Tech Policy Seminar

Mr. Fix-It Has a Little Too Much Faith in His Tools

So, I wrote this post last week but forgot to, uh, post it. At least I'm only two hours late...

Ground Rules

Before I begin the substantive portion of my post, I think it’s necessary and important to get meta for a moment. When making policy proposals in the area of copyright law, virtually all assertions suffer from a lack of empirical support. It’s simply very difficult to measure the effects of policy moves on overall output, or variety of creative production—particularly in the post-registration regime. This, of course, frustrates any attempts to persuade by aversion to the data—and should, then, inform the persuader that temperance and tolerance of contrary views are essential. When a point can be made only through theory, dismissing those who disagree is rather presumptuous. As an example, I give you Mr. Netanel. While I agree with the general tenor of many of Netanel’s proposals for changes to copyright law, what really bothers me is his reluctance to adequately address counterarguments in their most flattering light. In a debate short on empirics generally, Netanel’s refusal to tell both parts of the story only weakens the force of his contentions.

Understanding Netanel

One can sum up Netanel’s general approach to copyright reform with two terms:
“derivative works” and “big media”.  Throughout the course of Copyright’s Paradox, these two themes color all of Netanel’s positive perceptions and normative proposals. He generally believes that at present, the vast majority of creative output in the U.S. is authored by media conglomerates who stifle independent creators with an overzealous (and law-endorsed) assertion of their copyrights (p. 167).

It seems to me, however, that technology—and not law—is the driver of this phenomenon. Now that digital creation and dissemination technologies have altered the mechanics of creative production, we’re seeing a dramatic surge in the creation and sharing of media from an incredibly diverse body of sources; in the past, the huge upfront costs necessary for creating a reputable newspaper, television program, or widely-disseminated literary work by force resulted in a few big players who could afford the cost and turn a profit on the back end. It wasn’t the law or human will inhibiting production, but economics. As a result, we should not take as our aim the dethroning of Big Media and defense of the little guy, but rather the maximization of creative output in both quantity and variety—while relatively agnostic to its source.

Oh, and in order to understand Netanel, we must also recognize that he really, really loves The Wind Done Gone and appropriative uses of The Simpsons. (We all have our pet topics.)

Specific Issues

Onto the meat. A comprehensive analysis of all Netanel’s proposals would be far too lengthy, so I’ll limit myself to a chosen few.

Copyright Term Length, Orphaned Works, and Google Book Search

One of the first topics that Netanel considers is that of copyright duration and its interaction with preservation efforts, particularly digital archives. This debate centers around the fate of orphaned works, and how such works can best be treated so as to enrich the cultural archive. Here, for the most part, I agree with Netanel’s basic position that the extension of copyright terms provides no marginal incentive to create. The obvious next point, then, is that such terms are problematic in that they tie up long-abandoned works (and even vibrant, successful ones) from subsequent productive uses down the line. While I don’t mind the notion of renewal payments for the few particularly  profitable copyrights, it seems that Landes and Posner’s idea that longer copyright terms incentivize dissemination for orphaned works goes too far. Given that such works have already been created, we should care most about what rule will be most likely to get them “out there”. Prior to digital scanning and archiving technologies, granting a property-esque, longer copyright term may have been the best solution, but given the advent of several digital archiving efforts of both commercial and noncommercial nature, it seems clear that these efforts are the  most promising avenue for dissemination of orphaned works. If Google Book Search or Project Gutenberg want to archive a work that no one else has been incentivized to disseminate in the last 20 years or so, there’s no reason to stop them—particularly given the likely derived benefit from the public generally.

Fair Use Reforms

Deriving from his First Amendment concerns, Netanel argues that courts should give more weight to transformative expressions and purpose when evaluating fair use under Section 107. I’m fine with this added weight, as I, like Netanel to a degree, feel that additive creation is too constrained at present. It’s hard to see how such a change will take place, though. We can urge judges all we want from the sidelines, but short of an actual insertion of weights into the text of Section 107’s enumeration of factors, I’m not sure much will change. Even then, given how muddy and unpredictable fair use analysis already is, it’s hard to expect much solid, quantifiable progress.

