A Dogged Insistence on Real Numbers
The Freakonomics blog has an excellent post on the bills in Congress popularly known as SOPA and PIPA. The “Stop Online Piracy Act” and the “Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act” aka the “PROTECT IP Act” would attempt to frustrate online copyright violations by tinkering with the inner workings of the Internet.
Would amending the Internet be justified? The post is called “How Much Do Music and Movie Piracy Really Hurt the U.S. Economy?“:
Supporters of stronger intellectual property enforcement … argue that online piracy is a huge problem, one which costs the U.S. economy between $200 and $250 billion per year, and is responsible for the loss of 750,000 American jobs. These numbers seem truly dire: a $250 billion per year loss would be almost $800 for every man, woman, and child in America. And 750,000 jobs – that’s twice the number of those employed in the entire motion picture industry in 2010. The good news is that the numbers are wrong …
Freakonomics’ authors picked up two good authorities: Cato’s own Julian Sanchez and Cato’s own (adjunct) Tim Lee. It’s nice to see Cato scholars getting high-profile credit for their dogged insistence on real numbers, something Congress routinely fails to exhibit.
Losses from violations of copyright law are hard to calculate.
There are certainly a lot of people who download music and movies without paying. It’s clear that, at least in some cases, piracy substitutes for a legitimate transaction … In other cases, the person pirating the movie or song would never have bought it. This is especially true if the consumer lives in a relatively poor country, like China, and is simply unable to afford to pay for the films and music he downloads. Do we count this latter category of downloads as “lost sales”? Not if we’re honest.
And there’s another problem: even in the instances where Internet piracy results in a lost sale, how does that lost sale affect the job market? While jobs may be lost in the movie or music industry, they might be created in another. Money that a pirate doesn’t spend on movies and songs is almost certain to be spent elsewhere. Let’s say it gets spent on skateboards — the same dollar lost by Sony Pictures may be gained by Alien Workshop, a company that makes skateboards.
The challenges go deeper: The theoretical arguments about intellectual property laws are a congeries. Libertarian advocates of statutory intellectual property protection will cite Ayn Rand, who was a stalwart on defending creations of the mind as property. But a coherent system of rights does not produce conflicting claims, and intellectual property laws seem to exalt the property of some at a cost to the liberty of others. The some, in this case, are the music and movie industries, the others, Internet content companies and users.
This area still needs a good deal of sorting out. For the time being, a firm insistence on real numbers is a good thing. Serious empirical work is sorely needed. Killing off bogus numbers can only go so far.
How Copyright Industries Con Congress
I’ve yet to encounter a technically clueful person who believes the Stop Online Piracy Act will actually do anything to meaningfully reduce—let alone “stop”—online piracy, and so I haven’t bothered writing much about the absurd numbers the bill’s supporters routinely bandy about in hopes of persuading lawmakers that SOPA will be an economic boon and create zillions of jobs. If the proposed solution just won’t work, after all, why bother quibbling about the magnitude of the problem? But then I saw the very astute David Carr’s otherwise excellent column on SOPA’s pitfalls, which took those inflated numbers more or less as gospel. If only because I’m offended to see bad data invoked so routinely and brazenly, on general principle, it’s important to try to set the record straight. The movie and music recording industry have gotten away with using statistics that don’t stand up to the most minimal scrutiny, over and over, for years, to hoodwink both Congress and the general public. Wherever you come down on any particular piece of legislation, this is not how policy should get made in a democracy, and it’s high time they were shamed into cutting it out.
