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Copyright Law and Price Discrimination
Abstract
I show that copyright law is intimately connected to price discrimination. First, price discrimination is common in markets for copyrighted works. Second, many features of copyright law affect resale or personal arbitrage and so influence the profitability of price discrimination. For example, the first sale doctrine and the fair use doctrine often facilitate arbitrage and discourage discrimination, while the derivative and public performance rights impede arbitrage and promote discrimination. Third, optimal copyright policy requires attention to the social costs and benefits from price discrimination. I use models of price discrimination to unify the analysis of a wide range of copyright policy issues. I argue that public performance rights are desirable because they support fine-grained price discrimination and displace other forms of price discrimination that have greater social cost. I argue against a broad definition of the derivative right that includes movie merchandise. Movie merchandising usually imposes allocative and implementation costs with little offsetting benefit in terms of creative incentive. I show that personal copying and other activities possibly covered by fair use have mixed effects on price discrimination and social welfare. Finally, I argue that the importation right should not cover gray market goods and should not be used to facilitate geographic price discrimination.
... According to the InfoSoc Directive, the expression "sale" should be interpreted in a uniform and independent way inside the EU (Julie, 2007). Every mode of transfer of property is strictly linked to distribution right in the principle, subsequently excluding the public lending, rental and display. ...
Parallel import can be defined as importing goods through parallel means. Imported goods are genuine and original but importing mean is not authorized one. This piece of research analyzes the current copyright law of Pakistan to find out that whether parallel imported goods are legally allowed in Pakistan or not? It also throws some light on internationally adopted laws for this matter. Furthermore, it will give some important recommendation according to the finding based on this analysis. It will recommend the solutions keeping in view the developing status of country. Keywords: Copyrights, Parallel Import, Doctrine of Exhaustion.
... In most legal systems the use of a work free from most of the restrictions of copyright law is recognized as: (a) free uses which are acts of exploitation of works which may be carried out without authorization and without an obligation to compensate the holder of rights for the use, and (b) non-voluntary licenses under which the acts of exploitation may be carried out without authorization but with the obligation to compensate the holder of rights [37]. Examples of free uses include the making of quotations from a protected work, provided that the source of the quotation, including the name of the author, is mentioned, that the extent of the quotation is compatible with fair practice, and that the work in quotation has been lawfully made available to the public [45]; use of works by way of illustration for teaching purposes; political speeches and speeches delivered in the course of legal proceedings; and use of works for the purpose of news reporting [22]. ...
This paper is focused on openness movement and the principles that said movement declared regarding the use of works set under copyright protection to enable for open access works. The three-step-test legal edifice is deeply rooted in international copyright law; its meaning and application is of vital importance for any consideration of amending copyright law with the aim to include provisions for openness. Unless a provision for openness passes the three-step-test there can be no sustainable amendment of copyright law in favour of openness.
... In most legal systems the use of a work free from most of the restrictions of copyright law is recognized as: (a) free uses which are acts of exploitation of works which may be carried out without authorization and without an obligation to compensate the holder of rights for the use; and (b) non-voluntary licenses under which the acts of exploitation may be carried out without authorization, but with the obligation to compensate the holder of rights [18]. Examples of free uses include the making of quotations from a protected work, provided that the source of the quotation, including the name of the author, is mentioned, that the extent of the quotation is compatible with fair practice, and that the work in quotation has been lawfully made available to the public [19]; use of works by way of illustration for teaching purposes; political speeches and speeches delivered in the course of legal proceedings; and use of works for the purpose of news reporting [20]. ...
This paper is focused on openness movement and the principles that said movement declared regarding the use of works set under copyright protection to enable for open access works. The three-step-test legal edifice is deeply rooted in international copyright law; its meaning and application is of vital importance for any consideration of amending copyright law with the aim to include provisions for openness. Unless a provision for openness passes the three-step-test there can be no sustainable amendment of copyright law in favour of openness.
... Because copyrights protect creative content, they can provide owner-managers with an invaluable form of IP protection when a startup's business model and long-term strategy are predicated on a creative idea to preserve and extend the first-to-market advantage, such a novel product design or computer code. As a consequence, there is evidence that young retail businesses can leverage copyrights to increase their market share valuation (Shavell and van Ypersele, 2001), and thereafter can appropriate economic rents by charging higher margin prices for their products and services (Meurer, 2001). ...
While the value of patents is documented widely for technology ventures, whether retail ventures can improve their survival odds from patents, copyrights or trademarks remains unexplored. Given the relatively lower survival rate of retail ventures, whether investing in intellectual property could improve their survival odds is an important research question for both the retailing and entrepreneurship literatures. Based on a sample of 585 retail and 2406 non-retail ventures in the Kauffman Firm Survey, retail ventures have a lower chance of survival. Compared to non-retail ventures, patents, trademarks or copyrights in retail ventures increase the odds of survival. The findings have implications for resource allocations related to intellectual property in retail ventures.
... 11 While prices vary based on demand elasticity, Ramsey pricing operates under a profi t constraint, which 10 Most economists defi ne price discrimination by explicitly excluding cost-based price diff erentials and would not describe regulatory pricing as price discrimination. Meurer ( 2001 ); Tirole 133-34 ( 1988 ). 11 Berry 111 (1992) (Ramsey pricing is "the second-best Pareto-optimal solution for a multi-product regulated monopoly where prices set equal to marginal costs fail to cover average costs."). ...
Telecommunications infrastructure is mixed infrastructure with a long history of public commitment to commons management. As Chapter 6 discussed, the industry transformed dramatically over the past century and continues to be quite dynamic. This chapter provides an overview of the basic economic issues and the industry transformation and highlights the consistent role of commons management.
... During the survey, medicine price discrimination from one survey area to another was observed. In economics, when prices for the same product are observed to differ without any clear differences in the costs of production or distribution, the phenomenon is referred to as price discrimination (Frank, 2001, Meurer, 2001, Reekie, 1978. Therefore, the fact is strongly supported in the survey that all medicine needs to disclose on the dispensed medicine label. ...
This article is aimed at evaluating the Public Perception towards Medicine Quality and Prices in Afghanistan. A cross-sectional descriptive study involving (n = 12, 82) was conducted in six zones of Afghanistan with the response rate of 100%. During the analysis, it was found that high proportions 61.4% of Afghan doctors are prescribing quality medicines. The survey results have shown that nine out of ten (96.3%) respondents suggested that Afghan government should adopt health policies to control the medicine prices and expenditure. A similar high proportion agreed that higher medicine costs negatively affects patient outcomes (89.6%). It is strongly recommended by the respondents (93.1%) that prescription drug prices need to be regulated by the government. During the survey, it was strongly (94%) emphasized that all medicine prices need to be disclosed on the dispensed medicine label. As a conclusion, the government should take firm steps to control the quality and disparate medicine prices in the country. Unified medicine pricing policy is sought and the entry ports to be equipped with quality control staff, labs and warehouses. The medicine importing and dispensing bodies should be monitored against the performance metrics adopted.
... By staggering release and employing copyright protections, producers have the ability to prevent arbitrage. It is clear in this example, as it is more generally that sellers always benefit from price discrimination (Meurer, 2001, p. 91). The questions becomes one of determining which, if any groups of consumers benefit. ...
This article develops a more comprehensive understanding of data mining by examining the application of this technology in the marketplace. In addition to exploring the technological issues that arise from the use of these applications, we address some of the social concerns that are too often ignored.
As more firms shift more of their business activities to the Web, increasingly more information about consumers and potential customers is being captured in Web server logs. Sophisticated analytic and data mining software tools enable firms to use the data contained in these logs to develop and implement a complex relationship management strategy. Although this new trend in marketing strategy is based on the old idea of relating to customers as individuals, customer relationship management actually rests on segmenting consumers into groups based on profiles developed through a firm's data mining activities. Individuals whose profiles suggest that they are likely to provide a high lifetime value to the firm are served content that will vary from that which is served to consumers with less attractive profiles.