The more problematic aspect of this suggestion is that Netanel supports “favored status” for preservation-style efforts like Google Book Search merely because of its transformative nature (p. 191). True, Netanel recognizes the need for some sort of “remuneration” to authors, given GBS’ sure impact on ex ante creation incentives (p. 210), but to characterize the compilation of virtually every book available as transformative is ridiculous. Merely creating a compendium is not transformative; clipping, organizing in a novel way, providing commentary and analysis, sure. But mere aggregation is not.

Netanel’s next fair use suggestion—that market competition be completely dropped from the fair use analysis—is more troubling (p. 191). Such a change would, in my view, clearly go too far (p. 191). Surely ex ante creation incentives would be dampened if we allow transformative uses regardless of their impact on the market for the original work. The more pertinent question, though, is whether such a move would on balance reduce original creation more than it incentivizes transformative creation. Of course, this is hard to say, but it seems to me that given its centrality to an author’s ex ante motivation, the competitive impact of a secondary work should at least be granted token consideration.

The notion of burden-shifting in fair use cases does seem appropriate to me. Given the difficulty of proving a negative (here, the absence of market harm) and our general goal of promoting creative production and dissemination, it surely seems correct to require the copyright owner to prove any harm caused by appropriative uses.

“Reasonable” Madness

My final concern is with Netanel’s persistent use of the “reasonable” rate, “reasonable” royalty, and “portion of the work” idea. As we know from regulated industries, the idea that independent bodies of experts, judges, or anyone else is capable of accurately setting market-mimicking rates is mere fantasy. For example, on Netanel asserts that “secondary authors should only be required to disgorge to the copyright holder the proportionate share of their profits attributable to using the underlying work (p. 197, emphasis added). That’s a great idea in concept. But how in the world is anyone to determine what share of a secondary authors’ profits derived from use of the original work and not from that author’s creative genius? This notion of independent rate-setting is a plague that runs throughout Netanel’s arguments, and which seriously undercuts the viability of his core ideas about consumptive uses (copyright levy for peer-to-peer file-sharing, e.g.), appropriative uses, and damages and remedies.. If no one is capable of setting acceptable rates, his entire regime of take-and-pay falls apart.

Conclusion

While I think that Netanel accurately perceives a copyright regime which too often stifles appropriative and derivative uses of existing works, his approach is seriously flawed. (Disclaimer: I’ve got nothing better, so stones can fairly be tossed into my glass house.) By failing to fairly explain anecdotes, history, and opposing views in an even-handed manner, misunderstanding the past, taking his arguments too far, and ignoring the limits of independent rate setters, Netanel converts his great treatise on copyright reform into just another mixed bag of ideas good and bad.

Tortured Economics and My Tortured Pages

I dog-ear books in places I find exceptionally interesting. It's an old habit. I have dog-eared every page of the last twenty-plus in Copyright's Paradox. This tells me I have more to say than is sane, so I'm just going to focus on the economic incentive issues raised by the last portion of the book.

Getting the Incentives Right

Netanel argues that extended periods of copyright protection are unnecessary. He does so on several grounds, one of which is the willingness of publishers to print and distribute books in the public domain. (Page 201.) He cites as evidence of this Mark Lemley's comments about Ulysses. Obviously, though, a great many public domain works simply go out of print entirely. Netanel makes much of this in the following pages, but overlooks a trouble spot: some works would not go out of print if copyright still existed. Classics stay in print, to be sure, but a great many volumes in any major library would be cost-prohibitive to reproduce in physical form if there is even a risk of competition in that work from another publisher. The potential market for many of these books is so small that any competition makes all players net losers.

