This past Thursday, the Cato Institute held a forum called Copyright Unbalanced: From Incentive to Excess to discuss the current state of copyright law and issues raised by the Institute’s recently released book with the same title. The panel discussion featured the book’s editor, Jerry Brito of the Mercatus Center, Mitch Glazier of the RIAA, and one of the book’s contributors, law professor Tom Bell.

Much could be said concerning the event and book. I’d like to focus in on one specific point.

Tom Bell says in the book that “to change the way that people think about copyright, we have to change the way they talk about it.” To do so, he proposes banishing the conception of copyright as “property” and instead consider it a “mere privilege”, capable of all sorts of capricious intervention by the government. Bell argues that copyrights do not “deserve” to be called property. What accounts for all this property-talk throughout history? 1For just one example, see Myths from the Birth of US Copyright for evidence that the Founding Fathers primarily conceived copyright as a property right. According to Bell, “bad philosophy.”

He next provides several examples that purport to distinguish a copyright from other forms of property. Today I want to focus on one specific example Bell provides to distinguish copyright from more deserving forms of property: that “copyright does not qualify for just compensation under the Fifth Amendment’s takings clause.” Bell is correct in noting that “the exact question remains as yet unlitigated,” but how does the rest of his analysis stack up?

Does the Takings Clause Apply to Copyright?

The “Takings Clause” of the Fifth Amendment prohibits Congress (and the States through the Fourteenth Amendment) 2Chicago B & QR v Chicago, 166 US 226 (1897). from taking private property for public use, without just compensation. Literally, the government cannot take private property, unless it is for public use, and the government provides just compensation. The clause has been broadened over time: today, it applies not only to an actual taking of legal title to property, but also to regulations that impact the economic use of property in such a way that they can be characterized as a “taking.” 3See Penn Central Transport v New York City, 438 US 104, 124 (1978). But, on its face, the clause requires some interest in “property.” It is here Bell makes his argument: if copyright is, indeed, “property”, then the government should be limited by the Fifth Amendment in what it could do.

One could look toward the Supreme Court to see if it is. Indeed, in 1998, four Supreme Court Justices stated that “The ‘private property’ upon which the [Takings] Clause traditionally has focused is a specific interest in physical or intellectual property.” [Emphasis added.] 4Eastern Enterprises v Apfel, 524 US 498, 554 (Dissent, J. Stevens, J. Souter, J. Ginsburg, and J. Breyer).

That may not be satisfactory enough, since it, though a descriptive statement, is not binding precedent.

We can look instead to another case, where a majority held that trade secrets are property and subject to the Takings Clause (citing, among others, William Blackstone and John Locke):

This general perception of trade secrets as property is consonant with a notion of “property” that extends beyond land and tangible goods and includes the products of an individual’s “labour and invention.”

Although this Court never has squarely addressed the question whether a person can have a property interest in a trade secret, which is admittedly intangible, the Court has found other kinds of intangible interests to be property for purposes of the Fifth Amendment’s Taking Clause. That intangible property rights protected by state law are deserving of the protection of the Taking Clause has long been implicit in the thinking of this Court:

“It is conceivable that [the term `property’ in the Taking Clause] was used in its vulgar and untechnical sense of the physical thing with respect to which the citizen exercises rights recognized by law. On the other hand, it may have been employed in a more accurate sense to denote the group of rights inhering in the citizen’s relation to the physical thing, as the right to possess, use and dispose of it. In point of fact, the construction given the phrase has been the latter.” 5Ruckelshaus v Monsanto, 467 US 986, 1002-03 (1984).

The Court later adds:

The right to exclude others is generally “one of the most essential sticks in the bundle of rights that are commonly characterized as property.” With respect to a trade secret, the right to exclude others is central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data. That the data retain usefulness for Monsanto even after they are disclosed — for example, as bases from which to develop new products or refine old products, as marketing and advertising tools, or as information necessary to obtain registration in foreign countries — is irrelevant to the determination of the economic impact of the EPA action on Monsanto’s property right. The economic value of that property right lies in the competitive advantage over others that Monsanto enjoys by virtue of its exclusive access to the data, and disclosure or use by others of the data would destroy that competitive edge.

Patents and copyrights would also be included in this analysis since they enjoy at least as much status (if not more) as property than trade secrets. 6In Kewanee Oil v Bicron Corp., 416 US 470, 497 (1974) (J. Douglas & J. Brennan dissenting)., two Supreme Court Justices stated off-hand that, contrary to this case, “A trade secret, unlike a patent, has no property dimension.” So it would follow that a subsequent decision saying trade secrets do in fact have a property dimension for Fifth Amendment purposes implies patents and copyrights certainly fall within the Clause’s scope.

Zoltek v US

Bell, however, relies on Zoltek v US, a 2006 Federal Circuit Court decision, as his sole support for the claim that “copyright does not qualify for just compensation under the Fifth Amendment’s takings clause.” 7442 F.3d 1335.

But I don’t think the case suggests what Bell says it suggests. In Zoltek, the Federal Circuit rejected the Takings Clause claim of a patent owner whose patent was infringed by the US Government. Not because patents are not Fifth Amendment “property”, but because patent owners already have a remedy against the United States for infringement (the same holds true for copyright infringement). 8See 28 USC § 1498(a), (b).

The court did not expand its holding past the issue of infringement by the federal government — that is, one cannot draw from the court’s decision the general case, that any interference in a patent or copyright is not subject to the Takings Clause, from the specific case, that infringement by the United States involves a “taking.” (It’s also worth noting that the court’s decision drew a vigorous dissent both in its original decision and in its denial for rehearing.) 9464 F.3d 1335 (2006).

Contrary Case Law

Much more fatal to Bell’s claim that a solitary Circuit Court decision “strongly suggests” copyright is not subject to the Takings Clause is the existence of decisions from five other Circuit Courts that suggest otherwise.

In a 1989 case, the First Circuit was confronted with a situation similar to the one in Zoltek, except here the alleged infringement was done by the state of Massachusetts rather than the federal government, raising the issue of sovereign immunity under the Eleventh Amendment. 10Lane v First National Bank of Boston, 871 F.2d 166 (1st Cir. 1989). Ultimately, the court held that the Copyright Act did not abrogate sovereign immunity for copyright infringement, but noted that not all was lost for the copyright owner. Massachusetts had separate statutes that allowed tort claims against the state and claims for compensation when private property is confiscated. Said the court:

The statutory scheme manifests a recognition that where private property is taken for public use, a constitutional right to just compensation attaches. Since a copyright is property, [the plaintiff] may very well be able to sue in state court on a state-law claim for essentially the harm that she contends the Commonwealth has perpetrated. And if she exhausts State remedies and establishes that the Massachusetts legal system affords her no just compensation for the wrongful confiscation of her property, the Takings Clause of the federal Constitution might at that point enable her to pursue a damage remedy in federal court. 11Id. at 174.

A few years prior, the Second Circuit was confronted with a dispute over the validity of a work-for-hire contract. 12Roth v Pritikin, 710 F.3d 934 (2nd Cir. 1983). The agreement was entered into right before the Copyright Act of 1976 went into effect, while the work at issue, and the subsequent dispute, did not arise until shortly after the Act became law. The Copyright Act of 1976 changed the rules governing the work-for-hire doctrine, and under the circumstances of this case, the difference between the old rule and the new rule would result in a different outcome.

Said the court:

Although the language of the Act, its legislative history and rules of statutory interpretation are sufficient answers to Roth’s claim, we note, en passant, adoption of her interpretation of § 301 would, in addition, raise a serious issue concerning the Act’s constitutionality. An interest in a copyright is a property right protected by the due process and just compensation clauses of the Constitution. The agreement between Roth and the appellees, pursuant to which Roth surrendered any rights she might otherwise have obtained in the copyright, was valid when it was entered into, and a subsequently enacted statute which purported to divest Pritikin and McGrady of their interest in the copyright by invalidating the 1977 agreement could be viewed as an unconstitutional taking. Resolution of this issue is not required for our holding, and will have to wait for an appropriate case.

Moreover, the district court failed to make any findings relevant to this question, and accordingly, we do not decide whether retroactive application would, in fact, violate constitutional restrictions. Even the spectre of a constitutional issue concerning the proper application of the “takings clause”, however, is sufficient cause to construe the statute to provide for exclusively prospective relief, particularly in the absence of any clear congressional mandate to the contrary. 13Id. at 939.

The Second Circuit again noted the possibility that the Takings Clause applies to copyright in CCC Information Serv. v Maclean Hunter Mkt. Rep. 1444 F.3d 61 (2nd Cir. 1994). There, the creator of a database of used car valuations (CCC) sought a declaration that its copying and republishing of used car values from a competitor was not copyright infringement. It argued, in part, that since the competitor’s used car valuations were incorporated by reference into several state insurance regulations, the compilation of values had “passed into the public domain.” The Second Circuit disagreed, saying:

We are not prepared to hold that a state’s reference to a copyrighted work as a legal standard for valuation results in loss of the copyright. While there are indeed policy considerations that support CCC’s argument, they are opposed by countervailing considerations. For example, a rule that the adoption of such a reference by a state legislature or administrative body deprived the copyright owner of its property would raise very substantial problems under the Takings Clause of the Constitution. 15Id. at 74.

The Ninth Circuit relied in part on CCC Information to uphold the validity of a copyright in Practice Management Info. v American Medical Ass’n, quoting approvingly the Second Circuit’s Takings Clause discussion. 161212 F.3d 516, 520 (9th Cir. 1997).

The Fifth Circuit has had occasion to weigh in on this issue of copyright and the Takings Clause. Like several of the cases already discussed, Chavez v Arte Publico Press concerned tensions between the Copyright Act and the Eleventh Amendment’s protection of state sovereign immunity. 17157 F.3d 282 (5th Cir. 1998). Here, an author alleged copyright infringement and breach of contract against the University of Houston, a state institution. During its discussion, the Circuit Court stated, “Copyrights are indeed a species of property, but the extent to which they are protectable against the states raises troubling issues.” Citing to the Supreme Court’s holding in Ruckelshaus that trade secrets are property protected by the Takings Clause, the court said, “By analogy, copyrights constitute intangible property that, for some purposes at least, receives constitutional protection.” The court ultimately held, however, that one of those purposes does not include copyright infringement by a State.

Finally, the Sixth Circuit also appears to have taken the view that copyrights may be subject to the Takings Clause. In a non-precedential opinion, it affirmed the dismissal of a copyright infringement claim against the National Science Foundation because the plaintiff had failed to register his work with the Copyright Office before bringing suit. 18Cawley v Sw’earer, 936 F.2d 572 (6th Cir. 1991). But not without expressing “some doubt as to the grounds for dismissal.” The source of this doubt stemmed from constitutional concerns; as the court noted, “the Copyright Act does not preempt the Fifth Amendment’s Takings Clause.”

In short, it’s reasonable to conclude that the Takings Clause would apply to copyrights — the opposite of what Bell claims. This is obviously but one point in the larger work of Copyright Unbalanced. I may look at other points raised in the book at a later date, but for now would suggest to anyone reading it to approach it with a skeptical eye.

References   [ + ]

1. For just one example, see Myths from the Birth of US Copyright for evidence that the Founding Fathers primarily conceived copyright as a property right.
2. Chicago B & QR v Chicago, 166 US 226 (1897).
3. See Penn Central Transport v New York City, 438 US 104, 124 (1978).
4. Eastern Enterprises v Apfel, 524 US 498, 554 (Dissent, J. Stevens, J. Souter, J. Ginsburg, and J. Breyer).
5. Ruckelshaus v Monsanto, 467 US 986, 1002-03 (1984).
6. In Kewanee Oil v Bicron Corp., 416 US 470, 497 (1974) (J. Douglas & J. Brennan dissenting)., two Supreme Court Justices stated off-hand that, contrary to this case, “A trade secret, unlike a patent, has no property dimension.” So it would follow that a subsequent decision saying trade secrets do in fact have a property dimension for Fifth Amendment purposes implies patents and copyrights certainly fall within the Clause’s scope.
7. 442 F.3d 1335.
8. See 28 USC § 1498(a), (b).
9. 464 F.3d 1335 (2006).
10. Lane v First National Bank of Boston, 871 F.2d 166 (1st Cir. 1989).
11. Id. at 174.
12. Roth v Pritikin, 710 F.3d 934 (2nd Cir. 1983).
13. Id. at 939.
14. 44 F.3d 61 (2nd Cir. 1994).
15. Id. at 74.
16. 1212 F.3d 516, 520 (9th Cir. 1997).
17. 157 F.3d 282 (5th Cir. 1998).
18. Cawley v Sw’earer, 936 F.2d 572 (6th Cir. 1991).

