Promoting Innovation and Economic Growth: The Special Problem of Digital Intellectual Property

There has been an explosion in the popularity of downloading and transmitting high-value digital content, triggered by the growth of the Internet and the evolution of peer-to-peer systems. At the same time, there is a substantial disconnect between public attitudes toward copyright and the letter of the law, and growing concern among copyright-holders over the erosion of their rights. The National Academy of Sciences has identified the phenomenon at the center of these developments and labeled it the "digital dilemma": The same technologies that allow the creation and manipulation of digital content (as well as its perfect reproduction and nearly free distribution) can also be used to prevent access to digital content. The result is a major policy debate between those who seek to protect their rights in digital content and those concerned about the public access to content that has traditionally been guaranteed under copyright law. In this emerging digital world, what, if anything, should be done to ensure that authors, artists, songwriters, and musicians have adequate incentives to create content? And what, if anything, should be done to protect the public's access rights, developed in the physical world, in order to encourage innovation and dissemination and to enhance the public domain? This report from the Digital Connections Council (DCC) of the Committee for Economic Development presents a different view of this "digital dilemma." Because of CED's mission to foster economic growth, the DCC has focused on the economic impact of copyright protection in the digital age and the potential economic effects of proposals for change. The report briefly explores the history of copyright law, revealing that legal protection of the rights of creators has always been explicitly balanced against protection of ongoing innovation. The DCC brings the perspective of the second innovator -- the creator of new social value based on existing copyrighted works -- to bear, noting that every creator owes a debt to what has come before. For this reason, our intellectual property systems are based on providing incentives to both create new material and to make such material open to the public for use for subsequent creation. The report then discusses current proposals for legislative and regulatory change, focusing on requests by the content distribution industries for technical copy protection mandates. Such mandates would have substantial effects on the information technology and consumer electronics industries in this country, on innovation, and on the economic growth that stems from the freedom to innovate

MAPPING THE INFORMATION ENVIRONMENT: LEGAL ASPECTS OF MODULARIZATION AND DIGITALIZATION

The Article highlights the language of the digital and the principle of modularization as the basic concepts which the further development of the information environment will have to pivot around, regardless of how conflicts between freedom and control are temporarily solved. Perceiving both the computer and the Internet as complex systems, the authors look at how modular design of these systems freed the functionality of applications from the physicality of infrastructures, describe the evolutionary gains adhering to modularity, and how to preserve them - elaborating on the issues of access to the cable platform for broadband Internet and to virtual networks for computer technology. Their second focus shows how digitalization of information makes possible the merger of content and its protection. Especially through the use of DRM systems, private actors can create right enforcement mechanisms independent of the State. The legal system therefore faces new and more complex relations between private will and public sovereignty. In such a merged system it is harder to maintain freedom - much like in the fusion of function and infrastructure

Copyright Complements and Piracy-Induced Deadweight Loss

Conventional wisdom suggests that copyright piracy may in effect reduce the deadweight loss resulting from copyright protection because it allows the public unlimited access to information goods at a price closer to marginal cost. It has been further contended that lower copyright protection would benefit society as a whole, as long as authors continue to receive sufficient incentives from alternative revenue streams in ancillary markets, for example, touring, advertising, and merchandizing. By evaluating the empirical evidence from the music, performance, and video game markets, this Article highlights a counterintuitive yet important point: copyright piracy, while decreasing the deadweight loss in the music market, could simultaneously increase the deadweight loss in ancillary markets via the interaction between complementary goods. The deadweight loss in ancillary markets tends to become dominant if a substantial portion of relevant consumers have high valuation but low frequency in music consumption, are risk averse toward up-front payment with uncertain demand, or discount future value at a high rate. Additionally, this Article’s findings shed new light on the current debates over several competing propositions to reform indirect copyright liabilities in the digital age

Copyright Complements and Piracy-Induced Deadweight Loss

Conventional wisdom suggests that copyright piracy may in effect reduce the deadweight loss resulting from copyright protection because it allows the public unlimited access to information goods at a price closer to marginal cost. It has been further contended that lower copyright protection would benefit society as a whole, as long as authors continue to receive sufficient incentives from alternative revenue streams in ancillary markets, for example, touring, advertising, and merchandizing. By evaluating the empirical evidence from the music, performance, and video game markets, this Article highlights a counterintuitive yet important point: copyright piracy, while decreasing the deadweight loss in the music market, could simultaneously increase the deadweight loss in ancillary markets via the interaction between complementary goods. The deadweight loss in ancillary markets tends to become dominant if a substantial portion of relevant consumers have high valuation but low frequency in music consumption, are risk averse toward up-front payment with uncertain demand, or discount future value at a high rate. Additionally, this Article’s findings shed new light on the current debates over several competing propositions to reform indirect copyright liabilities in the digital age

Content Control: The Motion Picture Association of America's Patrolling of Internet Piracy in America, 1996-2008

This historical and political economic investigation aims to illustrate the ways in which the Motion Picture Association of America radically revised their methods of patrolling and fighting film piracy from 1996-2008. Overall, entertainment companies discovered the World Wide Web to be a powerful distribution outlet for cultural works, but were suspicious that the Internet was a Wild West frontier requiring regulation. The entertainment industry's guiding belief in regulation and strong protection were prompted by convictions that once the copyright industries lose control, companies quickly submerge like floundering ships. Guided by fears regarding film piracy, the MPAA instituted a sophisticated and seemingly impenetrable "trusted system" to secure its cultural products online by crafting relationships and interlinking the technological, legal, institutional, and rhetorical in order to carefully direct consumer activity according to particular agendas. The system created a scenario in which legislators and courts of law consented to play a supportive role with privately organized arrangements professing to serve the public interest, but the arrangements were not designed for those ends. Additionally, as cultural products became digitized consumers experienced a paradigm shift that challenged the concept of property altogether. In the digital world the Internet gives a consumer access to, rather than ownership of, cultural products in cyberspace. The technology granting consumers, on impulse, access to enormous amounts of music and films has been called, among many things, the "celestial jukebox." Regardless of what the technology is called, behind the eloquent veneer is the case in point of a systematic corrosion of consumer rights that, in the end, results in an unfair exchange between the content producers and consumers. What is the relationship of the MPAA to current piracy practices in America? How will Hollywood's enormous economic investment in content control affect future film distribution, exhibition, and consumer reception? Through historical analysis regarding the MPAA's campaign against film piracy along with interviews from key media industry personnel and the pirate underground, this contemporary illustration depicts how the MPAA secures its content for Internet distribution, and defines and criticizes the legal and technological controls that collide with consumer freedoms