The problem is this: we all are familiar with the "forever period stream" function for the value of a perpetual copyright. That is, PV = C/r (present value of a work with eternal returns equals periodic value over rate of interest). The fact that the value of a copyright decays with time means that when we set time limits, the law of diminishing returns applies - the value of year 28 in a copyright is less than the value of year 27, for example, and so on. In order to incentivize authors and publishers, we must give them the bulk of their potential profits. After all, if all one could get from writing Harry Potter novels was royalties on the first 25% of book sales, fewer popular books would probably be written, unless one could be confident of a roaring success. Once we get out to year 150, say, not to mention year 1,000, unless the market is tremendous - fueled, perhaps, by tenth-grade required reading lists - the marginal returns are usually too small to make it worthwhile for more than one player to enter the market. Because of the up-front costs of printing a book, this risk is likely to be enough to keep everyone out, lest anyone be caught by surprise. The average bottom-dwelling new release on Amazon probably still produces more revenue than the average five-volume tome on eighteenth-century European ornithology, and the prospect of competition makes the reprint even scarier.

What I'm getting at is simple: provide the opportunity to print something free of competition, and people will take the opportunity. Impose the risk of huge sunk costs, small marginal costs, and small marginal returns made smaller by competition, and there may be no takers, even when society might benefit from the reprint.

Beware the Huddled Masses - They Have Broadband

One argument that bothered me terribly in this section was on page 208. Netanel argues for "largely unrestricted noncommercial file sharing while remunerating copyright owners." The economic reasoning on this page has utterly befuddled me. Netanel says we should compensate copyright owners for file sharing through "a noncommercial use levy - set as a percentage of gross revenue." Yet, he has already provided that the only covered uses are noncommercial - those who are "not receiving monetary compensation" are the people shielded. I find unconvincing his argument that it is possible for a peer-to-peer software platform to enable sharing, while profiting itself yet obtaining the benefits of this shield. More importantly, I don't think you can spell this out so clearly that courts will never find that platform providers or ISPs can be made liable for profiting when users share copyrighted files.

What really blows my mind, though, is the argument that the only fees assessed would be as a percentage of gross revenue. There are millions - maybe billions - of people sharing files at a loss, with no intent of making money on the practice, already. This surely is noncommercial - if I give an MP3 to Douglas Baird for his own amusement while we sip Scotch, neither of use is receiving monetary compensation. Yet there is no revenue to be levied. BitTorrent, Napster, and plenty of other platforms are used mostly by people with no monetary interest in their actions of uploading, downloading, or making available copyrighted works. That leaves us with only the purely commercial enterprises - Netanel mentions YouTube (which barely generates any gross revenue, anyway) and ISPs - to tax. Do we really want to pay $150 for Internet access to subsidize the neighbor's kid who runs a mini-server farm to share movies over BitTorrent? Even if we could measure the amount of copyrighted material users access - a technically daunting prospect which also implicates tremendous privacy concerns due to the necessities of monitoring and filtering at the ISP level - ISPs are network industries. Their profit margins are necessarily extremely small, and the prospect of a 4% levy on gross revenue (pages 208-09) might cause many ISPs either to stop providing service or block all of the content Netanel wants us to be able to access, because it will be impossible to obtain a competitive rate of return while providing unfiltered access.

Fossilizing the Tree of Knowledge (While Saluting Star Trek)

I haven't watched anything Star Trek in years, now. I remember clearly one episode of The Next Generation, though, which I happened to catch, called "Darmok." I kept thinking of that episode the entire three weeks we have spent on this book. In "Darmok," Picard and crew encounter a strange alien race, The Children of Tama, who speak entirely in metaphor, by reference to shared stories. For example, a complete statement or question in their language would be "Chenza at court," or "Kiazi's children, their faces wet."

The episode has prompted numerous fan dictionaries, of course, like this one. There is a world of irony in the fact that people are producing dictionaries and fan sites around a race who learned to communicate solely through stories and shared meaning. There is also the more relevant irony of the fact that this is a kind of fan fiction, perhaps most like the Harry Potter Lexicon - these dictionaries are meaningless without a copyrighted show and unquestionably quote or retell large parts of it, yet they also unquestionably help explain a very confusing hour of television and have social value as a result.