Social costs may be imposed on society when objectively rational business decisions involving data mining and consumer profiles are made. The ensuing discussion examines the ways in which data mining and the use of consumer profiles may exclude classes of consumers from full participation in the marketplace, and may limit their access to information essential to their full participation as citizens in the public sphere. We suggest more ethically sensitive alternatives to the unfettered use of data mining.
... The price of these choices usually declines with the viewing date. Meurer (2001) gives some examples of quantity-based versioning for information goods: software site licenses often provide discounted royalties as the number of networked machines or users grow; online databases offer discounts based on number of users or on usage by a particular user (measured by the number of searches performed, the quantity downloaded or printed, etc); music performance licenses use factors like the number of square meters in a bar or store, or the size of the audience for a radio or TV station to set quantity-based royalties; magazine and newspaper subscriptions feature quantity discounts. 8 This problem was initially examined by Mussa and Rosen (1978). ...
Price discrimination consists in selling the same product to different buyers at different prices. When sellers cannot relate
a buyer's willingness to pay to some observable characteristics, price discrimination can be achieved by targeting a specific
package (i.e., a selling contract that includes various clauses in addition to price) for each class of buyers. The seller
faces then the problem of designing the menu of packages in such a way that each consumer indeed chooses the package targeted
for her. This practice, known as versioning (or as second-degree price discrimination), is widespread in the information economy.
In this paper, we propose a simple unified framework to study the general theory behind versioning and to consider a number
of specific versioning strategies used in the information economy (namely, bundling, functional degradation and conditioning
prices on purchase history). (JEL L82, L86, K11, O34)
... The last point is necessary because it exists a broad body of literature (e.g. [14, 15, 2, 46, 44, 26, 27, 29, 9, 5, 45, 1, 28, 32, 41]) about several aspects of pricing but they all have different effects on market (i.e. customers, competitors, supplier etc.) and cannot mixed without considering there interdependencies. ...
The Feature Oriented Reuse Method (FORM), an successor of the famous Feature Oriented Domain Analysis (FODA) method, has broaden the focus of Product Line Engineering methodologies to business concerns, especially marketing. It uses the information gathered at the marketing and product planning steps to further improve the engineering of software product lines. A drawback of the FORM is, that it does not contribute much value to concerns directly related to the marketing, such as the price of a product, the management of licenses and the settlement of some features of a product of the product line. The paper is going to show a way to extend the FORM to additionally cover the whole set of features of the product line, which carrying value for the customer, not only the parts implemented by software - the functional requirements. Namely, it focuses on the introduction of economical aspects to the domain engineering. The specialization of the original FORM is called EconFORM.The specialization is introduced by formalizing the value based pricing approach of Nagle and Hogan to a process description. This description can than be used to be integrated into a Product Line Engineering approach such as FORM. A conclusion wraps the discussion up and raises questions for future research.
In the Second Edition of Copyright Exhaustion, copyright scholar Péter Mezei offers an expanded examination of copyright exhaustion, including its historical development, theoretical framework, practical applications, and policy considerations. He includes updated case law and statutory developments for the first-sale doctrine in the United States and in the European Union, covering both analogue and digital applications with an eye toward scrutinizing the common rejection of exhaustion in the resale of digital subject matter including computer programs, sound recordings, audiovisual works, and e-books. He advocates for a digital first-sale doctrine that would offer legal consistency to copyright law and a technologically feasible framework for content producers and consumers.
The concept of digital exhaustion has long been a controversial issue in EU copyright law. This dissertation explores the teleological foundations of the exhaustion-doctrine and uses this foundation to explain digital exhaustion and the concept of “copies.” The teleological foundations lie in a balancing of the interest presented by the (i) alienation of property, (ii) freedom of movement, (iii) appropriate remuneration. Additionally, the dissertation explores how digital exhaustion can be understood from the perspective of the user by employing the common-law doctrine of implied licence. Implying a licence shifts the focus from the rights lost by the author to the amount of rights conferred upon the recipient of a digital copy. This leads to an understanding of “copies” that contrasts with the current doctrine of exhaustion. Subsequently, the dissertation explores whether or not exhaustion should be reframed by employing implied licence.
The purpose of this Article is to critically analyze and examine positive Israeli copyright law under the paradigm of law and economics. The Article reviews several central and influential decisions of Israeli Supreme Court in the area of copyright law. It then analyzes these decisions in a manner that critically evaluates the reflections and impacts of the law and economics school on positive Israeli copyright law. Within this framework, the Article focuses on a selected number of cases and topics, including the Israeli Supreme Court's interpretation and application of the originality requirement and the fair use exemption. As the discussion in the Article indicates, several important decisions of the Israeli Supreme Court have indeed applied, either explicitly or implicitly, utilitarian considerations while implementing economic analysis as a focal of Israeli copyright law. One interesting observation that arises from our survey is that at least in some cases, there is no correlation between a declaratory judicial implementation of economic considerations and the desirability of the court's decision in terms of its efficiency. In several cases, while the Supreme Court applied economic considerations as its proclaimed normative compass, the outcomes of the court's decisions seem inefficient; whereas in other cases in which courts applied non-economic theories as their corner stone (while neglecting emphasis on economic considerations) the results were found to be economically efficient. © 2006, Cambridge University Press and The Faculty of Law, The Hebrew University of Jerusalem. All rights reserved.
This section provides a comprehensive analysis comparing both systems from a social welfare point of view and hence asking whether academic publishing should be organized by means of a universal closed or open access mode. The first subsection is an extensive view on both regimes and their impact in the light of the publishing game and hence the prevailing “publish or perish”—environment in scientific research. The impact on researcher’s private incentives to write high quality papers will be investigated as well as the social welfare effects when shifting towards an universal OA regime. Several robustness checks and a model extension to think outside the box of the model’s inherent contest character provide a broad picture on the superiority of either regime. The second subsection picks up on the distributive effects from shifting towards an “author pays” principle when introducing OA as the dominant publishing mode, briefly highlighting some possible distortions that may result in an obviously heterogeneous world. In this regard, especially the consequences for developing countries will be addressed, providing the analytical framework for investigating the international political economy of access to scientific knowledge in Sect. 4.2 of this chapter.
Despite some countervailing effects of a shift from the CA to the OA model—which have to be taken into account closely in the process of reconceptualizing the predominant business model in academic publishing—there is one important conclusion from our analysis and the overall research on this intriguing topic: Open access should be the future of academic publishing (Finch 2012).
In conclusion, there are several arguments to believe that the future of academic publishing should be open access. While Shavell (2010) finds that OA may strictly increase researcher’s incentives due to higher readership, our analysis also points to some countervailing effects of OA, especially when reconsidering Shavell’s assumption that most universities will cover the publication costs under an “author pays” model. We show that primarily due to rent seeking motives in the publishing game the incentives to exceed higher efforts may decrease. Nevertheless, we have stressed that this may just correct another distortion that the “publish or perish” environment in academia has enforced: namely the fact that “too many” papers are produced that are hardly ever read. Meho (2007) finds evidence for the fact that 90 % of all published papers are never cited and as many as 50 % of all papers are never read by anybody but the reviewer and the authors themselves. Moreover, we have pointed to the possible benefits but also the costs of OA publishing at the international level, especially when considering the position of developing countries.
Copyright—lat. copia, plenty or to make plenty—generally provides its rightholder with “an exclusive right to copy, reproduce, distribute, adapt, perform or display” (Scotchmer and Maurer 2006, p. 76) her works of creative expression.
In this section we elaborate on the general structure of the academic publishing market. In fact, it is important to understand how the academic publishing market and especially the journal publishing market has evolved over time. First, we will generally look at the principles of academic publishing, creating a basic understanding on the different models for scholarly publication and the players involved. Second, we will elaborate on the specific market characteristics. Facts and figures on the publishing model provide with a comprehensive overview on the immanent structure and changes of market characteristics in historical reflection. The implications drawn from this industry analysis lay the foundations when later reflecting on the effects of certain legislative or policy changes.
