The Orphans, the Market, and the Copyright Dogma: Berkeley Orphan Works and Mass Digitization Symposium

Earlier this week I participated in the Berkeley Center for Law and Technology Symposium on Orphan Works and Mass Digitization. I was part of a panel devoted to various solutions to the problem. Here is my presentation.

 

The Orphans, the Market, and the Copyright Dogma

At its core, copyright law is based on a very simple logic–market logic.  The law grants limited exclusive rights in creative works, with the expectation that such rights will then be voluntarily exchanged in a decentralized market place.

Whether we believe that exchange will provide the financial incentives for creating the works in the first place, or whether we have a different theory of copyright, the idea of a decentralized market place is central to copyright.

Indeed, the idea of a decentralized market was implanted in the DNA of copyright since the Statute of Anne, which hoped to dislodge the monopoly of the Stationers’ Company and replace it with a market-based system.

We should keep this point in mind when we think about solutions to the orphan works problem, and we should be cautious about solutions that bring back a new version of the Stationers’ Company, and entrust monopolies and bureaucracies as guardians of orphan works and gatekeepers of knowledge.

We all know that the general rule in copyright is that a user should contact the owner and ask permission before using the work. Generally, this permission-first rule makes lots of sense. It makes sense mainly because it is much less costly for a prospective user to approach the owner and ask permission before using, than for an owner to locate and go after all actual or potential users and ask them to pay. But generally is not always.  A permission-first rule only makes sense if the cost of getting permission is indeed low.  But if the cost of obtaining prior permission becomes prohibitively high, then a system demanding prior permission would result in a market failure—the very market the copyright law seeks to create.  In such cases we need an alternative rule.

But as it turns out, finding an alternative rule has been a challenge. And the question is why?

 

The Copyright Dogma

The reason why so far it has been so difficult to find a solution to the orphan works problem is that we often treat the permission-first rule as a dogma. We don’t treat it as a rule whose validity depends on how well it promotes the purpose of copyright law, but as “a belief held unquestioningly and with undefended certainty.”

As David Nimmer wrote, and Judge Chin accepted “[T]he law of the United States is that a copyright owner may sit back, do nothing and enjoy his property rights untrammeled by others exploiting his works without permission.”

Sit back and do nothing, regardless of the consequences. That’s the dogma. For the copyright dogma, the wrong in using someone else’s work without permission has nothing to do with impairing the ability of the copyright owner to participate in this marketplace, nor does it lie in any measurable concept of harm to the owner.

The dogma does not regard the use of works as something that ought to be celebrated and facilitated. Instead, the dogma considers the use of works as a sin that can only be avoided by seeking permission and paying a fee. This view of using a work as a sin motivates many of the proposed solutions to the orphan works problem. Many of them are based on the proposition that if the copyright owner is unlocatable, the user should get permission from and pay to, someone else.

So Canada has created a bureaucratic mechanism—and I may add useless—that allows the Copyright Board of Canada to grant permission to use an orphan work.  And the Board actually took it one step further and usually requires that payment will be made to a copyright collective.  So effectively, the Copyright Board created an Extended Collective Licensing regime.

Extended Collective Licensing (ECL) is another solution that has gained popularity in the aftermath of the rejection of the Google Books Settlement. Under ECL, a copyright collective can issue licenses not only with respect to the works of its members, but it can also authorize the use of the works of non-members, such as orphan works.

But these solutions don’t really solve the orphan works problem. These solutions merely pretend to solve the problem by requiring the user to pay money to someone else. However, if the owner is unlocatable, sending money to a copyright collective merely shifts the problem from the user to the collective. It is a good mechanism for collecting money from users, but it has nothing to do with facilitating transactions between owners and users.

The main rationales offered by the Copyright Board of Canada for its decision to create a de facto Extended Collective Licensing Regime are entirely moralistic. The Board believes that

  • “it should not be in the business of issuing free insurance policies against prosecutions for violation of copyright.”
  • It regards such payments as disgorgement of profit (hence the use as an offence),
  • and finally it assumes that “given the choice, the unlocatable copyright owner would prefer that the royalties be paid to a group that represents interests similar to those of the owner than to see the user take advantage of the owner’s copyright for free.”