Back to the episode. The premise is all necessarily very circular, of course - The Children of Tama have to explain their own metaphors to each other in metaphor - and tends to confuse the living daylights out of the Enterprise crew, who are not used to thinking in this way.

What struck me most severely and often about Netanel's book is his dogged insistence on free sharing of stories and the freedom to produce remixes, mashups, and fan fiction (his apologia for moral rights on 215-16 notwithstanding). In Netanel's ideal copyright regime, one can easily see countless derivative works produced around the Harry Potter characters, for example. I have an uneasy feeling - unfounded, probably - that this would tend to impoverish our culture by blurring the lines between independent and dependent creation. Harry Potter is popular not only because the books are well-written, but because they are different. Perhaps not all that different from books like The Black Cauldron or Tolkien's writings, but different enough. In a world flooded with fan fiction, though, imagine how difficult it will be for an author to break away from any given mold - as stories grow farther and farther from their roots, the line between original authorship and yet another knockoff of some story might be very unclear, indeed. Music, with its limited vocabulary of tones and rhythms, might be even more rapidly exhausted.

Some people would say this is not problematic, that a book's value and meaning is in the mind of the reader, and likewise for other types of creative works. Thus, if the fan fiction and mash-ups convey something interesting, why would we care if the work is independent or derivative? I disagree. We would not even have the original work that prompted a derivative work, unless somebody had a creative flash. There may be a hundred ways to retell the story of Romeo and Juliet, but the value of the eponymous play is immeasurable. More importantly, the brand value - the signaling value in the name "Shakespeare" - has social worth. We want to know that the original source - whoever that really was, in this case - is a source of quality, so we can obtain more work like the play in question and incentivize the author to keep writing.

Netanel's idealized copyright regime, on the other hand, produces for me a mental image of our currently ever-expanding and growing tree of knowledge and thought suddenly and unexpectedly calcifying, as societies lose their ability to be creative. When parents, teachers, and children become more and more accustomed to derivative works - books, music, movies, and so on - thinking up something truly new will be harder and harder. I worry that such a permissive regime will damage that tree, until fewer and fewer branches are able to bear fruit and truly independent imagination is stifled in ways neither copyright nor the First Amendment are intended to bring about.

Conclusion

I have no doubt that the quotes from Picasso, Stravinsky, Eliot, and Guthrie on page 58 hold much truth. I worry, however, lest they become actual truth; we may not mind the theft of a musical, poetic, or artistic idea, but we should encourage a creative repackaging of the idea so we... don't really notice it. When the line between creation and theft blurs too much, we may care a great deal less about any of the themes we have discussed this quarter. Google's accumulation of knowledge may seem less intimidating, privacy may have lost its distinctive nature (with too many stories about a person or group of people, who really cares how many are true?), and we may all plug into a universal computer, but if we no longer care about true independence in creation, we may not care all that much if we're not that distinguishable in our lives, either.

Perhaps I'm simply jaded. I'd like to think, though, that our independence - in our thoughts, our creative output, and our choices to reenact light saber battles in front of a camcorder - is something we really want to fight for.

TM Dilution & Fair Use v. Copyright's Equivalents

Last week, Prof. Picker had mentioned the similarities between a Copyright holder's desire to avoid exploitation of his or her work, and the corollary in Trademark Law known as Trademark Dilution.  I think we discussed Dilution in the context of derivative works, but perhaps it was in the context of moral rights.  Trademark Law from two semesters ago was escaping me in class, but I thought about it some over the weekend and a few things came to mind.

TM Dilution allows owners of famous marks to bar the use of the famous mark on products outside the mark's relevant market (ie, uses that would likely not satisfy the Likelihood of Confusion analysis).  A typical example is selling a Coca-Cola T-shirt.  The idea is that by using the mark so broadly it either weakens its identifying characteristics, or makes it look like the company, Coca-Cola, endorsed the subsequent product, the T-shirt.

