Is Balance The Right Standard For Judging Copyright Law?

from the balancing-what? dept

For many years, I've pointed out that I tend to disagree with many folks -- who I otherwise agree with -- in copyright debates, who argue that we should be looking for the "right balance" of copyright holder rights vs. user rights. I've long thought that balance is the wrong way to look at it. The purpose of copyright law is to incentivize the creation of new content, and thus the standard on which copyright law should be judged is one where the creation of content is maximized. As such, there shouldn't be a question of balance, because the ideal situation where content is maximized should make everyone better off. Talking about balance is figuring out how both sides should compromise to meet in the middle. Talking about maximizing content creation, on the other hand, is talking about ways to improve the marketplace of options for everyone.

Still -- especially among so called "copyfighters" -- the concept of "balance" is quite commonly used. However, it appears that at least some others are also concerned about this use of "balance." Copycense alerts us to a paper that was published recently by Abraham Drassinower, of the University of Toronto Law School, which also argues that balance is the wrong way to view copyright policy. Unfortunately, the paper is not the most... lucid thing out there. It's quite academic and, tragically, does not do a particularly good job clearly and concisely making its point. It's not what I would call an easy read. Instead, it rambles at times, and uses overly complex (and at times circular) language, rather than just coming out and stating a clear and concise thesis. This is unfortunate, because if you can get through the language used in the paper, it does make some very valuable points.

The argument is, effectively, that "balance" as a concept in copyright law really only makes sense if you believe that copyright law is designed to reward a content creator for their labor -- in legal terms, the "sweat of the brow" argument. However, courts in both the US and Canada have rejected a "sweat of the brow" standard for copyright law, as being separate from the purpose of copyright law. If you believe that "sweat of the brow" is appropriate, then you are starting from a position that a content creator naturally deserves rewards from all benefits that result from his or her work. And, thus, the "balance" is in slowly removing some of those rewards and giving them to the public, until things are seen as "fair" for both sides.

The sweat of the brow standard affirms a view of copyright law on the basis of what we might call a misappropriation paradigm--that is, a paradigm that grants copyright in the products of a person's mental effort so as to preclude others from reaping where they have not sown. The mischief copyright law aims at in this paradigm is the misappropriation of value through copying. Copying a phone directory gives rise to copyright liability because such copying amounts to an unauthorized transfer of value from the author to the copyist, the plaintiff to the defendant. It is to correct this "grievous injustice"--to use the words of a classic House of Lords judgment in this tradition--that copyright law operates. Its target is the injustice of misappropriation.

But, without a "sweat of the brow" standard, then the whole concept of balance makes a lot less sense. Instead, Drassinower notes that copyright is actually based on a "skill and judgment or creativity" standard, which focuses just on the creative elements of the work, rather than the effort put into the work. In other words, the standard we have set for copyright focuses on the value of creativity rather than the value of effort. Drassinower argues that balance, as a concept, does not, and cannot take that difference into account.

Again, while I agree that balance is the wrong way to look at things, I was quite disappointed by the way Drassinower sets out to make this case. It's interesting, but not presented in a compelling way. There are times when it makes good points (though, again, using overly dense language in most cases), but never seems to fully come out and just state the clear conclusion of focusing too much on balance: that it falsely implies that when one loses the other wins. That it falsely implies that this is a zero sum game. At times, he gets close, as in the following passage:

[Once] the metaphor of balance is assumed as the integrating mechanism holding authors and users together, integration properly so-called can never occur. And that is because once value-balancing is the ordering mechanism, then the relation between authors and users is but a perennial struggle for value, such that claims of authors are but minimizations of the value-entitlements of users, and similarly, the claims of users are but minimizations of the value-entitlements of authors. The upshot is that successful haggling about price masquerades as the foundation of a truly public domain. The failure to elucidate authorship as anything other than value-origination generates an impoverished vision of the public domain as nothing other than a lower or lowered price.

But he fails to take that final step of pointing out that it's not a zero sum game, and the goal of copyright should be maximizing the creation of content overall, such that everyone is better off. Still, if you can get through the rather dense language, the paper does raise some good points, even if I felt it misses the true problems over "balance" in the copyright debate.

