enjoy.  There is no inherent conflict. 

Larry Spivak, Keynes Center: ability to make costless copy is part of the issue, but free is never the right price.  (I’m sure glad the AEI didn’t know that when it hosted this free event!) Our studies show that theft is not costless to society. We put out a paper looking at the giants of conservative and libertarian thought: Von Mises, Hayek, Friedman—© is completely consistent with laissez-faire economics and doesn’t create monopoly. Justice Dep’ts IP guidelines say IP doesn’t create monopoly.

Ryan [x] from Competitive Enterprise Institute: gov’t develops rules to limit property where it’s harmful, like numerus clausus. Makes property better with limits. ©: the goal is not to subsidize industry but to bring us closer to optimal amount of creation, because DRM and contracts aren’t good enough.  Q whether we should propertize something is fact-specific. Many things people create could be propertized but shouldn’t be because costs are too high/things work pretty well most of the time. With nearly perfect DRM, we might not need much ©, but right now it’s a legit tool.

[x], Federalist Society: Standup comic; jokes not subject to ©. Standup is harder than it looks—1 hour act takes a year to develop. Easy to steal. Rivalrousness: he thinks jokes are rivalrous because they can be told too many times. Comedy/creative work can depend on novelty/reaching the market first/association with your brand.  Don’t we have to consider the relationship with the public as we don’t do with other property?

Palmer: there’s a lot of innovation w/out IP and the burden of proof is on those who would demand propertization. 

Brito: comedy is an example of where you don’t need IP. There’s no dearth of comedy available. (Guy says it’s stolen; Brito asks what that means.) There are internal sanctions; we see a lot of innovative comedy without copyright. Does more copyright get us more expression remains a question.

Liebowitz: he hears the argument that people produce anyway. Maybe more songs are created now every year, but they’re garage band versus professionally created.  Burden of proof should be: every other market has IP.  Increased payments = increased supply. So the burden of proof should be on the anti-copyright.  IP supports professional careers; you get paid.

Shultz: Comedy markets are not bereft of IP; aspects are protected by © and TM. So there are ways of protecting intellectual labor. Sometimes norms can work, but two sad things: (1) sometimes when the system fails there are actual fights—that’s not a good thing. Property rights exist to stop violence. (2) They work with people with equal power, but people with more power get away with flouting the norms. Normative systems don’t always protect the weak against the strong.

Jared Myer, Manhattan Institute: Miley Cyrus owns her rights to her songs longer than if I cured cancer. Doesn’t that seem out of whack?  Retroactive extensions: are those ok?

Tom Sydnor: If © owners could get 20 years of exception-proof protection, no limitations or exceptions, idea and expression both, they would take that. © and patent differ fundamentally because scope of rights is radically different. Historical differences also matter. Rights of author approach has always mattered.  Not just a term picked out of a hat; differs from patent context.  (Actually the multiples of 7 approach historically applied to both, possibly arising from Biblical/apprenticeship heritage, as a great unpublished paper I once read argued.)

Eisenach: length of term issue—Walt Disney isn’t more likely to have created Mickey because the copyright term might someday be extended, but that’s the economic event we’re trying to affect. Instead it’s whether Disney continues to invest in things people value, which is enabled by ability to appropriate part of value created by Mickey.  (Um, that makes no sense. Why shouldn’t other people be able to acquire capital for their new works by using Mickey? You first have to decide that Disney is a better user of Mickey-related capital than any other possible producer, and that is really not a “free market” position at all.)

Atkinson (?): Nobody really cares if you can’t access Miley Cyrus.  Patents are different because we want to spur innovation and then open it up to other people, allowing others to develop derivatives. That’s very different than ©; we don’t care whether Miley Cyrus is open or closed from a societal perspective; by contrast there’s a big societal benefit from opening patents up after a short period.  (Whoa.  Also, again, my kingdom for a feminist reading; again this was a pretty direct quote.)

Liebovitz: we don’t often talk about it, but something underneath markets makes them work, and that something is government.  Gov’t is what we expect to be in place making sure the property right exists and functions.  It’s not the gov’t creating/interfering.  No easy resolution to this clash of perspectives.

Palmer: Would a VC invest in a firm without IP? No, because we have an IP system. A great deal of activity is response to the law, which should be surprising to no one. People do respond to incentives; we shouldn’t raze them, but should be skeptical of constant extension. Retroactivity was a violation of the rule of law. If you want a new incentive, do it going forward.  The industry capture that produced term extension is a good warning bell of the dangers here.

Claims made about innovation are often in a particular institutional setting. Aircraft patents: had a compulsory patent pool for a long time.  Same as no patent system at all. Hard to say there was no innovation 1970-1985. Same thing for art, books, etc. Maybe we get more.  The law should be about establishing clear rights that everyone should understand. Don’t screw around with it with extensions or retroactivity in response to concentrated interests. That’s why he’s a skeptic.

Schultz: Some of this is a reaction to the role of gov’t.  Heterodoxy: gov’t does good.  Work in developing world: a lot of free market advocates/libertarians in developing countries are not anarchists. They know anarchy and don’t like it. Gov’t is good/legit when it enforces property, contracts, rule of law. Smearing something with the gov’t brush doesn’t end the argument. We have to ask why we have the right, when should gov’t act. That’s when you look to the moral basis of the right.  That’s what distinguishes the taxi medallion from ©: people engaging in productive labor, living flourishing lives through their ability to control their property.  (Taxi drivers by contrast are apparently unworthy and do not perform productive labor.)

Term is a red herring, just prudential. Not a fundamental justification issue, but a matter of trade policy.  Reasonable argument for it as well as reasonable argument it’s too long.  We should have that argument after the effective term is longer than 5 minutes given inability to enforce.  (If it weren’t fundamental, then you should fully commit to the idea that © and patent, as property, should never end any more than property in a car/land.)  Empirical evidence for IP exists.

Brito: he was as shocked by the term argument as I was! Though for somewhat different reasons. He thinks © is obviously property and fosters innovation, but the contours of that right matter a lot. Term, whether you need registration, etc. Where we set the dial is the crux of the debate. 

Taxi medallions: the key distinction is that some on the right see it as property v. privilege—and © is absolutely a privilege.  Congress can, tomorrow, repeal copyright statute.  Congress cannot write a law that repeals property rights in your self or your personal property.  The real question is where to fix the limits.