Why Do They Do That Thing They Do?
(or How I Learned to Stop Hating the Mouse1)
by: Dwayne Stresman, Associate Editor, MTTLR
“Don’t hate the player, hate the game”2
At one time, copyright law was to be a little-known discipline that few lawyers practiced, and one the general public knew (or cared) little about. My, how things have changed. These days copyright is “front and center” - hardly a week or two goes by without some aspect of copyright law appearing in the popular news, and most of the time the stories aren’t very heartwarming. You get everything from young women hit with 6-figure damages judgments for infringing file-sharing3 to artists threatening to sue their own fan clubs for allegedly infringing use of images and songs.4 All-in-all, it makes for quite a mess, and not surprisingly, commentators have called for change.5 But why do many rights-holders engage in what is seen by many as “Draconian” enforcement of copyright law? This post offers a possible explanation, from an economic perspective, which suggests that the actual structure of the copyright system may incentivize rights-holders to use a “take no prisoners” approach to enforcement.
Enforcement in an Eroding Rights Regime
Legal rules (or sets of rules) which grant rights fall into one of two categories. They either erode as a result of past breach or they don’t. Eroding rights are those which are lost if the rights-holder fails to adequately enforce them. For example, some common legal rights which erode in the face of past breaches are contractual rights (course of performance trumping even express terms), or real property rights (adverse possession).6 Alternatively, rights which don’t erode might include Civil Rights, or First Amendment rights. You don’t lose the right to speak freely simply because you failed to sue to remedy a past violation of that right. The category your particular right falls into can definitely affect what actions you take to vindicate that right.7
When examining an eroding rights regime, it only makes sense to look at scenarios which contain multiple time periods, or “repeat games”.8 A right can only erode if there are subsequent time periods in which the right has been devalued. In an eroding regime, a rights-holder acts not only because of the loss which results from the present violation, but because of future losses due to that violation. 9 That is, when deciding whether or not to attempt to enforce the current violation, a rational rights-holder takes into account the fact that in the subsequent period (or game) a failure to enforce in this period means that the value of their right in the next period is already diminished.
When deciding whether or not to enforce its right, a rational rights-holder will always weigh its cost of enforcement against its potential loss. In a static (non-eroding) regime this cost of enforcement is typically the cost of litigation for each violation. However, as already mentioned, under an eroding rights regime, a rights-holder must also consider the cost of erosion. As a result, the longer a game lasts (the more periods there are), the more the threat of erosion dominates the decision to enforce.10 Therefore, eroding regime games which contain multiple periods tend not to be governed by one-period concerns, but by long-term strategies. In such a situation, it is actually rational for a rights-holder to sue (even over a violation which is less costly than enforcement) in the first period, because doing so protects not only their present interest but their future interest as well.
Copyright Law as an Eroding Rights Regime
Is copyright law an eroding rights regime? If so, then this may, at least in part, explain why rights-holders sue to enforce their rights, even over seemingly trivial violations. In particular, I’ll focus here on two possible reasons why copyright law might be considered an eroding rights regime which is particularly likely to incentivize aggressive defense by rights-holders: 1) Much of the determination as to what copying is permissible (fair use) or not permissible (infringement) requires actual litigation, and 2) An actual market for the copyrighted content (the fourth factor in the fair use analysis) is potentially only created upon successful litigation.
At the heart of copyright law lies the notion that protection is granted to rights-holders primarily for the purpose of benefiting the general public.11 Fair use, arising under 17 U.S.C. § 107, is one way the law attempts to secure the public interest. Fair use potentially trumps any violation of a right granted by the copyright laws.12 However, a fair use analysis is highly factual in nature, and made only at the conclusion of an actual trial, after determination of exactly what the rights-holder possesses, and whether those rights have been unlawfully infringed. Litigation is synonymous with enforcement. The two acts are inseparable; without litigation, the extent of the right-holders actual rights are not defined, and thus not enforced.
In a related vein, sometimes litigation itself creates copyrights for rights-holders. In particular, the fourth fair use factor, the market effect of the allegedly infringing use, can actually be determined by the very lawsuit being brought.13 This circularity is perhaps the ultimate erosion regime in that the litigation actually creates a reverse erosion, or “expansion effect”. Not only is litigation required to maintain rights, but litigation can actually bring the legal right into existence. Not only would the right be eroded without enforcement - without enforcement it would never even have been created.