Much in the way a TM holder seeks to avoid the Dilution of his TM; a Copyright holder presumably seeks to bar derivative works that portray his or her work in a negative light. 

There's another aspect to this TM-Copyrihgt analogy however: TM Law also has a "Fair Use" exception.  Though structurally different from that of Copyright, it serves many of the same functions.  TM's "nominative fair use" allows an individual to use a TM when referring specifically to the marked good or service in question.  As such, a dilution claim likely would fail where one is using the mark in a manner that refers to the specific good, even if in a disparaging manner.  The class discussion left me with the impression that TM Dilution might somehow inform a copyright regime that restricts "fair use" or derivative works, but floating in the background of TM law is a provision that addresses some of the very free-speech concerns in "Copyright's Paradox". 

More Pending Legislation: The Pro-IP Act

On the topic of pending Legislation... while the Orphan's work bill seems to give something to the "Free Speech" side of Netanel's Copyright Paradox, the "Pro-IP Act" (which passed the House two weeks ago) throws a bone to the Copyright-Enforcement wing, Link (Ars Technica).

The Pro-IP Act would establish a new copyright enforcement division with the Department of Justice and create a new position for a federal copyright enforcement czar. The bill would also enable law enforcement agents to seize property from copyright infringers.

I imagine the idea is to target wholesale pirates, but I'm interested to see how the new resources and tools will be applied in practice.  In particular, I'm curious as to how the DoJ Czar decides who's copyrights to protect. (Note: Bill hasn't passed the Senate yet) 

Criticism of orphan artworks bill

To follow up on Chris's post:
http://www.nytimes.com/2008/05/20/opinion/20lessig.html

Orphan Works Bill Clears Senate Committee

FYI, from Ars Technica.

A Copyright View of the Cathedral

I’m intrigued by Netanel’s proposal for replacing a property rule with a liability rule in the areas of derivative works and colorable but unsuccessful fair use, but I wonder whether uncertainties as to the type of use, the reasonable value of a license and negative effects on the underlying work might inhibit private bargaining in the shadow of the rule.

Distinguishing Fair and Derivative Uses

In the fair use arena, Netanel proposes first a broad, purposive definition that would allow a fair use defense wherever the appropriator adds new expression or value that “imbues the original with a different purpose or character in furtherance of distinct creative, critical, communicative, or informative objective” (191). Second, it would be the copyright holder’s burden to show that the appropriator had used more than necessary, which would seem a difficult burden given the plasticity of what might be deemed “necessary” to a given expression. And finally, damages for a colorable but unsuccessful claim of fair use would be limited to the reasonable license fee. (192)

For derivative works, as for colorable but unsuccessful fair use claims, Netanel proposes to replace an entitlement with a liability rule. He qualifies Jed Rubenfeld’s proposal that secondary authors should be free to distribute derivative works subject only to disgorgement of profits attributable to using the underlying work (197) by 1) exempting certain genres like screenplays, 2) providing for a limited period of exclusivity to preserve incentives (198), and 3) providing a kind of moral rights compensation for loss of creative control (215). To encourage private bargaining, the secondary author would be penalized for failure to notify the copyright holder or refusing to pay a price less than or equal to the judicially apportioned profits (i.e. if it refused to accept a reasonable or better-than-reasonable deal).  Likewise, the copyright holder would be penalized if the judicially determined fee falls a certain percentage short of its licensing offer (i.e. if it tried to charge too much).

One question I have is how these regimes would interact. Because Netanel’s definition of fair use is broad and purposive—“imbues the original with a different purpose or character in furtherance of distinct creative, critical, communicative, or informative objective” (191)—it seems that the line between fair use and derivative works might be difficult to police. Would the liability for a colorable but unsuccessful fair use claim (reasonable license fee) be the same as for a derivative work (profits attributable to using the underlying work)? If so, it would seem that appropriators would want to claim unsuccessful fair use whenever possible because of the lack of penalties for failing to notify and strike a reasonable bargain, and also because of the exemption from the period of exclusivity for derivative works.