TV Broadcasters Tell Appeals Court to Shut Down Aereo — Eriq Gardner has an excellent rundown of last week’s arguments in front of the Second Circuit regarding the case against Aereo, which argues it’s not a cable system because it uses lots of little antennas instead of one big antenna.

Flexible exceptions to copyright have negative economic costs, says study — Barry Sookman points to a recent paper that highlights flaws in a widely-cited study purporting to put a dollar sign on how much exceptions and limitations to copyright add to the economy.

A Q&A With Beck Hansen, Author of Song Reader — This McSweeney’s interview with Beck about his latest release — released not on MP3 or CD, but on sheet music — is fascinating and engaging, especially when he talks about the different approach to songwriting that the medium required.

Too Loud & It All Sounds The Same? Why Researchers Were Wrong On Pop — “After scientists earlier this year claimed to have proved that music has been sliding a path of diminishing returns and actually does all sound the same, musicologist Stephen Graham points out why pop music is probably as exciting now as it was in 1955.”

(Another) Misleading Study (Sort of) Claiming Piracy is Good for the Movie Biz… — Ellen Seidler takes a closer look at a recent survey that has claimed the shutdown of MegaUpload last January actually had a negative effect on the film industry.

“The Funniest People I Know Are Women”: Director Paul Feig on The HeatBridesmaids and Freaks and Geeks — Great interview at The Credits, which is quickly becoming a source of top-notch stories about films and the people behind them.

 

Among the arguments against copyright law is the argument that copyright is not a property right. The “robust history” of describing copyright in terms of property 1See Justin Hughes, Copyright and Incomplete Historiographies: Of Piracy, Propertization, and Thomas Jefferson79 Southern California Law Review 993, 1004 (2006); Myths from the Birth of US Copyright. is simply wrong, say proponents of this argument. One line of such arguments claims that property rights are only justified to resolve conflicts over scarce goods. Because expressive works protected by copyright are not scarce — that is, one person’s use of a book, song, or film does not diminish another person’s ability to use that same work — the necessary condition for legitimate property rights is not met.

It is this view of copyright that seems to have informed the recently retracted Republican Study Committee policy brief on copyright law. The brief rejected the characterization of copyright as property right and instead characterized it as a monopoly privilege antithetical to free market principles.

I want to suggest an argument today that counters this conception of copyright. It is, in fact, concerned with scarcity. The error comes from mistaking the actual right at issue — the right to copy (hence, “copy right”) — with the actual right at issue with tangible goods, typically a right to possess.

Property is, at its heart, the set of rules concerning the relationship between individuals and things, and is one of the foundational legal doctrines, along with contract and tort law. Because property is conceptual, it, by definition, is not barred from being applied to intangible goods.

But some have made the argument, explored in more detail below, that property rights are only legitimate when they apply to scarce goods, ie, goods where one person’s use prevents its use by someone else. Property rules originated to resolve conflict over such rivalrous goods, so if a certain good is not rivalrous, then recognizing a property right in it is not justified.

What is Property?

In his 1990 article What is Property?, 213 Harvard Journal of Law & Public Policy 775 (1990). libertarian scholar Boudewijn Bouckaert provides an account of scarcity, saying it both explains and justifies property rights. While the concept of scarcity is discussed by earlier philosophers and legal theorists, the modern “law and economics” view places scarcity front and center as a rationale for these rights.

Scarcity is defined by Bouckaert as arising “when two or more persons consider one good as a means for the satisfaction of their wants and when the use they intend to make of it is incompatible.” But he prefaces this by noting that scarcity likely involves a “dimension beyond mere allocation” — solving allocative scarcity would require a “super-individual authority” to divvy up how and when competing individuals could use a certain good. So, we’re concerned primarily with distributive scarcity, which is unavoidable and leads to three possible outcomes, according to Bouckaert: “(1) permanent conflict–the assignments of scarce means are the result of the use of violence, ruse, and tactical games; (2) resignation–a resource becomes the object of competition, both parties withdraw, and such withdrawal means isolation and a massive drop in world population; (3) rules–assignments of power over scarce resources to individuals, groups, families, the government, and so forth.”

Bouckaert distinguishes between natural scarcity, which occurs prior to any social or political institutions, and artificial scarcity, which is the result of arrangements by such institutions. In the “law and economics” view, the first justifies property rights, but the second requires its own justification.

For purposes of this article, I will assume this argument is valid. But I do want to point out that the argument that property rights require scarcity is a minority view, one that has not escaped its share of criticism. Philosopher David Faraci, for example, has asked Do Property Rights Presuppose Scarcity? and concludes that the argument has thus far been under-motivated. Faraci notes that many dominant theoretical views of property appeal to values beyond the conflict-resolution inherent in the scarcity view of property rights. IP scholar Robert Merges rejects this “historical-essentialist” concept of property outright, in favor of a more “broad and roomy” conception whose “origins do not imply constraints of limits.” Merges sees a “powerful logic” in property, and its “restless capacity” to morph and adapt throughout its history to different arenas provides a robustness that makes as much sense to apply to intangibles as to physical property. 3Robert P. Merges, Justifying Intellectual Property, pp. 4-5 (Harvard University Press 2011).

Though whether or not copyright is considered “property” may seem like a matter of semantics, it does have implications for the proper role and scope of copyright law. If copyright is redefined as being something other than property — a “mere privilege” or an economic monopoly, for example — it is easier to argue that it is inconsistent with free market principles rather than being the mechanism for establishing a functioning market that fosters investment and dissemination of creative and expressive works.

Property in the Copy Right

Property is sometimes defined as including the right “to possess, use, enjoy, and dispose of a thing.” Possession is often considered one of the most basic of rights held by property owners. It is this right that is typically discussed when dealing with scarcity: only one person can possess a good at any given time.

Copyright, however, is not concerned with possession. Indeed, things get pretty metaphysical real fast if you start talking about how one can have possession over the intangible expression of an idea. Copyright instead is concerned with copying, which can be considered a specific form of using the property. 4Public performance and public display could similarly be mentioned here, though I leave them out for readability sake.

Copying, the act, should be distinguished from the copy, which is the material object that includes the expressive work in fixed form. These copies are treated as any other form of personal property. In fact, the US Copyright Act expressly distinguishes between copies and copying and notes that the right to copy is not the same as ownership in the resulting copies. 517 USC § 202, “Ownership of a copyright, or of any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. Transfer of ownership of any material object, including the copy or phonorecord in which the work is first fixed, does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any material object.”

The act of copying an expressive work, like the act of possessing a physical item, is rivalrous. Your copying of an expressive work diminishes my ability to copy an expressive work.

Odds and Ends

Now, in order to support this argument, one would need to include several additional claims.

First, we need to assume that we are dealing with a finite limit on the amount of copying that can occur. Expressive works are, after all, potentially infinitely reproducible — and, when they exist digitally, those copies can be made at near-zero cost.

But I think this focuses on the wrong thing. We could, in theory, reproduce any given work infinitely. But in practice, we don’t. A few weeks ago, Psy’s “Gangnam Style” music video became the most viewed video ever on YouTube, with over 800 million views and counting. Eight hundred million is a big number, but it’s still far less than infinity. Even the Bible itself, one of the most widely printed books for hundreds of years, has been printed an estimated six billion times.

So even given the fact that if we had an infinite amount of storage space and an infinite amount of time, we could infinitely reproduce any given work, I don’t think that is relevant. As a practical matter, we are always dealing with a naturally (and economically) scarce ability to copy an expressive work.

Second, we could assume that productive use of resources is inherent to any property system. This is apparent from the very term “law and economics”, where the law prong is concerned with resolution of conflict over scarce resources but the economics prong deals with creating value. Generally, we’re not driven to conflict merely because we are all Gollums, obsessing over our precious things. We seek them because of the value they can provide in producing wealth. Historically, copying has been one of the primary methods (though certainly not the only method) of extracting value from expressive works.

Finally, a caveat.

By saying that copying is rivalrous, I don’t mean to suggest that this rivalry exists anywhere near a 1:1 relationship. That is, I’m definitely not suggesting that “every download is a lost sale” or anything like that. It is simply an act that can be incompatible between two or more people. This is similar to possession: scarcity in this sense doesn’t imply a requirement that the use of a scarce good by two or more people has to occur at the same time or wholly deprive one of the use of the good. For example, if I use your hammer while you’re asleep, you haven’t “lost” anything. There simply has to be that potential for incompatible uses prior to any application of property rules.

References   [ + ]

1. See Justin Hughes, Copyright and Incomplete Historiographies: Of Piracy, Propertization, and Thomas Jefferson79 Southern California Law Review 993, 1004 (2006); Myths from the Birth of US Copyright.
2. 13 Harvard Journal of Law & Public Policy 775 (1990).
3. Robert P. Merges, Justifying Intellectual Property, pp. 4-5 (Harvard University Press 2011).
4. Public performance and public display could similarly be mentioned here, though I leave them out for readability sake.
5. 17 USC § 202, “Ownership of a copyright, or of any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. Transfer of ownership of any material object, including the copy or phonorecord in which the work is first fixed, does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any material object.”

Music Licensing Takes Center Stage at Congressional Hearing — On Wednesday, the House Judiciary Committee held a hearing on music licensing and the Internet Radio Fairness Act. At the risk of shameless self-promotion, I have a recap of the hearing over at the Copyright Alliance’s Idea/Expression blog.

Copyright Policy and Economic Doctrines— Robert D. Atkinson of the Information Technology and Innovation Foundation offers this fascinating paper looking at the influence of differing economic doctrines on copyright discussions. “Views on copyright policy are shaped in large part by the economic doctrine held by the advocate, scholar or policymaker. These differences in doctrine cause partisans to view facts differently and to focus on small segments of complex debates, leading to a breakdown of constructive dialog and much ‘talking past each other.'”

Why Are Cable Companies Forcing People to Turn to Piracy? — “Hint: they’re not. Also, they’re probably better at running their business than their many, many freelance marketing consultants among the digerati.”

Everything, Everywhere, All the Time — The Cynical Musician, responding to Rep. Chaffetz’s challenge during Wednesday’s IRFA hearings to name another successful internet radio service besides Pandora, describes why the internet only wants one of everything. “Once we have someone in this position, there’s very little other businesses can do to compete. They can’t sell something that the established power player isn’t selling, ‘coz he is. They can’t go for geographic advantage because there’s no issue of distance on the internet. They cannot hope to sell when the big guy’s closed, ‘coz he’s always open. Their only hope is either to compete on price, which is a race to the bottom (and one could argue that online everyone’s living in silt as it is) or on purchasing experience, which only becomes a factor if they can match the established player’s prices – tricky if you ain’t got the scale to make it up on.”

Deconstructing: Pandora, Spotify, Piracy, And Getting Artists Paid — Chris Ruen provides a detailed, in-depth look at IRFA and hot it fits into the context of the larger discussion of copyright’s vitality in a digital age. “The digital revolution has brought about a great many things. However, the obvious exploitation of artists — in knowing denial of their basic rights — remaining at such an industrial scale in 2012 is an embarrassment to that revolution; it is the cancer at the core of its lofty talk of “openness”; it is what child labor was to the Industrial Revolution.”

Congressional Research Service Memo on Constitutionality of IRFA Section 5— The Trichordist raised First Amendment concerns a few weeks ago about one of the lesser-known provisions of IRFA a few weeks ago, one that would create anti-trust liability for copyright owners who “impede” direct licensing efforts by internet radio services. The concerns stem from a recent lawsuit by SiriusXM against SoundExchange and A2IM that alleged just that, premised on blog posts the organizations had made explaining to artists some of the details of recent direct license offers. After an exchange with David Lowery at the Future of Music Coalition’s annual summit earlier this month, bill sponsor Senator Wyden passed along the concerns to the Congressional Research Service, which recently completed its analysis.

Music startups aren’t dead — they’re just changing — Former Last.fm exec Matthew Hawn responds to recent criticisms from Peter Kafka and David Pakman concerning the difficulties of finding sustainable business models for digital music startups. “Start-ups create the most value when they carve out new business models and transform the way we used to do things. They are less valuable (and thus less viable) when they just wringing the last drop of money out of old models. The truly great ones transform industries and build new opportunities, growing the market for everyone.”

Fair (?) dealing in Canada’s colleges — John Degen posts troubling video of members of the Writers’ Union of Canada being blocked from attending a series of seminars from the Association of Canadian Community Colleges about new “fair dealing” policies. “On November 12th, 2012, freedom meant writers were free to be removed by security, and access meant writers were allowed access only to the airport parking lot (for a fee).”

Myths and Facts about Copyright — More criticism about Derek Khanna’s recent policy brief published briefly on the Republican Study Committee’s website, this time from James DeLong at The National Review.

