Why We Need Strong Rights to Fair Use of Intellectual Property
* Steven Masur, January 2009: Developed from Presentation at DCIA Peer to Peer Summit at CES: Panel on developing a market for Peer to Peer content sales
For many years there has been a battle over peer to peer networks. It is often posited that the battle is polarized between two sides: 1) copyright holders who believe they should be paid for content to which they own the rights, and 2) pirates who feel that content should be free to the public and that creators of copyrights can make their money other ways, for example, by charging for live performances, selling merchandise, or licensing to advertisers. This polarized dichotomy has always been false. It reflects neither the way most people feel or behave, nor the balance the copyright clause of the Constitution of the United States established for science and the useful arts. The stalemate this worldview has created has far reaching international implications in that it threatens to throw off the balance articulated in the copyright clause, discourage the financial incentive to create new works, and create a competitive advantage for countries with more liberal rules regarding fair use.
Although there is previous law relating to protecting intellectual property, many credit the Copyright Clause in the United States Constitution as really accelerating the creation of a body of law around the concept that people should be able to make money from their ideas. The Copyright Clause empowers Congress:
“To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”
The clause allows owners of intellectual property a limited monopoly to make money on copyrighted works, so there will be a financial incentive for such works to be made. However, the monopoly is “limited.” In order for the balance to work, the intellectual property must be able to be copied and used by new makers of intellectual property, for free, so that the progress of science and the useful arts is not stifled.
The Right to Copy – For Free
Everyone believes in the right to make money from intellectual property. It is one of the central underpinnings in a capitalist economy. It is the other half of the balance -- the right to copy for free in order to promote creation of new intellectual property -- which is misunderstood by many and downplayed by entrenched interests who wish to keep a lock-hold on their intellectual property forever, so they can continue making money from it forever. I am not suggesting that intellectual property should be free and copyrights owners should find a new revenue model. I am saying that if we do not NAIL THE BALANCE between providing copyright holders with the tools to collect money on their copyrights, but allowing enough freedom to copy so that new inventions can be created, we could plunge ourselves into an intellectual property dark age in which no one is able to make money from their intellectual property.
It is, of course, true, that intellectual property can be licensed in whole or in part, and that this provides a fair market-based structure, which enables a good deal of new intellectual property to be created. The right to ownership presumes the right NOT to sell for any price. I am not talking about this main body of trade in intellectual property rights. I am discussing only the outer limits of use in which the refusal to allow free uses stifles creativity and inhibits progress.
An Intellectual Property Dark Age?
OK, so isn’t it a little melodramatic for me to say that we risk plunging the world into a dark age? No, it is not, because our world does not end at the borders of the United States or any other country with strong copyright protections. We live in a world of sovereign nations, which have different degrees of power at different times. The fact is that from a technology perspective, all intellectual property is discoverable and can be copied with increasing ease. So this is an international issue. If it is easy to copy intellectual property, and if in certain territories this is not illegal, or copyright protections are not enforced, then we stand to lose our most valuable intellectual property assets. Since we cannot count on always being in power, we can’t just rely on might to protect ourselves from this. Eventually, we must turn to the rule of law. For the rule of law to work among sovereign nations, it must be within the interest of all parties to sign on to certain principals. Those principals cannot just be, “our way or the highway,” because it is too easy for territories with varying amounts of power to either say, “no,” or to be lax in their enforcement of rules that are not in their interest to enforce.
A good illustrative example is peer to peer file networks. The idea of shutting them down and stamping them out is the same as saying that if God had wanted us to fly, he would have given us wings. Money is being made on content sold on peer to peer networks and peer to peer technologies are legitimate and are not going anywhere. So when we discuss peer to peer technologies, we should focus not on the money that is NOT being made, but on the money that is being made and how to increase it.
The seed of the small amount of money that has been made can be grown into a field of wheat. With smart investment and good execution, the field of wheat can be grown into a worldwide food supply; a vibrant market for intellectual property sold, traded, exchanged and recycled legitimately using all manner of digital distribution technologies. All it really takes is good laws, which are in the interest of every nation to properly enforce.
As everyone knows, peer to peer technologies have been well been tested and proven to work for the illegal sharing of unprotected files for free. They are now in the refinement stage. What has not been tested sufficiently is how to increase the amount of money being made on peer to peer networks. Major copyright holders have stalled so long in granting licenses, and made it so difficult and expensive to try new business models, that it has choked many early stage companies, and stifled innovation to the degree that the illegal market is stronger than the legal one. The many young bright eyed entrepreneurs who had previously been attracted to try new ideas and models for selling intellectual property on the internet and mobile devices has been limited to a slow trickle of battle-hardened digital media executives with good relationships in the established industry, or fringe players willing to dabble in the illegal.
The Market is Broken
So should we give up on the basic tenants of capitalism and adopt an ISP tax or levy? No, I don’t think we should. I trust the market and the innovation that it can create. I fear a media business that does not overpay stars with a lot of talent and the power to bring it to market, or risk-taking entrepreneurs who want to compete to create better products for our enjoyment.
I just think the market is broken. What is broken about it is that we have not nailed the balance, by protecting the outer fringes of copyright -- fair use -- the right to use intellectual property for free in order to promote progress in science and the useful arts. Under our current regime, it is easier to steal intellectual property and use it illegally than to legally license and pay for it. We have stifled a great many of the innovators who would have come up with ways to distribute media further, faster, and cheaper. In so doing, we have left hundreds of millions in potential earnings on the table, and exposed ourselves to being overtaken by innovators in foreign lands, who have no qualms about making use of our intellectual property for free in order to advance their interests.
In the music industry alone, hundreds of millions in venture capital investments have been wasted because major music labels will not license music to new start-ups with good ideas. There are a host of legitimate reasons not to license against which I do not argue. But because the music is not licensed, new music services die on the vine, and there is a massive trade in illegal content on file-sharing networks. The film and book industries are moving in the same direction, they just have not advanced as far down the path.
The legitimate refusal of these companies to license content rights is a classic example of our failure to nail the balance, and illustrates how keeping a lockhold on intellectual property stifles progress. Because companies with new ideas cannot legally license files without paying advances that are too large to risk on unproven models, only the marginal services that tangentially address the problems of music distribution are created, and no truly groundbreaking new distribution model evolves, except abroad, or on the illegal darknet.
We have done enough for a while in protecting the right to make money on intellectual property. We’ve done such a good job, that we have broken the market. Now, we need to fix the market, by quickly evolving rules that implement fair protections for the other half of the balance; the freedom to use intellectual property for free to promote the progress of science and the useful arts.
Doing this is absolutely central to our ability to survive if our primary export is intellectual property. This is no less important now, than were the adoption of the securities laws, the labor laws, or the antitrust laws in their time. In each case, these laws were enacted to fix markets that were broken. If we don’t fix the market for purchase and sale of intellectual property, we stand to lose everything, just as we did after the great depression. So in a very real way, this is the challenge of our generation.
This article does not attempt to propose a solution. It is enough for now to articulate the problem, so that we can begin working on a solution.