If Everything is Free Who's Able to Pay for Lunch?

“Copyright is dead, it’s an outmoded concept destroyed by students all over the world who refuse to pay for any digital content, especially music” opined the Professor. He continued his argument saying “like drug laws copyright laws just turn students into criminals, young people just don’t respect copyright and download all their music for free and copyright laws won’t stop downloading so they are irrelevant and should be abolished .” He went on to argue that song writers need to give their music away to promote their concerts where they can earn a living. With a son who graduated in music from Latrobe University and who has been trying to make a living from music for more than 10 years I reflected on how often you hear such arguments from well paid people, often paid from the public purse, but who would have no idea how to live on the door take from small audiences and low pay for performing at music venues around town.

With trillions of devices connected to the Internet we can now share, measure and exchange most things we value, including music. Developments in technology provide us with choices. We can choose to regulate our economy in many different ways but we need to ensure that those regulations create a dynamic and vibrant society.  We need to motivate those that create new things whether that be music or memes or stories or services by giving them the power to set their price and conditions that apply. Modern technology gives us almost unlimited choices in how we design such a system.

Our economy and particularly our monetary system has evolved enabling sharing, measuring and exchanging of goods with strangers. Whilst the village economy could rely on memory and reputation to balance the books, commerce with strangers required an independent valuation mechanism and means of exchange, which is what we now know as money. Exchange of physical goods required laws to help define and control what was exchanged and over time complex property  rights emerged to support an efficient economy. Today more than 50% of the value being exchanged in our economy is based on knowledge and ideas which makes the laws controlling intellectual property critical yet they are a muddled mess.

In this Blog I would like to summarise the arguments raging about the current copyright system, review the current law of copyright and patents and discuss a new and more effective system that encourages innovation and invention whilst rewarding investment in creation.

Technology mostly in the form of the Internet has driven massive innovation in how digital assets of books, music, film and software can be created, tested, deployed and published. This technology has changed the means and methods of exchange in what we have been calling the digital economy. But as the Internet has now so permeated the broader economy it no longer making sense to distinguish the  “digital economy” so let’s examine how the economy more broadly should operate to improve the human condition.

The debate about copyright

If there ever was a paradox then copyright is one. It is easy to agree with both sides of this argument. When an author labours for a lifetime and produces a substantial body of work why should the ownership of that work vaporise 70 years after his death (It is more complicated than this see link). If he had chosen to apply his labour to build physical objects of similar value then his heirs could enjoy that value for an unlimited time.   Alternatively why should a company that freely utilised the ideas from earlier stories involving animals and fairy tales strictly control the use of a mouse, or a rabbit or a deer in film and television? If Christopher Marlowe and Thomas Kyd had been given the same copyright protection in the 1590′s as Disney has been given for Mickey Mouse, would the works of William Shakespeare have achieved the same recognition 500 years later? For in the words of Sir Isaac Newton William Shakespeare stood on the shoulders of giants and in his case the giants were Marlowe and Kyd.

The impact on our society of getting the laws of copyright wrong is dramatic and affects us all. On the one hand we all like to get free music and not have to pay for our newspapers. On the other if our favourite musicians have no time to write and record new songs because they are exhausted from touring and if the exactitude of our newspapers suffers because of their reliance on citizen journalists then the quality of our lives is diminished. When the advertising revenue stream for major newspapers is taken by Google because they can freely place their ads alongside any newspaper content then who will be paying the salary of the investigative journalist working on the next Watergate break in? It is not the sensational story that is important it is the constant enquiry into the power and politics of every nation that keeps our institutions honest and operating with some level of transparency. Our copyright laws should provide proper and adequate protection with appropriate remedies to enable creators of content the choice of how their assets are utilised.

“A large, diverse society cannot survive without property; a large, diverse and modern society cannot flourish without intellectual property.” In his wonderful book Free Culture Lawrence Lessig argues that creators of intellectual property rely on the the ideas and knowledge that went before them. That innovation requires access to those ideas and knowledge in the public domain. If the Law causes or at least permits the public domain to become barren innovation will be adversely affected.  Consequently we need choices that reward creation but build the public domain of knowledge and ideas.

