Monetizing Infringement (in progress)
The deterrence of copyright infringement and the evils of piracy have long been an axiomatic focus of both legislators and scholars. The conventional view is that infringement must be curbed and/or punished in order for copyright to fulfill its purported goals of incentivizing creation and ensuring access to works. This Essay proves this view false by demonstrating that some rightsholders don’t merely tolerate, but actually encourage infringement, both explicitly and implicitly, in a variety of different situations and for one common reason: they benefit from it. Rightsholders’ ability to monetize infringement destabilizes long-held but problematic assumptions about both rightsholder preferences, and about copyright’s optimal infringement policy.
Through a series of case studies, this Essay describes the impetuses and normative implications of this counterintuitive—but not so unusual—phenomenon. Recognition of monetized infringement in copyright is interesting not only for its unexpectedness, but also for the broader point that its existence suggests: we have an impoverished descriptive account of why some laws operate the way that they do. This is particularly unsettling in an area like copyright, where advocates are sharply divided along policy lines. This Essay is an important first step toward a positive theory of copyright—one that recognizes the underappreciated role, both positive and negative, that private parties play in policymaking.
Super-Statutory Contracting (in progress)
The conventional wisdom is that property rules induce more (and more efficient) contracting, and that when faced with rigid property rules, intellectual property owners will contract into more flexible liability rules. A series of recent, private copyright deals show some intellectual property owners doing just the opposite: faced with statutory liability rules, they are contracting for more protection than that dictated by law, something this Article calls “super-statutory contracting”—either by opting for a stronger, more tailored liability rule, or by contracting into property rule protection. Through a series of deal analyses, this Article explores this counterintuitive phenomenon, and updates seminal thinking on property entitlements and private ordering in the intellectual property context.
While law and economics scholars have long grappled with the question of whether property rules or liability rules are preferable, and when, they have traditionally ignored a key lever: “perceived control,” or a rights holder’s impression of their ability to grant or withhold permission to use their work, and/or to name their price for such use. In addition to proposing a recalibration of the relative importance of consolidation, transaction costs, defaults, and damages, this Article identifies and describes perceived control as an essential factor in the licensing enterprise. This has significant implications for legislators and policymakers seeking to better align incentives between licensors and licensees, and for administrators tasked with term and rate setting.
Copyright and Economic Viability: Evidence from the Music Industry (under review)(with James Hicks and Justin McCrary)
How long should the copyright term last? Copyright provides a long term of legal excludability, ostensibly to encourage the production of new creative works. The extent to which this term aligns with the economic incentives of creators has been subject to vigorous theoretical debate. Using a novel longitudinal dataset of music sales and streaming, we assess the economic viability of content in a major content industry: commercial music. We find that the typical work has an extremely short sales “half life”—on the order of months, rather than years or decades. We also find suggestive evidence that new forms of distribution (such as subscription streaming services) are extending the commercial viability of music, relative to traditional sales media.
A Reconsideration of Copyright’s Term, 71 Alabama L. Rev. 351 (2019)(with Justin McCrary)
For well over a century, legislators, courts, lawyers, and scholars have spent significant time and energy debating the optimal duration of copyright protection. While there is general consensus that copyright’s term is of legal and economic significance, arguments both for and against a lengthy term are often impressionistic. Utilizing music industry sales data not previously available for academic analysis, this article fills an important evidentiary gap in the literature. Using recorded music as a case study, we determine that most copyrighted music earns the majority of its lifetime revenue in the first 5-10 years following its initial release (and in many cases, far sooner than that).
Our analysis suggests at least two results of interest to legislators, lawyers, and scholars alike: First, it contributes to the normative debate around copyright’s incentive-access paradigm by proposing a more efficient conception of copyright’s term for information goods; namely, one that replaces the conventional “life plus” durational standard with one based on the commercial viability of the average work. Second, it demonstrates that advocates’ and legislators’ tendency to focus on atypical works leads to overprotection of the average work, suggesting that copyright’s term is not nearly as significant for copyright owners as conventional wisdom submits.