Conclusion
There are many legal rights which may erode over time due to non-enforcement. If real property rights can be forfeited in this way (adverse possession), then it seems possible, perhaps even likely that copyrights, as intellectual property rights, are similar. Further, in repeat game scenarios involving eroding rights, rights-holders actually have an incentive to enforce (litigate) even minor violations because doing so prevents future losses. If, as argued, U.S. copyright law fits this description, then understanding what motivates rights-holders in such a regime is essential, and attempts to change copyright law for the better will only be successful when they effectively deal with the incentives those laws create.
1 The mouse in question is, of course, Mickey. The Walt Disney Company is especially notorious for its “vigorous” enforcement of its copyrights. Perhaps the most famous case is Video Pipeline Inc. v. Buena Vista Home Entertainment, Inc., 192 F. Supp. 2d 321 (D.N.J. 2002), aff’d, 342 F. 3d 191 (3d Cir. 2003). You can find the opposing party’s creative public relations response by watching his video here: http://www.archive.org/details/willful_infringement_mickey_and_me.
2 Ice-T, Don’t Hate the Playa, (Coroner/Atomic Pop 1999). Song lyrics available at http://www.azlyrics.com/lyrics/icet/donthatetheplaya.html (last visited Mar. 6, 2008.).
3 Wikipedia, Jammie Thomas, (last visited Feb. 20, 2008). Thomas was found liable for violating the distribution right with regard to 24 songs and ordered to pay a total of $220,000.
4 Joel Horowitz, Prince Sues Fans, psfk, Nov. 9, 2007.
5 For what many consider the definitive statement on copyright change and other reforms, See generally Lawrence Lessig, Free Culture, (The Penguin Press, 2004). Full-text available free online at http://www.free-culture.cc/freeculture.pdf.
6 Omri Ben-Shahar, The Erosion of Rights By Past Breach, 1 Amer. L. Econ. Rev. 190 (1999).
7 Id. at 203-07, 215-19. Prof. Ben-Shahar lays out how, in the most general instance, the legal rule is irrelevant. However, he then goes on to show that making realistic adjustments to the general model will result in non-trivial differences in outcomes depending on the legal regime protecting the right.
8 For a quick discussion of game theory generally, including various types of game scenarios, See Wikipedia, Game Theory, (last visited Feb. 20, 2008).
9 Ben-Shahar, supra note 6, at 204-09.
10 Id. at 203-10. In each example, the number of periods corresponds inversely to the amount of harm needed to trigger enforcement. In a two period case, under an eroding rights regime, the trigger value for suit in period one is ½ the enforcement cost. In the three period case it is 1/3 of the enforcement cost. Extending this trend, for example, to 100 periods, or even to an infinite number of periods means that any violation, even a trivial one, triggers enforcement. But, again, Prof. Ben-Shahar reminds that, in the most general case, the number of periods does not favor a either a static or eroding regime. The relevance of static vs. eroding rights only comes into play when the general model is “tweaked”.
11 U.S. Const. Art. I, § 8, Cl. 8.
12 See 17 U.S.C. § 106 (subjecting § 106 rights to the fair use provisions of § 107, amongst other restrictions). Note, however, the controversy over whether the Digital Millennium Copyright Act (DMCA) provisions are meant to be subject to § 107. That is, whether a “fair use” defense is valid against a DMCA violation.
13 See, American Geophysical Union v. Texaco, Inc., 60 F.3d 913, 929 (2d Cir. 1995)(“whether the publishers can demand a fee for permission to make photocopies is the very question that the fair use trial is supposed to answer”); Princeton University Press v. Michigan Document Services, Inc., 99 F.3d 1381, 1407 (6th Cir. 1996)(Ryan, J., dissenting)(“The right to permission fees is precisely what is at issue here. It is circular to argue that a use is unfair, and a fee therefore required, on the basis that the publisher is otherwise deprived of a fee”).
by: Dwayne Stresman, Associate Editor, MTTLR
“Don’t hate the player, hate the game”2
At one time, copyright law was to be a little-known discipline that few lawyers practiced, and one the general public knew (or cared) little about. My, how things have changed. These days copyright is “front and center” - hardly a week or two goes by without some aspect of copyright law appearing in the popular news, and most of the time the stories aren’t very heartwarming. You get everything from young women hit with 6-figure damages judgments for infringing file-sharing3 to artists threatening to sue their own fan clubs for allegedly infringing use of images and songs.4 All-in-all, it makes for quite a mess, and not surprisingly, commentators have called for change.5 But why do many rights-holders engage in what is seen by many as “Draconian” enforcement of copyright law? This post offers a possible explanation, from an economic perspective, which suggests that the actual structure of the copyright system may incentivize rights-holders to use a “take no prisoners” approach to enforcement.