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Why Fining People Can Actually Increase That Activity... An Economics Lesson

from the fascinating! dept

I was recently having a discussion with a friend where I pointed out one of the biggest mistakes that people make in trying to understand economics is to assume, incorrectly, that "marginal benefit" or "marginal cost" means money. And, yes, this is actually a mistake that many economists themselves make -- and, in part, it's because the marginal benefit is often measured in monetary terms. So, people seem to think that if there isn't a monetary component it doesn't count. This makes for silly statements like "economics doesn't properly understand how people act." Almost every time that's said, when you look at the details, it's wrong. It's just that people assume that because someone does something for a non-monetary reason, economics can't account for it. That's simply not true. If people do things for a non-monetary reason, it's because they're receiving marginal benefits in some other manner, whether it's attention, pride, happiness, joy or "just because I want to." Those are all marginal benefits.

In fact, Clive Thompson points us to a study that highlights this in a really strong way. It's a series of studies that show that when people overestimate the monetary benefits (or costs) and underestimate the nonmonetary ones, they often set up really bad incentives.

For example, they've found that fewer people give blood when they're paid for it. For someone who thinks only in terms of the monetary benefits, this would make no sense. Why would giving people money lead to less of the activity. But the reasoning is that the real marginal benefit that people get from giving blood is the belief that they're doing good in the world and helping to save lives. Getting paid for it, actually hinders that feeling, by making the whole thing feel like a transaction. And the money paid is apparently a lot less than the decreased "good feelings" from the marginal benefit.

On the flip side, other experiments showed that fining people over certain actions (such as picking up their kids from daycare too late), actually increased the number of tardy parents. Again, if you think of this solely in monetary terms, this makes no sense. It now costs more, monetarily, to be late to pick up a kid. But, in making it a monetary transaction, it removed non-monetary costs -- such as the "guilt" of being late. As the article notes:

The fine seems to have reduced their ethical obligation to avoid inconveniencing the teachers and led them to think of lateness as simply a commodity they could purchase.

This is really fascinating stuff that is important for people to understand in setting up any sort of incentive structure. Money -- either on the cost or benefit side -- is not the only incentive. And thinking that it is often leads to miscalculating a series of other, potentially more important, costs and benefits. That doesn't mean that economics is wrong. It can handle all of that. The problem is when people assume that it's only the direct monetary costs and benefits that go into the equation. It is, unfortunately, a common problem, and leads to all sorts of confused thinking both about business models, but also about the economics profession itself.

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The Placebo Effect: Things Pharma Prefers You Not Worry About

from the here,-take-this-sugar-pill dept

There's a fascinating article in the latest issue of Wired about the placebo effect and pharmaceutical companies. It's fascinating for a few reasons: First, because it shows the thought process of pharma firms and why "what's best for pharma" is often not what's best for your health (which is a line often trotted out by those who believe in protecting pharma). Second, because it suggests that some (potentially significant) parts of pharmaceutical science -- the stuff we hear over and over again is so important to protect via patents -- is bunk. And, finally, just because it may surprise you to know just how powerful the placebo effect appears to be -- and that it's only getting stronger.

The critical point is that final one. Basically, the placebo effect (the impact had on a patient taking a sugar pill under the false impression that it's medicine) seems to be quite real and, at times, quite powerful and lasting. Even more surprising is that, over time, the placebo effect has only become stronger and stronger.

Now, if pharmaceutical companies were actually interested in your health, then this would be a ripe area of study, well worth exploring to see if the placebo effect could be better understood and somehow harnessed to make people healthy. But, of course, you can't patent a sugar pill, so pharma research dollars have gone into drugs that can be patented.

However, a serious problem has arisen: with the placebo effect getting stronger and stronger, these "wonder drugs" that pharma has been spending millions of dollars "developing" have increasingly been failing clinical trials, because they can't out-perform placebos. The theory behind testing against placebos is that if a drug doesn't outperform the placebo, you have to question what good the actual drug is and why it should be approved. So, if a drug fails to outperform a placebo, then (the thinking goes) the drug is useless. But that's partly based on the idea that the effect of taking a placebo is weak.

