File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM FAULTY MATH: THE ECONOMICS OF LEGALIZING THE GREY ALBUM Derek E. Bambauer* ABSTRACT.................................................................................................346 I. INTRODUCTION.......................................................................................346 II. MISSED OPPORTUNITIES.....................................................................348 III. COPYRIGHT’S UNUSUAL ECONOMICS.................................................354 IV. ECONOMIC THEORIES SUPPORTING THE DERIVATIVE WORKS RIGHT357 A. Reducing Transaction Costs...........................................................358 1. Theory: Copyright as Clearinghouse.......................................358 2. Analysis: Second-Best at Cutting Costs....................................359 B. Enabling Price Discrimination.......................................................361 1. Theory: Broadening Access, Boosting Returns........................361 2. Analysis: Movie Rentals and Other Weaknesses......................364 a. Access.................................................................................364 b. Production..........................................................................367 c. Shortcomings......................................................................368 C. Exploiting Markets Efficiently........................................................368 1. Theory: Digging Dry Wells......................................................368 2. Analysis: De-Regulation and Discovery...................................368 D. Creating Incentives........................................................................368 1. Theory: Happy Meals and Other Rewards...............................368 2. Analysis: Lottery Tickets and Low Elasticity of Supply............368 a. Theoretical Objections.......................................................368 b. Empirical Analysis.............................................................368 V. ELIMINATING THE DERIVATIVE WORKS RIGHT..................................368 VI. CONCLUSION.......................................................................................368 APPENDIX A...............................................................................................368 APPENDIX B...............................................................................................368 APPENDIX C...............................................................................................368 * Assistant Professor of Law, Wayne State University Law School, Detroit, Michigan. The author thanks Sarah Abramowicz, Tim Armstrong, Linda Beale, Erica Beecher-Monas, Susan Crawford, Steve Davidoff, Terry Fisher, Lance Gable, Jack Goldsmith, Noah Hall, Dan Hunter, Mark Lemley, Jessica Litman, Bill McGeveran, Dan Meltzer, Thinh Nguyen, John Rothchild, Wendy Seltzer, Becky Watt, Jon Weinberg, Aaron Williamson, Tim Wu, Peter Yu, the Harvard-Yale Cyberscholars Group, and the fellows of the Berkman Center for Internet & Society at Harvard Law School for helpful discussions and comments. Their generosity in offering suggestions does not imply agreement with the paper’s content. Communication regarding this Article is welcomed at [email protected]. 345 File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM 346 Alabama Law Review [Vol. 59:2:345 ABSTRACT From an economic perspective, giving copyright holders the right to control production of derivative works—works that transform their expres- sion, such as the movie version of a novel—is unjustified, even harmful. Current scholarship either defends this entitlement as economically sensible or partially reconfigures it. This Article assesses the dominant economic rationales for derivative control and finds them weak at best. Unlike other copyright scholarship, this piece argues that since the right prevents pro- duction of attractive, diverse, cheaper new expression, and blocks the prom- ise of re-mix culture, it should be eliminated. This change would also con- centrate attention on the adaptation right’s role as a proxy for other copy- right concerns, primarily the risk of derivatives substituting for initial works. This Article proposes re-configuring copyright law to unfetter trans- formative expression while safeguarding copyright’s other entitlements. Finally, it concludes by suggesting