Enforcement in an Eroding Rights Regime
Legal rules (or sets of rules) which grant rights fall into one of two categories. They either erode as a result of past breach or they don’t. Eroding rights are those which are lost if the rights-holder fails to adequately enforce them. For example, some common legal rights which erode in the face of past breaches are contractual rights (course of performance trumping even express terms), or real property rights (adverse possession).6 Alternatively, rights which don’t erode might include Civil Rights, or First Amendment rights. You don’t lose the right to speak freely simply because you failed to sue to remedy a past violation of that right. The category your particular right falls into can definitely affect what actions you take to vindicate that right.7
When examining an eroding rights regime, it only makes sense to look at scenarios which contain multiple time periods, or “repeat games”.8 A right can only erode if there are subsequent time periods in which the right has been devalued. In an eroding regime, a rights-holder acts not only because of the loss which results from the present violation, but because of future losses due to that violation. 9 That is, when deciding whether or not to attempt to enforce the current violation, a rational rights-holder takes into account the fact that in the subsequent period (or game) a failure to enforce in this period means that the value of their right in the next period is already diminished.
When deciding whether or not to enforce its right, a rational rights-holder will always weigh its cost of enforcement against its potential loss. In a static (non-eroding) regime this cost of enforcement is typically the cost of litigation for each violation. However, as already mentioned, under an eroding rights regime, a rights-holder must also consider the cost of erosion. As a result, the longer a game lasts (the more periods there are), the more the threat of erosion dominates the decision to enforce.10 Therefore, eroding regime games which contain multiple periods tend not to be governed by one-period concerns, but by long-term strategies. In such a situation, it is actually rational for a rights-holder to sue (even over a violation which is less costly than enforcement) in the first period, because doing so protects not only their present interest but their future interest as well.
Copyright Law as an Eroding Rights Regime
Is copyright law an eroding rights regime? If so, then this may, at least in part, explain why rights-holders sue to enforce their rights, even over seemingly trivial violations. In particular, I’ll focus here on two possible reasons why copyright law might be considered an eroding rights regime which is particularly likely to incentivize aggressive defense by rights-holders: 1) Much of the determination as to what copying is permissible (fair use) or not permissible (infringement) requires actual litigation, and 2) An actual market for the copyrighted content (the fourth factor in the fair use analysis) is potentially only created upon successful litigation.
At the heart of copyright law lies the notion that protection is granted to rights-holders primarily for the purpose of benefiting the general public.11 Fair use, arising under 17 U.S.C. § 107, is one way the law attempts to secure the public interest. Fair use potentially trumps any violation of a right granted by the copyright laws.12 However, a fair use analysis is highly factual in nature, and made only at the conclusion of an actual trial, after determination of exactly what the rights-holder possesses, and whether those rights have been unlawfully infringed. Litigation is synonymous with enforcement. The two acts are inseparable; without litigation, the extent of the right-holders actual rights are not defined, and thus not enforced.
In a related vein, sometimes litigation itself creates copyrights for rights-holders. In particular, the fourth fair use factor, the market effect of the allegedly infringing use, can actually be determined by the very lawsuit being brought.13 This circularity is perhaps the ultimate erosion regime in that the litigation actually creates a reverse erosion, or “expansion effect”. Not only is litigation required to maintain rights, but litigation can actually bring the legal right into existence. Not only would the right be eroded without enforcement - without enforcement it would never even have been created.
