Copyright as Trade Regulation

III. On the Utility of Copyright as Trade Regulation

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III. On the Utility of Copyright as Trade Regulation

A. Solving the “Problem” of Personal Copying

Most copyright scholars agree that almost nothing poses a greater threat to the enterprise of creation than the “problem” of unauthorized copying. To quote Professor Marshall Leaffer, the “‘copying problem’ presents challenges that transcend qualitatively anything in history, and the economic stakes are greater than ever.”190 Solutions abound. After detailing eight ways in which scholars have proposed to solve the “copying problem,” Professor Peter Yu has suggested that lawmakers use “a combination of these proposals,” although he warns that there is “no panacea.”191 As I have argued, of course, one might solve the copying “problem” by amending the Copyright Act to withhold the exclusive right of reproduction entirely. According to Professor William Patry and Judge Posner, however, this “would be the undoing of copyright.”192 Why?

Scholars have competing theories as to why copying threatens the enterprise of creation. One theory (to which Patry and Posner subscribe)193 is that copying forces a reduction in prices of copies of copyrighted works, thus depriving copyright owners of profits and reducing their incentives to create. As Professor Raymond Ku has observed, “[i]f competition from copiers drives the price of a work down to the marginal costs of the copier, it threatens the incentives to distribute the work in the first place.”194 Even Professor Lunney, who advocates some private copying, has warned that instances of private copying, “[a]lthough individually trivial, … in the aggregate could radically reduce the incentive to create any given work of authorship.”195

In fact, however, acts of copying, standing alone, would not produce these results. Only the distribution of unauthorized copies would tend to increase supply, thus decreasing prices (at least in a competitive market). Further, only the public distribution of unauthorized copies would tend to increase supply enough to have any appreciable effect on prices. The “private” distribution of unauthorized copies might deprive copyright owners of at least some profits as consumers shared purchased copies within “normal circle[s] of … family and … social acquaintances.”196 But given how broadly the courts have construed the statutory definition of “publicly,” private distributions are likely to involve relatively few copies, which means that any lost profits would be unlikely to have a significant effect on the inducement to create. This may be why “[c]opyright owners in the twentieth century sued counterfeiters but generally did not sue end users even if they were making illegal copies”:197 the benefits of enforcement did not justify the costs.198 Unfortunately, this approach seems increasingly anachronistic.199

If copying is thought to pose more of a threat to copyright owners today, it is because technological advances are enabling copyists to make “perfect copies” (and “perfect copies of the copies”) at “massive[ly] declin[ing]” costs.200 As before, however, the problem is not reproduction, but distribution. The most significant impact of advancing technology has been the transformation of consumers into public distributors. With the click of a mouse, a person can use his or her computer to send thousands of “perfect copies” of copyrighted works to thousands of strangers, or to make those copies available for downloading by thousands more. In the old days, that kind of distribution required a significant amount of investment, and the resulting barriers to entry created the very oligopolies that are so quick to blame reproduction technologies for their problems today.

A second theory as to why copying causes harm is that copying forces copyright owners to raise the prices of copies of their works, thus injuring the consuming public. To quote Professor Trotter Hardy, “[p]rices would be lower in the absence of copying,”201 presumably because competition from copyists is thought to lead to fewer sales for copyright owners, forcing those copyright owners to boost revenues by charging higher prices. If copyright owners were losing market share to copyists, however, then raising prices would be the wrong way to go. Copyright owners who insisted on charging higher prices in such a market would, in the end, be forced either to reduce their prices or to watch their market share erode considerably. Regardless, it would be unfair to blame copying alone for competitive harms like these. Consider an example from the music industry: If record companies decided, finally, to give consumers the (legal) opportunity to download individual songs at reasonable prices, it was only because online “distributors” forced those companies to change the way in which they distributed music. A guy in his basement can copy thousands of copyrighted songs onto his hard drive, but only when he distributes those copies to the public does he inflict competitive harm on copyright owners. Record companies may love the reproduction right because it enables them to threaten litigation against (and thus frighten away) as many members of the public as possible,202 but this is not a good enough reason to retain a right that Professor Julie Cohen has described as “recogniz[ing] few boundaries”—“drafted extraordinarily broadly in the first instance, and … extended even more broadly by the courts.”203