that economic arguments cover more deeply held beliefs, based on personality theory or labor-desert concep- tions, supporting control over adaptation. I. INTRODUCTION American copyright law is mainly about money. Paradoxically, this means copyright owners should not control production of derivative works based on their creations. This Article explains why. Art can pay well. Popular novels become profitable movies; science fic- tion films sell action figures. Under American copyright law, creators dic- tate when and under what terms their art may be adapted into other forms and thereby earn revenue. Scholars view this entitlement as vital in encour- aging production of new expression. Yet this derivative works right also blocks creativity. Those who would build upon existing art must seek permission, usually at a price, to transform copyrighted expression. From an economic perspective, the right incurs costs as well as creating benefits. Nearly all analysts accept that some con- trol over derivatives is sensible on economic grounds. This Article argues they are wrong and that eliminating the adaptation right is sensible under this calculus. Previous scholarly work concentrates on arguments for augmenting the derivative works right,1 shifting from injunctive remedies to a liability rule,2 1. See, e.g., Michael Abramowicz, A Theory of Copyright’s Derivative Right and Related Doc- trines, 90 MINN. L. REV. 317 (2005); Jane C. Ginsburg, Creation and Commercial Value: Copyright Protection of Works of Information, 90 COLUM. L. REV. 1865 (1990). 2. See, e.g., Dennis S. Karjala, Harry Potter, Tanya Grotter, and the Copyright Derivative Work, 38 ARIZ. ST. L.J. 17 (2006); Alex Kozinski & Christopher Newman, What’s So Fair About Fair Use?, 46 J. COPYRIGHT SOC’Y U.S.A. 513 (1999). File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM 2008] Faulty Math 347 focusing on whether the individual copyright owner has been compensated adequately,3 offering alternative rationales for copyright’s protections,4 de- creasing the right’s duration,5 revising the definition of a derivative work,6 employing an expanded fair use doctrine to permit “blocking copyrights,”7 reducing uncertainty in adjudicating infringement,8 demarcating the right more clearly,9 and altering the right to permit “recoding” of expressive works.10 In short, current thinking either defends or reconfigures the deriva- tive works right. This Article takes an approach both more basic and more radical: it ex- amines the predominant arguments justifying the right—those grounded in a utilitarian economic calculus—and finds them wanting. It proposes accord- ingly that the right should be eliminated, not refined or strengthened. This fundamental change to copyright law would reduce derivatives’ cost and increase their diversity. Moreover, it would concentrate attention on the adaptation right’s role as a proxy for other copyright concerns, primarily the risk of derivatives substituting for initial works and undermining the repro- duction right. Shifting certain derivative works, such as abridgments and translations, to be covered by the reproduction right would address the sub- stitution concern. Copyright law should protect transformative works from infringement liability with copyright while safeguarding initial authors against minor variants that merely substitute for their expression. From a coldly economic perspective, the adaptation right’s costs outweigh its bur- dens, and it should be removed from copyright’s entitlements. Finally, this Article concludes by arguing that economic arguments cover more deeply held beliefs supporting control over adaptation. Echoing personality theory, we may confer a veto over derivatives to ensure artists guide development of their creations, preventing uses seen as shoddy or distorting. In addition, we may feel creators deserve the benefits accruing from their contributions to the expressive commonweal—an argument founded in Lockean labor-desert theory. These rationales are perfectly de- fensible, but they are not the ones commonly deployed. If they justify con- 3. See, e.g., Amy B. Cohen, When Does a Work Infringe the Derivative Works Right of a Copy- right Owner?, 17 CARDOZO ARTS & ENT. L.J. 623 (1999); Paul Goldstein, Derivative Rights and De- rivative Works in Copyright, 30 J. COPYRIGHT SOC’Y U.S.A. 209 (1983). 