How Are Google’s Anti-Piracy Search Policies Working? — The answer, according to Vox Indie’s Ellen Seidler, is “not too well.”

The House Judiciary Committee will be holding a hearing on music licensing today at 11:30EST. The hearing, which will be streamed live online, looks to focus on recent proposed legislation that concerns internet radio royalties. Representatives from Pandora, the National Association of Broadcasters, SoundExchange, and the Recording Academy will be testifying, as well as economist Dr. Jeffrey A. Eisenach and venture capitalist David B. Pakman.

In anticipation of the hearing, I thought it would be helpful to provide a brief history of internet royalty rates. It’s not the most exciting topic, but it’s also difficult to find a singular, satisfactory source on the subject. For this article, I’m going to focus primarily on “webcasting”, or internet radio services like Pandora.

The Digital Performance Right for Sound Recordings

Musical compositions — songs — and sound recordings are each is separately protected by copyright. Copyright protection for songs came first, implicitly under the original Copyright Act of 1790 and explicitly under the Copyright Act of 1831. This copyright was limited to reproduction of the works until 1897, when Congress added the right to publicly perform musical compositions.

Recorded sound, of course, only appeared toward the end of the 19th century, and it wasn’t until 1972 that the US Congress granted separate federal copyright protection to sound recordings. But this protection excluded the right to publicly perform sound recordings. So while copyright owners of songs were paid anytime a venue or radio station performed their work, the same was not true for sound recording owners.

This changed somewhat in 1995, when Congress passed Digital Performance Right in Sound Recordings Act (DPRA). Though it didn’t give sound recording owners a full public performance right, it did give them the exclusive right “to perform the copyrighted work publicly by means of a digital audio transmission.” 117 USC § 106(6).

This right was modified in two major ways. First the right did not extend to “eligible non-subscription transmissions”, which primarily meant retransmission of AM/FM radio broadcasts over the internet. Second was a compulsory blanket license for “noninteractive subscription transmissions.” Any service under this definition could, so long as it complied with the license terms, play any sound recording without needing permission from the copyright owner at a royalty rate set by the Copyright Arbitration Royalty Panel (CARP), an ad hoc body that set rates for the various compulsory licenses under the Copyright Act. The Act provided, however, that CARP would only step in if copyright owners and noninteractive subscription services failed to reach voluntary agreement over rates under the compulsory license. When this occurred, CARP was directed to set a rate using the standard set in § 801(b)(1) of the Copyright Act, subject to revisions by the Librarian of Congress.

Any other type of transmission under DPRA required direct licensing from sound recording owners, which led to the first dispute. Non-subscription webcasters — webcasters who relied on advertising or other forms of revenue — disagreed with the recording industry over whether they were exempt from DPRA. 2In the matter of rate setting for digital performance right in sound recordings and ephemeral recordings, Report of the Copyright Arbitration Royalty Panel, No. 2000-9, 8 (2002). This led to Congress revisiting the digital performance right in the Digital Millennium Copyright Act (DMCA) a few years later (the same Act that created safe harbors for online intermediaries, among other things).

The DMCA affected digital performances in a number of ways. First, it added “eligible non-subscription services” to the types of webcasters who qualified for the compulsory license (interactive services still needed to privately negotiate for performance rights). Second, it altered the standard the CARP must apply when determining royalty rates for these compulsory licenses — instead of the §802(b)(1) standard, CARP would “establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller” (the “willing buyer/willing seller” standard). However, it “grandfathered” the existing §802(b)(1) standard for “preexisting subscription services” and preexisting satellite radio services — at the time, these consisted solely of five services: DMX, Music Choice, Muzak, Sirius, and XM (since then, the last two have merged to form Sirius XM Radio).

One quick note: the DMCA also expanded the term “interactive service” to include services “that are specially created for a particular individual.” 3H.R.Rep. No. 105-796, at 87 (1998) (Conf.Rep.). In 2001, a group of record labels then under the umbrella of BMG sued internet radio provider Launch Media for copyright infringement, alleging that its service, which, like Pandora, allows listeners to create “custom” radio stations based on genre or artist, was required to obtain direct licenses from BMG because it was an “interactive service” under the DMCA. 4Arista Records v Launch Media, 578 F.3d 148 (2nd Cir. 2009). The 2nd Circuit disagreed with the labels, holding that Launch Media was not an “interactive service” under the definition of the statute.

Since then, webcasting has been the subject of three rate proceedings, each involving issues that have spilled over into Congress and the courts.

Webcaster I

The Copyright Office announced in November 1998 the beginning of the voluntary negotiation period for the first round of licensing, which would cover through the end of 2000. 567 FR 45239. No private agreement was reached, so a CARP proceeding was commenced, and, because of procedural delays, was consolidated with a proceeding on licensing for the next period, through 2002.

The CARP reached its determination on royalty rates February 2002 (informally referred to as “Webcaster I”), which was revised and published by the Librarian of Congress on July 8, 2002. 6Id. Among its determinations, the LOC accepted the Panel’s rejection of a “percentage of revenue” rate in favor of a “per performance” rate. It noted:

A key reason for rejecting the percentage-of-revenue approach was the Panel’s determination that a per performance fee is directly tied to the right being licensed. The Panel also found that it was difficult to establish the proper percentage because business models varied widely in the industry, such that some services made extensive music offerings while others made minimal use of the sound recordings. The final reason and perhaps the most critical one for rejecting this model was the fact that many webcasters generate little revenue under their current business models. As the Panel noted, copyright owners should not be ‘‘forced to allow extensive use of their property with little or no compensation.’’ 7Id. at 45249.

The LOC adopted the Panel’s tiered rate structure for different classes of licensees. Webcasters and commercial broadcasters would pay $0.0007 per performance, non-commercial broadcasters $0.0002. The LOC also designated SoundExchange, a non-profit organization established by the RIAA in 2000 and later spun-off as an independent entity in 2003, as a Designated Agent for collecting and distributing royalties under the compulsory license. 8Id. at 45267.

Smaller commercial and noncommercial webcasters immediately protested the LOC’s final determination, and Congress acted quickly in response, introducing the Small Webcaster Settlement Act of 2002 (SWSA) less than 20 days after the determination and passing the bill in December. SWSA provided a grace period for small webcasters for paying royalties and encouraged SoundExchange to engage in negotiations for alternative rates with these webcasters. Such agreements were reached — one for small commercial webcasters that same December and one with noncommercial webcasters the following June. Under these agreements, “small” webcasters (defined by annual revenues) would pay a graduated “percentage of revenue” rate while noncommercial webcasters would pay a flat annual fee, plus a $0.0002 per performance rate on any performances that exceeded a monthly “Aggregate Tuning Hours” cap.

These agreements would remain in effect through 2004, extended through 2005 by The Copyright Royalty and Distribution Reform Act of 2004.

Through this Act, Congress also replaced the ad hoc Copyright Arbitration Royalty Panel with the current system of three standing Copyright Royalty Judges. Judges were to be appointed by the Librarian of Congress and serve staggered six year terms. The Act established qualifications for the Judges. “Each judge must be an attorney with at least seven years of legal experience. The Chief Copyright Royalty Judge must have at least five years experience in administrative hearings or court trials and may hire 3 full-time staff members. Of the other two CRJs, one must have expertise in the area of copyright law and the other economics.” 9Robin Jeweler, CRS Report Report for Congress, The Copyright Royalty and Distribution Reform Act of 2004, Order code RS21512 (2004).

The Act also removed the Librarian of Congress from any role in revising final determinations by Copyright Royalty Judges — determinations were directly appealable to the DC Circuit Court.

Webcaster II

The first rate determination proceeding for digital performances conducted by the new Copyright Royalty Board (CRB) concerned license rates for 2006-2010, but despite the changes Congress had made, this proceeding (“Webcaster II”) played out in much the same way as Webcaster I. Notice announcing commencement of the proceedings was published by the CRB February 2006. The Board announced its final determination on March 2007. 1072 FR 24084. Again, the CRB rejected a percentage of royalty rate for a per performance rate. 11In doing so, the CRB stated in a footnote:

It must be emphasized that, in reaching a determination, the Copyright Royalty Judges cannot guarantee a profitable business to every market entrant. Indeed, the normal free market processes typically weed out those entities that have poor business models or are inefficient. To allow inefficient market participants to continue to use as much music as they want and for as long a time period as they want without compensating copyright owners on the same basis as more efficient market participants trivializes the property rights of copyright owners. Furthermore, it would involve the Copyright Royalty Judges in making a policy decision rather than applying the willing buyer/willing seller standard of the Copyright Act.

The CRB set rates for commercial webcasters at “per play” rates of $0.0008 for 2006, $0.0011 for 2007, $0.0014 for 2008, $0.0018 for 2009 and $0.0019 for 2010. Non-commercial webcasters would pay an annual $500 flat rate for performances under the same “Aggregated Tuning Hours” cap as was set by the SWSA, with performances above the cap assessed at the same rates as commercial webcasters.

Several webcasters again raised objections to the rate determinations in Webcaster II. A petition for rehearing was filed but denied by the CRB, and appeals were filed by several parties for review in the DC Circuit Court. In a 2009 opinion, the DC Circuit affirmed nearly all of the CRB’s determination. 12Intercollegiate Broadcasting System v Copyright Royalty Board, 574 F.3d 748. The exception was the court’s remand of the CRB’s omission of a cap on minimum fees for commercial webcasters.

And as in Webcaster I, webcasters turned to Congress, which responded with the Webcaster Settlement Act of 2008. 13Pub. L. No. 110-435, 122 Stat. 4974. The Act was essentially a rewrite of the Small Webcaster Settlement Act of 2002 and encouraged the private negotiation of alternative licensing rates. The timeframe for these negotiations was extended by Congress the following year through the Webcaster Settlement Act of 2009. 14Pub.L. 111−36, 123 Stat. 1926.

Following these Settlement Acts, settlements with webcasters in a wide variety of segments of the webcasting market were reached — eight total agreements resulting in around a dozen different royalty schedules. 15See Notification of Agreements Under the Webcaster Settlement Act of 2008, 74 FR 9293 (March 3, 2009), Notification of Agreements Under the Webcaster Settlement Act of 2009, 74 FR 34796 (July 17, 2009), Notification of Agreements Under the Webcaster Settlement Act of 2009, 74 FR 40614 (August 12, 2009. The “Pureplay” agreement, for example, which Pandora operates under, set a per play rate lower than the one set by the CRB or 25% of gross revenues, whichever is greater. In nearly all cases, these agreements set royalty rates through 2015.

Webcaster III

While these agreements covered nearly 95% of all digital performances administered by SoundExchange, the Copyright Royalty Board was still required to conduct proceedings for rates for 2011-2015 for those webcasters who did not elect any of the settlements — Intercollegiate Broadcasting System and Live365 being the only two — or webcasters that weren’t in existence at the time. These proceedings began January 9, 2009 and concluded with a final determination only three months later, dubbed “Webcaster III.” The CRB largely applied the royalty schedules from the recent settlements across the board.

The CRB rejected, however, Intercollegiate’s proposal for different rate structures for “small” and “very small” noncommercial webcasters. Intercollegiate appealed the CRB’s determination to the DC Circuit and also raised a collateral attack on the constitutionality of the appointment of the Copyright Royalty Judges. Just this past July, the DC court held (wrongly, in my opinion) that the appointment of Copyright Royalty Judges violated the Appointments Clause. 16Intercollegiate Broadcasting v Copyright Royalty Board, 684 F.3d 1332 (DC Cir. 2012). It remedied the infirmity by striking statutory language that limited the ability of the Librarian of Congress to remove Judges and vacated Webcaster III. The existing settlement agreements were unaffected by this decision.

Webcaster IV?

Current rates for webcasters under the compulsory license are set to expire in 2015. The hearings today will perhaps offer one of the earliest glimpses at some of the issues we can expect during the CRB’s next rate proceeding.

At center stage is the recently introduced Internet Radio Fairness Act (H.R. 6480). The primary effect of the bill, supported most publicly by Pandora, would be to change the standard used by the Copyright Royalty Judges from the current “willing buyer/willing seller” standard to the §801(b) standard used for satellite radio and pre-existing subscription services. The bill would also implement a host of procedural changes to CRB proceedings, discussion of which would make this post longer than it already is.

Discussion of a competing bill circulated last August by Rep. Nadler, the Interim FIRST Act, may also come up. That bill would instead subject all digital performance rate proceedings to the “willing buyer/willing seller” standard.

The Competing Standards

Before wrapping up, I thought it would be worthwhile to take a closer look at the two standards that have been discussed above.

