Copyhype

The criticism that copyright is a “monopoly” is often bandied about. Most recently, we’ve seen it pop up in certain conservative critiques of copyright law, like Derek Khanna’s memo last November, but it is undoubtedly a recurring argument that stretches back centuries.¹See previous posts Myths from the Birth of US Copyright: Part 2, The Purposes of Copyright Law and “Anti-Copyright” Arguments, and 7 Mythbusting Copyright Law Articles for more on these arguments and their history.

The purpose of this argument is apparent; “monopoly” has historically carried a negative connotation. At times, however, the debate seems to devolve to mere semantics. It may be more helpful to look at exactly what negative effects a monopoly has on society and see how prevalent these effects are in markets for copyrighted works to see how accurate this label is. This is especially helpful because the legal and colloquial definitions of monopoly differ throughout history—the term means something different under the current Sherman Antitrust Act, to someone during the era of trust-busting in early 20th century United States, and to a jurist in 18th century England.

While certainly not the earliest expression of this argument, Thomas Babington Macaulay provides an oft-cited iteration of this critique. The following quote from the 19th century British politician (once called “the most brilliant writer of his time, but not the most correct”)²Wraxall’s Memoirs, Littell’s Living Age (Boston 1884). comes from a speech made in front of the House of Commons during 1841. The House was currently considering a bill to extend the term of copyright duration. Macaulay made the following remarks:

Copyright is monopoly, and produces all the effects which the general voice of mankind attributes to monopoly. … I believe, Sir, that I may with safety take it for granted that the effect of monopoly generally is to make articles scarce, to make them dear, and to make them bad. And I may with equal safety challenge my honourable friend to find out any distinction between copyright and other privileges of the same kind; any reason why a monopoly of books should produce an effect directly the reverse of that which was produced by the East India Company’s monopoly of tea, or by Lord Essex’s monopoly of sweet wines.³A Speech Delivered in the House of Commons on the 5th of February 1841, Lord Macaulay’s Speeches, pg 112 (London 1866).

Given the concerns raised by Macaulay and others throughout copyright’s history, we might say that there are three chief effects of monopoly that are particularly relevant: that it raises prices, that it prohibits others from engaging in behavior they otherwise could engage in, or that it serves as a barrier to entry in the specified market. By examining each of these in turn, we can test whether it is valid to consider copyright a monopoly, beyond the more common definitional arguments.

Does Copyright Raise Prices

In a purely competitive market, the price of a good tends toward the marginal cost of producing the good. When a firm operates under a monopoly, it can set prices above the marginal cost since it is free from competitive pressures. The result is a diversion from the optimal supply/demand curve: less consumers pay more for a good, while a firm sees higher profits, leading to less aggregate economic welfare.⁴George Stigler, “Monopoly“, Concise Encyclopedia of Economics, Library of Economics and LIberty. So, if copyright is a form of monopoly, we should expect that copyrighted works on average are priced higher than non-copyrighted works.

This, however, is not necessarily the case. In a 2008 paper, economist Stan Liebowitz set out to test whether copyright is like a monopoly by endeavoring “to infer the extent of monopoly power by measuring the price increase, if any, caused by copyright,” a question that had apparently not been tested before. Liebowitz came to two conclusions.

The first, treating all observations equally, found “that copyright does not raise price and that there is no monopoly deadweight loss. Increases in copyright unambiguously enhance economic efficiency.” [Emphasis added.] The second observation weighted books by their sales and found “that copyright increases price but by a modest level which is generally about the same as typical royalty payments”, implying “that any economic rents go to authors.”⁵Is the Copyright Monopoly a Best-Selling Fiction?

These conclusions should not be as surprising as they seem to the ordinary observer. Most people would note that copyrighted works show a remarkable consistency in pricing: iTunes, for example, has a very narrow range of prices for digital song downloads. This would suggest that while a single copyright owner has exclusive control over her work, this control is not monopolistic; there are such a wide range of close substitutes in the market to prevent any individual copyright owner from raising the price too far above the marginal cost.

Does Copyright Take Away Anyone Else’s Rights

Nowadays, a monopoly most often arises organically, when a firm becomes so dominant in its market that it has the ability to engage in anti-competitive behavior unless the law steps in. But in the past, monopolies were likely the result of actual government grants. It is in this sense that copyright has historically been labelled a monopoly, since prior to modern copyright laws, printers and publishers were given exclusive rights through such grants.⁶See, generally, Tyler Ochoa & Mark Rose, The Anti-Monopoly Origins of the Patent and Copyright Clause, 49 Journal Copyright Society of the USA 675, 677-79 (2002).

The primary effect of grants like this was that they excluded others from engaging in conduct they were otherwise able to do, as this portion of a 1901 treatise attests:

§ 1. Definition of monopoly.— A monopoly is a license or privilege allowed by the sovereign for the sole buying and selling, making, working, or using of anything whatsoever; whereby the subject in general is restrained from that liberty of manufacturing or trading which he had before.