4. See, e.g., William M. Landes & Richard A. Posner, An Economic Analysis of Copyright Law, 18 J. LEGAL STUD. 325 (1989); Stewart E. Sterk, Rhetoric and Reality in Copyright Law, 94 MICH. L. REV. 1197 (1996). 5. See, e.g., LAWRENCE LESSIG, FREE CULTURE 294–95 (2004). 6. See, e.g., Lydia Pallas Loren, The Changing Nature of Derivative Works in the Face of New Technologies, 4 J. SMALL & EMERGING BUS. L. 57 (2000); Naomi Abe Voegtli, Rethinking Derivative Rights, 63 BROOK. L. REV. 1213 (1997). 7. See, e.g., Mark A. Lemley, The Economics of Improvement in Intellectual Property Law, 75 TEX. L. REV. 989 (1997). 8. See, e.g., Michael Wurzer, Note, Infringement of the Exclusive Right to Prepare Derivative Works: Reducing Uncertainty, 73 MINN. L. REV. 1521 (1989). 9. See, e.g., LESSIG, supra note 5, at 295. 10. See, e.g., Note, “Recoding” and the Derivative Works Entitlement: Addressing the First Amendment Challenge, 119 HARV. L. REV. 1488 (2006). File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM 348 Alabama Law Review [Vol. 59:2:345 tinued control over derivatives, we should advert to these grounds explicitly and evaluate the adaptation right’s scope in light of their demands and limi- tations. Part II of this Article describes the right’s cost in foregone creative ex- pression, while Part III explores copyright’s unusual economics. In Part IV, the piece describes and analyzes the four economic arguments employed to support exclusive control over derivative works. Part V proposes eliminat- ing the right, and discusses legal changes necessary to leave copyright’s other entitlements unchanged. Finally, Part VI concludes by suggesting that the right’s persistence is best ascribed to other rationales, such as labor- desert or personality theory, that are cloaked in the prevailing, economi- cally-oriented mode of copyright’s discourse. II. MISSED OPPORTUNITIES The derivative works right blocks creation of attractive, transformative expression, despite technological changes that make producing such works ever easier and cheaper. Current copyright law lets creators dictate whether, and on what terms, their works can be adapted, transformed, or interpreted in new ways. A de- rivative work produced without authorization may be popular, attractive, and imaginative, but it is also unlawful. Initial creators can thus prevent new expression that uses their work as a base from reaching an audience or a market. Intuitively, this seems unproblematic: artists should produce new offer- ings rather than recycling existing ones. However, most creative works adapt previous expression. Examples abound: Rosencrantz and Guilden- stern Are Dead elaborates upon Hamlet.11 Most jazz music riffs on prior pieces.12 Robert Parker’s private eye Spenser owes a significant debt to Raymond Chandler’s gumshoe Philip Marlowe.13 Many computer programs incorporate significant elements of the operating system upon which they run or the software with which they interact.14 The best-selling novel Ahab’s Wife incorporates much of Moby Dick.15 Martin Scorsese’s Oscar-winning film The Departed reworks the Hong Kong police drama Infernal Affairs 11. See WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF INTELLECTUAL PROPERTY LAW 108 (2003). 12. See Note, Jazz Has Got Copyright Law and That Ain’t Good, 118 HARV. L. REV. 1940, 1942–43 (2005). 13. See Craig S. Semon, Whodunit Author Parker: What He Writes Is What You Get, WORCESTER TELEGRAM & GAZETTE, Apr. 26, 2000, at 6 (noting Parker admitted to copying Marlowe’s character in his early stories). 14. See Jonathan Zittrain, Normative Principles for Evaluating Free and Proprietary Software, 71 U. CHI. L. REV. 265, 265–74 (2004); Mitchell L. Stoltz, Note, The Penguin Paradox: How the Scope of Derivative Works in Copyright Affects the Effectiveness of the GNU GPL, 85 B.U. L. REV. 1439, 1450– 54 (2005). 