This leaves out an important part of the equation: If the placebo is really effective in dealing with certain issues, then why not examine how to utilize that fact to make people healthy? Some in the pharma world have been pushing for this for a long time, and have repeatedly asked the big pharma companies to release their data on clinical trials, in order to better understand the impact of placebos and to see if there's a way to harness their power. But the pharma companies have resisted and don't want to release the data -- in part because they're scared to death of what this all means. If sugar pills are effective, that's a very different business, and the claims of all of the drugs that are on the market would be called into serious question. Instead, they've apparently spent their time writing out detailed marketing plans that convince doctors to prescribe medicine that doesn't work any better than alternatives.

Now, let's be quite clear here: I am not saying that drugs don't do any good. There are plenty of pharmaceuticals that certainly help deal with certain conditions, and there are plenty of people who lead better lives (or are alive at all) solely because of modern medicine. But, these findings about the placebo effect certainly suggest that -- at least in many cases -- rather than dumping chemicals into the human system via a pill, your brain may actually be a lot more effective at concocting the proper chemicals itself.

If we had a healthcare system built on incentives to actually keep people healthy -- rather than just to sell more pills -- this would be the beginning of a very important field of study. Instead, it's been resisted and the data has been hidden away for years.

The incentive system is clearly screwed up. It's based on patents and hoarding information, rather than on actually keeping people as healthy as possible. If you could craft a healthcare system that actually rewards those who keep patients healthy, then perhaps we'd actually know a lot more about the placebo effect and, beyond it, our own brains' ability to produce important, potentially life-saving or life-improving chemicals on its own. In fact, in such a system, the incentives would be less about hoarding information, and more about sharing it, since, through collaboration, it would be more likely that more people could be kept healthier, allowing greater overall profits. The problem today is that the system is based on incentives that are misaligned... and thus, it's a struggle to get anyone to care about the fact that the placebo effect actually seems to help some people.

Update: As pointed out in the comments, Skeptic Magazine recently had an article that provides some more thoughts on placebos.

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Why The Healthcare Industry Doesn't Want Electronic Medical Records

from the it-would-reveal-the-business-model dept

I've been really confused by the whole push for "electronic healthcare records" as some sort of big step for improving our healthcare system. It's such a minor part of what's needed that it seems to be looking at curing a cough when someone has terminal cancer. The cough isn't the issue. Also, it's never been quite clear why hospitals didn't move to electronic healthcare records in the first place. Lots of other businesses with tons of paper records long ago realized that moving to electronic records and making things more efficient wasn't just a fantastic way to make money, but a way to expand their own market. The switch from paper stock certificates to electronic ones didn't just save printing costs -- it enabled the stock market to change in a massive way (perhaps too much, many will note).

Andy Kessler, who's been thinking an awful lot about these issues (and whose book The End of Medicine hasn't received nearly the attention it deserves) has an interesting article discussing why the industry has resisted the move to e-healthcare records. While it would save some money, he notes, it would also expose the entire scam of the healthcare system: which is that they make a ton of money from inefficiencies baked into the system, which are totally hidden from view. It's a massive boondoggle for the industry, and e-healthcare records would actually make it easier for people to understand that the healthcare system profits from people being sick and not from having them be well.

The incentives are totally screwed up for everyone.

Healthcare providers make more money the sicker you are. Pharmaceutical companies make easy money with gov't monopolies limiting the ability to spread useful drugs. The actual costs are nearly totally hidden from most consumers, so they don't make smart choices at all. There's a lot of built in artificial scarcities in the system, and opening up the flow of information changes that.

Of course, in the grand scheme of things, this is dumb. Focusing on preventative care and actually keeping people healthy would actually provide a massive economic benefit not just to the healthcare industry, but to the economy as a whole. More healthy people contributing to production, output and consumption can do quite a lot for the economy. The numbers on some studies are staggering (we're talking trillions of dollars). If the incentives could be aligned such that people paid for staying healthy, rather than having illness treated, then there's a ton of money to be made without resorting to the old inefficient mess that is today's healthcare system.