The popular argument for free is based on the 100 year old third party payment model where the content creator provides the content consumer with free or low cost access to the content because a third party (the advertiser who wants access to the consumer) who provides a revenue stream to the content producer. The model worked well for media and brilliantly for Google. Construction Data Management applied this model to the construction industry by collecting building plans from architects without cost in exchange for providing the architects with costing data by region and CDM in turn built a revenue stream from manufacturers by charging them for access to information on building projects to help their sales team sell building components to construction projects. However contortions of this model can reduce economic efficiency when the cost of providing information to the paying third party is much greater than the consumer paying a lower price for information they seek. Put another way the total costs within the economy have to be met by someone and a more efficient system with lower total costs and less “wastage” will provide a higher growth in GDP and ultimately a high standard of living for its citizens.

Chris Anderson the great advocate of “Free” does concede in his book that “Everyone can use a Free business model, but all too typically only the number one company can get really rich with it.” It is not surprising that the two major advocates for open and free; Google and Apple are also the most guarded and proprietary about their core revenue generating digital assets and benefit greatly from others providing their digital assets free. Free music for Apple’s idevices and free searchable content for Google’s ads. The challenge we are now confronted with is that where traditionally the market lead held 60% market share with number two 30% and number three perhaps 5% in the Free market online the winners like Google take 95% market share and society is unlikely to be better off.

The greatest advocates for copyright protection today is Hollywood and it was these film studios who took on iiNet in the Australian Federal Court charging iiNet with authorising their customers’ illegal downloading of music files. One wit described this as an argument to charge VicRoads with aiding and abetting armed robbery because the robbers used their roads to escape. The irony here is Hollywood was created by film producers moving to the West Coast of USA to avoid paying royalties to Edison in the more regulated East where he held patents on cinematographic cameras. Other cases have seen the Recording Industry Association of America sue Jesse Jordan for breach of copyright because his search engine enabled students to find and download music files. With US legislation providing greater damages for downloading two songs in breach of copyright than for medical negligence by a surgeon in removing the wrong limb in an operation it is clear that our copyright laws are in a mess.

How Might the System be Improved?

Harvard law professor William Fisher has suggested that all content capable of digital transmission be marked with a digital watermark and governments regulate a system developed by entrepreneurs to measure usage and collect payments based on this watermark. The important thing is to assure creators compensation without breaking the Internet. Developing this idea further it is now technically possible to:

  • allow digital files to be loaned as we currently loan a paper book with an iPod/Pad/Phone or Kindle suspending access to a file on one device for a pre-set period while it is active on another
  • allow digital files to be permanently transferred (sold) to another device
  • that copyright holders may set fees for permitting permanent transfer (selling) or temporary transfer (lending) of files
  • that ‘fair use’ permissions be set for limited extracts of file content and be secured with a digital watermark
  • that ‘fair use’ fee structure be set by copyright holder at publication
  • that to obtain copyright a digital work must be lodged and registered
  • to sustain a copyright the copyright owner must renew their registration say every 5 years and failing to register or renew a copyright renders that copyright to the public domain

The US Congress and other parliaments have been extending copyright protection for authors since 1908 taking it from 14 years to an authors lifetime plus 70 years or 95 years for a corporation. If this continues, as it is likely to do, we are operating under permanent copyright protection by stealth. The complexity in obtaining copyright clearance has pretty much made it impossible to reuse copyrighted material and the cost of doing so makes that one of if not the major cost of any production. See Australian Copyright  Council for a more detailed description.

To simplify the system we need to strengthen copyright. But to reduce the high legal fees involved in current copyright cases we need to make as clear as possible what rights are held by the copyright holder by making those rights narrow and clearly defined. By narrow rights I would propose that derivatives from a copyright work be separated from the work itself and be limited to a very short term perhaps 10 years. That is where a film is made based on a book or a musical is created from music innovators will be free to create new works but fees for reuse of existing works in their original form will require payment of a copyright fee. By restricting the broader rights it is justified to provide permanent copyright for the narrower rights suggested.

Conclusion

Our parliaments have often modified copyright as technologies developed (printing, photography, radio, film, telephone, networks and computers) providing different rights with new technologies (eg composers are paid whilst performers are not for music played on radio). As the Internet delivers the most major change to the sharing and measurement of digital files it is vital that innovation is encouraged and creators are paid. We need to simplify and automate the regulation of copyright and protect the public domain of intellectual property. Dynamic and vibrant societies are rarely dominated by monopolies and so it is vital that we encourage our legislators to protect the interests of the broad community of creators so that fair and equitable payment systems are allowed to emerge.