Bargaining in an Uncertain Shadow

Replacing a property with a liability rule would seem to make sense for derivative and colorable but unsuccessful fair uses for the Calabresi-Melamed reason that transaction costs may be high where rights to the work are fragmented (i.e. the tragedy of the anti-commons). But I suspect that bargaining may also be inhibited by uncertainty about how much the secondary work owes to the original. Netanel cites a movie executive’s dictum, “Nobody knows anything,” for the proposition that the market for creative works is extremely uncertain. Under Netanel’s proposed derivative works regime, it would seem extraordinarily difficult to determine how much of the secondary work’s profits are “attributable to the underlying work.” It is easy to imagine a good deal of self-serving bias leading to a disparity in estimates of the value added by the underlying work, even assuming that the parties are bargaining in good faith. Of course, the parties will be bargaining in the shadow of sanctions if they fail to offer or accept a reasonable licensing deal, but I wonder whether parties will have any degree of certainty as to what percentage of profits a judge might deem attributable to the underlying work.

Another area of uncertainty, which admittedly can be easily clarified, has to do with the meaning of “profits attributable to the underlying work.” I think the “profits attributable to the underlying work” metric might be construed (perhaps a bit creatively) to capture something like the more traditional metric of the displacement effect of the secondary work on the copyright holder’s ability to enter the market occupied by the secondary work. In other words, the copyright holder could have entered that market if it added value 5 to its existing value in the underlying work 10 (total value of 15). To the extent that the derivative work displaces the copyright holder’s ability to enter the relevant derivative market, the secondary author owes the copyright holder a fraction of 10/15 or 2/3 of its profits. So if half the derivative market is taken by the derivative work, then the copyright holder is owed 1/3 of its profits. On reflection, however, it’s probably more likely that Netanel means “profits attributable to the underlying work” would apply even if there was no displacement of the copyright holder’s ability to enter the relevant derivative market. I think the first version is more favorable to secondary authors (no payment without displacement—and only payment to the extent of displacement), but the plain meaning of “profits attributable to the underlying work” would seem to suggest the latter interpretation.  (In favor of the latter approach is that there is only one step to the calculation, easing the information-gathering costs.)

I guess my point is that although liability rules are said to be good where parties have difficulty bargaining, it may be optimistic to hope that they will be able to bargain more effectively in the shadow of a liability rule that is fraught with uncertainties.

Negative Externalities

Another area of uncertainty which might tend to inhibit private bargaining is that of the negative externalities of the secondary work. Netanel briefly refers to the negative impact of loss of creative control in the moral rights context, suggesting that the price of licensing should reflect that negative impact. Another negative externality would be a derivative work that lowers the value of the original by, for example, mocking it.  (This is something we discussed a bit during the last class.)  If that lost value were incorporated into the cost of the license, it would seem to have adverse policy implications in terms of raising the cost of critical or satirical speech as compared to bland, non-controversial speech.  I guess this would be another reason to support a liability rule, where judges are instructed to ignore these externalities in setting the price of licenses—and also to support bargaining backed by sanctions in the shadow of this externality-blind rule. Still, I wonder how this hypothetical speech-protective, externality-ignoring rule lines up with the idea of moral rights. Wouldn’t an author feel that his moral rights were more infringed by a parody than a reverential treatment? Maybe the solution is a flat percentage for the loss of moral rights, regardless of the positive or negative impact on the underlying work.

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.

   

A paternalistic balance

I started off the quarter with a post pushing back on the glories of utility computing.  I shared some concerns that under Carr’s description of utility computing, we could end up in a society separated by technology and providing people with too much privacy.  The result would be detrimental to the civic participation and ongoing conversations we need for a well-functioning democracy.  (Many did not share my concerns, which I was happy to see.) Therefore, I definitely sympathize with Netanel’s concerns about reigniting the public conversation by limiting the chilling effects copyright can have on subsequent expression.  Netanel wants First Amendment rights to win more of the battles against copyright’s limiting effects on expression.