But rather than tackle any of that, we get attempts to fix the cough in the terminally ill patient -- and the patient likes the morphine drip so much that he'll do anything to avoid getting healthy. It's time to fix the healthcare system. And while I don't necessarily believe that a small step like electronic medical records is all that meaningful, if Kessler is right and it actually drives some awareness to the underlying mess, perhaps it's at least a good start.

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Yet Another Study Shows That Weaker Copyright Benefits Everyone

from the good-news dept

Economists Felix Oberholzer-Gee and Koleman Strumpf have written some previous papers on this subject, but they've just come out with a new working paper on how weaker copyright protection benefits society (pdf file). Michael Geist has an excellent overview and summary of the paper. To understand the key points made by the paper, you need to understand the purpose of copyright -- something that many people are confused about. It's always been about creating incentives to create new works. Copyright maximalists and defenders of strengthening copyright laws always suggest that without copyright, there would be much less creative output, because there would be much less incentive to create. History has shown that to be false. If you look back at the age when all creative output had to be registered to be covered by copyright, studies showed that only a very small fraction of content creators even bothered, because copyright wasn't the incentive. It's only now, when copyright is automatic, that people seem to think that copyright is somehow necessary.

But the paper shows why this isn't true, and highlights a few points that we've made repeatedly over the years. Even if there are fewer "album" sales, more people are creating more music than ever before in history, and more people are making some money from the production of music -- even if it's not from album sales directly:

Overall production figures for the creative industries appear to be consistent with this view that file sharing has not discouraged artists and publishers. While album sales have generally fallen since 2000, the number of albums being created has exploded. In 2000, 35,516 albums were released. Seven years later, 79,695 albums (including 25,159 digital albums) were published (Nielsen SoundScan, 2008). Even if file sharing were the reason that sales have fallen, the new technology does not appear to have exacted a toll on the quantity of music produced....

Similar trends can be seen in other creative industries. For example, the worldwide number of feature films produced each year has increased from 3,807 in 2003 to 4,989 in 2007 (Screen Digest, 2004 and 2008). Countries where film piracy is rampant have typically increased production. This is true in South Korea (80 to 124), India (877 to 1164), and China (140 to 402). During this period, U.S. feature film production has increased from 459 feature films in 2003 to 590 in 2007 (MPAA, 2007).

So the idea that file sharing has somehow damaged creative output is simply not supported by the numbers. At the same time, the paper also makes the other point that we've made: that as infinite goods spread more widely, it only tends to increase the ability to make money from other scarce complements. After going through a few different studies, the paper notes:

As these results show, income from the sale of complements can more than compensate artists for any harm that file sharing might do to their primary activity. We are not aware of empirical work that has looked at these effects in industries other than music. But the potential of complements to provide ancillary income is certainly not unique to the music industry. In film, for instance, the International Licensing Industry Merchandisers' Association (LIMA) estimates that Hollywood derives $16 billion annually from sales of entertainment merchandise, a figure that exceeds the value of ticket sales (Film Encyclopedia, 2008).

The role of complements makes it necessary to adopt a broad view of markets when considering the impact of file sharing on the creative industries. Unfortunately, the popular press -- and a good number of policy experts -- often evaluate file sharing looking at a single product market. Analyzing trends in CD sales, for example, they conclude that piracy has wrecked havoc on the music business. This view confuses value creation and value capture. Record companies may find it more difficult to profitably sell CDs, but the broader industry is in a far better position. In fact, it is easy to make an argument that the business has grown considerably. Figure 7 shows spending on CDs, concerts and iPods. The decline in music sales -- they fell by 15% from 1997 to 2007 -- is the focus of much discussion. However, adding in concerts alone shows the industry has grown by 5% over this period. If we also consider the sale of iPods as a revenue stream, the industry is now 66% larger than in 1997.... Technological change will often lead to changes in relative prices and shifts in business opportunities. Focusing exclusively on traditional streams of revenue to arrive at a sense of how new technology changes welfare will typically be misleading.