15. See, e.g., Stacey D’Erasmo, Call Me Una, N.Y. TIMES BOOK REV., Oct. 3, 1999, at 12. File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM 2008] Faulty Math 349 (Mou gaan dou).16 Popular works often reveal a heritage of adaptation: West Side Story re-imagines Romeo and Juliet in the world of urban gangs while Shakespeare based his play upon a poem by Arthur Brooke.17 Controls on derivative works thus have significant consequences for the production of new expression and may prevent it (or at least make it unlawful). Hip-hop music executive and mixtape artist DJ Drama felt this control sharply: he was arrested at the behest of the Recording Industry Association of America (RIAA) and charged with felony violation of Georgia’s Racket- eering Influenced Corrupt Organization (RICO) law.18 Drama’s mixtapes— unlicensed compilations of remixes, unreleased tracks, and promotional material—are a popular, vital marketing tool for hip-hop artists who not only acquiesced in his efforts but actively assisted him.19 The record labels who own the music’s copyrights, though, view mixtapes as piracy.20 Al- though many musicians support mixtapes, which often bolster sales of au- thorized releases, producing a lawful mixtape is difficult.21 As DJ Drama learned, creating a popular but unauthorized, derivative work—even one that benefits artists—is little comfort when the police arrive. Consider also the Grey Album. Brian Burton, better known as Danger Mouse, had a brilliant idea: mix music from The Beatles’ White Album with rap lyrics from Jay-Z’s Black Album.22 The resulting Grey Album is popular (downloaded over one million times in a single day),23 creative (Rolling Stone called it “ingenious . . . ahead of its time”),24 and illegal.25 The record label EMI, which owns the rights to the Beatles’ musical recordings, in- sisted Danger Mouse cease distributing the work.26 EMI argued Danger 16. Felix Chong and Siu Fai Mak (as Alan Mak), who wrote Infernal Affairs, received writing credits for The Departed. See David Stratton, Scorsese Set for Another Killing, WEEKEND AUSTRALIAN, Oct. 14, 2006, at 22. 17. See William M. Landes & Richard A. Posner, Indefinitely Renewable Copyright, 70 U. CHI. L. REV. 471, 480 (2003); W.H. Baird Garrett, Note, Toward a Restrictive View of Copyright Protection for Nonliteral Elements of Computer Programs: Recent Developments In the Federal Courts, 79 VA. L. REV. 2091, 2120 n.199 (1993). 18. See Kelefa Sanneh, With Arrest of DJ Drama, the Law Takes Aim at Mixtapes, N.Y. TIMES, Jan. 18, 2007, at E1. 19. See Samantha M. Shapiro, Hip-Hop Outlaw (Industry Version), N.Y. TIMES MAG., Feb. 18, 2007, at 29, available at 2007 WLNR 3224903. 20. See Recording Industry Association of America, Identifying Unauthorized Sound Recordings, http://www.riaa.com/ (follow “Identifying Pirated Product” hyperlink) (last visited Nov. 15, 2007) (defining “[u]nauthorized duplication of sounds . . . . sometimes advertised as DJ or Dance Mixes” as “Pirate”). 21. See Sanneh, supra note 18, at E1. 22. Beatles fans will properly note that the correct album title is The Beatles. 23. See Elizabeth Armstrong, Suppressed Album Finds Voice on the Web, CHRISTIAN SCI. MONITOR, Mar. 1, 2004, at 11, available at 2004 WLNR 1642753. 24. Lauren Gitlin, DJ Makes Jay-Z Meet Beatles, ROLLING STONE, Feb. 19, 2004, at 18, available at http://www.rollingstone.com/news/story/5937152/dj_makes_jayz_meet_beatles. 25. See Renee Graham, EMI Puts It in Black and White: No “Grey Album,” BOSTON GLOBE, Feb. 18, 2004, at C2 (noting Burton “always understood that his recordings were ‘illegal’”); Bill Werde, Defiant Downloads Rise from Underground, N.Y. TIMES, Feb. 25, 2004, at E3. 26. See Armstrong, supra note 23; Graham, supra note 25; Chilling Effects Clearinghouse, Take- down that Grey Album, http://www.chillingeffects.org/fairuse/notice.cgi?NoticeID=1093 (last visited Nov. 23, 2007) (reproducing redacted text of a Digital Millennium Copyright Act take-down notice to a File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM 350 Alabama Law Review [Vol. 59:2:345 Mouse needed its permission to use and adapt the White Album and that he should have sought a license to do so.27 This position overlooked two prob- lems. First, requests for permission to sample the Beatles’ work have always been denied.28 Second, Danger Mouse would also need permission from Roc-A-Fella Records (to use the Black Album), and either label could have demanded more than 50% of his revenues as a licensing fee.29 The Grey Album probably does not harm sales of either component album—in fact, remixes are often used as underground marketing to spur interest in the original recordings—yet it could not have been produced lawfully.30 Or think about fan fiction. This genre consists of consumer creations— stories written by readers employing a work’s setting, characters, or plot to new ends.31 These creations rarely, if ever, compete with the originals; few even enjoy