Indeed, the Copyright Board’s assumption only makes sense if the unauthorized use is viewed as a sin, and the user as a sinner.

 

Indulgences and the Copyright Hell

In fact, there are remarkable similarities between the emergence of this dogma and the emergence of some aspects of Catholic dogma in the Middle Ages. In the Middle Ages, the Catholic Church realized that since it couldn’t really prevent people from being sinful, it might as well monetize sin. And monetize sin it did. The most extravagant example of this mechanism was the widespread sale of indulgences. This became an extremely lucrative business, which helped preserving the dominance of the Church and enriched some of its highest priests.

Essentially, the Canadian solution and ECL offer nothing but indulgences for sale. They don’t really solve the orphan works problem, but they allow the Copyright Church to sell indulgences to users who want to save their souls from the copyright hell, and they allow some copyright owner to enrich themselves at the expense of other owners and users.

So now comes the big question: is there a better a solution to orphan works than the sale of indulgences?  Is there a solution that retains copyright law’s market orientation, facilitates the revival of orphan works and is also responsive to the wishes of copyright owners? The answer is Yes, and it is totally within our grasp. We can do it without monopolies or bureaucracies, and it does not require any substantial legislative reform.

 

Solution: Remedy Tweaking

My proposal is simple common law solution: Remedy Tweaking. My proposal is not based on defining conditions that would create immunity from liability, and it does not depend on defining what an orphan work is, because the concept of an orphan work is highly elusive. Instead, my proposal treats the problem at the remedial stage. I propose that the fact that the owner was unlocatable should be a factor considered by the court when determining the proper remedy after a finding of infringement. In some cases this consideration would justify a denial of an injunction. The court may still order to pay damages, or account for the profit attributable to the infringed work, but if these approximate what the parties would have agreed had a license been negotiated in advance, the orphan works problem would be seriously diminished.

Statutory damages, to the extent that they are mandatory and the court cannot reduce them to zero when appropriate, still pose a problem, so perhaps this is the only aspect of my proposal that may require legislative intervention (this solution is similar to the Copyright Office’s original proposal, but I can discuss some differences in the Q&A).

Why is remedy tweaking a better solution? To answer this question we need to understand why we an orphan work to begin with.

Usually, the orphan works problem is described from the demand side. What we have in mind is a user who finds it prohibitively costly to locate the owner. But this description ignores the supply side. It doesn’t explain why copyright owners choose not to make themselves easily locatable. This isn’t a trivial question, because copyright owners also lose if users can’t transact with them, so we might think that copyright owners would have good incentives to make themselves locatable. This could suggest that maybe there isn’t really an orphan works problem and that the problem it will take care of itself as digital technologies and markets mature. Patience, therefore, would be the best recommendation.

While I have some sympathy to this point of view, I think that it is only partly correct. The orphan works problem is deeper because it reflects discrepancy between the social benefits of using works and the private benefits accruing to the owner. The reason for this mismatch is that a copyright owner has to incur some expenses in order to maintain herself locatable. However, the owner will incur those costs only if the present value of the benefits that she expects to gain is larger than the costs that she needs to incur today. The problem is that the owner cannot expect capturing the full social benefit from using her work, only a portion of it. In addition, whatever she might expect to earn in the future is discounted because the future is in the future and the future is unknown.

Therefore, because of this is mismatch between the public and private benefits, owners will make sub-optimal investments in maintaining themselves locatable. We can also restate the problem in terms of costs.  We have an orphan works problem because owners don’t internalize the full cost of their works becoming orphan, and the current system does not provide them enough incentive to invest in making themselves locatable.

Now that we’ve stated the problem in terms of costs that are not fully internalized, we can immediately notice that the orphan works problem becomes a familiar problem. It’s not a problem unique to copyright, but a problem that is pervasive throughout the law. It’s a problem that has familiar solutions.

