Copyright Reform through Private Ordering

Derek Khanna’s lead essay, as well as his memo for the Republican Study Committee, urge libertarians and conservatives to rally around copyright reform as both good policy and good politics. While copyright law has its problems—like any statutory scheme, it is far from perfect—pursuing the “way forward” suggested by the lead essay is unlikely to yield policy or politics that are helpful or appealing to advocates of the free market.

If we embark on the path to copyright reform, where we end up very much depends on where we start. Given how the lead essay frames the discussion, it points us to a bad end. I addressed some of my general philosophical and policy disagreements with the RSC memo elsewhere. In this short response essay, I focus on the problems with the lead essay’s portrayal of copyright as “regulation.”

The lead essay describes copyright as a “government-imposed system of regulation.” I fear that this characterization confuses private ordering with government intervention. It proposes to put copyright on a path that likely would lead to more intervention.

In a superficial way, intellectual property rights may indeed seem to resemble the sort of economic regulations that provoke skepticism among free market advocates. For example, it appears that copyright prohibits the remix DJs discussed in the lead essay from freely employing their labor and selling the products of that labor.

The problem with the “regulation” label is that copyright law, in its broad strokes, does not tell anyone what he must and must not do.[1] Copyright only acts as a prohibition if a copyright owner chooses to use it that way. However, there is a vast diversity in how copyright owners actually choose to exercise their rights—they may sell copies at a fixed price, negotiate terms on a case-by-case basis, forgo payment entirely via a Creative Commons license, or simply choose to ignore or tolerate unlicensed uses. Or an owner may simply choose not to license at all. Fair use might override many of these choices, and, in any event, an unhappy potential buyer or user can always attempt to negotiate further.

Like other forms of property, copyright thus represents an invitation to a transaction and an opportunity to bargain. This opportunity for parties to transact and bargain is one of the key differences between property and regulation. A regulator has a duty to enforce the law—and if a regulator chooses not to enforce, then a court may order him to do so. Copyright owners need not enforce their rights, of course. Moreover, it is perfectly legitimate to offer a property owner money to forgo their right to enforce their copyrights; such commercial transactions are really the whole point of copyright. Make the same offer to a regulator, and you go to jail.

The distinction here between property and regulation ought to matter to conservatives and libertarians. We are rightly concerned that regulation impedes freedom. We typically embrace the exercise of property rights as furthering freedom. How we classify a copyright owner’s actions—regulation or property—makes a difference, particularly when they are stubbornly refusing to allow others to use their works in the way that others deem most prudent and efficient.

The rhetorical application of the “regulation” label tends to undermine support for the exercise of property rights. Advocates of free markets generally supported the rights of Susette Kelo and her neighbors when they resisted the city of New London taking of their property to give to another private party in the Kelo v. City of New London case. Nobody vilified Kelo and her neighbors as “regulators” for exercising their property rights, first by refusing to sell and then by fighting the city’s taking of their property. While Kelo’s opponents won anyway, their path certainly would have been even smoother if the city could have pulled the neat rhetorical trick of casting Kelo and her fellow plaintiffs as the bullying “regulators.”

Some will object that the analogy is inapt because tangible property differs from intangible property. While they do indeed differ in important ways, I’m not convinced that the difference matters in this context. The great virtue of property rights is that they push decisionmaking and power down to the lowest level possible, empowering owners to decide what uses best supports their needs to succeed and flourish in life. Property rights also put decisions in the hands of those with the best information and biggest stake in getting things right—the owner of the right and his customers and trading partners. These features make property rights both efficient and liberating. The virtues are the same whether the property is tangible or intangible.

I thus find it unfortunate when copyright owners’ exercise of their freedom to choose is characterized as regulation. The concern underlying such rhetoric seems to be solely for the freedom of would-be users of creative works, rather than those who created or financed them. Framing the issue this way loses sight of the virtues of the liberties supported by property rights.

An appreciation of the virtues of copyright-as-property can also highlight the possibilities for a different type of copyright reform—the continuous reform that results from private action. As property, copyright is incredibly malleable, allowing tremendous choice and freedom for owners and users to reach their own arrangements. And, in fact, they do.

