The Society for Economic Research on Copyright Issues

Review of Economic Research on Copyright Issues (RERCI)

RERCI Articles

Copyright from an Institutional Perspective: Actors, Interests, Stakes and the Logic of Participation

Review of Economic Research on Copyright Issues, Vol. 4, No. 2, 65-97, 2007

Antonina Bakardjieva Engelbrekt


Abstract

This article investigates recent developments in copyright, proceeding from a participation-centred comparative institutional approach (Komesar, 1994). Following institutional theory, the approach implies conceiving of the market, the political process (legislatures and administrative agencies) and the courts as alternative decision-making processes in the area of copyright law and policy. It emphasises the importance of institutional choice, based on careful comparison of the modalities for participation of different interests in these processes.
Novel digital and information technologies influence the conditions for participation in copyright decision-making at all levels and unsettle previously established institutional equilibriums. In the wake of the Infosoc Directive, a dynamic process of institutional adjustment seems to be unfolding in the Member States of the European Union whereby a variety of private, public and mixed institutional schemes for interpretation and enforcement of the new digital copyright are emerging, seeking to reconcile the interests of a variety of old and new stakeholders. This dynamism is interpreted as a search for appropriate decision-making institution to mitigate the consequences of an expansive legislative copyright policy as materialized in the Infosoc Directive and to re-establish a balance of rights and obligations. It is argued that the institutional design of these schemes and the modalities for actor participation will be crucial for their sustainable success and seem therefore to deserve more careful scrutiny. At the same time, the conservative force of institutional legacies is emphasized as a factor deterring institutional innovation.

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Optimal Copyright Over Time: Technological Change and the Stock of Works

Review of Economic Research on Copyright Issues, Vol. 4, No. 2, 51-64, 2007

Rufus Pollock


Abstract

The optimal level for copyright has been a matter for extensive debate over the last decade. Using a parsimonious theoretical model this paper contributes several new results of relevance to this debate. In particular we demonstrate that (a) optimal copyright is likely to fall as the production costs of 'originals' decline (for example as a result of digitization) (b) technological change which reduces costs of production may imply an increase or a decrease in optimal levels of protection (this contrasts with a large number of commentators, particularly in the copyright industries, who have argued that such change necessitates increases in protection) (c) the optimal level of copyright will, in general, fall over time as the stock of work increases.

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Technological Transformation, Intellectual Property Rights and Second Best Theory

Review of Economic Research on Copyright Issues, Vol. 4, No. 2, 5-28, 2007

Richard G. Lipsey


Abstract

Over the last decade, the research interests of myself and my co-authors have concerned economic growth, technological change and general purpose technologies - pervasive technologies that transform our whole society. Our many publications culminated in Economic Transformations: General Purpose Technologies and Long Term Economic Growth by Richard Lipsey, Kenneth Carlaw and Cliff Bekar (hereafter LCB). This work has only incidentally raised issues concerning intellectual property rights (IRPs). So what I will cover in this paper is first a brief survey of some of the historical parts of LCB. Then, I give some general discussion of economic policy with emphasis on second best issues and, finally, some of the IPR issues that arose incidentally in our work.

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The 'Competitive' Value of Music to Commercial Radio Stations

Review of Economic Research on Copyright Issues, Vol. 4, No. 2, 29-50, 2007

Paul Audley and Marcel Boyer


Abstract

Our objective in this paper is to develop a methodology to infer from the behaviour and choices of broadcasters the "competitive" value they attach to the use of music, more precisely sound recordings, and to derive from such an inferred value the proper "competitive" copyright payments to be made to authors, composers, performers, and makers of sound recordings. We illustrate the methodology by applying it to Canadian data. The background is provided by the statement of case and supporting proof presented in the 2004 proceedings before the Copyright Board of Canada on the commercial radio tariff. The results called for a significant increase in copyright payments by Canada's commercial radio industry: the proper competitive copyright payments should be substantially more than double what the industry was paying at the time of the hearings.