 

Copyright Owners are the Least-Cost Avoiders

One familiar solution is to ask who is the “least cost avoider”. That is, who is the party that is better positioned to reduce the cost of an activity. If we identify such a party we want to maker sure that it has the right incentives to reduce the cost. In our case, it is clear that the copyright owner is the least cost avoider, because she’s the one who always knows who she is and where she can be found. No one else knows better than her.

If the copyright owner is the least-cost avoider of the problem but doesn’t have good incentives to maintain ownership information available, the law can create these incentives with sticks, carrots, or both. This is what my proposal does. We can formulate my proposed solution as a stick (“if you don’t make yourself easily locatable ex ante you will be entitled to less ex post”), or we can formulate it as a carrot (“you, the owner, can choose between investing today in order to keep yourself locatable in the future, in which case you will be entitled to all the remedies, OR you can choose to invest less today, but earn less in the future).

Note that I’m not proposing immunity for users, or a blanket exception to liability. My proposal allocates the cost of maintaining a market system between users and owners: the user has the best information about his contemplated use and therefore should take reasonable steps to communicate his plans to the owner by seeking permission; the owner, on the other hand, has the best information about her identity and how she can be reached, and therefore should take reasonable steps to make this information available to potential users. Remedy tweaking will shift some of the risk of using orphan works from the user to the owner. It will adjust the user’s duty to seek ownership information and permission with a corresponding duty of the owner to provide such information.

While my solution may sound inconsistent with the copyright dogma, it is highly consistent with other aspects of the law. It is based on the general principle of the “duty to mitigate”. This principle plays out in various forms in contract law, in tort law, in property law, and in other areas. This solution will maintain the market orientation of the copyright system by encouraging owners to make themselves locatable, and reduce the risk of using works when the owners aren’t locatable. If it hasn’t been applied to copyright law, then it’s only because we have been captive by the Dogma, but we can set ourselves free.

Decline the New Stationers’ offer

To sum, the copyright system is based on market logic, but developed markets cannot exist without clear sense of who owns what, and without rules that encourage participants to provide information that is crucial for the ability to transact. Most of the proposed solutions are based on putting the entire onus on the user, whereas the least-cost avoiders are owners. If we want to solve the orphan works problem we have to make sure that owners have good incentives to make themselves locatable.

The solution is not to replace the market with regulated monopolies, or to establish new bureaucracies, and make them gatekeepers to knowledge. We should respectfully decline the offer of the New Stationers to regain control, and we should not substitute an industry of indulgences for a market for creative works.

 

 

Posted in Antitrust / Competition Law, Blog, Copyright, Copyright Collectives, Featured, Stationers Tagged with: ,
6 comments on “The Orphans, the Market, and the Copyright Dogma: Berkeley Orphan Works and Mass Digitization Symposium
  1. Andrew Martin says:

    Having worked both sides of this, it really isn’t that simple. Professor Katz suggests (or implies) that a copyright owner who wants to be found will usually be found, and easily. In practice, and absent a national database of some kind, it can be very difficult to ensure that you’re found – and that also assumes that users make a serious effort, and I suspect that most don’t. If failure to make your presence known might mitigate the penalties, then failure to look should surely increase them.

    Here are some of the challenges – people die; they change their name when they marry (perhaps more than once; they change their name to make it less “foreign”, as many immigrants have done; spelling mistakes; use of initials; more than one first name.

    Membership of a copyright collective is in fact a very sensible way to establish your ability to be located, and presumably Professor Katz doesn’t take issue with that? The role of the Copyright Board and specifically the reliance on collectives does obviously go further, because the policy objective is to reduce infringement, not set up a litigated debate over the ease or otherwise of enquiry. And this has many practical consequences. For instance, many government grants require satisfactory proof that the recipient of the grant has or will have the necessary IP rights. The use of collectives, which may be able to assist in tracing the owners, and which can issue licences where this proves impossible, may be the only way to meet that requirement.