Take, for example, the problem of anti-copying technology, or digital rights management (DRM). Around the turn of the century, DRM was a cause célèbre among academics and activists.[2] They feared that it would interfere with fair use, violate privacy, and severely restrict traditional uses of copyrighted works, such as borrowing and sharing among friends. Consumers also often found DRM annoying, as it made works hard to transfer among devices.

These objections to DRM have never been fully addressed or eliminated, but they have been greatly tempered by what one might call copyright reform without government intervention. Or, at least one might refer to it as business model reform in lieu of law reform. Over the years, DRM on recorded music has been dropped as Apple convinced record labels to ease control in order to better serve consumers. Some publishers publish e-books without DRM. Others, such as Amazon, attempt to emulate traditional forms of sharing by allowing limited sharing of e-books.

While none of these changes to DRM go as far as some advocates would prefer, they represent a significant evolution from the DRM policies of a decade ago. At least for consumers, we are far from the locked-down dystopia many anti-DRM commentators then feared. The private ordering enabled by copyright’s property regime has made these changes possible.

Perhaps more significantly, copyright’s private ordering regime facilitates important reform movements such as Creative Commons and the open source movement. These developments have allowed creators to address shortcomings in the copyright system through private action.

One potential problem with a copyright reform that views copyright owners as “regulators” is that it may insert government regulators (further) into the copyright industries to ensure that a proper balance is achieved. One problem with this result is regulatory complexity—complexity of the sort that smothers entrepreneurship. The Copyright Act already contains such provisions. For example, Section 111 contains a lengthy and complex compulsory licensing regime for collecting and divvying up royalties from cable television providers administered by the Copyright Office and the Copyright Royalty Board. A resource for documentary filmmakers referred to these “retransmission” royalties as television’s “multi-million dollar secret”, because of the complexity and expense of the process tends to leave out those with fewer resources.

Perhaps a palatable form of copyright reform might focus on the challenges that the copyright system poses to entrepreneurial “creative upstarts.” Unlike a reform that promotes an abstract and unattainable balance between individual and collective interests, a reform focused on emerging content providers would focus on making the copyright system work more efficiently for creators. For example, the DMCA’s notice and takedown system is often criticized for its chilling effects, particularly as that system is used by larger, established companies. However, independent creators can find the notice and takedown system both prohibitively time consuming and frustratingly ineffective. A worthy reform would make the system easier and more effective for creative upstarts.

Copyright reforms itself, given sufficient market incentives or effective civil society advocacy. The reforms may not be as deep or far-reaching as some may prefer. They may never address the issues that raise the greatest ideological passion, such as copyright terms. But for all that, copyright practices and copyright-based business models change greatly and frequently precisely because of the control afforded by property rights. Such private ordering is something that conservatives and libertarians can and should embrace rather than vilify as regulatory excess.

Notes

[1]Section 106 of the Copyright Act sets forth, in clear and simple terms, the rights of copyright owners, but it makes those rights subject to sections 107–120, many of which contain a myriad of detailed regulatory type provisions. I leave it the reader to determine whether such departures from a property regime are a feature or a bug.

[2] See for example the work of Professor Julie Cohen.

Also from This Issue

Lead Essay

  • The Way Forward on Copyright Reform by Derek Khanna

    Derek Khanna argues that copyright was never intended to stand in perpetuity, yet that is in effect what we have for a large number of works today. Copyright’s original purpose was not to compensate content creators, but to promote the arts and sciences, as explained in the Constitution. Returning to that aim should entail shorter copyright terms, which permit future reuses of creative content. Khanna outlines several upcoming opportunities to move in this direction.

Response Essays

  • Civil Asset Forfeiture and Intellectual Property by Timothy B. Lee

    Since the passage of the 2008 PRO-IP Act, the federal government has been able to use civil asset forfeiture to circumvent even having to make a case against copyright infringers. It may now simply seize and shut down allegedly violating websites. Libertarians have always found civil asset forfeiture troubling, and its extension into intellectual property should be reversed. Timothy B. Lee argues that this is one place where our copyright system is ripe for reform.

  • A Balanced Approach to Copyright by Ryan Radia

    Ryan Radia argues for a middle path on intellectual property. He reminds those who treat copyright as a privilege or a subsidy how similar copyright is to traditional property protections. He further reminds those who favor the current system that in practice, even property rights in land are subject to abridgement in the name of efficiency.

The Conversation