This looks like another great addition to the literature on the overall economic impact of "file sharing" and copyright. How much do you want to bet Congress will ignore it?

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Wait... Wouldn't Micropayments Be Bad For Journalism?

from the how-much-did-you-earn... dept

It's been funny watching newspaper execs and journalists go on and on and on about how important it is to "save journalism" and then come up with plans that will likely hasten the demise of newspapers -- such as micropayments. We've discussed in great detail why micropayments are unlikely to work (they've pretty much failed everywhere they've been tried with news content), but Kevin points us to an argument that shows why micropayments would likely be a terrible thing for journalists as well. When you have a direct association between revenue and a particular article, then suddenly it becomes possible to determine quite specifically how much people are willing to pay for a certain journalist's articles. Thus, management now has incentive to reward journalists who get more people to pay -- meaning those journalists have every incentive in the world to try to come up with stories that will make people pay, which might not be "good journalism."

Of course, some will (and have) pointed out that there's already some of this done, with tracking of advertising revenue on certain articles, but this would be even more direct -- and the key point is that it leads to trying to maximize the experience of a single article, rather than the entire experience:

An article is worth far more than the number of direct sales it generates. Even more importantly, thinking of each article in isolation shortchanges the value of the publishing enterprise as a whole. There are many things that make the New York Times better than the Podunk Daily, but "readable articles per day" is the least of them. (Which means that in addition to being bad for consumers and journalists, by destroying brand value micropayments would also hurt publishers. The trifecta!)

In fact, in this hour of crisis, newspapers should be moving in the exact opposite direction to generate revenue -- focusing not on specific articles, but rather on delivering valuable experiences to their readers, whether that takes the form of articles, databases, multimedia, user-generated content, or whatever else will serve the audience's needs. It is the entirety of that experience that will deliver goodwill and revenue opportunities down the road.

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Incentives Align To Create Bubbles

from the blame-game-not-necessary dept

In the latest financial crisis, we've seen even more focus on casting blame than following most financial crises. It may be because of the sheer size of the mess this time, and it may be because the events that led up to this mess are a lot more difficult to understand than in the past -- and may even feel more nefarious. However, the deeper you look into the crisis, the harder it is to directly assign blame for the majority of the mess. Yes, there were scammers and fraud on the margins, but for the most part, everyone was doing things in a way that makes sense. This, among other things, is a key point brought out by Henry Blodget's article in The Atlantic about why these types of collapses happen so often. Basically, there is some amount of irrationality in the system, but over time, as more and more people seem to be making money against the irrationality, more and more explanations are made for why that irrationality is actually rational. And since the irrational activity goes on for so long, it becomes nearly impossible for most people to really believe that things are so irrational. So, it's not that there's anyone who did anything wrong that needs to be blamed, so much as we need to blame ourselves, for not taking enough time to recognize that what seems irrational in the beginning actually is irrational.

Of course, along those lines, it's important to realize that, as painful as market corrections like this are going to be, the end result is often beneficial. During the bubble period, lots of money gets thrown at certain things (infrastructure or products) that post-bubble are available for quite a discount. Bubbles help build up new institutions, and even if the original investments get washed away, something good often comes out of them in the end. It may not be clear yet how this financial crisis will eventually work out, but now is a decent time to be looking for opportunity in the carnage rather than worrying about who to blame.

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Time Warner Cable Using Incentives And Fine Print To Lock Customers Into Broadband Caps

from the read-the-fine-print dept

Back in January, Time Warner Cable admitted that it was considering adding usage caps and overage fees to broadband users. It recently started signing up new customers for these offerings (sometimes with absurdly low usage caps). Of course, it knows it can't just change existing customers over to such plans, realizing they'd be in for quite a set of lawsuits for selling people one thing and then completely changing the terms. However, it's now working on a way around this: trying to convince existing customers to upgrade to special triple play packages with "locked in" pricing for a year and then burying in the fine print that they also agree to the usage caps. Sneaky. Soon it won't be long before you won't be able to change anything on your plan without also agreeing to the new usage caps.