§ 801(b)(1) was created as part of the Copyright Act of 1976. Draft bills establishing the agency to administer the new statutory licenses created by the Act originally provided only that the rates be “reasonable.” 1773 FR 4080. Some concerns were raised about the constitutionality of delegating rate-setting authority under such a vague standard. In response, Congress added four factors to guide the setting of rates. Prior to the DPRA, the Copyright Royalty Tribunal — the precursor to the CARP — had only applied this standard in two other proceedings: the 1980 Jukebox License Proceeding and the 1981 Mechanical License Proceeding.

The standard requires that royalty rates be set in order—

(A) To maximize the availability of creative works to the public.

(B) To afford the copyright owner a fair return for his or her creative work and the copyright user a fair income under existing economic conditions.

(C) To reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication.

(D) To minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices.

The “willing buyer/willing seller” standard, found in 17 USC § 114(f)(2)(B), requires the Copyright Royalty Board to set a rate—

that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller. In determining such rates and terms, the Copyright Royalty Judges shall base their decision on economic, competitive and programming information presented by the parties, including—

(i) whether use of the service may substitute for or may promote the sales of phonorecords or otherwise may interfere with or may enhance the sound recording copyright owner’s other streams of revenue from its sound recordings; and

(ii) the relative roles of the copyright owner and the transmitting entity in the copyrighted work and the service made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, and risk.

The two standards are essentially the same, save for the fourth factor of the § 801(b) standard. Very broadly speaking, copyright owners tend to favor the “willing buyer/willing seller” standard while services using copyrighted works tend to favor the § 801(b) standard. And while I’ve detailed above lengthy proceedings over the past decade regarding royalty rates for webcasters, that is not necessarily a result of the standard used — keep in mind that these proceedings involved thousands of separate webcasters while only a small handful of services continue to operate under the § 801(b) standard. So it is no surprise that there has been more disagreement during proceedings that affect the vast majority of digital music services.

References   [ + ]

1. 17 USC § 106(6).
2. In the matter of rate setting for digital performance right in sound recordings and ephemeral recordings, Report of the Copyright Arbitration Royalty Panel, No. 2000-9, 8 (2002).
3. H.R.Rep. No. 105-796, at 87 (1998) (Conf.Rep.).
4. Arista Records v Launch Media, 578 F.3d 148 (2nd Cir. 2009).
5. 67 FR 45239.
6. Id.
7. Id. at 45249.
8. Id. at 45267.
9. Robin Jeweler, CRS Report Report for Congress, The Copyright Royalty and Distribution Reform Act of 2004, Order code RS21512 (2004).
10. 72 FR 24084.
11. In doing so, the CRB stated in a footnote:

It must be emphasized that, in reaching a determination, the Copyright Royalty Judges cannot guarantee a profitable business to every market entrant. Indeed, the normal free market processes typically weed out those entities that have poor business models or are inefficient. To allow inefficient market participants to continue to use as much music as they want and for as long a time period as they want without compensating copyright owners on the same basis as more efficient market participants trivializes the property rights of copyright owners. Furthermore, it would involve the Copyright Royalty Judges in making a policy decision rather than applying the willing buyer/willing seller standard of the Copyright Act.

12. Intercollegiate Broadcasting System v Copyright Royalty Board, 574 F.3d 748. The exception was the court’s remand of the CRB’s omission of a cap on minimum fees for commercial webcasters.
13. Pub. L. No. 110-435, 122 Stat. 4974.
14. Pub.L. 111−36, 123 Stat. 1926.
15. See Notification of Agreements Under the Webcaster Settlement Act of 2008, 74 FR 9293 (March 3, 2009), Notification of Agreements Under the Webcaster Settlement Act of 2009, 74 FR 34796 (July 17, 2009), Notification of Agreements Under the Webcaster Settlement Act of 2009, 74 FR 40614 (August 12, 2009.
16. Intercollegiate Broadcasting v Copyright Royalty Board, 684 F.3d 1332 (DC Cir. 2012).
17. 73 FR 4080.

Debate over the role and scope of copyright law in a digital age was reignited last week after the brief appearance of a policy brief by a Republican Study Committee staffer, Derek Khanna. The brief was officially pulled from the RSC website, but copies are easily found online.

Copyright skeptics were quick to dub the brief a “watershed” moment and seem unable to confine the hyperbole of their remarks. One Twitterer compared the policy brief to the 95 Theses, which catalyzed the Protestant Reformation. One might chalk up the reaction to a form of confirmation bias — or, “brilliant people agree with me“.

But as I mentioned last Wednesday in the first part of my examination of the policy brief, any debate should begin with sound premises. And the RSC policy brief, which first lays out three “myths” about current copyright law, does not do this. If copyright skeptics can’t advance arguments without rewriting history, perhaps their arguments are not as solid as they think.

Today, I want to continue my in-depth look at the RSC policy brief, focusing on the final “myth” and sections on the current status of copyright law.

Myth 3. The current copyright legal regime leads to the greatest innovation and productivity

First, this myth begs the question that the purpose of copyright under the Constitution is to provide the greatest amount of the ill-defined concepts such as “innovation” and “productivity.” Too often “innovation” is used as a code word for increasing the bottom line of venture capital firms and the consumer electronics sector. As I noted in my first part, this interpretation of the purpose behind the Copyright Clause does not comport well with history.

Second, and more importantly, is the suggestion that there are those who would say the current copyright legal regime is ideal. I doubt you will find many from any side of the copyright debate who will declare this. In fact, the perceived shortcomings of the law do much to explain its expansion over the past two centuries.

There were four major revisions to the Copyright Act since the first Act in 1790: 1831, 1870, 1909, and 1976. 1William Patry, Copyright Law and Practice, Chap. 1 (2000). During each of these, you can find those who expressed the need for reform precisely because the existing copyright law was inadequate in some fashion.

You can see this in the work of Noah Webster, writer of what would become the seminal American dictionary. Webster actively lobbied for copyright legislation under the Articles of Confederation. 2Noah Webster, A Collection of Papers on Political, Literary, and Moral Subjects, pp 173-75 (Webster & Clark, 1843). But before the end of his life, he would return to Congress in the 1820’s to argue on behalf of the “justice of a more liberal law” that would cure some of the “defects” in the 1790 Copyright Act. His efforts in part resulted in the first major revision of US copyright law in 1831. 3Id. 175-78.

Librarian of Congress Ainsworth Spofford remarked upon these shortcomings as motivation for the progression of copyright law during the third major revision to the Copyright Act in 1870. “It is a very notable fact that the United States of America was the first nation that ever embodied the principle of protection to the rights of authors in its fundamental law. Thus anchored in the Constitution itself, this principle has been further recognized by repeated acts of Congress, aimed in all cases at giving it practical effect.” 4The Copyright System of the United States—Its Origin and Growth.

Within forty years, Congress would again seek to revise the copyright law. During this period, the first US Register of Copyrights Thorvald Solberg said in 1904: “The laws as they stand fail to give the protection required, are difficult of interpretation, application, and administration, leading to misapprehension and misunderstanding, and in some directions are open to abuses.”

In the decades following, Congress engaged in perhaps the most thorough and comprehensive revision of copyright law. During this time, former Register of Copyrights Barbara Ringer said in a 1975 Congressional Hearing:

The Constitution speaks of the desirability of promoting the progress of science and useful arts, science in the broad sense of learning or knowledge, by offering protection for limited times to authors and inventors.

It seems to me that it is this protection, the exclusive rights that are supposed to be granted to authors, that is the ultimate public interest that the Constitution and its drafters were thinking about. I do not think that this has ever been fully or even partly realized in any copyright law we have had in our entire history.

If anything else, the past two decades have borne witness to many arguments that copyright law is not ideally fit to accomplishing its purpose of establishing a functional marketplace for the creation and dissemination of expressive works. This “myth” is little more than a strawman.

Current status of Copyright Law?

Khanna begins the next section of his brief by remarking:

Under the Copyright Act of 1790, the first federal copyright act, it stated that the purpose of the act was the “encouragement of learning” and that it achieved this by securing authors the “sole right and liberty of printing, reprinting, publishing and vending” their works for a term of 14 years, with the right to renew for one additional 14 year term should the copyright holder still be alive. This is likely what our Founding Fathers meant when they wrote in the Constitution for a “limited time.” Gradually this period began to expand, but today’s copyright law bears almost no resemblance to the constitutional provision that enabled it and the conception of this right by our Founding Fathers.

But is this “likely what our Founding Fathers meant”?

The US Copyright Act of 1790 borrowed the UK’s 1710 Statute of Anne Statute of Anne (1710) almost in its entirety, including the fourteen year term of protection. 5See Oren Bracha, The Adventures of the Statute of Anne in the Land of Unlimited Possibilities: The Life of a Legal Transplant, 25 Berkeley Technology Law Journal 1427 (2010). It’s worth noting that the adoption of the fourteen year term is entirely arbitrary, and reminds me of the old story about the Easter Ham. 6“As a little girl watches her mom prepare the Easter ham, she wonders why her mother cuts off both ends of the ham before putting it in the pot. So, she asks why, and her mom realizes that she doesn’t know. That’s the way her mother prepared the Easter ham.

So they call grandmother and pose the question about cutting off the ends of the Easter ham. Grandmother admits to not knowing either. She just prepared the ham the way her mom did it.

Their next call is to great-grandmother. When they ask her about her method of preparing the Easter ham, she laughs. Then she says, ‘It was the only way I could get the Easter ham to fit the small pot I had!'”

The US Congress chose a fourteen year term because that’s how long England protected copyright under the Statute of Anne. And England settled on a fourteen year term in the Statute of Anne because that is how long the Statute of Monopolies (1624), passed nearly a century prior, had protected letter patents. 7Ronan Deazley, ‘Commentary on the Statute of Monopolies 1624‘, in Primary Sources on Copyright (1450-1900) (eds L. Bently & M. Kretschmer, 2008). And that term, according to one scholar, was “based on the idea that 2 sets of apprentices should, in 7 years each, be trained in the new techniques.” 8Fritz Machlup, “An Economic Review of the Patent System”, pg 5, Study of the Subcommittee on Patents, Trademarks, and Copyrights of the Committee on the Judiciary, United States Senate, United States Printing Office, Washington: 1958.

Thus, the original fourteen year term was not “likely what our Founding Fathers meant when they wrote in the Constitution for a ‘limited time'” as Khanna claims. Instead, the 14 year term was a “quirk of history”, borrowed from tradition without much thought by a Congress that at the dawn of a new nation had more pressing matters to attend to. 9See Oren Bracha, Commentary on the U.S. Copyright Act 1790, in Primary Sources on Copyright (1450-1900) (eds L. Bently & M. Kretschme 2008). The argument that the length of copyright protection should be based on how long it took apprentices to master a craft 500 years ago is not so compelling.

Khanna next states:

Critics of current law point out that the terms of copyright continue to be extended perpetually, ensuring that works never actually enter the public domain – particularly Walt Disney’s production of Steamboat Willey, the first Mickey Mouse film. If this is true, if copyright is to be indefinitely extended, then that would effectively nullify Article I, Section 8, Clause 8 of the Constitution which provides protection only for “limited times.”

While this meme seems to begin to appear in early 2000, it was really Lawrence Lessig who popularized this alternative reality. Here is Lessig in a 2002 speech:

Eleven times in the last 40 years it has been extended for existing works–not just for new works that are going to be created, but existing works. The most recent is the Sonny Bono copyright term extension act. Those of us who love it know it as the Mickey Mouse protection act, which of course [means] every time Mickey is about to pass through the public domain, copyright terms are extended.