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Guest Editor's Introduction

Review of Economic Research on Copyright Issues, Vol. 4, No. 2, 1-3, 2007

Christian W. Handke


Abstract

The Society of Economic Research on Copyright Issues (SERCI) Annual Congress 2007 was hosted by the Centre for British Studies at Humboldt University Berlin. The congress was fully subscribed with well over 90 registered participants from 18 different countries. It attracted 48 academic researchers who presented 27 papers, four of which make up this special issue of the Review of Economic Research on Copyright Issues. The SERCI Annual Congress 2007 also featured a special session on the economics of copyright collecting societies. This session proved particularly interesting to policy-makers and practitioners and triggered a diverse debate.

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Unauthorized Copying and Copyright Enforcement in Developing Countries: A Vietnam Case Study

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 87-96, 2007

Koji Domon and Kiyoshi Nakamura


Abstract

At present, Vietnam is regarded as the most notorious country regarding copyright infringement. China, joining WTO in 2001, has since implemented strict copyright measures. Even though Vietnam has laws covering intellectual property rights, enforcement is almost non-existent. We investigated how unauthorized P2P file-sharing affects copyright infringement in Vietnam. We assumed, before visiting Vietnam, that P2P file-sharing was more popular than pirated CDs and DVDs. However, few people there knew of its existence. Even when they did, they were unwilling to use it. Another astonishing fact was how pirated CDs play a role in promoting singers who relied on stage performances. Singers were not eager to support copyright enforcement. In this paper we consider these situations and explain how such behavior is commonplace in Vietnam.

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Causes, Effects and Solutions of Piracy in the Computer Software Market

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 63-86, 2007

Amy Marshall


Abstract

Much literature has been devoted to exploring the protection of computer programs. The decreasing effectiveness of copyright and patents has been extensively examined and alternative forms of protection, both physical and market-based, have been laid out. A large proportion of writings is dedicated to describing the significant network externalities that exist in the software market, and the effect that these have on the optimal level of protection. A large number of surveys have been undertaken to analyse the characteristics of software pirates and their incentives to pirate. This paper attempts to provide an overview of this literature.

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Private-Collective Software Business Models: Coordination and Commercialization Via Licensing

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 47-61, 2007

Heli A. Koski


Abstract

Private-collective business models that involve both private investment incentives and the production of public goods are not well understood. This empirically oriented research uses a unique data from the software industries of five European countries (Finland, Germany, Italy, Portugal and Spain) to illuminate the patterns of private, entrepreneurial provision of software placed in the public domain. The estimation results strongly suggest that the highly restrictive GPL works as an efficient coordination mechanism for the (leading) developers of the OSS community and spreads particularly via the firms that have participated in the OSS development projects. The software companies supplying the OSS, instead, tend not to aim at using the GPL to coordinate the further development of their own OSS. Rather the firms are the origin of more flexibly licensed OSS products though generally the software firms' OSS business strategies relate to the restrictive licensing strategy choices.

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Patent and/or Copyright for Software: What Has Been Done So Far?

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 3-14, 2007

Richard Watt


Abstract

The particular case of software seems to have stretched the patent-copyright divide to the point of breakage. Inspite of being traditionally excluded from patent, software is an obvious case of a single creation that embodies both expression and innovation, and so strong arguments exist for software to be both copyrightable and patentable material. The legal profession has looked carefully at the patentability of software over the past 15 years or so, both from a fully legal perspective, and using economic-type arguments. But we are still waiting for the economics profession per sé to set to work on this issue. Here, I shall go through some of the most well known arguments surrounding the protection of software, and then put forward a personal opinion as to what theoretical economists are likely to add, if and when they include this important question on their research agendas.

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Copyright Versus Patents: The Open Source Software Legal Battle

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 21-46, 2007

Francois Leveque and Yann Ménière


Abstract

Open Source Software is often viewed as an anti-intellectual property regime. In contrast, we argue how intellectual property law is at the heart of open source model since licenses that organize the innovation and business relationships between developers, distributors and end-users are based on copyright law. The proliferation of software patents can, however be seen as a threat for the development and deployment of open source software. We present the nature of the threat and review a series of initiatives undertaken by the open source community to address them effectively. These initiatives, such as the redesign of licenses and the creation of patent commons, are a testiment to a genuinely creative use of intellectual property law by the open source community, not its undermining.