University presses currently exist in the dual worlds of print and digital publishing. Current staffing needs require that they hire personnel with skills and experience that mirror that present duality. Training and maintaining a skilled workforce requires a commitment to flexibility and an openness to the ever-changing nature of scholarly communication. As the scholarly publishing ecosystem continues to evolve, university presses will need to look to a future workforce that has additional training, knowledge, and experience beyond the traditional skills associated with academic publishing, one that fully embraces the realities of a digital world, the habits of new generations of researchers, and the increasing role of technology in scholarly communication. This article looks at what the future might look like, what skills might be required, and how one might prepare for that future. This article looks at practical issues in scholarly publishing pertaining to training, educating, and preparing scholarly publishing professionals for today's technology-driven world. To provide a context for my views, I'll begin by describing the nature of publishing at The Pennsylvania State University Press. Next, I'll explore what contemporary publishing means within the setting of a university press. Then, using the following questions as a guide, I'll map what skills might look like, now and in the future. One, what skills and expertise are publishers looking for in "contemporary book and journal publishing"? Two, where/how does one acquire those skills? Three, as publishing evolves, how will the skill sets for publishers change? And, four, where are publishers looking now for help in that future.
The online environment and new digital technologies threaten the viability of the music and film industries' traditional business models. The industries have responded by seeking government intervention, among other means, to protect their traditional models as well as by developing new models specifically adapted to the online market. Industry activity and public debate have focused on three key policy areas related to copyright holders' control of content: technical interference with and potential liability of P2P services; copyright infringers' civil and criminal liability; and legal reinforcement of digital rights management technologies (DRM). This paper seeks to support policymakers' decision making by delineating the potential consequences of policy actions in these areas. To do so, it assesses how such action would impact relevant social values and four business models representative of current and emerging attempts to generate viable revenues from digital media. The authors caution that government intervention is currently premature because it is unlikely to strike an appropriate balance between achieving industry goals while supporting other social values, such as consumer rights, the diversity of available content, and technological innovation.
ABSTRACT Differences in national intellectual property rules may cause economic activity to shift from one jurisdiction to another, so that a higher-protection rule will be undermined by lower-protection rules of other jurisdictions. This chapter illustrates this phenomenon with four examples: different rules on the enforceability of anti-reverse engineering clauses of software licenses, on the protectability of bio-engineered research tools, on peer-to-peer file sharing, and on exceptions to anti-circumvention rules. It considers several options nations may have to respond to such intellectual property arbitrage, none of which is likely to be very effective. Differences in national rules enable IP arbitrage The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), concluded in 1994, has narrowed the range of issues on which nations can adopt differing IP rules. All World Trade Organization (WTO) Members, for example, must now protect computer programs by copyright law. Yet, TRIPS plainly contemplates continued differences in national laws by signaling that nations are free to adopt higher-protection rules than the required minima (which presumably means they need not do so). Members are also “free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.” TRIPS restricts national autonomy by forbidding nations from treating foreigners less well than their own nationals, but this implicitly “accepts the proposition that states may differ in their substantive laws.”
Increased use of the intellectual property label to describe copyright and related areas of law has spawned analogies to the protections afforded real property. These analogies ignore significant differences between the foundations that undergird real and intellectual property rights. In particular, real property rights operate to avoid breaches of the peace and tragedies of the commons—problems that do not arise with intellectual works—while copyright and other intellectual property rights are designed to provide an incentive to create, an incentive irrelevant when land is at issue. These disparities in justification caution against routine importation of real property concepts into copyright law., After exploring the weak correlation between justifications for rights in land and in works of authorship, the article explores how the disparate justifications should and do shape doctrine. In particular, the Article suggests that differences in the duration of rights, in the scope of the right to exclude, and in the availability of injunctive relief can be explained by differences in justification for property rights. The Article then turns to the interplay between copyright and contract, and suggests that here, too, the difference in foundation for real and intellectual property rights cautions against resort to easy analogies to resolve unique and difficult problems. Reprinted by permission of the publisher.
Copyright is at once an engine of free expression and impediment to free expression. Copyright law underwrites much literature, journalism, music, art, and film. Yet copyright often stands in the way of speech that would build upon existing expression to convey new messages and artistic perspectives.
In a seminal 1970 article, Melville Nimmer, the leading copyright and First Amendment scholar of his day, aptly termed the copyright‐free speech conflict a “largely ignored paradox.” Yet today that conflict has come virulently to the fore, and copyright is increasingly chastised as a tool of private censorship.
Why has that happened? What values and practices does the copyright‐free speech conflict put at stake? How should the conflict be resolved?
These are the principal questions this book seeks to answer. This book explores the copyright‐free speech conflict as it cuts across traditional and digital media alike. In so doing, it juxtaposes the dramatic expansion of copyright holders' proprietary control against individuals' newly found ability to digitally cut, paste, edit, remix, and distribute popular sound recordings, movies, TV programs, graphics, and texts the world over. It tests whether, in light of these developments and others, copyright still serves as a vital engine of free expression and assesses how copyright does—and does not—burden speech. Taking First Amendment values as its lodestar, the book argues that copyright should be delimited by how it can best promote robust debate and expressive diversity, and it presents a blueprint for how that can be accomplished.
Copyright law today is straining to keep pace with rapid technological advance in information technologies. For example, through the Internet today a copy of a digital file can instantaneously and flawlessly enter the collections of many individuals, thus potentially depriving the copyright holder of revenue from licensed sales. As a consequence, holders of copyright on a variety of types of creative works in digital format are questioning the right of consumers to make use of copyrighted materials in potentially infringing ways. Consumers, on the other hand, have begun to chafe at copyright owners' use of digital technologies to impose obstacles to some uses for copyrighted works to which they have become accustomed. Copyright law has implications not just for producers and consumers of copyrighted material but for society at large. First, economic growth from investments in digital hardware, software and in communications are linked, at least in part, to the availability of creative content in digital form. Hence, when and how the digital copyright debate is resolved may influence the growth of those sectors of the economy. Second, potential revisions to copyright law may have an impact on broader social concerns such as individual privacy and free speech.
In this contribution, it is investigated what the apparent economic policy goals are of the EU Copyright Directive of 2001. Additionally, it is explored what, according to mainstream economic theory, will be the likely result of the new regulations on copyright law. The article concludes that the Directive appears to be based on a great belief in the beneficial effects of granting to information producers broad property rights in information products and in the ability of the market mechanism to achieve an optimal result in the information market. However, it may well be argued that the apparent faith in the 'invisible hand' of the market is unjustified where information products are concerned. There may be valid arguments for the legislator to intervene by limiting the freedom of contract and by curtailing the freedom to block any information usage technologically.
The conventional wisdom that antitrust is less tolerant of monopoly than is intellectual property (IP) law is sometimes true, but there is another side of the coin that is less frequently commented upon and that deserves further scrutiny. On occasion, IP law condemns conduct on the part of IP owners - or excuses otherwise infringing activity on the part of IP defendants - expressly for the purpose of promoting competition, even though antitrust law (if it were to apply at all) would not find anticompetitive harm absent a more thorough analysis of whether the antitrust defendant possesses power over a well-defined market. Salient examples include the misuse doctrines in patent and copyright law; some applications of merger and fair use in copyright; and trademark law's functionality doctrine. In this paper, I develop an explanation for this divergence between antitrust and IP. Specifically, I argue that in some limited contexts the expected social costs (including error costs) of ruling for IP defendants are relatively low in comparison with the expected anticompetitive harm from ruling for IP plaintiffs. As a result, it is sometimes welfare-enhancing for IP courts to be less concerned than antitrust courts about the expected costs of "false positives," that is, cases wrongly decided against the party defending the allegedly anticompetitive conduct. Thus, in an appropriate case courts should deploy IP doctrine to prevent harms that would be deemed unduly speculative, or not cognizable at all, in the analogous antitrust context, including (1) harms stemming from the exercise of small-scale, transitory, or localized market power; (2) harms that are individually of little competitive significance, but which in the aggregate threaten a substantial reduction in consumer welfare; (3) threats to dynamic efficiency stemming from the reduction of competition in innovation markets; and (4) potential reductions in expressive output that, for reasons rooted in the First Amendment, may be qualitatively, but not quantitatively, significant. I further contend, however, that such cases probably are more common in the copyright than in the patent law context, and that even in copyright contexts courts should be cautious about casually inferring anticompetitive harm; but that the analysis provides a rationale for a relatively expansive definition of trademark functionality.