Lessig’s revisionist statements quickly became gospel among copyright skeptics. You can easily find these ideas — that copyright was extended 11 times in the past 40 years 10Ian McClure, Be Careful What You Wish For, 10 Chapman Law Review 1, 11 (2007), “The copyright term has been lengthened eleven times in the past forty years”; Gary Shapiro, President, Consumer Electronics Association, Remarks at the Cato Institute Conference: Copyright Controversies: Freedom, Property, Content Creation, and the DMCA, Copyrights and Property Rights, CATO Policy Report, July-August 2006, “Congress has acted 13 times to expand the length of the copyright terms; 11 of those expansions were passed during the last 40 years”; Larry Downes, ‘Free the Mouse’ for creativity’s sake, USAToday (Oct 7, 2002), ” In the past 40 years, entertainment industry lobbyists have persuaded Congress 11 times to extend copyrights on their vast treasure troves of books, films and music”; Kendra Mayfield, Setting Boundaries on Copyrights, Wired (Feb. 20, 2002); See also Lawrence Lessig, Free Culture, Ch. 10 (2004), “Eleven times in the last forty years, Congress has extended the terms of existing copyrights”; Jesse Walker, Copy Catfight, Reason (March 2000), “This period has been gradually extended, especially lately: It has been lengthened 11 times in the last 40 years, most recently by the Sonny Bono Copyright Term Extension Act of 1998.” and that these copyright extensions amount to “perpetual copyright on the installment plan” and/or have occurred everytime Mickey Mouse or Steamboat Willie is set to enter the public domain. 11“In the United States, we have perpetual copyright on the installment plan,” said Peter Jaszi in 2003; Jane Hamsher, GOP Tries to Overthrow the Tyranny of Mickey Mouse…Then Sadly Backs Down, bytegeist, Nov. 19, 2012, “Disney keeps bribing congress to extend copyright laws and keep Mickey Mouse under copyright”; Mike Masnick, Do Bad Things Happen When Works Enter The Public Domain? The Data Says… No, TechDirt, Sept. 28, 2012, “As you know, whenever Mickey is getting close to the public domain, Congress swoops in, at the behest of Disney, and extends copyright”; Matt Asay, Copyright extension of 45 years to net just $40 for most performers, CNet, Sept. 9, 2008, “Every few years the US extends copyright terms because Disney lobbies the heck out of Congress’ weak-kneed legislators to prevent Mickey Mouse from becoming public domain”; Kevin Goldman, Limited Times: Rethinking the Bounds of Copyright Protection, 154 University of Pennsylvania Law Review 705 (2006), “Each time the term of copyright protection has been due to expire, Congress has passed another extension.”

To put it bluntly, this idea is hogwash.

In a 2002 law review article, Scott Martin thoroughly debunks this idea. 12Scott M. Martin, The Mythology of the Public Domain: Exploring the Myths Behind Attacks on the Duration of Copyright Protection, 36 Loy. L.A. L. Rev. 253 (2002). Says Martin:

According to myth, Congress relentlessly extended the term of copyright eleven times in just forty years, and, unless the courts intercede, the “copyright dictators” will continue to successfully pressure Congress into extending the term countless times in the future.

In fact, Congress revised its view of the appropriate duration of copyright protection only twice in the past forty years: once in the 1976 Copyright Act-which changed the term from an initial term of twenty-eight years plus a renewal term to a term of life of the author plus fifty years (with a commensurate increase in the term of protection for existing works); and then again in the 1998 CTEA-which added twenty years of additional protection to all existing terms of copyright. The other nine extensions were short interim extensions passed during the deliberation over the 1976 Act in order to ensure that authors of works on the cusp of falling into the public domain would not be penalized by Congress’s glacial pace in enacting the new Copyright Act.

The 1909 Act provided for an original and a renewal term of statutory copyright totaling fifty-six years. Congress changed this in the 1976 Act, effective January 1, 1978, to a term of life plus fifty years for new works. Congress did not apply the new term to existing works, but it did add nineteen years to the term of protection for existing works which were not yet in the public domain. Congress began actively working on the new Copyright Act in 1962, but it took fourteen years to reach agreement on all the details of the new Act. Ironically, the term of protection to be applied by the new Act was one of the least contentious provisions of the new law. Since the provisions of the new Act did not apply to works which entered the public domain prior to the effective date of the Act, Congress provided for a series of nine short interim extensions of copyright pending final enactment of the new law.

The congressional intent behind the interim extensions was clear: Congress felt that it would be inequitable to deny the benefit of the extended copyright term to works on the cusp of entering the public domain solely because of the long delays in the legislative process.

The need for nine successive short-term extensions can be traced directly to the fact that no one expected the process of enacting the new Act would take years to complete.

 

And while the statement that copyright duration was extended eleven times in the past forty years might be forgiven because it is technically correct though meaningless, the notion that the impetus for these extensions was to circumvent the Constitution’s “limited times” mandate and keep Steamboat Willie out of the public domain is simply wrong.

As Martin says later:

Characterizations of these short-term interim extensions, all of which were a part of the single congressional effort to enact a revised Copyright Act, as unrelated extensions of the term of protection, or as a recidivist congressional pattern of endlessly extending the duration of copyright are either uninformed or intellectually dishonest.

Martin is not alone. Law professor Edward Samuels has also remarked that “these statements are misleading, if not downright disingenuous.” 13The Public Domain Revisited, 36 Loyola LA Law Review 389, 423 (2002).

Even the Supreme Court has weighed in. In Eldred v Ashcroft, where the constitutionality of the 1997 Copyright Term Extension Act was challenged, the Court declared that “a regime of perpetual copyrights ‘clearly is not the situation before us.'” 14537 US 186, 209 (2003), quoting Eldred v Reno, 239 F.3d 372 (DC Cir. 2001).

So far, Khanna’s policy brief is not holding up.

References   [ + ]

1. William Patry, Copyright Law and Practice, Chap. 1 (2000).
2. Noah Webster, A Collection of Papers on Political, Literary, and Moral Subjects, pp 173-75 (Webster & Clark, 1843).
3. Id. 175-78.
4. The Copyright System of the United States—Its Origin and Growth.
5. See Oren Bracha, The Adventures of the Statute of Anne in the Land of Unlimited Possibilities: The Life of a Legal Transplant, 25 Berkeley Technology Law Journal 1427 (2010).
6. “As a little girl watches her mom prepare the Easter ham, she wonders why her mother cuts off both ends of the ham before putting it in the pot. So, she asks why, and her mom realizes that she doesn’t know. That’s the way her mother prepared the Easter ham.

So they call grandmother and pose the question about cutting off the ends of the Easter ham. Grandmother admits to not knowing either. She just prepared the ham the way her mom did it.

Their next call is to great-grandmother. When they ask her about her method of preparing the Easter ham, she laughs. Then she says, ‘It was the only way I could get the Easter ham to fit the small pot I had!'”

7. Ronan Deazley, ‘Commentary on the Statute of Monopolies 1624‘, in Primary Sources on Copyright (1450-1900) (eds L. Bently & M. Kretschmer, 2008).
8. Fritz Machlup, “An Economic Review of the Patent System”, pg 5, Study of the Subcommittee on Patents, Trademarks, and Copyrights of the Committee on the Judiciary, United States Senate, United States Printing Office, Washington: 1958.
9. See Oren Bracha, Commentary on the U.S. Copyright Act 1790, in Primary Sources on Copyright (1450-1900) (eds L. Bently & M. Kretschme 2008).
10. Ian McClure, Be Careful What You Wish For, 10 Chapman Law Review 1, 11 (2007), “The copyright term has been lengthened eleven times in the past forty years”; Gary Shapiro, President, Consumer Electronics Association, Remarks at the Cato Institute Conference: Copyright Controversies: Freedom, Property, Content Creation, and the DMCA, Copyrights and Property Rights, CATO Policy Report, July-August 2006, “Congress has acted 13 times to expand the length of the copyright terms; 11 of those expansions were passed during the last 40 years”; Larry Downes, ‘Free the Mouse’ for creativity’s sake, USAToday (Oct 7, 2002), ” In the past 40 years, entertainment industry lobbyists have persuaded Congress 11 times to extend copyrights on their vast treasure troves of books, films and music”; Kendra Mayfield, Setting Boundaries on Copyrights, Wired (Feb. 20, 2002); See also Lawrence Lessig, Free Culture, Ch. 10 (2004), “Eleven times in the last forty years, Congress has extended the terms of existing copyrights”; Jesse Walker, Copy Catfight, Reason (March 2000), “This period has been gradually extended, especially lately: It has been lengthened 11 times in the last 40 years, most recently by the Sonny Bono Copyright Term Extension Act of 1998.”
11. “In the United States, we have perpetual copyright on the installment plan,” said Peter Jaszi in 2003; Jane Hamsher, GOP Tries to Overthrow the Tyranny of Mickey Mouse…Then Sadly Backs Down, bytegeist, Nov. 19, 2012, “Disney keeps bribing congress to extend copyright laws and keep Mickey Mouse under copyright”; Mike Masnick, Do Bad Things Happen When Works Enter The Public Domain? The Data Says… No, TechDirt, Sept. 28, 2012, “As you know, whenever Mickey is getting close to the public domain, Congress swoops in, at the behest of Disney, and extends copyright”; Matt Asay, Copyright extension of 45 years to net just $40 for most performers, CNet, Sept. 9, 2008, “Every few years the US extends copyright terms because Disney lobbies the heck out of Congress’ weak-kneed legislators to prevent Mickey Mouse from becoming public domain”; Kevin Goldman, Limited Times: Rethinking the Bounds of Copyright Protection, 154 University of Pennsylvania Law Review 705 (2006), “Each time the term of copyright protection has been due to expire, Congress has passed another extension.”
12. Scott M. Martin, The Mythology of the Public Domain: Exploring the Myths Behind Attacks on the Duration of Copyright Protection, 36 Loy. L.A. L. Rev. 253 (2002).
13. The Public Domain Revisited, 36 Loyola LA Law Review 389, 423 (2002).
14. 537 US 186, 209 (2003), quoting Eldred v Reno, 239 F.3d 372 (DC Cir. 2001).

Late last Friday evening, a policy brief written by 24 year old Derek Khanna was posted to the website for the Republican Study Committee (RSC), a caucus of conservative House Republicans. The brief, Three Myths About Copyright Law and Where to Start to Fix It, was removed from the site Saturday morning, but copies were all over the internet shortly afterward, with critics of copyright applauding the paper.

Many on the internet were quick to declare the paper the absolute most stunningly brilliant paper history has ever produced. Techdirt’s Mike Masnick lamented the fact that, having read the paper, he will no longer be able to enjoy future papers, for they will only pale in comparison.

RSC spokesman Brian Staessle remarked upon retracting the brief that “we hope people will now use this opportunity to engage in polite and serious discussion of copyright law.” I agree. Copyright law increasingly requires dialogue from all corners of society; this is, in fact, one of the reasons I began writing this blog over two years ago.

But any debate or dialogue should begin with sound premises. This policy brief doesn’t. Instead, like an unfortunate strand of copyright skepticism, it runs from reality, rewrites history, and hides from logic.

The brief begins with Khanna presenting three “myths” that he debunks, and then turns to several areas of concern under current copyright law while finally offering a number of potential policy solutions. Today I want to begin an in-depth look at the brief, starting with the first two “myths”. In later posts, I will look at the remaining sections.

Myth 1. The purpose of copyright is to compensate the creator of the content

Khanna begins:

It’s a common misperception that the Constitution enables our current legal regime of copyright protection – in fact, it does not. The Constitution’s clause on Copyright and patents states:

“To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;” (Article I, Section 8, Clause 8)

Thus, according to the Constitution, the overriding purpose of the copyright system is to “promote the progress of science and useful arts.” In today’s terminology we may say that the purpose is to lead to maximum productivity and innovation

Khanna is correct on one point: the view of the Copyright Clause he disagrees with is indeed common. But rather than being a misperception, this is the view embraced by the Founding Fathers and, over the past 200 years, the Supreme Court, Congress, and numerous jurists, scholars, and writers. 1See my post Copyright is for the Author First and the Nation Second.

In recent decades, many copyright skeptics have increasingly turned to the Founding period of US history in search of arguments against the perceived overreach of the law. This search has given birth to many myths about the goals and purposes of Congress’s copyright power.

Though there was little said about the copyright power during this time, what was said more often than not supports a property right to establish a functioning market for the creation and dissemination of expressive works, not the utilitarian view embraced by Khanna here.

This is evident several years before the Constitution would be drafted. James Madison, who would author the Copyright Clause sat on the committee of the Continental Congress which recommended that the states pass laws protecting copyright. In March 1783, this committee issued a report saying it was “persuaded that nothing is more properly a man’s own than the fruit of his study, and that the protection and security of literary property would greatly tend to encourage genius.” 224 Journals of the Continental Congress 326.

Most of the States that subsequently adopted copyright statutes explicitly adopted the Continental Congress’s natural rights language. 3The preambles to the Massachusetts, New Hampshire, and Rhode Island copyright acts stated:

Whereas the improvement of knowledge, the progress of civilization, the publick weal of the Commonwealth, and the advancement of human happiness, greatly depend on the efforts of learned and ingenious persons in the various arts and sciences: As the principal encouragement such persons can have to make great and beneficial exertions of this nature, must exist in the legal security of the fruits of their study and industry to themselves, and as such security is one of the natural rights of all men, there being no property more peculiarly man’s own than that which is produced by the labour of his mind.

In a similar fashion, North Carolina’s copyright act read:

Whereas nothing is more strictly a man’s own than the fruit of his study, and it is proper that men should be encouraged to pursue useful knowledge by the hope of reward; and as the security of literary property must greatly tend to encourage genius, to promote useful discoveries and to the general extension of art and commerce.