The bogus numbers Carr cites—which I’ll get to in a moment—actually represent a substantial retreat from even more ludicrous statistics the copyright industries long peddled. In my previous life as the Washington editor for the technology news site Ars Technica, I became curious about two implausible sounding claims I kept seeing made over and over—and repeated by prominent U.S. Senators!—in support of more aggressive antipiracy efforts. Intellectual property infringement was supposedly costing the U.S. economy $200–250 billion per year, and had killed 750,000 American jobs. That certainly sounded dire, but those numbers looked suspiciously high, and I was having trouble figuring out exactly where they had originated. I did finally run them down, and wrote up the results of my investigation in a long piece for Ars. Read the whole thing for the full, farcical story, but here’s the upshot: The $200–250 billion number had originated in a 1991 sidebar in Forbes, but it was not a measurement of the cost of “piracy” to the U.S. economy. It was an unsourced estimate of the total size of the global market in counterfeit goods. Beyond the obvious fact that these numbers are decades old, counterfeiting of physical goods imported in bulk and sold by domestic retail distributors is, rather obviously, a totally different phenomenon with different policy implications from the problem of illicit individual consumer downloads of movies, music, and software. The 750,000 jobs number had originated in a 1986 speech (yes, 1986) by the secretary of commerce estimating that counterfeiting could cost the United States “anywhere from 130,000 to 750,000″ jobs. Nobody in the Commerce Department was able to identify where those figures had come from.
These are the numbers that were driving U.S. copyright policy as recently as 2008—and I’m still seeing them repeated in “fact sheets” circulated by SOPA boosters. Finally, in 2010, the Government Accountability Office released a report noting that these figures “cannot be substantiated or traced back to an underlying data source or methodology.” Now, if a single journalist could discover as much with a few days work, minimal due diligence should have enabled highly paid lobbyists to arrive at the same conclusion. The only way to explain the longevity of these figures, if we charitably rule out deliberate deception, is to infer that the people repeating them simply did not care whether what they were saying was true. If I were a legislator, I would find this more than a little insulting
As Carr’s piece suggests, SOPA’s corporate backers have fallen back on new numbers, but they’re still entirely bogus:
The Motion Picture Association of America cites figures saying that piracy costs the United States $58 billion annually. Mark Elliot, an executive from the U.S. Chamber of Commerce, said in a letter to The New York Times that such piracy threatened 19 million American jobs
Only $58 billion! We’re making progress! So where does that figure come from? The source here is a paper released by the Institute for Policy Innovation, and authored by one Stephen Siwek, an MBA and principal of a consulting firm called Economists Incorporated that produces economic analysis for hire on behalf of (among others) businesses seeking to influence policy makers. That does not, in itself, invalidate the research, but we should at least begin with the recognition that we are not dealing here with impartial academic studies produced by a university or government research agency.
Justice Scalia Reads Cato’s Amicus Briefs
During Wednesday’s oral argument in Golan v. Holder (transcript here), Justice Scalia said something that was at once obvious and startling:
It seems to me Congress either had the power to do this under the Copyright Clause or it didn’t. I don’t think that powers that Congress does not have under the Constitution can be acquired by simply obtaining the agreement of the Senate, the President and Zimbabwe. I do not think a treaty can expand the powers of the Federal government.
This proposition is obvious, because the Constitution vests Congress with limited, enumerated powers, which can only be increased by constitutional amendment, not by treaty. But Scalia’s words were also startling because Justice Oliver Wendell Holmes said exactly the opposite almost a century ago—or at least that’s how his opinion has been read—in the canonical case of Missouri v. Holland. We filed a brief arguing that Holmes was wrong, and we are delighted that Justice Scalia agrees.
Thanks to Tim Lee for pointing out this exchange to me before I had a chance to read the transcript and to Georgetown’s Nick Rosenkranz, the principal author of our brief.
Copyright Monkey Business
Given enough time, a monkey sitting at a typewriter will type out the complete works of William Shakespeare. Believe it or not, it’s called the infinite monkey theorem. A thousand monkeys at a thousand typewriters would cut the time in half … or something.
But would the monkey hold the copyright?
We may soon find out. Or at least we’ll be entertained by the tiff between TechDirt‘s Mike Masnick and a person claiming to represent the owner of a photograph taken by, yes, a monkey.