Countless high profile cases like the recent patent litigation threatening to shut down the BlackBerry® service have long drawn sharp criticism; and in response, most of the intellectual property (IP) literature argues for the use of weaker, or liability rule, enforcement as a tool for solving the problems of anticompetitive effects and downstream access while still providing sufficient rewards to IP creators. This paper takes an unconventional approach under which rewards don't matter much, but coordination does matter a great deal. The paper shows how stronger, or property rule, enforcement facilitates the good type of coordination that increases competition and access. The paper further shows how, paradoxically, the reforms urged by IP critics end up facilitating the different, bad type of coordination that decreases competition and access. Simply put, the paper shows how policy debates would be radically improved by consideration of these two different coordination effects. The paper follows the general approach of the field called New Institutional Economics ("NIE"), which has explored many problems that are triggered by different institutions of laws and norms. Because no institution is perfect, the NIE approach suggests that our choices among institutions must be informed by our views of the solutions we most want and the problems we can best mitigate or bear. The paper explores a theory of the institution of property rights backed up by property rules as playing a particular, good role in facilitating coordination among many diverse complementary users of an asset in a way that increases competition and access. Under this view, coordination is offered as an alternative to other goals that have been suggested including internalizing externalities, mitigating rent dissipation, or providing direct incentives, and property is offered as an alternative to other institutions or organizations that also can facilitate this coordination goal, including, norm communities such as open source projects, firms, and government. The paper also shows how property rights backed up by weaker, or liability rule, enforcement can play a particular, bad role in facilitating the kind of coordination among large, established players that decreases competition and access. The shift in focus towards the link between property rule treatment and coordination has several practical effects. First, it explains why many of reform proposals of yesterday and today that do not use the coordination approach should be expected to exacerbate the two key persistent problems of anticompetitive effect and reduced downstream access. Second, it explains why certain aspects of IP regimes may be working well and why others may be candidates for change or elimination. Third, it elucidates factors that cut against changing IP regimes in ways that likely will exacerbate the two key persistent problems of anticompetitive effect and reduced downstream access. Providing one example of how the coordination approach could inform practical policy discussions, the paper frames a discussion for evaluating a case against the present copyright regime.
Controversies often arise at the interfaces where intellectual property ("IP") law meets other topics in law and economics, such as property law, contract law, and antitrust law. Participants in the debates over how to mediate these interfaces often view each interface as a special case deserving unique treatment under the law. The doctrines of copyright and patent misuse are cases in point: they graft select antitrust principles onto copyright or patent law, even though there is an entirely distinct body of law - antitrust law - designed to deal with the putative concerns about competition that allegedly give rise to misuse. In this essay, we argue that a better approach for mediating disputes at the periphery of IP law focuses on what we term the "basics" - or core principles and features - of each area of law, and rarely requires specialized frameworks. For example, according to our "basics matter" approach, there is no need to create special doctrines or approaches to address issues relating to matters such as price discrimination or restrictive licensing arrangements involving IP. Rather, analyzing the legality of such arrangements simply requires one to look to the basics of substantive IP law, antitrust law, and what some people call the "general law" - property law, contract law, and the like. Applying the basics of each area of the law gives us a workable - and more predictable - framework of analysis than creating one - with more specialized approaches, such as the doctrines of copyright or patent misuse, using the basics results in easier to apply rules for resolving disputes that transacting parties can better understand and rely on in advance. By reducing legal uncertainty, the "basics matter" approach facilitates the ex ante coordination necessary to promote innovation through the commercialization of the inventions, symbols, and creative works that are protected by patents, copyrights, and trademarks - the entire goal of IP law and an important goal of antitrust law.
From an economic perspective, giving copyright holders the right to control production of derivative works - works that transform their expression, such as the movie version of a novel - is unjustified, even harmful. Current scholarship either defends this entitlement as economically sensible or partially reconfigures it. This article assesses the dominant economic rationales for derivative control, and finds them weak at best. Unlike other copyright scholarship, this piece argues that since the right prevents production of attractive, diverse, cheaper new expression, and blocks the promise of re-mix culture, it should be eliminated. This change would also concentrate attention on the adaptation right's role as a proxy for other copyright concerns, primarily the risk of derivatives substituting for initial works. The article proposes re-configuring copyright law to unfetter transformative expression while safeguarding copyright's other entitlements. Finally, it concludes by suggesting that economic arguments cover more deeply held beliefs, based on personality theory or labor-desert conceptions, supporting control over adaptation.
In most countries the right to publicly perform music is not administered individually by the copyright holders but rather collectively by Performing Rights Organizations (PROs). The common explanation behind the proliferation of collective administration is that some aspects of copyright administrations are natural monopolies. It is often argued that individual administration is impracticable or at least non-economical. Collective administration is therefore promoted as the most efficient method for licensing, monitoring and enforcing those rights. In addition, since the market is a natural monopoly, regulation, rather than an attempt to foster competition, is thought to be the optimal regulatory response.This is a first in a series of two articles that critically analyzes this natural monopoly argument. In this article I argue that the case for PROs is not as straightforward as it is assumed to be. I show that many of the underlying cost efficiencies that are attributed to PROs are usually simply assumed, and in many cases could be equally achieved under less restrictive arrangements. The next article will show that technological changes that can facilitate the online licensing of music undermine the natural monopoly framework even further. This is a pre-copy-editing, author-produced PDF of an article accepted for publication in the Journal of Competition Law and Economics following peer review.
This Note will address the salience of a simple analogy: will privacy law be for the information age what consumer protection law was for the industrial age? At the height of industrialization, the United States market for consumer products faced instability caused by a lack of consumer competence, lack of disclosure about product defects, and advancements in technology that exacerbated the market's flaws. As this Note will show, these same causes of market failure are stirring in today's economy as well. The modern economy is not one of goods but of information, and although consumers have long been aware that their personal information may have marketing value, the Internet has fundamentally changed the scope and depth of information collection, exposing more consumers than ever to injuries requiring not just a comprehensive remedy but a wholesale change in the level of care of the information industry. Just as the mass-production economy precipitated a wave of reforms in consumer protection (in part thanks to a kick-start by author Upton Sinclair), so too must the mass-information economy adapt. After demonstrating the parallels between the problems of today with those of yesterday, this Note will propose parallel solutions, particularly a consolidation of regulatory power and a new tort for breach of information privacy, which draws its inspiration from general products liability. These proposals show that rather than reinvent the wheel, modern lawmakers can (and should) answer today's problems with lessons from the last century.
This article explores the lawfulness of servitudes on personal property in both common law and intellectual property regimes. The common law has from ancient times recognized the general right of owners of real property to burden land with restrictions on use - restrictions that "run with the land" - subject to various conditions and limitations. It has been more ambivalent about similar restrictions on personal property. Why? That was a question broached seventy-five years ago by Zechariah Chafee, though he never fully answered it. Today, the question has acquired a new importance because of the pervasive use of computer software licensing restrictions that, for all practical purposes, can be regarded as a form of property servitude. Software licensing restrictions implicate specialized rules of intellectual property, such as the first sale doctrine. However, those rules are basically derived from common law policies (most notably policies against restraints on alienation and restraints of trade) so the question about the legality of such restrictions is essentially no different for intellectual property than for common law property. In all events this article argues that the traditional hostility to use and resale restraints on personal property is misguided in both the common law and intellectual property contexts. While there may be legitimate reasons for limiting an owner's right to impose post-transfer restrictions on use and resale, those reasons are more exceptional than has been commonly assumed. Moreover, in the new digital world where servitude-type restrictions can be engineered into the architecture of the property right itself public policy restrictions on contractual "servitudes" may prove to be ineffectual, raising a new reason to take a fresh look at old conceptions of personal property servitudes.