Netanel’s underlying assumption, however, is that people will speak—namely, that they will create and otherwise will have the ability to create—as long as copyright is not an impediment.  Furthermore, we will want this type of creation for the diversity of viewpoints necessary in a marketplace of ideas that leads to the best democratic policies.  He also assumes that people will want to listen and be able to listen to these diverse viewpoints.  Lastly, he argues (or assumes) that the best method to reignite this conversation is to limit copyright and allow more freedom in creating secondary or derivative works.

I argue that while Netanel is probably right that copyright is a strong limiting factor today for producing new works, his assumption that people will listen, and which will lead to better democracy, is flawed.  I propose an alternative regime (“a paternalistic balance”) that may be better at alleviating his concerns while not resting on faulty assumptions.

Who’s listening?

I think Netanel is right that today one of the greatest impediments for creators is copyright (and its licensing regime).  Technology has made production of content and information cheap and ubiquitous.  Computers, cameras, communication, and collaboration have all become very cheap.  Distribution to a potentially large audience can also be done cheaply.  Assuming that most creation builds on prior creative works, copyright does seem to function as a wall.

The problem is not with creation or distribution, which Netanel seems to have gotten right, but with what happens afterwards.  The proliferation of information overloads our ability to sift through it all and we choose metrics that in the long run probably unhinge this marketplace of ideas full of people interacting with a diversity of viewpoints (the central purpose of the First Amendment).  Furthermore, as I argued in my first post, the shift to all this technological connectedness may be making us into more solitary creatures.  The combination of these two factors is the likely effect that implementing Netanel’s ideas is at best unlikely to foster the necessary democratic conversations and at worst is likely to reduce them.  And Netanel is certainly concerned with these types of conversations: “Robust public debate, the spread of knowledge, and the questioning of cultural hierarchy are of paramount importance to a democratic society.” (p.162)

Polarization: more is not better

Just yesterday, I discovered that a friend on facebook has posted a link to the following video: http://thinkprogress.org/2008/05/15/kevin-james-appeaser/.  It’s a political video of Chris Matthews allegedly embarrassing a Republican radio host regarding recent statements by President Bush.  If I am the original blogger wanting to engage in political dialogue with others, I could just describe the video and its contents, but it is probably more effective for people to simply watch the video.  That reduces costs to me of having to describe the video in great detail and to the reader of having to read a lengthy description.  Using descriptions rather than the video would also reduce the overall impact of the situation on the reader.  This seems like a prime situation in support of Netanel.  The posting of the video is unlikely to take away from MSNBC’s market; the video is political and discusses the state of our democracy; and it creates a forum for people to participate in political conversations.  Use of the First Amendment is at its highest.  If the original poster of the video had to acquire a license from MSNBC before posting the video, then that probably would have simply prohibited him from doing so.  (He may actually need to under our current regime and is simply committing piracy.) Conclusion: we should limit the extent of copyright in order to facilitate such conversations.

But let’s reevaluate.  That video is posted on a seemingly very liberal website.  The hundreds of comments following are a chorus of people cheering the embarrassment and simply echoing each other.  The few people who disagree or challenge these statements are yelled at and are labeled “trolls” in order to diminish any contribution they may make.  It isn’t long before the commentators are calling Bush and these trolls “Nazis” and murderers.  Is Netanel right that more expression will mean more diversity of expression?  That may be, but the crucial question is who will be listening (or reading or watching).  As I mentioned in my first post, research tends to show the polarizing effects of the Internet.  People visit the blogs and news websites with which they agree.  This seems to be a result of the proliferation of content and not the lack of it. 

Barriers to entry

Copyright, then, may serve an important function as a barrier to entry.  It reduces this information overload by requiring the creator to think strongly about the value of the work he is creating.  Only those that are considered valuable will be created and distributed in the market.  There are of course some concerns here.  Is the creator in the best position to decide what will be valuable—especially socially?  Shouldn’t society as a whole decide—meaning let the creator create and then citizens can pick and choose.  I think the reality is that this is impossible.  There is so much information that picking and choosing becomes so difficult that people begin to use poor metrics.  In a market situation, the creator will likely consider economic value, but that value intrinsically incorporates the value to the consumer (social, political, moral, aesthetic, etc.).  Often, I think, the incentives will be aligned such that if people value these important social conversations, those types of works will be created. 

