Thursday, August 15, 2013

The Future of Copyright (that will never, ever happen)

Here’s what I see as the logical future and structure for copyright law. I've written lengthy essays on this topic (those three links) which have -- I hope -- somewhat deeper analysis of the problems involved. (At any rate, now you have the links for future reference.) While my initial concerns with online flaunting of copyright were epistemological, I think the economics are no less problematic and ought to be addressed within the prinicpled framework of promoting science, the arts (I'm of the opinion that all arts are useful), and the general cross-pollination of ideas, information, and civil discourse that's the creative fuel of our society and democracy.

To my mind digital piracy is all about ease of access. Online culture has evolved to be wholly open-access and global. Speaking as an entertainment lawyer who's been practicing nearly two decades, I've come to the opinion that attempts to constrain digital behavior by legal or technological means are futile at best, overreaching at worst. Such laws cannot be effectively or equitably enforced, and such technologies are at best ephemeral and susceptible to circumvention. This reduces piracy of copyrighted works to an economic problem that can best be addressed by changes in business model. Looking solely at the situation in which the music industry finds itself, Amazon, eMusic, iTunes, Spotify, rdio, Pandora, Daytrotter, Bandcamp, and others are making inroads by offering inexpensive alternatives, but have not to date outcompeted the proliferation of pirate sites.

This being the case, what should Congress and the Copyright Office's roles be? The simplest solution would be to take "infringement" out of the equation entirely through changes to the copyright licensing and royalty model: specifically, by enacting universal compulsory licensing against statutory royalties. The various statutory royalty rates, which would be brokered by the Copyright Royalty Tribunal, via consent decree, or through some other public and transparent means, ought to be negotiated with copyright owner representatives (stakeholders), yet remain cognizant of market pressures (balancing retention of incentives for independent license negotiaton while rendering illegal competition by infringing nonparticipants significantly less economically viable), and likewise be balanced with public policy goals (facilitating distribution and access). For example, one might expect rates to scale slightly based on the popularity of a particular creative work, though such a scheme need not be implemented.

With compulsory licensing, the development of massive digital libraries to which all would enjoy free and unfettered access would cease to be controversial; digital access would become legally frictionless, whether implemented jointly or independently by the Library of Congress, Google Books, a consortium of academic institutions, or others. What's more, copyright holders could then be assured payment against access/usage (the way ASCAP, BMI, SESAC, and SoundExchange meter statutory royalties) by direct sampling of this database and known pirate exchanges (which of course would not be publicly supported, but ultimately rendered competitively superfluous in this scheme). This does not "socialize" intellectual property, since collection and payment are equally administerable by licensed private actors (whether for-profit or nonprofit entities) as they would be by government.
Where does the money for payments come from in this model? The answer would depend on how it is set up, but I think it can derive from a variety of sources. First, the private sector. Here, the framework already exists. Commercial providers from Google Books to Rhapsody would be obliged to pay into a re-allocable pool, demonstrate that they are themselves administering payments appropriately, or else be subject to lawsuit for noncompliance (this is the ASCAP, etc. model, and the funds ultimately derive from advertising or subscribers/fee payers for commercial entities and grant funds, tuition revenues, and tax deductibles for qualifying nonprofits). However, I think this would have to be supplemented by public sector (federal) funding, for which the taxpayers' ROI would be not only the emergence and availability of vast, open public digital repositories but frictionless access to content from any existing source (because all performance, copying, adaptation, and use would now be "fair use" compensated on an equitable basis to eligible copyright owners from the central funding pool).

Another benefit of making all copyrightable works subject to compulsory licensing against a statutory royalty supported by pooled federal and/or private revenue for limited periods of time (copyright duration), would be to shift copyright enforcement away from haphazard punishment of infringement (as all uses would be permissible either via compulsory or negotiated license or by fair use, collections and payments subject to regular, auditable reporting) to policing fair and accurate attribution of all works, preserving intellectual integrity and promoting accountability. This does require a modest change to the current conceptual paradigm, as rightful owners would lose "control" over adaptations and derivative works, but then the very idea of controlling access or usage of any work incarnated as digital media is essentially illusory anyway. Far better to establish a steady, transparent, and publicly auditable revenue stream that promotes and enables an unfettered, public exchange of ideas.