Noncommercial users of peer-to-peer systems, such as Kazaa and Gnutella, should be free to distribute and modify files as they wish. But providers of services and devices the value of which are substantially enhanced by such P2P file-swapping should be charged a statutory fee - what I term the Noncommercial Use Levy ("NUL") - set as a percentage of gross revenue. Likely candidates include Internet access, P2P software and services, computer hardware, consumer electronic devices (such as CD burners, MP3 players, and digital video recorders) used to copy, store, transmit, or perform downloaded files, and storage media (like blank CDs) used with those devices. Once collected, levy proceeds would be allocated among copyright holders in proportion to the popularity of their respective works and of user-modified version of their works, as measured by digital tracking and sampling technologies. I estimate that an average levy of some 4 percent of annual retail revenues of P2P-related goods and services would be sufficient to compensate copyright holders for the lost revenues they suffer as a result of NUL-privileged activity, at least for the next 5 years. Following my description of the NUL and how it would operate, I consider some common criticisms that scholars have put forth regarding levies. These include the argument that the NUL would unfairly and inefficiently require low-volume users of copyright-protected material to subsidize both copyright owners and high-volume users. I then favorably compare the NUL with three proffered alternatives for resolving the P2P file sharing controversy. These include (1) "digital abandon," a regime in which the law accords authors neither proprietary control nor a right to receive remuneration for P2P uses of their work; (2) "digital lock-up," a regime in which proprietary copyright reaches full fruition as copyright holders use digital encryption to control all uses of their works; and (3) a regime of government compensation to copyright holders paid out of general tax revenues rather than a levy on P2P-related goods and services. My proposed NUL is not a panacea. But a balance of trade-offs favors it over the alternatives.
My thesis is that while James Madison saw in copyright a coincidence of private interest and public good, historically copyright, with its roots in the Statute of Anne, originated and has developed as a devolution of the sovereign's role in cultural production. This devolution has over time lead to an expansion of private rights over various forms of expressive activities, including literary works, musical works, software, architectural works, and as I emphasize in this article, model legislation, religious texts, and encryption technology. The contemporary debate over copyright reflects this devolution that has been accelerated through decades of deregulation in such diverse areas as the airlines, telecommunications, financial services, law enforcement, pollution control, education, and income distribution policy. Hence, the title of this article: the time has come to recognize both copyright law as a form of privatization and the need to deprivatize copyright in order to realize the public good that Madison envisioned.
Adhesion contracts, many of them now in clickwrap or browsewrap form, proliferate and govern nearly every commercial transaction and most of the ways in which the modern consumer interacts with the world. Virtually every one of these contracts contains a limitation on copyright's fair use doctrine. These widespread and non-negotiated restrictions on fair use ("super-copyright" provisions) conflict with and stand as an obstacle to the achievement of federal purposes, but most courts and many commentators have rejected preemption as the appropriate doctrinal tool for addressing challenges to these provisions. This Article argues that enforcement of super-copyright provisions ought to be preempted. Preemption is the doctrine designed to address the interaction between state law and federal policy; other doctrinal approaches, such as state contract defenses and formation doctrines, do not do the work necessary to mediate between federal and state interests. In addition, preemption in this context is a way of acknowledging and emphasizing the proper institutional structure of copyright policymaking. By permitting copyright owners to contract around fair use, courts have improperly abdicated their fair use policymaking role while at the same time arrogating to themselves policymaking regarding contracting around fair use, which is a task that should be placed at Congress' door.
Patents both promote the development of health technologies as well as constrain access to them. Access constraints on patented medicines, diagnostics, and agricultural innovations can severely compromise human health, particularly for low-income populations. To help address this challenge, this Article explores mechanisms for integrating distributive safeguards in the patent system in a manner consistent with strong property rights and private ordering. Finding existing patent doctrine inadequate, this Article examines solutions arising from the developmental histories of particular health technologies. In particular, this Article argues that public institutions, which contribute enormous amounts of "scientific capital" - money, labor, and bodily materials - to life sciences research and development, can effectively leverage these contributions to enhance access to downstream patented technologies. By providing vital capital, government, academic, and nonprofit entities both weaken the economic need for exclusive rights as well as obtain limited co-ownership stakes in resulting inventions. By exercising this leverage, public institutions are helping to create a "distributive commons" that enhances access to patented health technologies for low-income populations. This Article surveys existing practices, providing prescriptions to address the chilling effects and technical competence concerns that undermine distributive efforts. It concludes by challenging prevailing theoretical preferences for individual rather than communal ownership of property, highlighting the advantages of public-private co-ownership of nonrival resources.
This paper deals with the legal regulation of mail-in consumer rebates - a significant, yet controversial marketing practices that has generated thousands of consumer complaints, inspired countless articles in major periodicals, and begun to attract the interest of state and federal legislators. The paper first aims to provide an understanding of the purposes of consumer rebate offerings. It then surveys the main categories of consumer rebate complaints, including that firms impose onerous requirements to discourage rebate redemption and that they fail to pay rebate rewards in a timely manner. The paper then draws on recent marketing, psychological and behavioral economics research to address the potent claim that rebates exploit sub-optimal consumer behavior. The latter part of the paper evaluates several possible regulatory options for consumer rebates, including unfair and deceptive trade practices litigation, informational or de-biasing laws aimed at reducing sub-optimal consumer behavior, and legislation that sets mandatory rebate promotion terms. The paper also discusses how the market has already begun to respond to consumer dissatisfaction with rebate promotions. In the end, the paper argues that the most egregious rebate promotion abuses can be managed with a minimum level of paternalistic intervention while preserving the welfare-enhancing benefits of rebate promotions.
Among drivers of evolution, two forces tower above all others. One of them is food. The other is sex. The seed is both. Information embedded in seed is amenable to various forms of proprietary protection. In the abstract, the Plant Variety Protection Act (PVPA) provides an attractive alternative to utility patents on plants and to the protection of hybrid crops as trade secrets. In practice, the PVPA has failed to become the preeminent form of intellectual property in plants. This article explores some of the reasons for this apparent statutory shortcoming. First, this article outlines the case for a substantive canon of statutory interpretation derived from the Constitution's requirement that federal intellectual property laws advance the Progress of Science and useful Arts. Second, this article applies this canon to the PVPA. In particular, it addresses the PVPA's controversial crop and research exemptions. Third, this article discusses the statutory requirement that applicants for plant variety protection deposit reproductive material in a public repository. Fourth, this article assesses the practice of seed-wrap licensing as a contractual response to reproductive breeding, brown-bag sales, and other activities putatively conducted under the PVPA's crop and research exemptions. This article concludes by defending its constitutionally informed approach to interpreting the PVPA, which appears to be a rare instance in the annals of contemporary intellectual property law in which proprietary protection is not excessive, but rather insufficiently robust.
The Supreme Court's Brand X decision has reignited the debate over "network neutrality," which would limit broadband networks' authority to impose restrictions on end users' ability to access content, run applications, and attach devices and to charge content and application providers higher prices for higher levels of quality of service. In this Article, Professor Christopher Yoo draws on the economics of congestion to propose a new analytical framework for assessing such restrictions. He concludes that when transaction costs render metering network-usage uneconomical, imposing restrictions on bandwidth-intensive activities may well enhance economic welfare by preventing high-volume users from imposing uncompensated costs onlow-volume users. Usage of bandwidth-intensive services can thus serve as a useful proxy for congestion externalities just a sport usage served as a proxy for consumption of lighthouse services in Coase's classic critique of the economic parable of the lighthouse. In addition, content delivery networks and other commercial caching systems represent still another innovative way to manage the problems associated with congestion and latency that would before closed by network neutrality. Furthermore, allowing network owners to differentiate their services can serve as a form of price discrimination that can mitigate the sources of market failure that require regulatory intervention in the first place. This frame work suggests that broadband policy would be better served by embracing a network diversity principle that would eschew a one-size-fits-all approach and would allow network providers to experiment with different institutional forms until it can be shown that a particular practice is harmingc ompetition. At most, concerns that telephone companies may prevent end users from using their digital subscriber line(DSL) connections to access Voice over Internet Protocol (VoIP) provide support for targeted regulatory intervention. They do not justify a blanket prohibition of end user restrictions that network neutrality proponents envision.