Copyright Arbitrage, 107 Calif. L. Rev. 199-266 (2019)
Regulatory arbitrage — defined as the manipulation of regulatory treatment for the purpose of reducing regulatory costs or increasing statutory earnings — is often seen in heavily-regulated industries. An increase in the regulatory nature of copyright, coupled with rapid technological advances and evolving consumer preferences, have seen an unprecedented proliferation of regulatory arbitrage in the area of copyright law. This article offers a new scholarly account of the phenomenon herein referred to as “copyright arbitrage.”
Where economic arbitrage is often considered net-neutral, copyright arbitrage is uniquely concerned with initial allocations, such that their manipulation is unlikely to be net-neutral in effect. Specifically, the nature of copyright arbitrage as a means of either reducing regulatory costs or increasing statutory earnings necessarily contravenes one or another of copyright’s foundational goals of incentivizing the creation of, and ensuring access to, copyrightable works. In other words, if we assume current copyright protections are optimally set, this contravention renders copyright arbitrage net-negative on balance. Even if we instead assume those protections are suboptimal, the existence of copyright arbitrage nonetheless provides strong support for the classification (and clarification) of copyright as a complex regulatory regime in need of a strong regulatory apparatus.
Given the strengths and weaknesses of each of the legislature and the judiciary in copyright, this article suggests a three-pronged approach to identifying, and curbing, copyright arbitrage: First, courts should take a purposive, substantive approach to interpretations of the Copyright Act. Second, Congress should empower a regulatory agency with rulemaking and enforcement authority. Finally, antitrust law can help to curb the anticompetitive effects of copyright arbitrage resulting from legislative capture.
Contracts v. Copyright: Contemporary Musician Income Streams (forthcoming chapter in Oxford Handbook of Music Law & Policy, Oxford University Press 2019)
Technological Rights Accretion, 36 Yale J. on Reg.: Notice & Comment (Sept. 19, 2018)
Improving the Quality & Consistency of Copyright Infringement Analysis in Music, Berkeley Tech. L.J. Commentaries (Jan. 23, 2018)
Royalty Securitization, Harvard J. Law & Tech. Digest (Oct. 23, 2017)
Facilitating Competition by Remedial Regulation, 31 Berkeley Tech. L. J. 183-258 (2016)
In music licensing, powerful music publishers have begun — for the first time ever — to withdraw their digital copyrights from the collectives that license those rights, in order to negotiate considerably higher rates in private deals. At the beginning of the year, two of these publishers commanded a private royalty rate nearly twice that of the going collective rate. This result could be seen as a coup for the free market: Constrained by consent decrees and conflicting interests, collectives are simply not able to establish and enforce a true market rate in the new, digital age. This could also be seen as a pathological form of private ordering: Powerful licensors using their considerable market power to impose a supracompetitive rate on a hapless licensee. While there is no way to know what the market rate looks like in a highly regulated industry like music publishing, the anticompetitive effects of these withdrawals may have detrimental consequences for artists, licensees and consumers. In industries such as music licensing, network effects, parallel pricing and tacit collusion can work to eliminate meaningful competition from the marketplace. The resulting lack of competition threatens to stifle innovation in both the affected, and related, industries.
Normally, where a market operates in a workably competitive manner, the remedy for anticompetitive behavior can be found in antitrust law. In music licensing, however, some concerning behaviors, including both parallel pricing and tacit collusion, do not rise to the level of antitrust violations; as such, they cannot be addressed by antitrust law. This is no small irony. At one point, antitrust served as a check on the licensing collectives by establishing consent decrees to govern behavior. Due to a series of acquisitions that have reduced the music publishing industry to a mere three entities, the collectives that are being circumvented by these withdrawals (and whose conduct is governed by consent decrees) now pose less of a competitive concern than do individual publishing companies acting privately, or in concert through tacit collusion. The case of intellectual property rights, which defer competition for creators and inventors for a limited period of time, is particularly challenging for antitrust.
