Incentive and the public domain

Posted by Dirk Avery at 8:57 am under Copyright, DMCA, Incentive.

Meritocracy or Innovation Desert?

What would happen if incentives to create under copyright, including the DMCA, were decreased? I know, I know. The concept brings gasps. Despite the parade of horrors often offered, the world would get along just fine.

A Utilitarian Model

Intellectual property in the US is decidedly utilitarian as a result of the IP clause of Constitution and the general American spirit. Progress, efficiency and wealth creation are concepts Americans assume are worthy. Intellectual property being utilitarian assumes the quid pro quo that creators are given an incentive to create by taking from the public rights in their creation. Real or personal property, on the other hand, is not utilitarian but based on Lockian or natural rights ideas: I have a job and work to earn money which I use to buy a TV, or, I bought this land which is now my home and by virtue of my relationship with it I have rights over it, or, more simply, I have the right to control my stuff.

The Property Spectrum

As the Constitutional Framers recognized, there is a continuum of property with differing protections being appropriate at different points. Property is graded on the continuum according to rivalrousness, essentially. Along the continuum, rivalrousness can be judged by varying actual and opportunity costs. On one end of the continuum is the right of a person in her own self. As the Declaration of Independence and Bill of Rights attest, this protection is the highest. If someone violates that right, the cost can be infinite — loss of life. Next, real property is considered unique, but, if push comes to shove, you can probably find another similar piece of ground. Therefore, the law confers the protection of veritable inviolability such as under trespass. Then there is personal property, which is a mixed bag. Some personal property is unique, such as a vase I make; you cannot own my unique vase if I own it. Other personal property is fungible. If you take my iPod, I cannot possess the same one but I can buy another that is equal. Under theft, conversion or trespass to chattels, the law provides significant protection but less than that given to real property.

Next on rivalrousness continuum is intellectual property. Here we switch from actual to opportunity costs, changing the analysis. If I write a book and you steal its content, verbatim, and publish the content yourself, your act does not dispossess me of my book. But, I likely cannot publish it and make the same amount of money. Progress requires the public has access to a rich public domain so there are raw materials from which to create new works. The law gives authors and inventors incentives to create by giving them special rights vis-à-vis the public, taking away from the public domain. To even approach optimality, Congress has attempted to balance public and creator rights in the patent and copyright statutes.

Finally, there are facts and scenes à faire. An abstract idea, fact or ubiquity, taken, does not practically dispossess me of anything nor foreclose any opportunity. You can write an innocent-on-the-run thriller (such as Hitchcock’s Foreign Correspondent) and I can write an innocent-on-the-run thriller (such as Grisham’s The Firm). We can both be successful and, in fact, network effects may make your taking of my idea more valuable if a genre with a following develops.

The DMCA, § 1201 in particular, protects intellectual property so naturally one would assume the legal protection to be similar to that given by other IP statutes. However, the protection granted amounts to that granted to tangible property. Courts have found rickety technological fences to be equivalent, in legal effect, to fortress walls. In Reimerdes, the movie industry’s CSS DVD “protection,” though cracked by a 15-year old, could invoke the protections of the law as long as its functions was to control access. Universal City Studios v. Reimerdes, 111 F.Supp.2d 294 at 318 (S.D.N.Y. 2000). As inviolability protection, preventing potential fair uses, it seems inconsistent and out of place in intellectual property. The digital world presents concerns which industries addressed through Congress and the legislation but the scheme diverges sharply from the longstanding place IP has had on the continuum.

Utilitarian critiques of § 1201 fail in that it does not presuppose the framework. The IP Clause of the Constitution only authorizes a utilitarian model, necessitating a “limited times” restriction. While it might be argued that § 1201 has a Constitutional basis in the Commerce Clause instead, to there under grant IP rights conflicts with the IP clause. If the public is going to give something up, namely rights to certain intellectual property, the public should get something in return. That a person can put up a fence around real property makes sense on the rivalrousness continuum. However, human knowledge and intellectual property is very different realm since we build upon prior knowledge and branch off in new and useful ways. The US IP tradition of utilitarianism is based on solid logical and empirical bases. Even the Framers recognized the difference between intellectual property and tangible property, thought through the issues, and decided permanent monopolies only appropriate for property and limited monopolies appropriate for intellectual property. The choice was made long ago.

Incentive is King

Given the superiority of the utilitarian over the natural rights model for intellectual property, does not, however, dictate the superior form of utilitarian protection. The point of a utilitarian model is not the protection but the incentive. The goal is to get more creators creating by increasing incentives. Incentive is the necessary and sufficient condition for offering protection. It is difficult to gauge whether modern US IP law properly balances incentive with protection. Clearly plenary protection is not necessary to provide incentive so something should always be left for the public: the quid pro quo.