Netanel, and Professor Picker, noted that sometimes the creator cannot fully capture this social value, thus resulting in underproduction of valuable works below the social optimum.  First, I question the extent to which such social values are not already incorporated into the price.

Second, I don’t understand how limiting copyright resolves the problem.  Netanel wants to argue that limiting copyright will lower the price for the second creator to create thus fostering more creation that the consumer values but is unwilling to pay for.  He wants a transfer from the initial creator to the consumer.  But why wouldn’t the transfer end up being from the initial creator to the second creator?  The price of the license will be reduced (maybe to $0) but the second creator can maintain his market price and reap the benefits.  This will be especially true if these consumers have a very low price and simply want to be free riders.  Netanel describes them as those who “benefit from the ability of secondary authors to reformulate and challenge [] social meaning…even if [they] never personally purchase or even see the transformative work.” (p.162) If these people are unwilling to pay for these social benefits, lowering licensing fees will not do anything to expand output.  It will simply transfer income from the primary to the secondary creator.

A paternalistic balance

Netanel is in some ways self-contradictory.  He asserts that an explosion of diverse viewpoints from limiting copyright will foster good civic debates.  But he also notes that often the mass media determine people’s values and preferences.  People are highly influenced by these media forces.  It seems unlikely then that simply increasing the amount of creation—even mostly independent creation—will change the level of the debate if people will simply follow the tastes established by mass media.

This is a crucial concern.  Some paternalism is necessary if we believe people are not looking out for their best interests (or the best interests of society as a whole) over the long term.  People may not be very good at independently assessing the value of various works if (1) they are greatly affected by mass media propaganda; and (2) use inadequate metrics to sift through information.  But limiting copyright, for all the reasons I have noted, does not seem to be the answer.  More creation is unlikely to create more and better conversations.  In fact, copyright seems to serve an important function as a barrier to entry.

I would instead propose some sort of a creativity tax on major media conglomerates.  That revenue would go towards funding a small number of independent creations that would seemingly foster such debates.  There are probably millions of difficulties with this solution, but I will try to address a few here.

First is cost.  Would this system not be costly?  I don’t think it would be costlier than all the government activity Netanel advocates in Chapter 9—having courts set licensing fees and liability amounts, having Congress set up various central databases for all types of information, etc.  A tax is of course pretty cheap to implement and the grants to some creators probably would not be that expensive to implement.

The bigger concern, of course, is of government determining the political debate.  Should we be concerned about censorship?  How in the world would the government determine to whom to give such grants?  I don’t have simple responses to these problems.  I think there are ways to allay some concerns by cabining discretion.  There could be a congressionally approved rubric for all the requirements a project must meet.  Each project proposal could be made public similar to notice-and-comment procedures in agencies currently.  The administrator of the program would not be a political appointee.

The benefits are several.  First, we will not see proliferation of information that could end up overloading senses and actually harming the debate.  It will be a more controlled stream rather than a waterfall.  Second, this will be a subsidy that will fund projects that may not have been viable independently in the marketplace—presumably because of the free rider problem Netanel noted.  Some people may value democratic conversation but not be willing to pay for it.  Third, I think it would minimize disincentive effects on the initial creator.  Limiting copyright had a direct effect on the returns a creator expects from his creation.  A tax on these conglomerates averages out over all projects, therefore making it more difficult for them to allocate the costs to any single project.  It would certainly matter at the margins by reducing the return per project on some diluted basis, but I am not as concerned given how much creation there already is (and the increasingly cheaper ways to create).

Netanel on Volokh

Just a quick FYI.  Netanel has been blogging all this week on Volokh about Copyright's Pardox.  See: http://volokh.com/posts/chain_1210894412.shtml