commercial demand. Fan fiction can increase consumption of originals by reinforcing interest in them. Yet authors such as Anne Rice use copyright law to prevent even non-commercial transformations of her vam- pire novels.32 (Interestingly, Rice seeks not only to control her characters and settings but to prevent fan fiction from interfering with her imagina- tion).33 Fan fiction’s benefits are largely intangible, but the pecuniary risks to its creators are real.34 While a newspaper may help develop children’s writing skills by asking them to produce their own denouements to the Harry Potter series, it may also encourage them to infringe J.K. Rowling’s copyrights.35 Copyright lawsuits need not succeed to dissuade derivative creation. The cost of defending even a spurious claim, along with the risk of sizeable statutory damages, can chill production of new expression.36 Technological changes that lower costs of creating new works worsen the problem. Computer technology and “prosumer” media equipment make site hosting the album). 27. See Werde, supra note 25. 28. Rob Walker, The Grey Album, N.Y. TIMES MAG., Mar. 21, 2004, at 32 (stating “the Beatles have not allowed any sampling of their music”); Roger Friedman, iTunes Gets the Beatles, FOXNEWS.COM, July 6, 2005, http://www.foxnews.com/story/0,2933,161662,00.html (noting that “No original recordings by the Beatles . . . [are] available for downloading”). 29. See Graham, supra note 25; Walker, supra note 28. See generally JOANNA DEMERS, STEAL THIS MUSIC: HOW INTELLECTUAL PROPERTY LAW AFFECTS MUSICAL CREATIVITY 117–18, 139–42 (2006). 30. See, e.g., Walker, supra note 28 (noting “unauthorized remixes can serve as promotional vehi- cles for the artists they sample”); cf. Sasha Frere-Jones, 1+1+1=1: The New Math of Mashups, NEW YORKER, Jan. 10, 2005, at 85 (stating the Grey Album “is processed so radically that its source is some- times not clear” and describing the transactional complexities of obtaining rights to sample music). 31. See supra notes 393–394 and accompanying text. 32. See, e.g., Diane Werts, Really Stranger Than Fiction, NEWSDAY, May 1, 2005, at C16. 33. See Linton Weeks, The Writers Related by Blood, WASH. POST, Oct. 20, 2000, at C1 (quoting Rice that if she read fan fiction, she “would block completely”). 34. See 17 U.S.C. § 504(c)(1) (2000) (entitling a copyright owner to recover statutory damages of $750 to $30,000 for infringement). 35. See Patsy Brumfield, Area Writers Help Bring Conclusion to Rowling Book Series, NORTHEAST MISS. DAILY J., Jan. 29, 2006, http://www.djournal.com/pages/archive.asp?ID=211530&pub=1&div=Lifestyles. 36. See 17 U.S.C. §§ 504–05 (setting statutory damages for copyright infringement and allowing recovery of costs and attorneys’ fees). File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM 2008] Faulty Math 351 producing sophisticated works increasingly easy and cheap.37 A user with an inexpensive personal computer (PC) and editing software can generate artistic works that required a team of experts and millions of dollars of equipment only a few years ago.38 Thus, Miami firefighter Rory Cejas could produce a sophisticated twenty-minute film based on the Star Wars movies using a single cheap PC, a Canon GL-1 camera, three actors, and five soft- ware programs, without the benefit of film school.39 Similarly, the cost of producing sound recordings has fallen dramatically; a music studio that cost $50,000 in 1980 is readily duplicated today by a PC and software for a few thousand dollars.40 Television shows employ increasingly sophisticated spe- cial effects as their expense drops.41 Adding a computer-generated crocodile to an episode of Invasion cost $7,500 in 2002, but only $1,500 today.42 This makes creating visually rich TV programs increasingly feasible and afford- able.43 Reduced costs extend to distribution.44 Professor William Fisher notes that distributing digital works over the Internet offers significant savings.45 Innovations such as playlists,46 recommendation systems,47 fan sites,48 and lawful file-sharing services49 substitute for expensive marketing and adver- tising.50 37. See Yochai Benkler, Coase’s Penguin, or, Linux and The Nature of the Firm, 112 YALE L.J. 369, 377, 404–05 (2002). 38. See, e.g., J.D. LASICA, DARKNET: HOLLYWOOD’S WAR AGAINST THE DIGITAL GENERATION 84 (2005) (citing examples). 