Conclusion
There are many legal rights which may erode over time due to non-enforcement. If real property rights can be forfeited in this way (adverse possession), then it seems possible, perhaps even likely that copyrights, as intellectual property rights, are similar. Further, in repeat game scenarios involving eroding rights, rights-holders actually have an incentive to enforce (litigate) even minor violations because doing so prevents future losses. If, as argued, U.S. copyright law fits this description, then understanding what motivates rights-holders in such a regime is essential, and attempts to change copyright law for the better will only be successful when they effectively deal with the incentives those laws create.
1 The mouse in question is, of course, Mickey. The Walt Disney Company is especially notorious for its “vigorous” enforcement of its copyrights. Perhaps the most famous case is Video Pipeline Inc. v. Buena Vista Home Entertainment, Inc., 192 F. Supp. 2d 321 (D.N.J. 2002), aff’d, 342 F. 3d 191 (3d Cir. 2003). You can find the opposing party’s creative public relations response by watching his video here: http://www.archive.org/details/willful_infringement_mickey_and_me.
2 Ice-T, Don’t Hate the Playa, (Coroner/Atomic Pop 1999). Song lyrics available at http://www.azlyrics.com/lyrics/icet/donthatetheplaya.html (last visited Mar. 6, 2008.).
3 Wikipedia, Jammie Thomas, (last visited Feb. 20, 2008). Thomas was found liable for violating the distribution right with regard to 24 songs and ordered to pay a total of $220,000.
4 Joel Horowitz, Prince Sues Fans, psfk, Nov. 9, 2007.
5 For what many consider the definitive statement on copyright change and other reforms, See generally Lawrence Lessig, Free Culture, (The Penguin Press, 2004). Full-text available free online at http://www.free-culture.cc/freeculture.pdf.
6 Omri Ben-Shahar, The Erosion of Rights By Past Breach, 1 Amer. L. Econ. Rev. 190 (1999).
7 Id. at 203-07, 215-19. Prof. Ben-Shahar lays out how, in the most general instance, the legal rule is irrelevant. However, he then goes on to show that making realistic adjustments to the general model will result in non-trivial differences in outcomes depending on the legal regime protecting the right.
8 For a quick discussion of game theory generally, including various types of game scenarios, See Wikipedia, Game Theory, (last visited Feb. 20, 2008).
9 Ben-Shahar, supra note 6, at 204-09.
10 Id. at 203-10. In each example, the number of periods corresponds inversely to the amount of harm needed to trigger enforcement. In a two period case, under an eroding rights regime, the trigger value for suit in period one is ½ the enforcement cost. In the three period case it is 1/3 of the enforcement cost. Extending this trend, for example, to 100 periods, or even to an infinite number of periods means that any violation, even a trivial one, triggers enforcement. But, again, Prof. Ben-Shahar reminds that, in the most general case, the number of periods does not favor a either a static or eroding regime. The relevance of static vs. eroding rights only comes into play when the general model is “tweaked”.
11 U.S. Const. Art. I, § 8, Cl. 8.
12 See 17 U.S.C. § 106 (subjecting § 106 rights to the fair use provisions of § 107, amongst other restrictions). Note, however, the controversy over whether the Digital Millennium Copyright Act (DMCA) provisions are meant to be subject to § 107. That is, whether a “fair use” defense is valid against a DMCA violation.
13 See, American Geophysical Union v. Texaco, Inc., 60 F.3d 913, 929 (2d Cir. 1995)(“whether the publishers can demand a fee for permission to make photocopies is the very question that the fair use trial is supposed to answer”); Princeton University Press v. Michigan Document Services, Inc., 99 F.3d 1381, 1407 (6th Cir. 1996)(Ryan, J., dissenting)(“The right to permission fees is precisely what is at issue here. It is circular to argue that a use is unfair, and a fee therefore required, on the basis that the publisher is otherwise deprived of a fee”).
Labels: copyright, game theory, law and economics
posted by MTTLR Blog Editor at
10:04 PM
2 Comments:
I wonder . . . if all a copyright registree has is a claim to a right (i.e. the rights are defined in litigation) can you really say that their rights are being eroded? Sure, they feel like their rights are being eroded because they might have an inflated view of what their rights are. But the court will decide what their rights are. Before litigation all they have is a claim. Maybe the copyright holder's behavior is more about the unpredictability of outcomes in copyright suits, and the erosion is in the eye of the beholder.
Dwayne, you've finally found a way to bring Ice-T and MTTLR together. Good job.
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