The short answers are: 1) A photograph taken by a monkey probably isn’t copyrighted, and 2) if it were, displaying the photo in a discussion of its copyright status is probably fair use. The lesson is: many, many people don’t understand what the copyright laws are, or why they are.
Mike participated in our “Copyright Controversies” conference some years ago. Should there be a sequel, we’ll invite the monkey.
Copyright, Innovation, and Empiricism
If you like innovation, and if you’re interested in intellectual property, you probably already know about the Committee on the Impact of Copyright Policy on Innovation in the Digital Era. That’s a group assembled by the National Academies to, well, analyze the impact of copyright policy on innovation in the digital era.
Long-standing consensus holds that copyright, by creating artificial scarcity in information goods, allows creators to enjoy rewards from their creations sufficient to justify creating them. In other words, copyright’s incentive structure encourages creation and innovation, the end result being more and better information goods for the society to enjoy.
Information technologies such as digitization and the Internet are rejiggering the balance that copyright is supposed to strike and casting doubt on the consensus about copyright in some quarters. Technological change has driven down the cost of producing and distributing many creative works quite dramatically. This improves the profitability offered to creators by copyright’s protections, so maybe less such incentive to create is required. Except that the same technologies also permit copying of works on a quite large scale, which reduces the benefits available to creators.
Copyright violation is utterly rampant today. You probably violate copyright law many times a day (subject to arguable fair use rights) when you forward around emails with jokes, pictures, and videos in them, for example. The copyright violations that “matter,” of course, are the ones that undercut the living of those who have made production and distribution of copyrighted works their business or source of financial support.
A further complication: Copyright may do more than simply encourage new creation. It may impede the development of new works because creators can’t use existing copyrighted works to create more. Artists today can’t stand on the broad shoulders of artists from the 1960s, ’70s, and ’80s. If they are to riff on existing cultural themes, they have to use the shoulders of artists from the 1860s, ’70s, and ’80s, whose works are in the public domain.
This is the thicket into which the committee wades. Happily, it’s holding the copyright consensus up to the light and doing some empirical study of the role that copyright has in innovation. Gathered at a Web site for the project are a series of papers that authors presented at a panel last week, including:
- Economic Effects of Copyright: The Empirical Evidence So Far, by Christian Handke
- Bye, Bye, Miss American Pie? The Supply of New Recorded Music Since Napster, by Joel Waldfogel
- The Impact of Digitization on Business Models in Copyright-Driven Industries: A Review of the Economic Issues, by Lisa Cameron and Coleman Bazelon
- Online Access and the Scientific Journal Market: An Economist’s Perspective, by Mark J. McCabe
- Copyright‐Protected Assets in the National Accounts, by Rachel Soloveichik and David Wasshausen
These are but a few of the many subjects that economic study should explore if we are to fully understand the effects of copyright and other intellectual property laws. There’s no time like the present for the studying to begin.
Another New Supreme Court Term, Another New Justice
Today is the first Monday in October, the traditional start of the Supreme Court term. While we have yet to see as many blockbuster constitutional cases on the docket as we did last term—which, despite the high profile 5-4 splits in McDonald v. Chicago and Citizens United actually produced fewer dissents than any in recent memory—we do look forward to:
- Two big free speech challenges, one over a statute prohibiting the sale of violent video games to minors, another the offensive protesting of a fallen soldier’s funeral;
- An Establishment Clause lawsuit against Arizona’s tax credit for private tuition funds (an alternative to educational voucher programs);
- Regulatory federalism (or “preemption”) cases involving:
- safety standards for seatbelts;
- an Arizona statute regarding the hiring of illegal aliens; and
- the forbidding of class-arbitration waivers as unconscionable components of arbitration agreements;
- Important ERISA and copyright cases;
- A case examining privacy concerns attending the federal government’s background checks for contractors; and
- A criminal procedure dispute regarding access to DNA testing that may support a claim of innocence.