The conventional approach to analyzing the economics of copyright is based on the premise that copyrightable works constitute pure public goods, which is generally modeled by assuming that such works are non-excludable and that the marginal cost of making additional copies of them is essentially zero. These assumptions in turn imply that markets systematically produce too few copyrightable works and underutilize those that are produced. Moreover, any attempt to alleviate the problems of underproduction necessarily exacerbates the problems of underutilization and vice versa. In this Article, Professor Christopher Yoo argues that the conventional approach is based on a fundamental misunderstanding. A close examination of the foundations of public good economics reveals that the defining characteristic of public goods is the need to satisfy an optimality criterion known as the "Samuelson condition," which gives rise to a source of market failure that is distinct from the problems posed by non-excludability and zero marginal costs. Reframing the analysis in terms of the Samuelson condition also expands the number of ways in which the assumptions underlying pure public goods can be relaxed. In so doing, it suggests that markets for copyrighted works are more properly analyzed as impure public goods. Unlike markets for pure public goods, markets for impure public goods exhibit no systematic bias toward underproduction and are not bounded away from providing efficient levels of utilization. The insights of impure public goods theory thus have broad implications for a wide range of copyright-related issues, including fair use, duration, compulsory licenses, database protection, digital rights management, and derivative works.
More than 150 years into development of the doctrine of "fair use" in American copyright law, there is no end to legislative, judicial, and academic efforts to rationalize the doctrine. Its codification in the 1976 Copyright Act appears to have contributed to its fragmentation, rather than to its coherence. This Article suggests that fair use is neither badly conceived nor badly applied, but that it is too often badly understood. As did much of copyright law, fair use originated as a judicially-unacknowledged effort via the law to validate certain favored social practices and patterns. In the main, it has continued to be applied as such, though too often courts mask their implicit validation of these patterns in the now-conventional "case-by-case" application of the statutory fair use "factors" to the defendant's use of the copyrighted work in question. A more explicit acknowledgement of the role of these patterns in fair use analysis is consistent with fair use and copyright policy and tradition. Importantly, it helps to bridge the often-difficult conceptual gap between fair use claims asserted by individual defendants and the social implications of accepting or rejecting those claims. Finally, a pattern-oriented approach is normatively appropriate, when viewed in light of recent research by cognitive psychologists and other social scientists on patterns and creativity. In immediate terms, the approach should lead to a more consistent and predictable fair use jurisprudence. In the longer term, it should enhance the ability of copyright law to promote creative expression.
This article aims to examine empirical evidence on how the Chinese music industry has adapted and developed in the shadow of rampant copyright piracy. Based on the analysis of public statistics, industrial data and existing market surveys from various secondary sources, this article suggests that a high level of piracy could have profound effects on the profitability, business model and creative process of domestic musicians. As copyright piracy obstructs the communication of consumer preferences to musicians, an increasing number of musical works are created to accommodate the tastes of entrepreneurs (e.g. sponsors and advertisers) rather than those of average consumers, which has caused a fundamental shift in the creative process of the Chinese music industry. Although entrepreneurs should arguably be willing to take whatever is popular among music fans as a draw to their own products, the expectations of entrepreneurs and consumers do not always meet in a dynamic market setting. For this reason, the interests of less commercial artists and new artists are most likely to be compromised. The empirical findings in this article have the potential to break the legal collusion with respect to copyright enforcement in China. On paper, the government constantly updates copyright statutes to comply with international standards. In reality, enforcement authorities (including courts and administrative bodies), without true appreciation of the value of copyright protection, only implement such statutes half-heartedly by means of sporadic enforcement campaigns and modest penalties. Pirating enterprises are consequently undeterred by copyright law and willing to take the risk of legal penalties as part of the costs of doing business. This legal collusion inevitably gives rise to a huge gap between copyright law in book and copyright law in action. By highlighting the fact that piracy of foreign works could pose a threat to the livelihood of domestic musicians in a more formidable way than to foreign firms, this article could hopefully supply a compelling reason for China and similar developing countries to tighten up copyright enforcement and create a healthy legal environment for the sustainable development of indigenous cultural industries.
The article describes a future copyright system for the Internet according to which the copyright owner is free to choose between exclusive exploitation on the basis of digital rights management and a business model where users may lawfully share the work for non-commercial purposes in peer-to-peer networks in exchange for an indirect payment through a levy or tax. This model is derived from an analysis of current proposals pleading for an adoption of levies or taxes in the digital network environment. The article explains that all of these currently discussed models violate international treaties on copyright (the Berne Convention, the TRIPS Agreement, the WCT), because they fail to acknowledge that these treaties mandate exclusive rights and anti-circumvention provisions as the statutory default in national copyright law. However, national copyright law would be compliant with these treaties if it left exclusive rights plus anticircumvention rules intact but gave copyright owners an incentive to opt for compensation without control by establishing a levy or tax system that was only available for those right holders who voluntarily registered their works for this alternative compensation system. As the article shows, such a bipolar copyright system (exclusivity on the one hand, a levy or tax system on the other) would address most of the concerns articulated by copyright pessimists without denying authors the right to decide about the use of their work on the Internet. Most importantly, it could be implemented immediately without having to amend international copyright law.
Is software licensed or sold? Software licensing occupies a unique position at the intersection of contracts, intellectual property, and commercial law doctrines. The difficulty in analyzing software licensing issues directly results from the sui generis nature of software which leads to the construct of what I refer to as the "software licensing dilemma" - if software is sold and not licensed, the licensor's ability to control unauthorized uses of its product is significantly curtailed; on the other hand, if software is licensed and not sold, the licensee's rights under the agreement are unduly restricted. Currently, the use of contract law to evaluate software license agreements is problematic, not because the doctrine is not up to the challenge but because those who use the rhetoric of contracts have tended to impose an artificially static view of what contract law demands - a view which wholly ignores the philosophical objectives underlying contract law. In this Article, I propose adopting a "dynamic contracts" approach to resolving the software licensing dilemma. A dynamic contracts approach aims to effectuate the intent of the parties while balancing their intent against policy considerations. A determination of the parties' intent would include examining both the nature of the transaction and the terms of the written document or license agreement. This Article argues that the validity of a license grant should not be inextricably tied to the validity of the contract. Contrary to what is suggested by the first sentence of this Article, software transactions are not a binary proposition. While some transactions can clearly be identified as either licensing or sales deals, many (perhaps the vast majority) entail both. The recognition of the independence of license grant provisions exposes the binary proposition of license v. sale as a false dichotomy. In applying a dynamic contracts approach, this Article also addresses several policy considerations relevant to interpreting two often disputed license provisions - the restriction on transferability and the restriction on commercial use.