All this the US can implement alone, but any universal scheme really ought to involve international participation (Berne Convention signatories) if not administration (I think private, non-profit ASCAP-style aggregator/distributors could be licensed to handle enforcement and administration of the collection/payment side of things, though I'm grudgingly willing to allow for national or multinational agencies to take this on). Nor is international participation far-fetched, once this legal change is effected. After all, Berne signatories will want their constituent copyright owners to be eligible to receive payments brokered from the central pool. Until they sign onto such a treaty, monies otherwise owed Eurozone members would be reserved or reallocated to undeserving American artists. Even for those few droit morale states remaining, I tend to think that following the money would trump matters of principle, especially given the renewed emphasis this policy would place on credit to original and underlying works (a real boon to provenance enthusiasts).

So there you have it. I don't argue that these changes would be any easier to perfect than proposed fixes to the DMCA or the PIPA/SOPA counterlegislation OPEN. However, I do believe that they would prove to be more robust and congruent with consumer (and creator) behavior. More extensive background and shoestring analysis can be found in those of my other essays to which I linked above.

As it happens, I ran these ideas past a colleague working in the electronic games industry last year, and the following dialogue emerged:

As I understand it, your proposal basically does away with the use of supply and demand pricing for copyrighted works, at least with respect to creators. Of course, most creators have little power, so publishers (including movie studios, record labels, book publishers, etc.) are an oligopsony. Creators who managed to get published will typically assign away all their rights anyway, so the state-set prices wouldn't help them. Any attempt to set prices low would be met with massive resistance. But, again, without market pricing, there is no way to find a market equilibrium. There's a good argument that the market is already malfunctioning because of the monopoly power of copyright, with prices kept artificially high. Given the political power of the content owners (i.e., publishers), it seems more likely than not that prices will be set higher than they should be, which is a massive subsidy to an already profitable industry. (Not that there aren't already examples of this.)

My feeling on this is that the brokering and monitoring of statutory royalty rates moves price setting from the marketplace (currently broken by uncontrollable piracy and subsidized erratically via irregular and inefficient enforcement in various courts) to direct negotiation as overseen and faciliatated by the Copyright Royalty Tribunal. Market forces still rule in this negotiation, however. For one thing, historic pricing data would have evidentiary value (to be argued by universities, libraries, and taxpayers), but I think that the imposition of compulsory licensing will help keep major industrial copyright owners (publishers, distributors, and promoters) honest. If they get greedy and use their money and influence to push for prices higher than the market will reasonably bear, they will be suffocated by competition from freebooters. All they will have done is exchanged the costs of pursuing and prosectuing infringers for the costs of pursuing and prosecuting re-distributors who refuse to pay into the revenue pool -- having lost the moral and legal authority to force digital consumers to pay them directly. In other words, the present and inextinguishable threat of piracy can be coopted into a market counterbalance, but only if it is in a sense legitimized through compulsory licensing.

Your total compulsory licensing scheme means that no publisher could ever get exclusive rights to anything. So a successful book could immediately be republished by another company, any successful music could be reissued, etc. This creates a huge free-riding problem. Why be the first to take a chance on investing in the cost of producing something when you can just wait for someone else to do it and then republish? Furthermore, the fixed royalties don't help the free-riding problem. If a work is successful enough, it will be profitable to republish and pay the royalties. Why wouldn’t the cannibalized sales from the creator/original publisher will be worth more than the royalties it gets as compensation? How is this fair to the creator?

It’s not ideal. My interlocutor raises an excellent point, but again, I'm trying to factor free-riders into the overall economic balance rather than view them as a subversive force external to the ecosystem. Piracy is the worst form of free-ridership, in that pirates impose anti-theft vigilance and policing costs which detract from the efficiencies of the marketplace. Legalizing redistribution might increase the prevalence of bootleggers, but if so, these would be bootleggers paying out statutory fees to the copyright holders. Whether or not bootlegging disincentivizes disproportionately large investments in content creation ($100M+ blockbuster films, say, and I think that's dependent on business model, since I could certainly imagine the commercial viability of capitalization by sales of in-content advertising and product-placement fees -- paid directly by contract from advertisers to the creators, and quite possibly with economic incentives based on viewership, etc., thereby turning bootleg distribution into cost-free redistribution and promotion for the producers), I think the guarantee of income will make it easier for more marginal creators (all the indies) to be more prolific. Digital access and lower barriers to re-distribution should increase their audience and their income stream. For some, that will just be pocket money, but others may find sufficient income to professionalize their output. Either way, to the extent the primary purpose of copyright is precisely to foster such increased output, the status quo may well change, but back toward fostering more widespread development creative works.

