Copyright and Innovation: The Untold Story

"Copyright and Innovation: The Untold Story" is the published result of some research by respected US academic Michael A. Carrier (Rutgers University School of Law). Soon to be published in the Wisconsin Law Review, it is is currently accessible on SSRN, here. The abstract runs like this:

"Copyright has an innovation problem. Judicial decisions, private enforcement, and public dialogue ignore innovation and overemphasize the harms of copyright infringement [of these three factors, the first two can be reasonably expected to ignore innovation at the expense of harm since they are part of a process of seeking to remedy actual or perceive harm. It's difficult to know how to assess the effect of public dialogue, though. Does public debate over orphan works over-emphasise the harms, or does it give equal weight to the need for innovation? Likewise the debate over sampling? Much is a question of definition and perception]. Just to pick one example, “piracy,” “theft,” and “rogue websites” were the focus of debate in connection with the PROTECT IP Act (PIPA) and Stop Online Piracy Act (SOPA). But such a debate ignores the effect of copyright law and enforcement on innovation. Even though innovation is the most important factor in economic growth, it is difficult to observe, especially in comparison to copyright infringement.

This article addresses this problem. It presents the results of a groundbreaking study of 31 CEOs, company founders, and vice-presidents from technology companies, the recording industry, and venture capital firms. Based on in-depth interviews, the article offers original insights on the relationship between copyright law and innovation. It also analyzes the behavior of the record labels when confronted with the digital music revolution. And it traces innovators’ and investors’ reactions to the district court’s injunction in the case involving peer-to-peer (p2p) service Napster.

The Napster ruling presents an ideal setting for a natural experiment. As the first decision to enjoin a p2p service, it presents a crucial data point from which we can trace effects on innovation and investment. This article concludes that the Napster decision reduced innovation and that it led to a venture capital “wasteland.” The article also explains why the record labels reacted so sluggishly to the distribution of digital music. It points to retailers, lawyers, bonuses, and (consistent with the “Innovator’s Dilemma”) an emphasis on the short term and preservation of existing business models.

The article also steps back to look at copyright litigation more generally. It demonstrates the debilitating effects of lawsuits and statutory damages [in the US there are grounds for saying this, but one might wonder why other jurisdictions, where damages are compensatory and lawsuits so far have proved far less chilling, have not seen a demonstrable surge in the sort of innovation that seems to come from the US or not at all]. It gives numerous examples, in the innovators’ own words, of the effects of personal liability. It traces the possibilities of what we have lost from the Napster decision and from copyright litigation generally. And it points to losses to innovation, venture capital, markets, licensing, and the “magic” of music.

The story of innovation in digital music is a fascinating one that has been ignored for too long. This article aims to fill this gap, ensuring that innovation plays a role in today’s copyright debates".

Thoughts, anyone?