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Desperation Sets In: Bill Gates Finally Launching His Plan To Bribe Users

from the search-fraud,-here-we-come dept

Way back in 2005, Bill Gates announced that one way that Microsoft could beat Google would be to pay users to use Microsoft's search engine. At the time, we noted all the problems with this approach. First off, it's been tried and failed many times in the past (even Google once had a program to pay users, though almost no one remembers it). Many such systems are also prone to gaming. Also, while we were just noting yesterday that money doesn't "ruin everything," it can change the way people view a service -- and not always in a positive manner.

Either way, Microsoft is finally moving forward with this plan, as Bill Gates is announcing a new program to give cash back to users who end up buying things following a Live.com search. It's not a pure "pay-for-search" offering, instead focusing on offering cash back after the fact for buyers. That's certainly better than a pure bribe 'em strategy, but it still seems like something of a desperation play. Basically, it's admitting that Microsoft hasn't been able to compete with Google in terms of overall user experience and now has to resort to paying users instead. In situations like this, implementation is everything, and while people will definitely use this to get certain discounts, it's not clear that it will really make a huge dent in Microsoft's efforts to lure users away from Google's overall search. In general, though, business models that pay people for doing something useful tend to make sense (it's paying them for their effort). Business models that simply pay people to attract their attention don't tend to work nearly as well (and are much less sustainable). In this case, it seems like Microsoft is doing the latter, rather than former, which may make it difficult to succeed.

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China Shows Again That Stronger IP Protection Comes After There's Content To Protect, Not Before

from the funny-how-that-works dept

Copyright and patent law is supposed to act as incentives for the creation of new content or inventions. Yet, as we've pointed out recently, there's little economic evidence that it does so. Instead, the evidence suggests that stronger intellectual property laws seem to come after the fact. In other words, when there is little IP protection, there is often quite a bit of creation and invention -- and then those that did that creation and invention decide that they want to protect it retrospectively. That's not the purpose of IP law, but it's what seems to happen. And, look no further than China to see it happening again. China, of course, is notorious as a haven for intellectual property infringement, which (not surprisingly) has resulted in business model innovation. However, now that China is hosting the Olympics, it's suddenly worried about making sure the video of the games will not be copied in an unauthorized manner (found via Against Monopoly). Note the obvious irony. You can walk around malls in parts of China and buy any kind of unauthorized software, music and movies for next to nothing... but when it comes to China's own content, suddenly copyright is a big deal. And, of course, it wasn't copyright that acted as the incentive for China to host and show the Olympics -- but now the country is using it to protect the content. Copyright is being used for protectionism, not as an incentive.

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If Copyright Is About Incentive, Should It Allow Total Control Over The Work?

from the questions-being-asked dept

William Patry points us to an interesting draft of an article by Prof. Shyamkrishna Balganesh (of University of Chicago Law School) for the Harvard Law Review concerning how the courts rarely take into account the real purpose of copyrights in deciding what copyrights allow people to do. The basic premise is that copyright is designed solely to be an incentive to get people to create new works -- and, as such, some of the powers that the courts and Congress have added to copyright seem to go well beyond that core purpose. Specifically, Balganesh suggests that copyright shouldn't prevent others from using the content in ways that the original author never foresaw, as those uses clearly should not have influenced the original incentive to create, since they were never even thought about. While Patry gives some compelling reasons why Balganesh's current argument is a bit flawed, it does bring up a variety of interesting and important questions concerning what copyright really should be doing.

Most specifically, this argument is going to become more and more important as content creation increasingly moves away from a "broadcast" model to a many-to-many "communications" model. In such a world, things like fair use, derivative works and whether someone should "own" all downstream uses become much more important:

None of copyright's current doctrinal devices enable courts to circumscribe a creator's entitlement by reference to the incentive structure that the institution is premised on. As a direct consequence, creators (and their assignees) are often thought to be 'rightfully entitled' to any revenue stream associated with their creation, whether or not it owes its existence solely to the creator and regardless of it having been developed well after the creation of the work.... Individuals will (and can) not factor the unforeseeable consequences of their actions into their ex ante reasons for acting. Consequently, limiting copyright's grant of exclusivity to uses of the creative work that were foreseeable to a creator at the time of creation is likely to better align creators' creative decision-making with their incentives.