Cato has filed amicus briefs in several of these cases—and in various others which the Court may decide to review later this year—so I will be paying extra-close attention.
Perhaps more importantly, we again have a new justice—and, as Justice White often said, a new justice makes a new Court. While her confirmation was never in any serious doubt, Elena Kagan faced strong criticism (including from me) on a variety of issues—most importantly on her refusal to “grade” past Court decisions or identify any specific limits to government power. The 37 votes against Kagan were the most ever for a successful Democratic nominee, which is emblematic of a turbulent political environment in which the Constitution and the basic question of where government derives its power figure prominently.
Given Kagan’s political and professional background, it is safe to assume that she’s not the second coming of Clarence Thomas. And because she replaces the “liberal lion” Justice Stevens, her elevation from “tenth justice” (as the solicitor general is known) to ninth is unlikely to cause an immediate change in issues that most divide the Court—particularly because she is recused from nearly half the cases this term. She could, however, add an interesting and nuanced perspective on a variety of lower-profile issues. Only time will tell what kind of justice Kagan will be now that she is, seemingly for the first time in her ambitious life, unconstrained to speak her mind.
Here’s to another interesting, varied, and (hopefully) liberty-enhancing year!
That Which is Seen and That Which is Not Heard
Cato adjunct scholar David Post writes on the Volokh Conspiracy blog about the sticky copyright wicket facing some impressive jazz recordings from the 30s and 40s.
I get pretty excited . . . when I read that the collection also contains live performances of a Goodman-Wilson duet on “Lady Be Good” (with Wilson playing harpsichord!), Lester Young and Herschel Evans on “Tea for Two,” Charlie Christian playing electric guitar with the Goodman sextet in a 1939 performance of “Shivers,” the Count Basie and Duke Elllington bands’ performances at the 1938 “Carnival of Swing” on Randalls Island, . . . all previously unreleased. Oh, lordy — you’ve got to be kidding me! And listening to the excerpts from the recordings here, if anything, makes me even more delirious — this is truly great stuff by some of the greatest musicians that ever lived.
But:
[T]he potential copyright liability that could attach to redistribution of these recordings is so large — and, more importantly, so uncertain — that there may never be a public distribution of the recordings. Tracking down all the parties who may have a copyright interest in these performances, and therefore an entitlement to royalty payments (or to enjoining their distribution), is a monumental, and quite possibly an impossible, task, and it may well be that nobody steps forward with the resources to (a) undertake the efforts required and (b) take on the risk of liability.
Some of Post’s observations on copyright policy:
[I]f you give people a property interest in their creations, they’ll be able to work out market arrangements to receive compensation for them; knowing that in advance, they’ll create more works of art than they otherwise would absent that protection, and we’re all better off as a result. That’s easy enough to see. What’s harder to see is why that principle should ever be limited. . .
This case makes seen some costs of overbroad copyright protection through the medium of what we may not hear.
Leaves Lady Gaga in the Dust
In their 2006 Cato Policy Analysis, “Amateur-to-Amateur: The Rise of a New Creative Culture,” Gregory Lastowka and Dan Hunter wrote about how the functions that make up the creative cycle—creation, selection, production, dissemination, promotion, sale, and use of expressive content—are undergoing revolutionary decentralization and disintermediation.
The only thing professional in the clip below was the writing of the song. It deserves its credit, but the performance itself, production of the video, its selection, dissemination, and promotion (Twitter users, YouTube) are all amateur or amateur supported by a professionally managed, ad-supported platform.
Watch it a second time to take in the reactions of the girls sitting in front of the map. If you like, compare it with the tacky, overproduced, and flat “professional video“.
This is amateur entertainment that rivals any professional production, in part because it’s amateur. Assuming this performer dedicates himself further to his craft, he can rival or surpass anything put out by yesterday’s professionals.
(And, yes, I’m waiting to learn that I’ve been duped by some clever marketing scheme, but I hope this is real.)