Shrinkwrap, clickwrap and browsewrap licenses have complicated contract law by introducing non-traditional methods of contracting to govern the use of software. The retention of the underlying intellectual property by the licensor, and the malleable qualities of software, give rise to the ability and the need to set parameters of use. The courts have tended to defer to the ownership rights of licensors by claiming that there is valid contract formation, even in "rolling contract" situations. Some commentators have argued that existing contract law doctrines - such as unconscionability and good faith - are sufficient to address digital-era contracting dilemmas. While such arguments have their place in discussions about contract enforcement, because these doctrines are standard contract defenses, they fail to explain a finding of contract formation. In this Article, I propose a theory for non-negotiated software licenses. A consumer's assent to a transaction should not be transmuted into blanket assent to each individual term of a non-negotiated contract. Instead, the concept of "assent" should be bifurcated into two parts, actual assent and presumed assent. Actual assent means express agreement, not simply to the transaction, but to each of the individual material terms. Presumed assent means that the licensee, by expressly agreeing to the transaction, may also be presumed to have assented to certain of the contract terms. The licensee should not be presumed to have assented to all contract terms, however, as is currently the case under the "blanket assent" approach to contracts. Whether the licensee's assent to a given term may be presumed depends upon the operative effect of the term. The licensee may be presumed to have assented to provisions governing the "scope of license" or the "terms of use" (as further defined) to the software or website because such terms establish the conditions upon which the licensor has agreed to make the digital information available. The licensee's performance under the contract, however, would be conditioned upon notice. Furthermore, the caption heading of "scope of license" or "terms of use" would not be determinative. The licensee should not be presumed to have assented to provisions that impose affirmative obligations or purport to take away the licensee's legal rights. Part I of this Article introduces the doctrinal problems related to non-negotiated software licenses. Part II proposes a 2-part methodology that first analyzes whether the putative licensee has assented and the nature of that assent (i.e. whether it is general assent to engage in a transaction or whether it manifests assent to the disputed term). The second step examines what terms govern the activity and determines enforceability according to the nature of the assent. Part III summarizes and analyzes the current case law using my proposed methodology, and applies the methodology to a sample license agreement. Part VI concludes that a presumption of assent to license terms and a requirement of actual assent to other material terms both respects the integrity of contract doctrine and accommodates business realities. A requirement of active assent affects the consumer experience and is therefore likely to influence contracting behavior.
Memes are hypothetical units of cultural transmission discussed and debated in the writings of Richard Dawkins, Daniel Dennett, and other contemporary scientists and philosophers. This paper uses the meme concept to address several aspects of copyright law. In particular, the paper presents the copyright system as forming part of the environment within which these units of information replicate and evolve. Changes in the copyright system affect not only the quantity of memes that are created and published, but also their diffusion, diversity, and quality, and the ways in which these units compete against one another for human attention spans. These evolutionary changes are unpredictable in their particulars, but it may be possible on occasion to predict some rough trends and to foresee potential tradeoffs along the various dimensions of quantity, quality, diversity, and diffusion.
In continental Europe, copyright law is traditionally viewed as a so-called 'natural' right - briefly put: it is simply right for the author to enjoy the fruits of his labor. However, socio-economic considerations are becoming more in important in European copyright doctrine. One reason for this tendency is that more and more copyright matters are regulated at the EU level and that the European regulator explicitly adheres to the economic rationale for copyright law. In this contribution, it is investigated what the apparent economic policy goals are of the EU Copyright Directive of 2001 - which is by far the most ambitious piece of EU legislation in the area of copyright to date. The purpose of this article is not to set-out new, cutting-edge economic theories on copyright law, but merely to analyze what the explicit and implicit aim of the Directive is and to explore what, according to standard, mainstream and widely known economic theory, will be the likely result of the new regulations on copyright law. Will the Copyright Directive succeed in achieving its apparent goals? What does economic theory predict about its impact? The emphasis is on the most important and controversial changes that the Copyright Directive brings about. These are the introduction of a right of temporary reproduction, the limiting of the exhaustion of copyright, the abolishing of remuneration rights and, last but certainly not least, the broad protection of technological measures - i.e. DRM systems. The article concludes that the Directive appears to be based on a great belief in the beneficial effects of granting property rights in information products and in the ability of the market mechanism to achieve an optimal result. However, it may well be argued that apparent faith in the 'invisible hand' of the market is unjustified. Particularly, the public good character of information products is not taken into account. Moreover, the provisions of the Directive may hinder competition to a further extent than copyright traditionally did, which could have an undesirable result as well. Additionally, the apparent reliance on market forces to match the demand for uses with the offered technological usage restrictions may be unsubstantiated. There may be valid arguments for limiting the freedom of contract and the freedom to block any information usage technologically.
Copyright piracy is one of the most difficult, yet important, transnational problems in the twenty-first century. Although legal literature has discussed copyright piracy extensively, commentators rarely offer a "grand unified theory" on this global problem. Rather, they give nuanced analyses, discussing the many aspects of the problem-political, social, economic, cultural, and historical. This nuanced discussion, however, is missing in the current public debate. To capture the readers' emotion and to generate support for proposed legislative and executive actions, the debate often oversimplifies the complicated picture by overexagerrating a particular aspect of the piracy problem or by offering an abbreviated, easy-to-understand, yet somewhat misleading version of the story. Such oversimplification is dangerous, for it creates misconceptions that not only confuse the public as to the cause and extent of the problem, but also mislead policymakers into finding solutions that fail to attack the crux of the piracy problem. In light of this shortcoming, this Article discusses four common misconceptions about copyright piracy: (1) Copyright piracy is merely a cultural problem; (2) copyright piracy is primarily a development issue; (3) copyright piracy is a past phenomenon for technologically-advanced countries; and (4) copyright piracy is a necessary byproduct of authoritarian rule. It then attempts to reconfigure the misguided public debate on copyright piracy by underscoring the need to focus on the copyright divide - the gap between those who have stakes in the copyright regime and those who do not. This Article concludes by warning that the United States might not be able to eradicate the piracy problem unless its legislators and policymakers are willing to change the lawmaking process by taking into account the interests of both the stakeholders and nonstakeholders.
Piracy is one of the biggest threats confronting the entertainment industry today. Every year, the industry is estimated to lose billions of dollars in revenue and faces the potential loss of hundreds of thousands of jobs. To protect itself against Internet pirates, the entertainment industry has launched the latest copyright war. So far, the industry has been winning. Among its trophies are the enactment of the Digital Millennium Copyright Act, Vivendi Universal's defeat and purchase of MP3.com, the movie studios' victory in the DeCSS litigation, the bankruptcy and subsequent sale of Napster and its recent relaunch as a legitimate subscription-based music service, the Supreme Court's rejection of the copyright bargain theory in Eldred v. Ashcroft, and the recording industry's relative success in its mass litigation campaign. Notwithstanding these victories, the war is expanding and has become even more difficult for the industry to fight than it was a year ago. Today, copyright law is no longer a complicated issue that is only of interest and concern to copyright lawyers, legal scholars, technology developers, and intellectual property rightsholders. Rather, it is a matter of public significance, affecting all of us in our daily lives. The ground has shifted. If the entertainment industry does not pay attention to the public and if it continues to use ill-advised battle strategies, it eventually might lose the war. Delivered as part of the 2003 Frontiers in Information and Communications Policy Lecture Series at Michigan State University, this Article examines the strategies used by the entertainment industry to fight the copyright wars: lobbying, litigation, self-help, education, and licensing. It also explores the impact of Eldred v. Ashcroft on these strategies, the decision's ramifications on future constitutional challenges to copyright laws, and recent developments in the international copyright arena. It concludes by arguing that the entertainment industry should change its existing strategies in light of the proliferation of peer-to-peer file-sharing networks and the increased consciousness of copyright issues.
Creators and owners of intellectual properties are alarmed by the growth of technologies that ease the tasks of copying these properties. This paper, however, shows that the unauthorized copying of intellectual properties need not be harmful and actually may be beneficial. The empirical impact of photocopying on publishers of journals is examined in an attempt to discover if publishers can indirectly appropriate revenues from users who are not original purchasers. The evidence indicates that publishers can indirectly appropriate revenues from users who do not directly purchase journals and that photocopying has not harmed journal publishers. 18 references, 1 table.
The Internet offers the fastest reproduction and distribution of information ever known, presenting fundamental challenges to copyright law. Practically anyone with a personal computer can receive and send information over the Internet, and so practically anyone has access to copyrighted works and can duplicate them, adapt them, or disseminate them. From the perspective of a copyright holder, even a single innocent use represents a threat. This Article examines the controversial proposal that Internet Service Providers ("ISPs") be held liable for the copyright infringements of the subscribers. The Article takes the position that the existing case law considering ISP liability for subscriber copyright infringement - under theories of direct liability, vicarious liability, and contributory liability - thus far has struck an acceptable balance between the property interests of copyright holders and the First Amendment rights of subscribers. The Article supports this contention with an examination of the rationales underlying the closely analogous field of enterprise liability in tort. It then examines recent Congressional legislation - the Digital Millenium Copyright Act ("DMCA") - providing "safe harbors" for ISP liability. The Article concludes that the DMCA, unless properly interpreted, threatens to upset the balance struck by the case law by creating an incentive to unduly restrict the free speech of subscribers.