If compensating creators is not the purpose of copyright law, then early lawmakers must not have gotten the memo either. As the first Congress worked on a copyright act, South Carolina Representative Aedenus Burke urged his fellow Representatives of the importance to creators of passing a copyright bill, noting “several gentlemen had lately published the fruits of their industry and application, and were every hour in danger of having them surreptitiously printed.” 4Annals of Congress, 1st Cong., 2nd sess., 1080.

Most telling, the Supreme Court has spoken on the Constitutional purpose of copyright twice in the past decade. Claims similar to Khanna’s were thoroughly rejected by the Court in 2003:

JUSTICE STEVENS’ characterization of reward to the author as “a secondary consideration” of copyright law understates the relationship between such rewards and the “Progress of Science.” As we have explained, “[t]he economic philosophy behind the [Copyright] [C]lause … is the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors.” Accordingly, “copyright law celebrates the profit motive, recognizing that the incentive to profit from the exploitation of copyrights will redound to the public benefit by resulting in the proliferation of knowledge…. The profit motive is the engine that ensures the progress of science.” Rewarding authors for their creative labor and “promot[ing] … Progress” are thus complementary; as James Madison observed, in copyright “[t]he public good fully coincides . . . with the claims of individuals.” JUSTICE BREYER’s assertion that “copyright statutes must serve public, not private, ends,” similarly misses the mark. The two ends are not mutually exclusive; copyright law serves public ends by providing individuals with an incentive to pursue private ones. 5Eldred v Ashcroft, 537 US 186, n.18.

And again in 2012:

Even were we writing on a clean slate, petitioners’ argument would be unavailing. Nothing in the text of the Copyright Clause confines the “Progress of Science” exclusively to “incentives for creation.” Evidence from the founding, moreover, suggests that inducing dissemination—as opposed to creation—was viewed as an appropriate means to promote science. Until 1976, in fact, Congress made “federal copyright contingent on publication[,] [thereby] providing incentives not primarily for creation,” but for dissemination. Our decisions correspondingly recognize that “copyright supplies the economic incentive to create and disseminate ideas. 6Golan v Holder, 565 US ___ (2012).

Khanna next attempts to cast proponents of copyright as somehow taking an “entitlement” mentality toward their rights. He concludes this first section by saying:

Strictly speaking, because of the constitutional basis of copyright and patent, legislative discussions on copyright/patent reform should be based upon what promotes the maximum “progress of sciences and useful arts” instead of “deserving” financial compensation.

I doubt many — if any — creators believe they are “entitled” to financial compensation merely because they have created something. Like any market, creators are only entitled to seek profit, not have it given to them. As Irwin Karp testified during the last Copyright Act revision, though the Copyright Clause establishes these rights, “it does not guarantee a fair reward, or any reward.”

For authors and publishers, both commercial and non-profit, must depend on income derived from uses of their books and journals to compensate for the talent, labor and money expended in creating them, and provide working capital for further publications. And as entrepreneurs, they must assume the ever-present risk that books and journals produced by substantial labor and cash outlays will fail financially although they make valuable intellectual contributions to the public interest.

But there’s a huge difference between feeling entitled to a reward and arguing for compensation when economic users exploit one of the exclusive rights of a work — by reproducing or publicly performing a work, for example. One of the favorite claims of copyright skeptics is that creators routinely oppose new technology because it “disrupts their business model.” 7See, for example, previous posts on The Story of John and Jack and 100 Years of Copyright and Disruptive Technology. On the contrary, it is often the case that the businesses utilizing the new technology are the ones who feel entitled — entitled to profit off the exploitation of established rights without compensating creators merely because they are using new technology. In this case, creators do “deserve” compensation. This isn’t a prize at the bottom of the box, it’s one of the foundations of a just capitalist society.

Myth 2. Copyright is free market capitalism at work

Khanna next writes:

Copyright violates nearly every tenet of laissez faire capitalism. Under the current system of copyright, producers of content are entitled to a guaranteed, government instituted, government subsidized content-monopoly

These two sentences are packed with so many misconceptions that I want to address them each one by one.

First, copyright has historically been treated like property — not a government subsidy.

Thomas Paine said in 1782, “in all countries where literature is protected, and it never can flourish where it is not, the works of an author are his legal property.”

At the birth of the United States, copyright was couched in terms of property more often that not. In Copyright and Incomplete Historiographies: Of Piracy, Propertization, and Thomas Jefferson, Justin Hughes traces the “robust history of copyright being referred to as ‘property.'” 879 Southern California Law Review 993, 1004 (2006). Most frequently, those involved in the creation and maintenance of copyright law have cited to the work of John Locke and his labor theory of property to justify copyright — a view that remains viable to this day.

Eaton Drone’s 1879 treatise on copyright, considered “the most extensive and comprehensive published on the topic in the United States in the nineteenth century” and the dominant treatise for decades, also embraced the view of copyright as property in Lockean terms. More importantly, it noted, in stark terms, that “To preserve the sanctity of property has ever been a chief function of government. Next to protecting the lives and liberties of the people, it is the highest.”

Not only is the security of property a chief function of government, but its protection is inextricably linked to the advancement of life and liberty. Even today, this important role of property in free capitalist societies continues to be expressed:

States which did not guarantee property and contract did not flourish economically compared to states that did. . . Property and contract law have indeed been foundational to enabling capitalism to take off. . . The emergence of well defined, secure property rights was a part of a much broader historical process in which absolute monarchies and their legitimating political philosophies lost their institutional dominance to be replaced by the institution of the modern state and secular political philosophies that recognized the rights of individuals within and against the state. . . The idea of a natural right of property was one crucial premise in John Locke’s rejection of the absolute authority of Kings. 9Dr. Peter Drahos, The Universality of Intellectual Property Rights: Origins and Developments.

Like property in general, copyright — the recognition of the rights of creators — has contributed to free society. Former Register of Copyrights Barbara Ringer wrote in 1974, “It is striking that the second and third copyright statutes in the world — those of the United States of America and of France — were adopted immediately following the revolutions in those countries that overthrew autocratic government and were based on ideals of personal liberty and individual freedom.” She adds:

Freedom of speech and freedom of the press are meaningless unless authors are able to create independently from control by anyone, and to find a way to put their works before the public. Economic advantage and the shibboleth of “convenience” distort the copyright law into a weapon against authors. Anyone who cares about freedom and authorship must insure that, in the process of improving the efficiency of our law, we do not throw it all the way back to its repressive origins in the Middle Ages.

Far from the government instituted regulation that Khanna suggests in his policy brief, copyright is no more and no less like any other free market system. 10See also Testimony of Irwin Karp: “the instrument chosen by the Constitution to serve the public interest, i.e., the securing of literary and scientific works of lasting value — is an independent, entrepreneurial property-rights system of writing and publishing”; David Householder, The Progress of Knowledge: A Reexamination of the Fundamental Principles of American Copyright Law, 14 Loy. L.A. Ent. L. Rev. 1, 35 (1993): the Copyright Clause “assumes that promoting the progress of knowledge is advantageous and directs Congress to achieve this benefit by securing exclusive rights in intellectual property. It mandates the creation of a marketplace, wherein this unique form of property, the copyright, may be traded and protected.”

In fact, the Constitutional Convention delegates explicitly rejected proposals that would give the federal government a more active role in promoting the progress of the sciences and useful arts — for example, the establishment of a national university or provisions for premiums and rewards to inventors and authors. 11The Records of the Federal Convention of 1787, Vol. 2, August 18, 1787, ed. Max Farrand (New Haven: Yale University Press, 1911). The delegates tossed these aside for the hands-off approach embodied in the Copyright Clause, which would establish a functioning market for expression. This suggests that the delegates thought the pursuit of self-interest would best serve to promote the public interest — as James Madison said of the Clause in the Federalist Papers, “The public good fully coincides. . . with the claims of individuals.”

Some might argue that the promotion of the public interest through the pursuit of self-interest is one of the cornerstones of capitalism. 12Some might also argue that “to oppose copyright is to oppose capitalism.”

Much along the same lines, Khanna’s characterization of copyright as “government-subsidized” is completely erroneous. The government offers nothing to creators except a functioning market to pursue their own ends. Khanna’s suggestion that because copyright holders can pursue civil and criminal remedies for infringement acts as a subsidy is bizarre. That would make all property a government subsidy — contracts too, since contractual parties can turn to courts in the event of a breach. Khanna asserts that because the statutory damages are “massive”, this creates a subsidy. While I think it’s completely appropriate to debate whether copyright remedies are fair and effective, for purposes of this myth, it’s enough to point out that the nature of the remedies does not transform a copyright into a government subsidy.

Second, Khanna describes copyright as a “content-monopoly.”

There is perhaps no more elementary and persistent error in the history of copyright then the claim that it is a monopoly. 13This phrase comes from Edmund W. Kitch, Elementary and Persistent Errors in the Economic Analysis of Intellectual Property, 53 Vand. L. Rev. 1727 (2000). And, just as persistently, it has been debunked.

As in the entry for “monopolies” in an 1839 encyclopedia, which states, “Copyright and patents are now generally placed among monopolies by legal writers, but not correctly.” 14The Penny Cyclopedia of the Society for the Diffusion of Useful Knowledge, Vol. 15, pg 341 (C. Knight, London, 1839). A treatise on literary property written around the same time says:

[The author’s] case is precisely the same as that of the maker of houses, who cannot get a monopoly rent, because other men make more houses, as soon as he demands too much. So, when an author who has produced a book for which the demand is great, is unwise enough to ask too high a price, another author, (perhaps greater than he,) will write another book on the same subject, and thus demolish his ideal monopoly. 15Philip H. Nicklin, Remarks on Literary Property (Phila. 1838).

An 1896 book on copyright goes into more detail, noting that such “monopoly language” is based more on rhetoric than reality:

It is sometimes attempted to stigmatize copyright as monopoly, and writers of loose and careless habit sometimes speak of copyright as monopoly. It is no more monopoly than is the ordinary ownership of a horse or a piece of land. Blackstone says that a monopoly is—

A license or privilege . . . whereby the subject in general is restrained from that liberty of manufacturing or trading which he had before.

The law dictionaries define it in the same way. A monopoly takes away from the public the enjoyment of something which the public before possessed. Neither copyright nor patent does this, for neither can be applied to anything which is not new; neither can be applied to anything which the public before possessed. The author and inventor must produce something new in order to be entitled to copyright or patent. 16The Question of Copyright, pg. 86 (GP Putnam, 1896).

There are many other examples from more recent decades. 17See, for example, RR Bowker, Copyright, Its History and Its Law, pg 50 (Houghton Mifflin 1912), “Copyright is a monopoly only in the sense that any ownership is a monopoly”; Karp, Id.,

The copyright in a book is not a “monopoly” in the antitrust sense. It does not give the author control over the market in books, or the business of publishing them. His book must compete in the market place with the 40,000 other titles published that year and the hundreds of thousands still in print from prior years, including many that deal with the same subject. His copyright only gives him certain rights to use the book he created. The owner of a copyright only has a “monopoly” in the innocuous sense that all property owners do — each owns a collection of rights, granted by law, to use that which he has created, purchased or inherited.

Householder, Id.,

It is like saying the owner of the lot on the northwest comer of Elm and First Streets controls, and is able to exclude competitors from the market for, property on the northwest comer of Elm and First Streets. That owner’s right is a property right; calling it a monopoly adds nothing to an understanding of the owner’s rights. Such usage merely serves to make the meaning of the term “monopoly” less precise and therefore less useful.

Finally, as the Supreme Court said in one of its more recent copyright cases, “copyright gives the holder no monopoly on any knowledge. A reader of an author’s writing may make full use of any fact or idea she acquires from her reading.” 18Eldred v Ashcroft, 537 US 186, 217 (2003).

Final Notes

Next time, I’ll dive into the remaining pages of Derek Khanna’s policy brief, but, in my opinion it has so far not gotten off to a great start.

Parker Higgins of the EFF said of the paper that Congress shouldn’t debate copyright in a reality-free zone. I agree. But we should concentrate on actual reality, not the alternative reality that Khanna and some other copyright skeptics have constructed over the past few years. No doubt there are areas of copyright law that need improving. And certainly there’s no argument that some who favor the continuing vitality of creators’ rights at times use unhelpful rhetoric. But Khanna’s brief is Exhibit A in what not to do. A fair, just, and equitable marketplace for creative expression deserves better.

Read Republican Study Committee Policy Brief on Copyright: Part 2

References   [ + ]

1. See my post Copyright is for the Author First and the Nation Second.
2. 24 Journals of the Continental Congress 326.
3. The preambles to the Massachusetts, New Hampshire, and Rhode Island copyright acts stated:

Whereas the improvement of knowledge, the progress of civilization, the publick weal of the Commonwealth, and the advancement of human happiness, greatly depend on the efforts of learned and ingenious persons in the various arts and sciences: As the principal encouragement such persons can have to make great and beneficial exertions of this nature, must exist in the legal security of the fruits of their study and industry to themselves, and as such security is one of the natural rights of all men, there being no property more peculiarly man’s own than that which is produced by the labour of his mind.