If the “predicate”204 right of reproduction provides copyright owners with few benefits, there are significant public benefits to be gained by withholding it. First, as we have seen, giving members of the public the right to make copies (and derivatives) of copyrighted works would increase access to those works during the copyright term without subjecting copyright owners to the kind of unfair competition that might reduce their incentives to create. That “access,” in turn, would lead to the creation of thousands of tangible copies—copies the creation of which the law now seeks to prevent (and punish). There are, of course, significant archival benefits to be gained by the proliferation of tangible copies,205 but I have argued that the proliferation and distribution of copyrighted works in tangible form also promotes the enterprise of learning. In fact, copyright law always has recognized this.206 Article I, Section 8, Clause 8 of the Constitution gives Congress the authority to provide authors with exclusive rights only in “Writings,”207 and accordingly, Congress has defined copyrightable works as those “original works of authorship fixed in any tangible medium of expression.”208 If the fixation requirement serves other purposes—including evidentiary ones209—it also provides the public with a tangible benefit in return for the impediment to access that the grant of exclusive rights represents.210

Granting the public access during the copyright term also might promote expressive diversity in surprising ways. To the extent the law requires members of the public to be “consumers” instead of “users,” copyright owners can train the public to satisfy its demand for expression by looking to the copyright industries alone. As Professor Benkler put it (using Disney as an example), “increased prevalence of Mickeys should lead to increased investment in forming preferences for their products. This should increase relative demand for their products. Repackaging the Mouse becomes not only cost effective, but also responsive to demand.”211 In time, the public tends to forget that the copyright industries are not the only sources of creative expression. If, however, the public enjoyed the right not only to “experience” copyrighted works212 but also to make copies and derivatives of those works for private use, people might begin to interact with copyrighted works in ways that raised the “common denominator,”213 at least in their own lives (and the lives of family and friends.) Meaningful access to creative works inspires creativity. Further, if the public began to view copyrighted works not only as finished products, but as raw materials, demand for those works might even increase. So might the value of the copyrights themselves, as users sought to license the right to market their improvements.

Perhaps the most significant benefit of withholding the exclusive right of reproduction, however, relates to derivative liability. Since the Supreme Court grappled with the issue of contributory liability in Sony Corporation of America v. Universal City Studios, Inc.,214 copyright owners have brought copyright infringement actions against manufacturers of copying technologies that enable computers to engage in unauthorized acts of reproduction. In Sony, the Court held that under the “staple article of commerce” doctrine, “the sale of copying equipment … does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes.”215 “Indeed,” the Court added, that product “need merely be capable of substantial noninfringing uses.”216 In the last twenty years, however, copyright owners have convinced courts repeatedly to distinguish the holding in Sony, and the Court itself did so last year.217 These days, manufacturers of copying devices may be guilty of contributory infringement if they distribute those devices “with the object of promoting [their] use to infringe copyright”218—even if those devices are “capable of substantial noninfringing uses.”219

Scholars, too, have struggled with issues of derivative liability, which have become particularly pressing as “digital technologies involve copying as part of use …”220 To quote Professor Jessica Litman, “[d]efining an appropriate boundary between contributory infringers and innovators in digital technology seems even more crucial today than it did when the Court decided Sony.”221 Although that boundary promises to remain elusive, it certainly cannot be drawn if acts of copying alone are punishable as copyright infringement.

If the goal is to promote both acts of creation and acts of technological innovation, then withholding the exclusive right of reproduction could help to achieve that goal in at least some cases. If copyright owners did not have the right to exclude others from copying their works, then by definition, they could not bring infringement actions against manufacturers of copying technologies (like the one in Sony) for enabling those acts of copying. Liability for contributory infringement derives from acts of direct infringement, which means there can be no derivative liability absent a violation of the Copyright Act.222 The benefit of withholding the reproduction right would be obvious for manufacturers of devices, such as computers, that cannot function without making copies. But that benefit also would be obvious for consumers, who would have the opportunity to purchase those copying technologies without funding payments of royalties. In the end, contributory liability would continue to be a threat only to those companies (like Napster and Grokster) that enable and “induce”223 users to engage in the public distribution of unauthorized copies (or derivatives) of copyrighted works, thus causing competitive harm. If this is not a perfect boundary “between contributory infringers and innovators in digital technology,” it certainly is an “appropriate” one.224

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