39. See Star Wars Episode I: The Jedi Saga – Frequently Asked Questions, http://www.solid- roc.com/faqs.html (last visited Nov. 15, 2007). The movie is available at http://www.solid- roc.com/movie.html (last visited Nov. 15, 2007). 40. WILLIAM W. FISHER III, PROMISES TO KEEP 23 (2004). 41. See Brooks Barnes, TV’s New Visual Effects, WALL ST. J., Nov. 10, 2005, at B1. 42. See id. 43. See id. (quoting the show’s visual effects supervisor). 44. See, e.g., Benkler, supra note 37, at 396–97 (noting “[t]o some extent [distribution] is a nonissue on the Internet”). 45. See FISHER, supra note 40, at 21. 46. See, e.g., H2O Playlist Homepage, http://h2obeta.law.harvard.edu/ (last visited Nov. 23. 2007) (allowing users to create and share playlists of content). 47. See, e.g., Nancy Bogucki Duncan & Mark A. Fox, Computer-aided Music Distribution: The Future of Selection, Retrieval and Transmission, FIRST MONDAY, Apr. 4, 2005, http://www.firstmonday.org/issues/issue10_4/duncan/index.html (describing how retrieval and selection technologies can help consumers locate music); Martin Edlund, The Madonna Code, SLATE, July 5, 2005, http://www.slate.com/id/2121998 (describing music recommendation systems); Rob Lightner, Sum of the Parts, http://www.amazon.de/exec/obidos/tg/feature/-/217324/ref%3Ded%5Fcp%5Fle%5F1%5F4/028- 2377104-4994961 (last visited Nov. 15, 2007) (describing Amazon.com’s book recommendation sys- tem). 48. See, e.g., Lower Manhattan Jazz Clubs, http://www.bigapplejazz.com/lowermanhattanclubs.html (last visited Nov. 15, 2007); Nancies.org, http://www.nancies.org/ (last visited Nov. 15, 2007) (exchanging information about the Dave Matthews Band). 49. See, e.g., Weedshare, http://www.weedshare.com/ (last visited Nov. 15, 2007) (now-defunct site which allowed users to share music files lawfully with others). 50. See, e.g., John Anderson, Once It Was Direct to Video, Now It’s Direct to the Web, N.Y. TIMES, Oct. 23, 2005, at AR27. File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM 352 Alabama Law Review [Vol. 59:2:345 Technological change empowers potential creators among the general public with the capability to produce sophisticated works.51 Like their predecessors, many new artists follow Apple’s credo of “Rip. Mix. Burn.,”52 re-configuring and incorporating existing creations.53 Consumers already practice unauthorized adaptation—witness fan fiction—and may be sur- prised to learn it is unlawful. With the increasing number of producers of transformative works, soci- ety benefits from greater diversity of offerings and from enhanced satisfac- tion of consumers’ desires. As with open source software, when “users” can tailor works to suit their needs, they benefit—particularly if those users con- stitute a group too small or obscure for the original author to see benefit in offering them a customized product.54 Such adaptations may also prove desirable to others. In contrast to the direction of technological development, the trend in copyright law augments initial creators’ control over expression. Legal changes have increased the scope of protection (for example, the Copyright Act of 1976 formally conferred power over derivative works),55 lengthened its duration (the Sonny Bono Copyright Term Extension Act (CTEA) of 1998 increased it by twenty years),56 prohibited users from circumventing technical restrictions on using works (for example, the Digital Millennium Copyright Act forbids bypassing access control measures),57 reduced fair use’s scope,58 increased civil and criminal penalties for infringement,59 and allowed license agreements to override countervailing rights and defenses such as fair use (for example, court decisions uphold license agreements banning reverse engineering even when it would be fair use).60 Moreover, the practical effects of increased copyright protection make it harder to obtain funding for, or to commercialize, transformative works.61 In 51. See William W. Fisher III, Reconstructing the Fair Use Doctrine, 101 HARV. L. REV. 1661, 1768–69 (1988) (arguing that evaluating fair use to encourage citizens to create transformative works contributes to a worthwhile life). 52. Copyright and the Law: Rip. Mix. Burn., ECONOMIST, July 2, 2005, at 56. 53. See generally LESSIG, supra note 5, at 184–88 (describing harms to potential creators from the current configuration of copyright’s derivative work protections). 