§ 2. Lord Coke’s definition is, “an institution by the king, by his grant, commission, or otherwise, to any persons or corporations, of or for the sole buying, selling, making, working or using of every thing, whereby any persons or corporations are sought to be restrained of any freedom or liberty they had before, or hindered in their lawful trade.”

§ 3. In Hawkins’ Pleas of the Crown the following definition is found: “A monopoly is an allowance by the king to a particular person or persons of the sole buying, selling, making, working, or using of any thing, whereby the subject in general is restrained from the freedom of manufacturing or trading which he had before. Monopoly differs from ingrossing only in this, that monopoly is by patent from the king, and ingrossing by the act of the subject between party and party.”‘

Under this definition, pre-copyright printing patents surely constituted monopolies.

The Stationers’ Company, operating initially under a 1557 royal charter, were granted privileges to Greek and Roman classics, not based on any privity with the original authors, but only through the caprice of the Crown. Similarly, some printers were granted privileges to entire categories of books, such as law books.

It is this monopoly that political philosopher John Locke wrote of, prior to England’s Statue of Anne, in his 1694 Memorandum Concerning Renewal of the Licensing Act:

By this clause, the Company of Stationers have a monopoly of all the classical authors; and scholars cannot, but at excessive rates, have the fair and correct edition of these books printed beyond seas. … That any person or company should have patents for the sole printing of ancient authors is very unreasonable and injurious to learning; and for those who purchase copies from authors that now live and write, it may be reasonable to limit their property to a certain number of years after the death of the author, or the first printing of the book, as, suppose, fifty or seventy years. This I am sure, it is very absurd and ridiculous that any one now living should pretend to have a propriety in, or a power to dispose of the propriety of any copy or writings of authors who lied before printing was known or used in Europe.

The Statute of Anne rectified this in 1710 by vesting exclusive rights only in the original author of a work, and originality has been the sine qua non of copyright protection in every copyright law that has followed, including the US in 1790 and France in 1793. Protection only extends to that which an author has created anew, and does not extend to anything already in existence, which would presumably be available to all to use.

Yet some continue to make the argument that copyright is a monopoly on the grounds that it restrains someone from doing something they were able to do before.

Stephen Kinsella, for example, makes the following claim in his book, Against Intellectual Property:

Let us recall that IP rights give to pattern-creators partial rights of control—ownership—over the tangible property of everyone else. The pattern-creator has partial ownership of others’ property, by virtue of his IP right, because he can prohibit them from performing certain actions with their own property. Author X, for example, can prohibit a third party, Y, from inscribing a certain pattern of words on Y‘s own blank pages with Y‘s own ink.

That is, by merely authoring an original expression of ideas, by merely thinking of and recording some original pattern of information, or by finding a new way to use his own property (recipe), the IP creator instantly, magically becomes a partial owner of others’ property. He has some say over how third parties can use their property. IP rights change the status quo by redistributing property from individuals of one class (tangible-property owners) to individuals of another (authors and inventors). Prima facie, therefore, IP law trespasses against or “takes” the property of tangible property owners, by transferring partial ownership to authors and inventors. It is this invasion and redistribution of property that must be justified in order for IP rights to be valid.

The claim is superficially attractive but falls apart on closer glance. Remember, copyright only prohibits copying of original expression. One is not restrained from independently creating existing expression, no matter how closely it resembles another’s work.⁷See, for example, Sheldon v Metro-Goldwyn Pictures, 81 F.2d 49, 54 (2nd Cir. 1936), “Borrowed the work must indeed not be, for a plagiarist is not himself pro tanto an “author”; but if by some magic a man who had never known it were to compose anew Keats’s Ode on a Grecian Urn, he would be an “author,” and, if he copyrighted it, others might not copy that poem, though they might of course copy Keats’s.”

So to say copyright “takes” some sort of right away from third parties is only correct under the most theoretical of physics. It might be easy to conceive of copyright as a restraint on one’s ability to reproduce, say, Suzanne Collins Hunger Games series of books. But it is more difficult to see how copyright “takes away” one’s ability to reproduce Collins’ next book, one she hasn’t written yet. Once she completes it, copyright vests in her the exclusive right to reproduce it, but that exclusive right is not at the expense of anyone else, unless they have a functioning time machine. It is the same as saying a law prohibiting an individual from flying by flapping his arms, or travelling faster than the speed of light, takes away a right. Copyright creates a right in the author without taking away any other’s rights.

Does Copyright Create Barriers of Entry to Potential Competitors

One final negative effect of monopoly is that it allows a monopolist to erect barriers to entry to other potential competitors, keeping the incumbent firm’s dominant position secure. The question would be, does copyright act as such a barrier to entry?

This is probably easiest to answer of all three: of course not. If Jack writes a song, that in no way affects Jill’s ability to write a song.

That’s not to say that firms producing copyrighted works have never engaged in monopolistic behavior—as with any other industry, this will occasionally happen.⁸See, for example, US v Paramount Pictures, 334 US 131 (1948); US v Lowe’s, 371 US 38 (1962); Starr v Sony BMG Music Entertainment, 592 F.3d 314 (2nd Cir. 2010). But it’s important to keep in mind that this isn’t an inherent part of copyright law. Such behavior occurs independently of copyright.