    • Ariel Katz says:

      Of course, locating owners may be a big challenge–that’s why there is an orphan works problem. But solving the problem requires understanding it, which includes understanding not only why users can’t locate owners, but also why owners let their works become orphaned. We (Canada and the US, that is) actually do have “a national database of some kind”, namely, copyright registries, and it is not that difficult to register a work. Registration is not the only way to maintain ownership information available. For example, this blog contains my publication list and a “contact me” feature. I can be easily contacted and provide the information, and it would be very easy to contact me by googling my name even it didn’t have a blog. As the cost of providing and seeking information decreases, we can expect more and more owners and users taking advantage of that, and reducing the registration fee or otherwise making registration more easy might be welcome too. But the point remains that an owner will only incur the cost of maintaining herself locatable if what she expects to earn is higher than the cost she needs to incur. The owner does not consider the costs and benefits for society. The result is that there is insufficient supply of ownership information.
      Presently, there are almost no consequences for failure to make your presence known, but there are severe consequences for failing to seek permission. As a result, users bear the full risk of using orphan works without permission, society pays the full cost of forgone uses, but owners have no duty to make themselves known so that permission could be sought. Such asymmetry rarely exists in other areas of the law. To fix that we need to allocate the cost of maintaining a market system between users and owners: the user has the best information about his contemplated use and therefore should take reasonable steps to communicate his plans to the owner by seeking permission; the owner, on the other hand, has the best information about her identity and how she can be reached, and therefore should take reasonable steps to make this information available to potential users.
      Indeed, membership of a copyright collective may be a way to establish your ability to be located, but surely this is not the only way, and in any event, orphan works are, by definition, not part of the collective’s repertoire. Therefore, even if the policy objective is to reduce infringement (which it is not, the policy objective is to promote the encouragement and dissemination of works of the arts and intellect while obtaining a just reward for the creator), I fail to see how paying a fee to a collective that does not represent the owner furthers this objective.

      • Andrew Martin says:

        The fault line in your argument is that if owners can be located, their works are not orphan. The extension of that reasoning, though, is that the more works that are represented by collectives, the smaller the orphan pool. Therefore, much of the problem will be solved if owners join collectives. For those that don’t, or can’t, though, the scheme put in place by the Copyright Board and managed by Access Copyright, is practical and efficient, especially for the user.

        The fee paid to the collective allows for the possibility that the owner will eventually be located. It isn’t a perfect solution, but it’s a workable solution that gives comfort to the user. When I negotiated such a licence a couple of years ago, it was the only way of meeting a funding requirement on a digitization project. The amount involved was small, and probably didn’t even cover the collective’s costs of putting the agreement together.

        • Ariel Katz says:

          The problem will be solved if owners will have good enough incentives to make themselves locatable so that there will be a market when permission is required, and that users will not be deterred from pursuing socially beneficial projects when owners fail to make themselves locatable. The solution is not to make the use of works so risky that buying an indulgence from a copyright owners’ cartel becomes the only workable option.

  2. Andrew Martin says:

    Given that we don’t really agree on the solution, this discussion may have run its course. As a purchaser of the indulgence, I (and my client) concluded that with several hundred owners to trace, this was a very neat and acceptable solution. We weren’t pressured, and the cost/benefit analysis overwhelmingly favoured this approach. But if more owners belonged to collectives, the problem would go away. Other than what seems an unwavering antipathy to collectives, I’m surprised that you don’t endorse this solution.

    • Ariel Katz says:

      Andrew,
      The purchase of an indulgence is always a neat solution for those who believe they need it, and good business for those who sell it. But this doesn’t make indulgences a good thing for society.
      Copyright collectives solve some problems, undoubtedly, but they may, and often do, create bigger ones. This is my concern, not simply unwavering antipathy to collectives.
      Correct me if I’m wrong, but as a former executive director of Access Copyright, you were the major purveyor of indulgences, and not only a current purchaser. It’s natural that you’d endorse a system that you helped creating and have unwavering sympathy to it, but you shouldn’t be surprised that others don’t share it.

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