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Intellectual Property in Software Development: Trends, Strategies and Problems

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 15-25, 2007

Knut Blind


Abstract

This paper analyses the impacts of the recent discussion to extend patentability to computer-implemented inventions, i.e. to allow software patents, in Europe. Based on two surveys among the German software sector referring to the use and importance of IPR in the year 2000 and 2004, the analysis finds that the share of companies using patents in the software sector remains constant, but the relevance of this instrument increased significantly for the active users of patents. Based on a set of hypotheses on the determinants for the use of patents, we also find changes. The size bias of patent use increased, whereas there is a dichotomy between using patents and following the open source model in the software sector and not a convergence, as has been suggested by the anecdotal evidence of some large multinationals. These changes in the software sector generate several new challenges for policy makers responsible for the IPR regime relevant for software in addition to the still unsolved question of extending patentability to software in Europe.

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Enforcement Sharing and Commercial Piracy

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 83-97, 2006

Dyuti S. Banerjee


Abstract

This paper uses a strategic entry-deterrence framework to analyze the effects of enforcement sharing between the government and the monopolist in dealing with commercial copyright piracy. The monopolist is the incumbent firm and is responsible for monitoring the illegal operations of a commercial pirate, the possible entrant, who illegally reproduces and sells unauthorized copies of the monopolist's product. The monopolist bears the monitoring cost and the government is responsible for setting a penalty. We show that even when enforcement is shared the socially optimal penalty may result in no piracy in equilibrium only if the government is sensitive to piracy.

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Transactions Costs and Administered Markets: License Contracts for Music Performance Rights

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 61-74, 2006

Michael A. Einhorn


Abstract

Performance rights organizations (PROs) provide transactional efficiency for music users and copyright owners by negotiating contracts, collecting revenue, and paying royalties for the rights to publicly perform musical compositions, thereby replacing their need to deal individually with one another in bilateral licensing. Historically, performance rights for catalogued works have been made available to users through blanket licenses, which convey the rights to perform, or have performed on licensed premises, all registered works in the corresponding catalog of registered works. While blanket licenses may enhance transactional efficiency, the same licenses are sometimes recognized as anticompetitive restrictions that compel each user to make an all or nothing choice that may force acceptance of a full license contract in place of a less inclusive alternative that may actually be preferred. Competitive concerns at the Antitrust Division of the U.S. Justice Department regarding blanket licensing at ASCAP and BMI led to a separate series of Consent Decrees for each of the two major PROs in the U.S.
To explore the disparate claims of economic efficiency, the paper finds that concepts from public utility regulation may be particularly helpful. Three characteristics are considered: where prices are subsidy-free, whether license provision is a natural monopoly, and whether any competitive submarkets can be structurally separated from the regulated core.

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Piracy Accommodation and the Optimal Timing of Royalty Payments

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 43-60, 2006

Alan E. Woodfield


Abstract

This paper generalizes the two-period model of Watt (2000) who demonstrates the possibility of optimal accommodation of a pirate when the royalty rate applying to a creation is uniform and second-period Cournot competition applies. Admitting nonlinear contracts with period-specific royalty rates that leave total payments unchanged, simulation analysis shows that a producer of originals does better to increase the royalty rate in period 1 and decrease the rate to a negative level in period 2, thereby more than offsetting the usual cost advantage available to a pirate. Watt's illustrative examples regarding piracy accommodation (but not piracy exclusion) are overturned when a nonlinear contract is chosen optimally, although accommodation remains optimal in some other cases. Further, where exclusion is impossible under uniform royalties, cases exist where exclusion is feasible under nonlinear royalties. Even so, accommodation may be a preferable strategy.

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Digital File Sharing and Royalty Contracts in the Music Industry: A Theoretical Analysis

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 29-42, 2006

Norbert J. Michel


Abstract

Although several researchers have examined the impact of copying in other contexts, relatively little theoretical work exists that allows for the presence of a profit maximizing music industry as an intermediary between the creators of intellectual property and consumers. This paper develops a simple theoretical model of interactions between artists who create original musical compositions, record labels that distribute them, and consumers who have the option of copying rather than buying music. The model provides testable price and demand equations and suggests that file sharing may have been undertaken by consumers who were previously not in the market for music.

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