Software piracy by users is generally believed to harm both software firms (through lower profits) and buying customers (through higher prices). Thus, it is thought that perfect and costless technological protection would benefit both firms and consumers. The model developed here suggests that in some circumstances, even with significant piracy, not protecting can be the best policy, both raising firm profits and lowering selling prices. Key to the analysis is joining the presence of a positive network externality with the fact that piracy increases the total number of program users. The network externality exists because consumers have an incentive to economize on post-purchase learning and customization costs.
This paper investigates the strategic pricing of consumer durable products which can be acquired through either purchase or reproduction (e.g., computer software). As copy piracy results in an opportunity loss, its adverse effect on profits needs to be incorporated in strategic decisions such as pricing. Using a dual diffusion model which parsimoniously describes sales and copying, and employing control theory methodology, optimal price trajectories are derived for the period of monopoly. The results indicate that (a) in absence of any protection, skimming pricing strategies are generally optimal, and (b) copy protection is warranted only when sales diffuse much faster than copying and the protection technology does not significantly raise the marginal production cost.
In an attempt to protect their intellectual property and compete effectively in an increasingly dynamic marketplace, software publishers have employed a number of preventive and deterrent controls to counter software piracy. Conventional wisdom suggests that reducing piracy will force consumers to acquire software legitimately, thus increasing firm profits. We develop an analytical model to test the implications of antipiracy measures on publisher profits. Our results suggest that preventive controls decrease profits and deterrent controls can potentially increase profits. Empirical results are also presented that support the proposition on the impact of deterrent controls on the extent of software piracy derived from the analytical model.
Previous authors who have considered partially nonexcludable goods have claimed that an increase in copyright protection will have the following two effects on social welfare. First, it will decrease the social welfare loss due to underproduction. Second, it will increase the social welfare loss due to underutilization. In this paper we investigate these claims in a formal setting by analyzing a model in which consumers vary only in terms of their costs of obtaining a reproduction. Our analysis provides partial support to the first claim of these previous authors while giving little or no support to the second claim.
This article considers an externality that affects abroad range of markets, specifically markets where one set of firms sells some platform technology such as a computer, video game console, or operating system, while another possibly overlapping set of firms sells peripherals compatible with that platform, for example, computer software or video game cartridges. The externality causes certain peripheral sellers to charge prices that are unprofitably high. That is, these firms could earn greater profits if only they could coordinate to charge lower prices. In many markets, such coordination is possible: firms can contract, for example, or integrate. In markets based on relatively new platform technologies, however, coordination will typically be difficult. The article explains why and argues that intellectual property law can and should facilitate price coordination in these "emerging technology" settings. Copyright 2000 by the University of Chicago.
This paper finds that unauthorized reproduction of intellectual property in the presence of demand network externalities can not only induce greater firm profits relative to the case where there is no copying, it can lead to a Pareto improvement in social welfare. Ceteris paribus, when network externalities are present, firms have a greater incentive to expand output because marginal revenue is higher and/or they may wish to create preemptive installed bases. This paper suggests that unauthorized copying can be a relatively efficient means of achieving this by allowing the firm, in effect, to 'price discriminate' among different classes of consumers. Copyright 1994 by Blackwell Publishing Ltd.
R&D spillovers are, potentially, a major source of endogenous growth in various recent "new growth theory" models. This paper reviews the basic model of R&D spillovers and then focuses on the empirical evidence for their existence and magnitude. It surveys the older empirical literature with special attention to the economic difficulties of actually coming up with convincing evidence on this topic. Taken individually, many of the studies are flawed and subject to a variety of reservations, but the overall impression remains that R&D spillovers are both prevalent and important. Copyright 1992 by The editors of the Scandinavian Journal of Economics.
Twentieth Century Fox was convicted of violating the 1951 paramount consent decree, to which it was a party, by block-booking in Minnesota and elsewhere, and was fined $500,000
- William K Knoedelseder
MCA Television Ltd. v. Public Interest Corp., 171 F.3d 1265 (11 th Cir. 1999) (applied
the per se rule and condemned package licensing of television shows). "As recently as December, 1988,
Twentieth Century Fox was convicted of violating the 1951 paramount consent decree, to which it was a
party, by block-booking in Minnesota and elsewhere, and was fined $500,000." William K. Knoedelseder
Jr., Fox Indicted on Charges of Block-booking Films, L. A. TIMES, Oct. 7, 1988 at Business, part 4, page
152 (showing that block booking can be used to price discriminate)
- Stigler
Stigler, United States v. Loew's, Inc.: A Note on Block Booking, 1963 SUP. CT. REV. 152 (showing that
block booking can be used to price discriminate). His work has been extended and generalized in many
directions. See e.g.,W. J. Adams & Janet L. Yellen, Commodity Bundling and the Burden of Monopoly, 90
Aggregation and Disaggregation) (subscriptions are economically similar to bundles --aggregation over time versus aggregation over products)
- B Hurley
- H Kahin
- Varian
Hurley, B. Kahin, and H. Varian, eds., MIT Press 16 (hereinafter Bakos & Brynjolfsson, Aggregation and
Disaggregation) (subscriptions are economically similar to bundles --aggregation over time versus
aggregation over products).
sellers can discourage sharing by either increasing copyright enforcement or by cutting the price
- Yehning See
- Ivan Chen
- Png
See Yehning Chen and Ivan Png, Software Pricing and Copyright: Enforcement Against End-Users,
unpublished manuscript, May 1999 (sellers can discourage sharing by either increasing copyright
enforcement or by cutting the price);
Increasing enforcement or anti-copying technology both cause the optimal monopoly price to fall. Id. The DMCA prohibits devices used to circumvent copy protection technology. See Meurer, supra note 2
- Id
Id. at 39. Increasing enforcement or anti-copying technology both cause the optimal monopoly price to
fall. Id. The DMCA prohibits devices used to circumvent copy protection technology. See Meurer, supra
note 2, at 882.
1996) (technology for sharing videogame cartridges found infringing)
- D Wash
D. Wash. 1996) (technology for sharing videogame cartridges found infringing);
A customer may license an object code copy of IBM's AIX Version 3.2.5 for between $ 650 and $ 12,100, with the price dependent upon the number of users and the size of the machine for which the object code is licensed
- O' See
- Rourke
See O'Rourke, supra note 60, at 533. A customer may license an object code copy of IBM's AIX
Version 3.2.5 for between $ 650 and $ 12,100, with the price dependent upon the number of users and the
size of the machine for which the object code is licensed. Id.
) (the Business Software Alliance settled copyright infringement claims against 20 small and medium size businesses --most of the infractions involved exceeding the quantity restrictions in site licenses)
Trade associations help reduce enforcement costs by achieving economies of scale. See Watchdog
Group Announces Settlements with 20 Software Pirates, N.Y. TIMES, (June 27, 2000) (the Business
Software Alliance settled copyright infringement claims against 20 small and medium size businesses --most of the infractions involved exceeding the quantity restrictions in site licenses);
each side has studies about the impact of Napster on sales. The industry studies show that Napster use reduces sales and the Napster studies show the opposite
- See Matt Richtel
See Matt Richtel, Napster and Record Industry Clash over Sales and Copyrights, N.Y. TIMES, July 4,
2000, <http://www.nytimes.com/library/tech/00/07/biztech/articles/04music.html> (each side has studies
about the impact of Napster on sales. The industry studies show that Napster use reduces sales and the
Napster studies show the opposite);
133 sharing may increase profit because of network effects)
- Mgmt
- Sci
MGMT. SCI. 125 (1991) (133 sharing may increase profit because of network effects);
- U S C
499 (19xx) (prices are discriminatory because "the implicit price paid for individual films will vary across markets.") Of course, I am not really interested in whether we can identify discrimination -I am
- See Roy
- Cir Th
- U S
- See Meurer