TLJ on Justice Stevens’ Tech Influence
TechLawJournal has a thorough analysis of Justice John Paul Stevens’ opinions in technology-related areas. I reproduce it here with permission. (Tim Lee’s earlier about Justice Stevens’ legacy in tech is here.)
Justice John Paul Stevens, who has served on the Supreme Court since 1975, announced on April 9, 2010, that he will retire when the Court completes its current term this summer. This article reviews his contributions to technology related areas of law.
Outline of Article:
1. Summary.
2. Copyright Cases.
3. State Immunity in IPR Cases.
4. Patent Cases.
5. Communications Cases.
6. Internet Speech Cases.
7. Privacy Cases.
8. Other Cases.
Washington Legal Foundation Opposes GBS Deal
Via James Grimmelmann, the Washington Legal Foundation, a group known for its defense of property rights, filed an objection to the Google book deal earlier this month focusing on concerns related to those I raised in my posts earlier this week.
WLF points out that the Supreme Court has mandated that plaintiffs seeking to certify a class must make a diligent effort to notify all affected class members. According to the high court’s Shutts decision, this effort must include—at a minimum—sending a letter to every identifiable member of the class. In this case, this would mean sending a letter to every address in the US Copyright Office’s database of authors. WLF questions whether this was done; the foundation reports that it never received notification related to any of the books for which it holds the copyrights.
Now, it might be objected that this process would be prohibitively expensive. But if the class is so large that it’s impractical to notify all of its members, then the class is certainly too large to expect a judge to verify that the interests of all class members is being served by the settlement. If the class is too large to notify, then it’s too large to certify.
The Libertarian Case against the Google Book Search Deal
Five years ago, Google began scanning millions of books for inclusion in what eventually became Google Book Search. Google carefully designed the service to stay within the boundaries of copyright’s fair use provisions, at least as Google interpreted them. Still, some authors and publishers objected, and in 2005 they filed a lawsuit accusing Google of copyright infringement. The lawsuit dragged on for more than three years. Finally, in 2008, the parties announced a settlement of the lawsuit. Its text runs for 140 pages, not counting a secret termination clause available only to Google and its adversaries. The deadline for comments on the settlement was earlier this month, and on October 7 a federal judge must decide whether to approve or reject the settlement.
I was (and still am) firmly on Google’s side on the copyright claims at issue in the lawsuit. But the proposed settlement is another matter. The parties like to describe the agreement as a private agreement settling a legal dispute. But I agree with Librarian of Congress Marybeth Peters, who surprised almost everyone on Thursday when, testifying before Congress, she came out swinging against the agreement:
We realized that the settlement was not really a settlement at all, in as much as settlements resolve acts that have happened in the past and were at issue in the underlying infringement suits. Instead, the so-called settlement would create mechanisms by which Google could continue to scan with impunity, well into the future, and to our great surprise, create yet additional commercial products without the prior consent of rights holders. For example, the settlement allows Google to reproduce, display and distribute the books of copyright owners without prior consent, provided Google and the plaintiffs deem the works to be “out-of-print” through a definition negotiated by them for purposes of the settlement documents. Although Google is a commercial entity, acting for a primary purpose of commercial gain, the settlement absolves Google of the need to search for the rights holders or obtain their prior consent and provides a complete release from liability. In contrast to the scanning and snippets originally at issue, none of these new acts could be reasonably alleged to be fair use.
In the view of the Copyright Office, the settlement proposed by the parties would encroach on responsibility for copyright policy that traditionally has been the domain of Congress. The settlement is not merely a compromise of existing claims, or an agreement to compensate past copying and snippet display. Rather, it could affect the exclusive rights of millions of copyright owners, in the United States and abroad, with respect to their abilities to control new products and new markets, for years and years to come. We are greatly concerned by the parties’ end run around legislative process and prerogatives, and we submit that this Committee should be equally concerned.
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