Running contrary to conventional wisdom, this Article posits that regulation — not antitrust — is the optimal means of enabling entry and innovation in the music licensing market. While regulation is conventionally understood to restrict new entry and to interfere with competition, this Article demonstrates that where a market becomes highly concentrated, regulation can actually encourage competition by ensuring access to key inputs at competitive rates. While not without its drawbacks, including an increase in the cost of private action, remedial regulation in music licensing corrects anticompetitive behavior and ensures ongoing access to content and fair payment to artists, while supporting continued innovation in content distribution.
Penalty Default Licenses: A Case for Uncertainty,89 N.Y.U. L. Rev. 1117-1183 (2014)
Research on the statutory license for certain types of copyright-protected content has revealed an unlikely symbiosis between uncertainty and efficiency. Contrary to received wisdom, which tells us that in order to increase efficiency, we must increase stability, this Article will show that uncertainty can actually be utilized to increase efficiency in the marketplace. In the music industry, the battle over terrestrial performance rights – that is, the right of a copyright holder to collect royalties for plays of a sound recording on analog format radio – has raged for decades. Last summer, in a deal that circumvented – for the first time ever – the statutory license for sound recordings, broadcasting giant Clear Channel granted the elusive terrestrial performance right to a small, independent record label named Big Machine, and agreed to pay royalties where no such legal obligation exists. This result not only improves upon many of the statutory license’s inefficiencies but is also the opposite of what we would expect given both the tumultuous history surrounding the rights at issue, and the respective parties’ bargaining positions, and suggests an underexplored mechanism at play: uncertainty. Using the statutory license for sound recordings and the Clear Channel-Big Machine deal to motivate the analysis, this Article argues that bounded uncertainty – such as uncertainty about the future legal status of terrestrial performance rights – converts a statutory license into a penalty default license. Just as penalty default rules encourage more efficient information exchange between asymmetrical parties, penalty default licenses encourage more efficient licensing among otherwise divergent parties by motivating them to circumvent an inefficient statutory license in favor of private ordering. While not without its drawbacks – previous work identified, and ameliorated, some of the adverse selection and distributive justice concerns – private ordering improves upon the statutory approach, resulting in greater efficiency not only for the parties involved, but for society overall. Recognition of the role that uncertainty plays in converting an inefficient statutory license into a penalty default license that improves market efficiency while mitigating inequality has implications beyond the statutory licensing context. Importantly, it suggests a revision in the way we view the relationship between uncertainty and efficiency. Specifically, it shows that when coupled with a penalty default, uncertainty can bring greater efficiency to the marketplace by encouraging private ordering, with its tailored terms and responsiveness to rapid legal and technological change, while mitigating concerns about equality and gamesmanship.
Private Copyright Reform, 20 Mich. Telecomm. & Tech. L. Rev. 1-43 (2013)
The government is not the only player in copyright reform, and perhaps not even the most important. Left to free market negotiation, risk averse licensors and licensees are contracting around the statutory license for certain types of copyright-protected content, and achieving greater efficiency via private ordering. This emerging phenomenon, herein termed “private copyright reform,” presents both adverse selection and distributive justice concerns: First, circumvention of the statutory license goes against legislative intent by allowing for the reduction, and even elimination, of statutorily mandated royalties owed to non-parties. In addition, when presented without full term disclosure, privately determined royalty rates can lead to industrial and statutory adoption of inaccurate “market” valuations. Finally, private copyright reform can exacerbate market inequalities by leaving smaller, less powerful parties with a weaker, less effective statutory regime. These concerns could be addressed by comprehensive copyright reform, an ambitious and lengthy process at best. The concerns might also be eliminated by making compliance with the statutory license mandatory, thereby eliminating private copyright reform as an option. Recognizing the efficiency-enhancing value of private copyright reform, however, this Article leaves the option to circumvent in place, and instead suggests two modest statutory amendments to alleviate the adverse selection and distributive justice concerns presented. Private copyright reform also challenges traditional intellectual property doctrine; specifically, it questions the efficiency of statutory licenses and collective rights organizations, while also raising questions of fairness around the ability of private parties to make law. While resolution of these doctrinal questions is outside the scope of this Article, the recent proliferation of private copyright reform suggests they are ripe for reconsideration.