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July 04, 2005
July 4 Grokster Roundup
The debate about the meaning and impact of the Grokster continues.
C.E. Petit of Scrivener's Error has collected his thoughts now that the decision is a few days old (Grokster Conclusion: Everything Old Is New Again). He focuses on illuminating the issues through the "copyright clause" of the US Constitution.
"Unjust enrichment"? Where did that sneak in? It's not anywhere in any of the opinions! So why are we considering first-year contract law? Well, the most rigorous answer is "we're not: we're considering the relationship of potential remedy to liability, and that relationship is behind virtually all of the common law." For, in the end, that is what the evidence in Grokster points toward: Use of copyright law to prevent unjust enrichment achieved through violation of an exclusive right. Absent the economic factor, it's a lot harder (not impossible, merely harder) to say that mere technology violates a conception of copyright that reads the Intellectual Property Clause as a whole. [emphasis in original]Ron Coleman
makes an interesting connection to some of Clay Shirky
's writings (Marginal Thoughts
Shirkey argues, compellingly, that a simpleminded application of the microeconomic model of marginal value to evaluating marginal content sales of the Internet doesn't, and can't, work. Now note that this has no effect on how the Grokster case should have come out, because he is really talking here about supply and demand and prospective IP regimes -- not about the application of the copyright laws based on the statutory language, stare decisis and that other dusty old stuff.
The Shirky piece he links to is Fame vs Fortune: Micropayments and Free Content
The answer is simple: creators are not publishers, and putting the power to publish directly into their hands does not make them publishers. It makes them artists with printing presses. This matters because creative people crave attention in a way publishers do not. Prior to the internet, this didn't make much difference. The expense of publishing and distributing printed material is too great for it to be given away freely and in unlimited quantities -- even vanity press books come with a price tag. Now, however, a single individual can serve an audience in the hundreds of thousands, as a hobby, with nary a publisher in sight.Gary Becker
explains some of the difficulties in having judges decide on technology's future potential (Grokster and the Scope of Judicial Power
But several things concern me about the issues raised by this and related court decisions. I basically do not trust the ability of judges, even those with the best of intentions and competence, to decide the economic future of an industry. Do we really want the courts determining when the fraction of the total value due to legal sales is high enough to exonerate manufacturers from contributory infringement? Neither the wisest courts nor wisest economists have enough knowledge to make that decision in a way that is likely to produce more benefits than harm. Does the fraction of legitimate value have to be higher than 50 per cent, 75 per cent, 10 per cent, or some other number? Courts should consider past trends in these percentages because new uses for say a software-legal or illegal- inevitably emerge over time as users become more familiar with its potential. Must courts have to speculate about future uses of software or other products, speculation likely to be dominated by dreams and hopes rather than firm knowledge?
Read the whole thing.
Richard Posner, who wrote the In Re Aimster decision, pushes his conception of how to decide these cases (Grokster, File Sharing, and Contributory Infringement).
There is a possible middle way that should be considered, and that is to provide a safe harbor to potential contributory infringers who take all reasonable (cost-justified) measures to prevent the use of their product or service by infringers. The measures might be joint with the copyright owners. For example, copyright owners who wanted to be able to sue for contributory infringement might be required, as a condition of being permitted to sue, to place a nonremovable electronic tag on their CDs that a computer would read, identifying the CD or a file downloaded from it as containing copyrighted material. Software producers would be excused from liability for contributory infringement if they designed their software to prevent the copying of a tagged file. This seems a preferable approach to using the judicial system to make a case by case assessment of whether to impose liability for contributory infringement on Grokster-like enterprises.
This is much easier said than done.
The New York Times writes about the fact that P2P will continue to be around after the decision (The Imps of File Sharing May Lose in Court, but They Are Winning in the Marketplace). Nothing particularly new here.
This post from Marginal Revolution is from June 27th, but definitely something I should have linked to earlier (Why Economists Should Feel Conflicted About the Grokster Ruling).
The bottom line: The welfare economics of music do not resemble those of bread or buttons. Right now we do not even know whether music is being oversupplied or undersupplied, relative to an optimum. Beware of any analysis of this case which does not consider these deeper underlying issues.
Read the whole thing.
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