I had promised you a blog on "virtual first sale," and you will have it. But I wanted to report first on an interesting happening. Let me start by quoting my colleague Mike Palmedo, at the Washington College of Law's Program on Information Justice and Intellectual Property:
On Tuesday the Computer and Communications Industry Association (CCIA) released its report "Fair Use in the U.S. Economy," which measures the economic contributions of industries that rely on flexibilities in copyright law. These contributions are massive, yet they are often overlooked in debate over the strengthening of IP enforcement. The report finds that in 2007, industries reliant on fair use produced:
CCIA President & CEO Ed Black announced the report at a panel on Capitol Hill, saying:
- $2.2 trillion in value added (revenue minus costs). This amounted to 16.2% of GDP
- 23% of real economic growth over the prior five years
- $281 billion in exports
- Employment for 17.5 million Americans, in jobs with higher-than-average compensation)
- Productivity gains that were 28% higher than the national averageIn a knowledge-based economy, having numbers that show why fair use matters is critical as legislation is made and trade agreements are negotiated. Fair use is critical to the innovation economy. Much of the unprecedented growth of the tech and communications industry can be credited to the fair use doctrine. This cornerstone that fosters creativity and innovation must be protected.
Representative Zoe Lofgren spoke, expressing hope that the report would help the public understand the importance of the balancing features of copyright law. She quoted the section of Constitution giving Congress the power "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;" then warned that much of the modern discourse has tended towards ever-higher protections for IP, which was not the original intent of the framers. She warned that the Anticounterfeiting Trade Agreement is problematic because it is a step in the efforts to further block access to content, and because it lacks protection of the flexibilities needed for creative industries. A better goal for trade negotiations would be a "freedom agenda" that promotes greater expression and innovation.
Mike goes on to note that I also spoke at the event, noting that a previous version of this report issued in 2007 had a positive impact on the debate over the effect of intellectual property on creative industries and the US economy as a whole. He explained that many of the industries which are often referred to as "copyright industries" would not exist today without fair use and other flexibilities in copyright law.
More specifically, I said:
I want to offer my compliments to CCIA, a crucial organization that balances respect for core IP rights with a recognition that the so-called "gaps" in copyright protection - including fair use and other statutory limitations and exceptions to copyright - are a "feature" rather than a "bug" in our prodigiously productive innovation system. Or to put the point in constitutional terms: CCIA works to remind us that the success of copyright in promoting "Progress in Science and useful Arts" is a function of all the parts of the system working together, rather than of any one standing alone.
The take-away from this splendid revised and updated edition of "Fair Use in the U.S. Economy" is that robust copyright flexibilities are at least as important to the ecosystem of creativity as are strong content protection. Indeed, many of the most important so-called "copyright industries" owe their very existence to "fair use," in both the broad and narrow senses of that term. That's because, of course, every "new" cultural product depends on all that has gone before. New software products succeed because they build upon and can interoperate with those that have gone before. Musicians must imitate in order to create. And in our media saturated culture, motion picture and TV production would be impossible if every reference to existing information objects required copyright clearance. We have known anecdotally about importance of fair use for decades, but this report makes the point clear than ever by quantifying what might be called the "fair use effect."
Maintaining this effect is going to be critical as the U.S. copyright industries face increasing global competition, not from IP piracy, but from rapidly growing domestic creative industries throughout the developed and developing world. And that raises what seems to me an important practical and ethical concern. Currently, the U.S. is actively engaged in exporting strong copyright norms to our trading partner - making use of familiar mechanisms like FTAs and--perhaps--novel multilateral instruments like the proposed Anti-Counterfeiting Trade Agreement (ACTA). The U.S. claim in these international negotiations is two-fold: That it is essential to protect US against wide-spread unauthorized duplication and sale, and that countries that upgrade their national laws actually will be doing themselves a favor--by creating a legal climate in which domestic copyright industries.
In the same negotiations, however, the U.S. doesn't seek to export our highly successful approach to defining and interpreting copyright flexibilities such as fair use. Are we, I wonder, playing fair by emphasizing the benefits of strong protection and matching penalties, while deemphasizing the other features of US law that--to at least the same degree--are part of our system's genius? And, in the medium and long-term, how will US copyright industries fair in an international marketplace that is more generally more restrictive of the creative process than our own tried and tested copyright law, with its emphasis on dynamic and productive balance? If we succeed in pressuring our trading partners to enact tough laws with no meaningful exceptions, our own copyright industries may suffer. (In this connection, it's worth remembering that under the widely-accepted international copyright rule of "national treatment," it's the domestic law of the country where alleged infringement occurs that governs where both rights and limitations are concerned!)
I need to disclose here that I helped the authors of the CCIA (economists Thomas Rogers and Andrew Szamosszegi of Capital Trade, Incorporated) to think through some of the underlying issues of industry classification back in 2007, when the first iteration of this report appeared. That said, the document has a lot to recommend it--not the least being that it relies exclusively on publicly available datasets, and uses a methodology that is fully and transparently disclosed. It's interesting to contrast the industry-funded studies of the costs of infringement to copyright industries, which were the subject of "Intellectual Property: Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods," a fascinating GAO study released a few weeks back - which concludes (in relevant part) that:
Generally, the illicit nature of counterfeiting and piracy makes estimating the economic impact of IP infringements extremely difficult, so assumptions must be used to offset the lack of data. Efforts to estimate losses involve assumptions such as the rate at which consumers would substitute counterfeit for legitimate products, which can have enormous impacts on the resulting estimates. Because of the significant differences in types of counterfeited and pirated goods and industries involved, no single method can be used to develop estimates. Each method has limitations, and most experts observed that it is difficult, if not impossible, to quantify the economy-wide impacts.
The "numbers war" in copyright is likely to continue, but the CCIA study could stand as model for how the way estimates are derived can be disclosed and explained.