In a similar fashion, North Carolina’s copyright act read:

Whereas nothing is more strictly a man’s own than the fruit of his study, and it is proper that men should be encouraged to pursue useful knowledge by the hope of reward; and as the security of literary property must greatly tend to encourage genius, to promote useful discoveries and to the general extension of art and commerce.

4. Annals of Congress, 1st Cong., 2nd sess., 1080.
5. Eldred v Ashcroft, 537 US 186, n.18.
6. Golan v Holder, 565 US ___ (2012).
7. See, for example, previous posts on The Story of John and Jack and 100 Years of Copyright and Disruptive Technology.
8. 79 Southern California Law Review 993, 1004 (2006).
9. Dr. Peter Drahos, The Universality of Intellectual Property Rights: Origins and Developments.
10. See also Testimony of Irwin Karp: “the instrument chosen by the Constitution to serve the public interest, i.e., the securing of literary and scientific works of lasting value — is an independent, entrepreneurial property-rights system of writing and publishing”; David Householder, The Progress of Knowledge: A Reexamination of the Fundamental Principles of American Copyright Law, 14 Loy. L.A. Ent. L. Rev. 1, 35 (1993): the Copyright Clause “assumes that promoting the progress of knowledge is advantageous and directs Congress to achieve this benefit by securing exclusive rights in intellectual property. It mandates the creation of a marketplace, wherein this unique form of property, the copyright, may be traded and protected.”
11. The Records of the Federal Convention of 1787, Vol. 2, August 18, 1787, ed. Max Farrand (New Haven: Yale University Press, 1911).
12. Some might also argue that “to oppose copyright is to oppose capitalism.”
13. This phrase comes from Edmund W. Kitch, Elementary and Persistent Errors in the Economic Analysis of Intellectual Property, 53 Vand. L. Rev. 1727 (2000).
14. The Penny Cyclopedia of the Society for the Diffusion of Useful Knowledge, Vol. 15, pg 341 (C. Knight, London, 1839).
15. Philip H. Nicklin, Remarks on Literary Property (Phila. 1838).
16. The Question of Copyright, pg. 86 (GP Putnam, 1896).
17. See, for example, RR Bowker, Copyright, Its History and Its Law, pg 50 (Houghton Mifflin 1912), “Copyright is a monopoly only in the sense that any ownership is a monopoly”; Karp, Id.,

The copyright in a book is not a “monopoly” in the antitrust sense. It does not give the author control over the market in books, or the business of publishing them. His book must compete in the market place with the 40,000 other titles published that year and the hundreds of thousands still in print from prior years, including many that deal with the same subject. His copyright only gives him certain rights to use the book he created. The owner of a copyright only has a “monopoly” in the innocuous sense that all property owners do — each owns a collection of rights, granted by law, to use that which he has created, purchased or inherited.

Householder, Id.,

It is like saying the owner of the lot on the northwest comer of Elm and First Streets controls, and is able to exclude competitors from the market for, property on the northwest comer of Elm and First Streets. That owner’s right is a property right; calling it a monopoly adds nothing to an understanding of the owner’s rights. Such usage merely serves to make the meaning of the term “monopoly” less precise and therefore less useful.

18. Eldred v Ashcroft, 537 US 186, 217 (2003).

A lot of ink has been spilled over the years over copyright. Many of the arguments against copyright, however, start to sound the same; trotted out again and again no matter how often they are debunked.

Case in point — the following is testimony from Irwin Karp, in his capacity as general counsel of the Authors League of America, during a hearing on copyright law revisions for what would become the Copyright Act of 1976, nearly 40 years ago.

Karp, who passed in 2006, “was a tireless advocate for author’s rights and remembered by many for his work on the 1976 Copyright Revision Act and on the Berne Convention.” Here, he is testifying specifically about “sections 107 and 108 of the Copyright Revision Bill and the issue of ‘library photocopying'”, but his remarks are just as applicable to broader issues. Karp lays out the purposes of copyright law — including its important free speech function — and then moves on to tackle the most popular “anti-copyright” arguments — copyright is a “monopoly”, it restricts access to knowledge, it is merely a government “privilege”. It’s telling that in the past thirty-five years, copyright skeptics have done little to move beyond these arguments.

As the Supreme Court has explained, the Copyright Clause of the Constitution was intended to establish independent, entrepreneurial, self-sustaining authorship and publishing as the means of serving the public interest in securing the production of valuable literary and scientific works. In so doing, the Copyright Clause serves a second purpose — it implements the First Amendment’s freedoms to express and publish ideas, information, opinions and all manner of literary, scientific and artistic works. The First Amendment protects against restraints on these freedoms. But the Copyright Clause is the only constitutional provision which establishes a legal-economic foundation for exercising them. The Copyright Clause thus frees authors from the need for subsidization by the state or other powerful, institutional “patrons”, and from the restraints such support often imposes. And it was intended to sustain the existence of a diversity of independent publishers, who would give a wide range of viewpoints access to the market place of ideas.

The Supreme Court has emphasized that the Copyright Clause of the Constitution

“was intended to grant valuable, enforceable rights to authors, publishers, etc. without burdensome requirements; ‘to afford greater encouragement to the production of literary [or artistic] works of lasting benefit to the world.'”

The Court said that the “economic philosophy” underlying the Copyright Clause

“is the conviction that the encouragement of individual efforts by personal gain is the best way to advance public welfare through the talents of authors . . .” {Mazer v. Stein, 347 U.S. 201, 219)

Thus, the instrument chosen by the Constitution to serve the public interest, i.e., the securing of literary and scientific works of lasting value — is an inde- pendent, entrepreneurial property-rights system of writing and publishing. The Copyright Act establishes the rights which prevent others from depriving authors and publishers of the fruits of their labor. But it does not guarantee a fair reward, or any reward. For authors and publishers, both commercial and non-profit, must depend on income derived from uses of their books and journals to compensate for the talent, labor and money expended in creating them, and provide working capital for further publications. And as entrepreneurs, they must assume the ever-present risk that books and journals produced by substantial labor and cash outlays will fail financially although they make valuable intellectual contributions to the public interest.

We urge that Congress should not disrupt the delicate balance of this essential system. Carving exemptions out of the “enforceable rights” of authors and publishers does not serve the public interest. For although the resulting uncompensated uses may further the convenience or ambitious plans of some “user” group, they diminish or destroy the ability of authors and publishers to serve the ultimate public interest — to continue producing new works of lasting benefit. The publication of scientific and technical journals, for example, richly serves the public interest — but it is at best a marginal economic operation. Learned societies and others who publish them do not grow fat on their profits. Squeezed by ever-increasing costs and static circulations, publishers will be forced to close down some journals or not start new ones if they are denied reasonable compensation for uses of their articles in the new medium of systematic, library one-at-a-time reproduction. Periodicals and journals are neither immortal nor immune from the laws of economics. The process of attrition may not be apparent to library spokesmen, but it is nonetheless inevitable. Yet, while they are willing to make substantial payments to the Xerox Corporation, suppliers and library employees to provide users with hundreds of thousands of copies of copyrighted articles, they demand of Congress the privilege of denying the journal’s publishers any compensation. [Ironically, libraries pay the Xerox Corporation a per-page fee — a royalty, if you will — for each page of each article they reproduce].

THE ANTI-COPYRIGHT ARGUMENTS

It has become ritual for library organization and Ad Hoc Committee spokesmen to accompany their demands for new exemptions with a series of attacks on copyright, calculated to suggest that the author has no legitimate claim to reasonable protection for the work he creates.

THE “ANTITRUST ARGUMENT”

Library and Ad Hoc Committee spokesmen charge that a copyright is a “monopoly”, suggesting it offends the Sherman Act. This is not so. The copyright in a book is not a “monopoly” in the antitrust sense. It does not give the author control over the market in books, or the business of publishing them. His book must compete in the market place with the 40,000 other titles published that year and the hundreds of thousands still in print from prior years, including many that deal with the same subject. His copyright only gives him certain rights to use the book he created. The owner of a copyright only has a “monopoly” in the innocuous sense that all property owners do — each owns a collection of rights, granted by law, to use that which he has created, purchased or inherited.

THE “RESTRAINT OF INFORMATION” ARGUMENT

Library and Ad Hoc Committee spokesmen charge that a copyright places a restraint on information. This is not so. A patent prevents others from using the ideas it protects. A copyright does not impose such restraints. Anyone is free to use the ideas, facts or information presented in a copyrighted book or article. The copyright only protects the author’s expression, not the ideas, facts or information. Other writers can draw on them. Other writers are free to independently create similar (indeed closely similar) works; the copyright only prevents substantial copying of the author’s expression.

In Progress and Poverty, Henry George made this trenchant observation about copyright :

“Copyright . . . does not prevent any one from using for himself the facts, the knowledge, the laws or combinations for a similar production, but only from using the identical form of the particular book or other production — the actual labor which has in short been expended in producing it. It rests therefore upon the natural, moral right of each one to enjoy the products of his own exertion, and involves no interference with the similar right of any one else to do likewise . . .”

The Copyright is therefore in accordance with the moral law — (p. 411)

THE “MERE PRIVILEGE” ARGUMENT

To Library and Ad Hoc Committee spokesmen, it smacks of immorality to suggest that the author has a moral claim to copyright protection in a work that he created, that would not have existed but for his talent, labor and creative efforts. They charge that copyright is not “property” because the rights are created by statute, and that Congress is not required to pass copyright laws since Art. I, Sec. 8 “merely” says that it “shall have the power” to do so. But the phrase “Congress shall have the power” does not precede the copyright clause of Sec. 8 — it prefaces the enumeration of all powers granted to Congress, including the powers to collect taxes, borrow money, raise armies and regulate commerce. Obviously Sec. 8 intended that Congress would enact copyright laws as well as exercise these other vital functions.

Of course a copyright is property. Like all other property, it is “a creature and creation of law . . .” (73 C.J.S. Sec. 1, p. 145). Like all property, it is a bundle of rights granted by the state, through legislation or court decision Copyright is hardly the only form of property created by statute. Property rights in billions of dollars worth of land, minerals and other natural resources have been created by acts of Congress.

But there is one basic distinction. These other statutes grant individuals perpetual, exclusive rights in resources that belonged to the Nation; they take property from the public domain and give it to private citizens. The Copyright Act grants the author rights in something he created and that already belonged to him at common law; and within a short time, the Act takes his creation from him or his heirs and places it in the public domain. Henry George was right in saying the author’s claim to adequate copyright protection rests on “natural, moral right”. The common law recognized that right, holding that an author “has an absolute property right in his production which he could not be deprived of so long as it remained unpublished, nor could he be compelled to publish it.” (Ferris v. Frohman). And as the Register noted, these exclusive common law rights “continue with no limit even though the work is used commercially and widely disseminated.”

Library and Ad Hoc Committee spokesmen have not asked Congress to grant them an exemption from the property rights of the Xerox Corporation which would permit them to use its machines without charge to reproduce “single copies” of journal articles or other copyrighted works. Property rights in machinery is something that apparently wins their respect. But the copyright owner’s right to compensation for systematic library reproduction stands on equally firm moral and legal footing. And his contribution to the libraries’ copying operations is indispensable. Unless the American Chemical Society and other publishers can afford to continue producing their journals, the Xerox machines and libraries will not have articles to reproduce.

The record label is dead: long live the record label — Despite over a decade of predictions of its imminent demise, the record label still plays a vital role. As Francis Moore of the IFPI points out, from the group’s latest study, record labels worldwide invested $4.5 billion last year developing and promoting recording artists, and over 70% of unsigned musicians want to be signed to a label.

With new channel investments, YouTube becomes even more like TV — Last year, YouTube invested $100 million toward original content for its site. This week, it announced it will only continue to fund 30-40% of those channels, according to GigaOm, making its renewal rate strikingly close to that of broadcast TV.

The Real McCoy: Should Intellectual Property Rights be the New Civil Rights in America? — That’s the question Raymond Millien asks in this must-read article from IP Watchdog. Also check out part 2.

The Education of Senator Wyden: Don’t break the artists…You can’t get away with the old RIAA Booga Booga Booga or that you’ll make it up on volume — Oregon Senator Ron Wyden gave the keynote address at this week’s Future of Music Coalition Summit. As Chris Castle puts it here, “Senator Wyden’s speech writers wrote a speech for him to give in 1999. It does not play in 2012.”