In fairness to my colleague, I cop to not having yet fully thought through the bootlegger issue in the context of video game production. These can be every bit as expensive as blockbuster films, and in many cases with greater risk exposure for many independent creators. Whether that forces the console/PC game industry toward a Kickstarter-driven (which assumes a trusting, inpaying fan-base) or subscription-based SAAS/SAAP model or more product-placement (assuming there are advertisers willing to gamble on other than tried-and-true franchises like Halo or GTA... which, if so, would get tired pretty quickly, and I'm not sure I want a console marketplace that's limited to Nabisco-themed or -sponsored product), or something else... well, I guess I need to think about whether my approach is viable for all content. If it isn't, I'm not sure I'm comfortable with the inefficiencies of leaving format ghettos (the way that sound recording performance rights are currently). My software friend views the bootlegger/freerider problem (whether posed by my system, an alternate approach, or viz. the status quo) as conceivably resolvable through a minimum period of exclusivity, if a much shorter one than we have now. While my proposal targets the orphan work issue, it does so at the expense of recent works whose owners are known. However, I have good reason for not limiting the reproduction and distribution rights solution to orphan works, rather than all works. Leaning all-or-nothing minimizes administrative inefficiencies. Any carve out would have to exempt/grandfather exploitations of "orphan works" to the date a legitimate owner emerges.

The public performance/public display rights are good candidates for your compulsory licensing scheme. While there is a moral rights argument for these rights, the U.S. has never used that basis. Without underlying moral rights, there's no real reason to allow blocking a performance. (OK, there's an argument that a really bad or offensive performance might hurt the value of the underlying asset; I don't know if there needs to be some sort of dilution type claim or if this is just a price to be paid for free speech.)

So long as they get proper pay and attribution for their original creation, I don't see any reason to allow copyright owners to block performances/redistribution by others, whether of copies, covers, or more sophisticated derivative works. I think our mashup age is now sufficiently sophisticated to distinguish the maker's work and opinions from those of the remixer, whatever the content being discussed. Oft-times this results in props back to the original creator (here I'm thinking specifically of the animation genre created by exploiting screen captures of action within MMRPGs with redubbed audio).

What happens to the first sale doctrine? This matters with electronic media, because without first sale, every time a piece of music or a video is loaded into the memory of a player, a royalty needs to be paid. Maybe that's a good thing.

This is something that must be brokered. Under the model I have proposed, redistribution of material is always subject to a tithe against the statutory royalty scheme. It's just that individual consumers end up oblivious to P2P sharing costs, as these are borne/paid out of the wider pool (which is why I have it partially subsidized by taxpayers... ignorance is bliss, and fair is fair; there's no such thing as a free lunch).

You're arguing, I think, for the obsolescence of fair use.

 Not at all. I think fair use ought to remain a reasonable defense against requiring contribution to the royalty pool or toward payment of statutory royalties. This poses a slight challenge to the paying entities' sampling algorithms (the ASCAPs, etc.), but to my mind, proper statistical sampling ought to be able to account for this. Fair use can be quantified as much as any download/stream/performance.

But do we price based on how much of a work is used or some other factor? Or is it the same royalty for a 4 word quote as for reproducing the entire piece? There are a lot of moving parts to consider.

Aren't these issues with us in our present system? I'm not sure the reforms I propose have any real effect on this. Recourse to compulsory licensing at statutory rates ought to help set the bargaining table, not eliminate incentives for creators and users to negotiate.

he problems that libraries and museums face might be better served by simply giving them an exemption directly or a low compulsory license, in the name of public interest. We already have exemptions for non-profit educational institutions, so this isn't a big change.

I'm okay with this (the library issue might be more controversial), but as stated, I think administrative efficiencies and enforceability favor the in-for-a-penny-in-for-a-pound approach. However, I must admit to pure legal fantasy. As Kirby Ferguson concludes his brilliant four-part video series "Everything is a Remix," without a groundswell of activism, this is all so much pie-in-the-sky. However, I see no such groundswell emerging, nor why should there be? Consumers are happy with the unsettled status quo, be it piratic or otherwise. The RIAA-dominated distributors still believe that they can fight the changing climate, or at least belatedly fight to the surface of the tsunami by buying into iTunes, Amazon, and subscription services. The new normal need not be lamented or resisted; it’s no mass-extinction event, just a sea change. Artists and their art will adapt to the environment, whatever it may be, resulting in innovations. Certainly diversity of output has never been greater. The lingering corruption and inefficiency trouble me, but perhaps I have too heightened a preference for orderliness.