In the days of the Framers, it was very difficult to publish a book. It took lots of money and far less people were literate. Consequently, even corrected for inflation, I doubt authors then made nearly as much money as authors today. Given these barriers to entry of writers, incentive may have been especially important to get creators up over the hump. Suppose then, that the Framers entire basis for providing incentive relied on such conditions. The patent world, today, often involves substantial investment to develop a new product, on average. In that case, strong incentive still seems important and justified. Whether the world of copyright is the same is unclear.

Barriers to entry for publication and production of the vast majority of copyrighted works are now practically nominal. Musical artists can produce higher quality music on widely available software and inexpensive hardware than was produced by studios two decades ago. The artist can create a CD, for practically nothing, using publicly available or easily borrowed equipment, or better yet, create an MP3 without cost. The song can be published (or made available) to hundreds of millions of users at near zero marginal cost. Authors can write entire books, typeset them electronically (PDF), and publish them without practical cost. Though creating these works require access to computers, the percentage of Americans with access to computers and the Internet (including shared access), is very high. Regardless, today it is likely that all of the people incentivized by copyright have ready access to these tools of self publication. Since the barriers to entry are now far lower or entirely gone, practically, the barriers to entry of intellectual property production and publication are greatly diminished.

Without a significant hurdle, the incentive required from the copyright system is now much lower. Since there are competing interests on either side in industry, the patent system has been kept rational and incentives have changed little over many years. However, that there are powerful lobbies without powerful counter-lobbies is clear by the irrational expansion of copyright incentives. One Harvard study found that 99.9% of the present value of a copyright was captured by its current term. Fair use returns some value back to the public but this doctrine is under attack. The DMCA, in addition, expands the scope of legally protectable intellectual property with potentially infinite term. That the powerful lobbies have captured Congress is clear since, if anything, less incentive is now needed yet more incentive is piled on top of the already teetering tower of incentive.

In discussing intellectual property, one species of incentive, monetary, often consumes the entire incentive genus, which serves corporate interests well. This cultural assumption can be questioned though. Powerful examples are abundant today that suggest money does not define incentive. Today it seems like nearly everyone copyright could tempt into authorship has a blog. Blogs, if they were a disease, would surely be classified as a pandemic. The vast majority of bloggers write without any hope of even a moderate monetary recompense for the time spent. Practically no one will read practically all blogs. Yet, the authors create. Complex and varying incentives besides money, at least for the rational, must be at work. YouTube is another example. Millions of person hours are spent producing videos which no one pays to view.

The pool of candidates wanting to be full-time musicians far exceeds what consumer spending can support. Though the hordes of clamoring artists may be doing so because of the hope of making huge sums of money (akin, perhaps, to clamoring law students), some percentage of artists must be rational and therefore realize there is virtually no chance of making a living. Even this rational group continues making music. Lately, more and more independent artists, who have generally written off hopes of becoming wealthy, are being discovered by the mainstream through independent production and publication means. The channels of distribution are fixed more in consumers minds based on previous eras of restriction causing lingering anti-independent bias. Yet, since no real barriers exist to distributing music without the recording industry, it will only be a matter of time before the trickle of non-recording-industry distribution to consumers becomes a torrent. The same thing happened in the textual world as Internet users realized content was available from many sources beyond the traditional distributors (e.g., blogs). Incentives besides money are likely to drive a new generation of musicians to create as barriers to entry into the market of consumer attention fall.

Popular music today is dominated by corporate mechanizations. A corporation decides by complex market analysis how much room there is for artists in the various genres, produces the “artists,” e.g., Britney Spears, who are usually low cost and low talent, turns them into stars using the corporate family of media companies and reaps tremendous profits. Significant aspects of American culture are thus tied up in these profit machines. Copyright provides the incentive for these leviathans to continue making profits with corporate armies of lobbyists and lawyers promoting the agenda. Is this the primary type of creation for which we want to provide incentives? Less incentive is needed today yet the public is getting less quid for its quo.

One can argue that the division of labor concept suggests we should have full-time artists who can create better music than part-time artists who have to split time with Starbucks. While this is certainly true economically, the market always takes care of the top few people (at least while they are on top). If there were far more full-time artists but they were paid reasonably, you’d get people motivated more by music rather than money. The Constitutional analysis seems, though, to disregard such considerations as incentive is the key. If enough incentive exists to create an overabundance of good works of authorship, certainly the Constitutional mandate would be satisfied. It seems clear that far less statutory incentive is needed in this low barriers-to-entry world as people are abundantly authoring works even without getting paid.

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