Radio-active: Internet Broadcasting and Artist Compensation [VIDEO] — Also from the FOMC Summit, video of the panel discussion on the Internet Radio Fairness Act, featuring Kurt Hanson of AccuRadio.com, David Lowery of University of Georgia/Cracker/Camper Van Beethoven, Michael Petricone of the Consumer Electronics Association, Patricia Polach of the American Federation of Musicians, and Colin Rushing of SoundExchange.

A Musician’s Perspective on Pandora [PDF] — The ad appearing in Billboard Magazine this weekend, signed by 125 artists. The range of artists represented on the list is notable; many different genres and a mix of newer and more established musicians. Says the ad, “Let’s work this out as partners and continue to bring fans the great musical experience they rightly expect.”

How to avoid accidental dealings with pirates — David Hahn, writing at iMediaConnection, provides three suggestions for helping brands avoid providing revenue to illicit sites. Hahn notes, “As RTB continues to grow and scale, it’s increasingly difficult to appeal to a brand’s goodwill alone to stop appearing on torrent sites. It’s more than likely that these brand marketers have no idea their ads are supporting these sites, and they’re probably horrified when they learn of the placements.”

Why Doesn’t MTV Play Music Videos Anymore? [VIDEO] — From sketch comedy duo Brian and Maria comes this (slightly NSFW because of language) funny video explaining the lack of music on MTV.

Google’s Serial Obfuscation: Music Canada, BPI, Billboard Question Whether Google Has Really Lowered Pirate Sites Search Rankings — The Trichordist sees little evidence that search rankings for illegitimate sites have dropped since Google announced in August tweaks to its algorithm to lower the rank of sites receiving large numbers of takedown notices.

Copyright and Technology 2012 Conference — December 5th in New York City is the annual Copyright and Technology Conference. Featuring a keynote speech by Rob Levine and panel discussions on both technology and law and policy. Registration is currently open. Be sure to also check out David Newhoff’s podcast interview with conference chair Bill Rosenblatt.

Internet radio service Pandora has been in the news in recent weeks as it gears up for a fight to reduce the amount it pays out to musicians, a fight that will take place in front of the public, Congress, and the courts. Most recently, Pandora has sued ASCAP, seeking lower license rates from songwriters and music publishers.

This might seem odd to someone unfamiliar with music and copyright in the US — how can you sue someone just for offering a price you think is too high? If you’re asking yourself that or something similar, read on.

Leaving Public Performance to the PROs

Recorded music by and large consists of two separate and discrete copyrights. One copyright covers the musical composition, which is the underlying song. The other covers the particular sound recording of that song. In addition, each copyright is actually a bundle of divisible rights; the holder of a musical composition copyright has the exclusive right to reproduce, distribute, create derivative works, and publicly perform the composition. 1The sound recording copyright includes all these rights except the right to publicly perform; instead, a sound recording copyright holder only has a narrower right to publicly perform “by means of a digital audio transmission.”

The public performance right of musical compositions is almost always administered by performing rights organizations (PROs). 2These organizations are sometimes also called “performance rights organizations”. The US Copyright Act uses the term “performing rights society.” 17 USC § 101. These organizations fall under a broader umbrella of what are called “collective rights organizations”, “collective management organizations”, or “collective societies.” These agencies don’t own the copyrights, they license them to various entities like radio stations, live venues, and websites, collect royalties, and pay them out to their members — these are blanket licenses, meaning a single license covers every song in the PRO’s catalog. The US has three PROs: ASCAP, BMI, and SESAC. Other countries have their own PROs. For example, SACEM in France, one of the world’s first PROs, has licensed public performances since 1847; Canada has SOCAN, and the UK has PRS.

ASCAP was formed in 1914 through the efforts of composer Victor Herbert and attorney Nathan Burkan to collectively administer the public performance rights of songwriters and composers. ASCAP would clash with radio broadcasters during the coming decades over compensation for public performance of music over the airwaves. In 1939, partially in response to a rate increase by ASCAP, the National Association of Broadcasters (NAB) created BMI as a competing performing rights organization.

Consent Decrees

Under pressure from NAB, the US Justice Department sued ASCAP and BMI in 1940, alleging violations of the Sherman Antitrust Act. As a result, both agencies entered into a consent decree with the government. 3United States v. ASCAP, 1940-43 Trade Cas. ¶56,104 (SDNY 1941); United States v. Broadcast Music, Inc., 1940-43 Trade Cas. ¶56,096 (ED Wisc. 1941). ASCAP’s consent decree was amended in 1950, establishing the authority of a district court to act as a “rate court” to settle disputes over rates when ASCAP and licensees could not reach agreement. 4United States v. ASCAP, 1950-51 Trade Cas. ¶62,595 at 63,754 (SDNY 1950). The ASCAP decree was amended again in 1960 and 2001. 5US v ASCAP, Second Amended Final Judgment, No. 41-1395 (WCC) (SDNY June 11, 2001). BMI was the subject of a second suit by the US in 1964, with a new consent decree in 1966, 6United States v. Broadcast Music, Inc., 1966 Trade Cas. ¶71,941 (SDNY). amended in 1994 to include a similar “rate court” provision. 7United States v. Broadcast Music, Inc., 1996-1 Trade Cas. ¶71,378 (SDNY 1994).

ASCAP and BMI together license the vast majority of musical composition public performances in the US. But there is a third performing rights organization in the US: SESAC. SESAC was originally formed in 1930 “to serve European composers not adequately represented in the United States.” SESAC does not operate under a consent decree. However, it is currently involved in a lawsuit alleging similar antitrust violations that resulted in ASCAP and BMI’s consent decrees. That lawsuit survived a motion to dismiss in 2011 and remains ongoing.

The consent decrees sharply limit ASCAP and BMI‘s conduct.

ASCAP, for example, is limited to licensing public performance rights on a non-exclusive basis — it cannot offer exclusive licenses or license any other right in the copyright bundle. It cannot prevent direct licensing between its members and music users, not can it offer different rates and terms to users who are “similarly situated” to existing licensees. And, perhaps most importantly, ASCAP is required to grant licenses to anyone who requests one. 8Though there are differences between the two decrees, both are broadly the same.

The Rate Court

The rate court provisions of the consent decrees are perhaps their most unusual aspect. The existence of a “rate-setting court” in the US is, in the words of one scholar, “extremely rare.” 9Daniel Crane, Bargaining in the Shadow of Rate-Setting Courts, 76 Antitrust Law Journal 307 (2009). Only a handful of consent decrees, mostly from the 1940s, 50s, and 60s, have included such provisions, and outside of ASCAP and BMI, only one court has actually ever exercised this function. 10Id., citing US v American Optical, 95 F.Supp. 771 (SDNY 1950). There is generally a deep skepticism toward US courts engaging in rate-setting. 11See, for example, Arsberry v Illinois, 244 F.3d 558, 562 (7th Cir 2001), noting a “historical antipathy to rate setting by courts, deemed a task they are inherently unsuited to perform competently”; In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 906 F.2d 432, 445 (9th Cir 1990), “The federal courts generally are unsuited to act as rate-setting commissions.” In many other countries, such functions have been expressly delegated to governmental administrative bodies. 12Laurence R. Helfer, Collective Management of Copyrights and Human Rights: An Uneasy Alliance Revisited, Collective Management of Copyright and Related Rights, 75, 91 (Daniel Gervais (ed.), Kluwer Law Int’l BV 2010), “governments in nearly all countries in which CMOs operate exercise some form of regulatory control over licensing practices to prevent abuse of their dominant positions. The source, extent and enforcement of these regulations vary widely, however. In some countries, copyright laws limit CMO activities. In others, administrative agencies, tribunals or other specialized regulatory bodies monitor CMO activities and adjudicate complaints by licensees. In yet other nations, users seek relief from the courts by filing competition or antitrust claims against CMOs, leading to judicial monitoring of licensing practices in the form of detailed consent decrees”;

Simon Helm, Intellectual Property in Transition Economies: Assessing the Latvian Experience, 14 Fordham Intellectual Property Media & Entertainment Law Journal 119, 201 (2003), “An example is the Copyright Board in Canada. Invested with quasi-judicial powers, the Copyright Board functions as an arbitral tribunal, and its decisions have the effect of superior court judgments. Under the Canadian model, collective rights administrative societies are required to submit an annual tariff, which is then published. The Copyright Board has jurisdiction to receive submissions from interested parties in relation to the proposed tariff and to make any amendments to the tariff that it considers necessary. Canadian law also sets tariffs for wireless broadcasters based upon their advertising revenues. In cases where an individual license cannot be agreed between the collective rights administration society and a user, the Canadian scheme provides for the submission of the dispute to the Copyright Board for resolution.”

Regardless, in the US, a federal court — specifically, the Southern District Court of New York — plays the role of rate-making agency for music composition public performance licenses. Here’s how it works: under the consent decree, ASCAP is required to provide a reasonable fee upon request. If a potential licensee disagrees with the fee provided by ASCAP, it can bring suit in court. ASCAP has the burden of proving the reasonableness of the fee; otherwise, the court will weigh the evidence to determine a reasonable fee.

It is under this provision that Pandora has brought suit against ASCAP. Pandora has been operating under a license from ASCAP that expired in 2010, and, as Bloomberg has reported, negotiations over the past year for a new license have been unsuccessful. So, in a sense, it’s a bit imprecise to say Pandora “sued” ASCAP. The court filing doesn’t allege any sort of malfeasance or breach that you’d ordinarily see in a civil lawsuit. Instead, it is part of the process for rate-setting established under ASCAP’s consent decree.

References   [ + ]

1. The sound recording copyright includes all these rights except the right to publicly perform; instead, a sound recording copyright holder only has a narrower right to publicly perform “by means of a digital audio transmission.”
2. These organizations are sometimes also called “performance rights organizations”. The US Copyright Act uses the term “performing rights society.” 17 USC § 101. These organizations fall under a broader umbrella of what are called “collective rights organizations”, “collective management organizations”, or “collective societies.”
3. United States v. ASCAP, 1940-43 Trade Cas. ¶56,104 (SDNY 1941); United States v. Broadcast Music, Inc., 1940-43 Trade Cas. ¶56,096 (ED Wisc. 1941).
4. United States v. ASCAP, 1950-51 Trade Cas. ¶62,595 at 63,754 (SDNY 1950).
5. US v ASCAP, Second Amended Final Judgment, No. 41-1395 (WCC) (SDNY June 11, 2001).
6. United States v. Broadcast Music, Inc., 1966 Trade Cas. ¶71,941 (SDNY).
7. United States v. Broadcast Music, Inc., 1996-1 Trade Cas. ¶71,378 (SDNY 1994).
8. Though there are differences between the two decrees, both are broadly the same.
9. Daniel Crane, Bargaining in the Shadow of Rate-Setting Courts, 76 Antitrust Law Journal 307 (2009).
10. Id., citing US v American Optical, 95 F.Supp. 771 (SDNY 1950).
11. See, for example, Arsberry v Illinois, 244 F.3d 558, 562 (7th Cir 2001), noting a “historical antipathy to rate setting by courts, deemed a task they are inherently unsuited to perform competently”; In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 906 F.2d 432, 445 (9th Cir 1990), “The federal courts generally are unsuited to act as rate-setting commissions.”
12. Laurence R. Helfer, Collective Management of Copyrights and Human Rights: An Uneasy Alliance Revisited, Collective Management of Copyright and Related Rights, 75, 91 (Daniel Gervais (ed.), Kluwer Law Int’l BV 2010), “governments in nearly all countries in which CMOs operate exercise some form of regulatory control over licensing practices to prevent abuse of their dominant positions. The source, extent and enforcement of these regulations vary widely, however. In some countries, copyright laws limit CMO activities. In others, administrative agencies, tribunals or other specialized regulatory bodies monitor CMO activities and adjudicate complaints by licensees. In yet other nations, users seek relief from the courts by filing competition or antitrust claims against CMOs, leading to judicial monitoring of licensing practices in the form of detailed consent decrees”;

Simon Helm, Intellectual Property in Transition Economies: Assessing the Latvian Experience, 14 Fordham Intellectual Property Media & Entertainment Law Journal 119, 201 (2003), “An example is the Copyright Board in Canada. Invested with quasi-judicial powers, the Copyright Board functions as an arbitral tribunal, and its decisions have the effect of superior court judgments. Under the Canadian model, collective rights administrative societies are required to submit an annual tariff, which is then published. The Copyright Board has jurisdiction to receive submissions from interested parties in relation to the proposed tariff and to make any amendments to the tariff that it considers necessary. Canadian law also sets tariffs for wireless broadcasters based upon their advertising revenues. In cases where an individual license cannot be agreed between the collective rights administration society and a user, the Canadian scheme provides for the submission of the dispute to the Copyright Board for resolution.”