The Shadow of a Judicially Imposed Liability Rule

The First Amendment Lodestar 

In Copyright’s Paradox, Netanel urges the reader to consider the approach of Justice Brennan, who, writing in dissent in Harper & Row v Nation, argued that “The copyright laws serve as the ‘engine of free expression,’ only when the statutory monopoly does not choke off multifarious indirect uses and consequent broad dissemination of information and ideas. To ensure the progress of arts and sciences and the integrity of First Amendment values, ideas and information must not be freighted with claims of proprietary right.” (217). Netanel joins Brennan in the position that a proprietary approach to copyright weighs down the progress of arts and sciences. He argues that instead of a property regime, we should embrace a liability rule, which would promote private bargaining but prevent impasse and the failure of negotiations.

Netanel writes that under this new regime, “the parties would often bargain, and could be induced to bargain reasonably, under the shadow of a judicially imposed liability rule should negotiations fail.” Netanel here brings up the idea that parties will privately order their bargaining in the shadow of the law, an idea first articulated by Mnookin and Kornhauser in “Bargaining in the Shadow of the Law: The Case of Divorce,” 88 Yale L.J. 950 (1979). In assessing how divorcing parties negotiate outcomes outside the courtroom, Mnookin and Kornhauser noted that “The ‘no-fault revolution’ has made divorce largely a matter of private concern” (Mnookin, 953). Netanel, in turn, argues for a type of “no-fault” liability regime in his arguments for revising our current copyright framework. This approach incorporates the actual behavior of rational parties in addressing how to formulate legal rules. 

Free Speech, Expressive Diversity, and Human Behavior 

In the last section of Copyright’s Paradox, Netanel addresses the shortcomings of applying the idea/expression dichotomy without reference to free speech concerns. In many ways, his ideas take into account rules of human behavior. He pays attention how the internal copyright valves (e.g. fair use) operate in the real world. His free speech observations also account for the way humans act. For example, his approach to creative appropriation uses the way humans express themselves as a touchstone. Mimicry is an essential part of human development, and as some people argue, even essential to the development of human culture. 

Complex imitation, some argue (see link), has allowed for a “great leap forward” in evolutionary terms. Imitation is an ancient form of communication and connection—more advanced forms of imitation provide the basis for efficient communication and for laying the grounds of common culture. In this way, imitation provides a distinct vehicle for speech and understanding that Netanel keenly recognizes and comments on in his thoughts on opposition and expressive diversity. He notes “To successfully challenge prevailing understandings and stereotypes perpetuated by mainstream, popular expression often requires a partial melding of expressive product rather than complete product differentiation.” (p. 159, emphasis in original). This approach to creative appropriation acknowledges habits of human speech that our current method of separating idea from expression does not necessarily incorporate. Netanel rightly accounts for how we might create bargaining endowments with reference to different forms of expression and First Amendment interests.

Commercial Copyrights, Demand Diversion, and Litigation

By contrast, I worry that some Netanel’s analysis excludes some other hallmarks of human behavior that should also influence how we balance Copyright with First Amendment concerns. First, humans often determine their hierarchy of values with reference to their proprietary value. Our current system certainly lacks fine-tailoring and does not readily accommodate negotiations, but the licensing regime created within a proprietary interest model might better perform the symbolic function of law—reinforcing the importance and value of original speech. Furthermore, it’s not clear to me that the bargaining outcomes would necessarily improve given a shift in models. 

    In their article about Bargaining in the Shadow of the Law, Mnookin and Kornhauser identify the important determinants for the outcomes in bargaining:

“The factors are (1) the preferences of the divorcing parents; (2) the bargaining endowments created by legal rules that indicate the particular allocation a court will impose if the parties fail to reach agreement; (3) the degree of uncertainty concerning the legal outcome if the parties go to court, which is linked to the parties' attitudes towards risk; (4) transaction costs and the parties' respective abilities to bear them; and (5) strategic behavior.” (966)

    The bargaining endowments created by legal rules, such as the penalties that Netanel envisions for supra-pricing their licenses, therefore play a role in the success of private ordering. These endowments, however, play just one role. Judicially-crafted compulsory licenses and rules that give judges the ability to determine license fees might run into the same problems that Netanel rightly criticizes in the clearinghouse culture. Uncertainty in litigation will persist and when crafting these rules, the same rent-seeking behavior from entertainment industries that shaped the CTEA (182) might influence the form of these rules. Resistance to this influence might falter under the difficulty of the task. How shall we craft these rules when, as Netanel himself notes, “these questions cannot be answered—and thus the competitive price benchmark ofr copyright cannot be defined—without making value judgements about the types and mix of expression and speakers we want our copyright systems to foster”? (128).

    Continuing to situate the action of the bargaining in the courtroom might continue to privilege massive media players who benefit from the leverage they can bring to bear. As Mnookin and Kornhauser note: “The magnitude of these transaction costs, both actual and expected, can influence negotiations and the outcome of bargaining…As is generally the case, the party better able to bear the transaction costs, whether financial or emotional, will have an advantage in divorce bargaining.” Part of operating in the shadow of a liability regime involves calculating one’s own ability to tolerate litigation as well as the other party’s ability to do so. It is not clear to me that Netanel’s solution, as he describes it in the book, would remedy the problem of litigation transaction costs. The bargains that his regime induces therefore might continue to favor the large media conglomerates that he finds so bothersome.

   

Comments

[Anglee Agarwal]

You write that the licensing regime created within a proprietary interest model might better serve the symbolic function of law, in reinforcing the importance and value of original speech. I think that an enforced licensing scheme would definitely put values on certain types of speech, but this is not necessarily a good thing. As you and Netanel note, setting competitive prices necessarily involves some type of value judgment about the mix of expression and speakers we want to promote. More worrisome, though, setting competitive prices necessarily involves judges making value judgments about individual works of authorship. I think it is more palatable that the author of a work gets to value his speech, even assuming that there will be problems with such a personal valuation. Judges have their own personal biases and agendas. Depending on the judge’s motivation, the competitive price of a work by Rush Limbaugh or Arianna Huffington might be wildly different, when in fact the value of each work is probably similar. True, letting authors set their own prices will probably lead to fewer licenses, but maybe this is acceptable if the alternative would be judges valuing speech in ways that are based on ideology or even just the judge’s own conception of artistic merit. (Indeed, even if the judge is perfectly unbiased in setting a competitive license, there is danger in the judge’s ruling being perceived as biased-this would undermine the symbolic function of the law).