In other words, just because your work is used in part by another to create something new and different, it often doesn't make sense to give the original creator control over that work -- especially if it has nothing to do with the original incentive to create. Somehow, I'd imagine that JK Rowling would disagree.

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SIIA's Bogus Bounty For Turning In Software Counterfeiters: Read The Fine Print

from the good-luck-with-that dept

We've already talked about the BSA's misleading program to get people to turn in their employers for using unauthorized copies of software. Now, sister organization, SIIA, has introduced its own silly program. Reader Jon writes in to let us know that the SIIA is supposedly offering $500 to anyone who "turns in" someone who sold them counterfeit software online. While the SIIA says it hopes that the recipient of the $500 uses it to buy legitimate copies of the software, they don't have to. At first glance, this program looks like it creates a system that gives people incentives to buy counterfeit software. After all, why not buy the counterfeit software, collect the reward and pocket it, while keeping the software? However, if you read the fine print, you'll realize that the program is quite limited. It's not really $500. It's "up to" $500, apparently at the SIIA's sole discretion. And... it's only open to the first 100 people who qualify. And... they'll get to use your name in press releases and force you to post feedback on eBay about how the seller sold you counterfeit software. And... it doesn't appear that you get any amnesty for having the software, meaning you could eventually be liable yourself for using counterfeit software (though, you have to give up the software to the SIIA, but if you installed it first...). Then, there's the best part. If the SIIA winds up in a court case with whoever you turn it, you may be required to testify -- and (wait for it...) the SIIA may reimburse your expenses, but if they do, those expenses will be reduced by the amount the SIIA paid as a reward. In other words, the "reward" simply becomes a prepayment on just some of the expenses you incur to testify on the SIIA's behalf. How nice of them.

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Copyright Is About Incentives, Not Protection

from the net-benefits dept

Whenever we discuss the issue of copyrights and bring up the fact that copyright is not a welfare system to protect creators, people get upset with us. There seems to be this false assumption that copyrights (and patents) are designed for the sake of protecting the creator of content. That's not true and it's never been true. From the very earliest debates about the concept of intellectual property in the US, it has always been about creating incentives for innovation -- or, as the Constitution so eloquently puts it: "to promote the progress of science and useful arts." In thinking over the various debates over copyright, it seems to come down to this particular issue over and over again. Those who are focused on the original purpose of copyrights recognize the problems with the copyright system and are interested in fixing them. Those who believe that the purpose of copyrights is to "protect" don't have a problem with the way things are, or with the idea of strengthening copyrights, even if they weaken the actual market and are a net negative on society.

This is quite clearly indicated in a great article by Julian Sanchez arguing against extending copyright protections to the fashion industry (found via Tim Lee). The question of extending copyrights to the fashion industry has been discussed at length before, but a few key points in Sanchez's piece highlight this split in thinking about the issue. He notes, as many others have, that the industry is constantly innovating and is quite healthy -- which is why the idea that new "incentives" are needed seems laughable. However, if you view things from the position that copyright is about protecting, then it's a different story. Sanchez notes that while individual designers may be harmed, it's only helped the overall industry. From that standpoint, if you believe in protectionism, then you say these new laws are needed to "protect" those who are harmed -- ignoring the greater harm caused to the rest of the industry.

The history of economics is littered with examples of why protectionism is rarely, if ever, a reasonable policy. It tends to backfire badly, in part because it takes away many of the incentives for competition and innovation. In protecting one area, you are inevitably harming another. Indeed, studies have shown that innovation in the fashion industry is often because of the rampant copying, rather than in spite of it. That's the way you want markets to work -- where competition drives innovation by forcing companies to keep innovating to leapfrog each other. Sanchez quotes legal scholar Kal Raustiala to make the point: "When a successful restaurant opens up on a street that's never had a restaurant before, there's a way in which the second business is parasitic on the first. But in the United States, we call that capitalism and competition."

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