54. See The Mail Must Get Through, http://www.catb.org/~esr/writings/cathedral-bazaar/cathedral- bazaar/ar01s02.html (last visited Oct. 15, 2007) (noting that “[e]very good work of software starts by scratching a developer's personal itch” and detailing the author’s creation of a custom-tailored e-mail delivery system). 55. See, e.g., Copyright Act of 1976, Pub. L. No. 94-553, 90 Stat. 2541 (1976) (codified as amended at 17 U.S.C. §§ 101–1101 (2000)). 56. See Sonny Bono Copyright Term Extension Act of 1998, Pub. L. No. 105-298, 112 Stat. 2827 (1998) (codified in scattered sections of 17 U.S.C.). 57. See Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2860 (1998) (codified as amended in scattered sections of 17 U.S.C.). 58. See Neil Weinstock Netanel, Copyright and a Democratic Civil Society, 106 YALE L.J. 283, 304–05 (1996). 59. See Digital Theft Deterrence and Copyright Damages Improvement Act of 1999, Pub. L. No. 106-160, 113 Stat. 1774 (1999) (codified at 17 U.S.C. § 504). 60. See, e.g., Bowers v. Baystate Techs., Inc., 320 F.3d 1317, 1323–28 (Fed. Cir. 2003). 61. See, e.g., MARJOIRE HEINS & TRICIA BECKLES, WILL FAIR USE SURVIVE? FREE EXPRESSION IN THE AGE OF COPYRIGHT CONTROL 5 (2005), available at File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM 2008] Faulty Math 353 movies, for example, the need to obtain “errors and omissions” insurance coverage forces creators to license “every snippet of film, photographs, mu- sic, or text that is used, in addition to shots of distinctive buildings or prod- ucts.”62 Producing films like a history of American commercials becomes difficult if not impossible.63 These changes narrow considerably material available to creators to use as the basis for their own works. A common response to complaints about these legal trends, and to the need for “starter material” for new works, is to direct potential creators to unprotected expression—resources in the public domain. However, recent changes to copyright law halted the flow of works out of protection and into the commons. For example, the CTEA provided twenty years of additional protection for works with expiring copyrights (including, famously, Dis- ney’s Mickey Mouse cartoon Steamboat Willie),64 thwarting creators about to gain new building blocks.65 Normally, copyright’s limited duration oper- ates like a conveyor belt, constantly bringing works into the public domain where artists can build upon them.66 The CTEA stopped this belt, making transformative access to existing, protected works even more important. Defenders of the adaptation right also advance important non-economic arguments for this control. 67 These rationales likely explain its presence and increasing strength better than the purported economic grounds. Such ex- planations draw upon labor-desert rationales68 (justifying control to protect the creator’s effort invested in them against misappropriation) or personality theory69 (advocating copyright based on the author’s identification with the work, both in her own mind and by others). For example, creators identify with, and feel ownership towards, their creations. They want to control how their works are used. This may require http://www.fepproject.org/policyreports/WillFairUseSurvive.pdf (stating that the “notion that every quotation except the most minimal must be licensed and paid for is pervasive in the commercial world of arts and culture”). 62. Id.; see PATRICIA AUFDERHEIDE & PETER JASZI, UNTOLD STORIES: CREATIVE CONSEQUENCES OF THE RIGHTS CLEARANCE CULTURE FOR DOCUMENTARY FILMMAKERS 6–28 (Nov. 2004), available at http://www.centerforsocialmedia.org/files/pdf/UNTOLDSTORIES_Report.pdf. 63. See HEINS & BECKLES, supra note 61, at 6 (citing the experience of E&O insurance broker Dennis Reiff). 64. See generally Robert MacMillan, Eldred v. Ashcroft: A Primer, WASHINGTONPOST.COM, Jan. 15, 2003, http://www.washingtonpost.com/wp-srv/technology/articles/eldredprimer_100902.htm. 65. See, e.g., Amy Harmon, A Corporate Victory, But One That Raises Public Consciousness, N.Y. TIMES, Jan. 16, 2003, at A24; James Surowiecki, Righting Copywrongs, NEW YORKER, Jan. 21, 2002, at 27, available at http://www.newyorker.com/archive/2002/01/21/020121ta_talk_surowiecki. 66. See 17 U.S.C. § 302 (2000) (defining duration of protection for a work under copyright). 67. See, e.g., John Tehranian, Et Tu, Fair Use? The Triumph of Natural-Law Copyright, 38 U.C. DAVIS L. REV. 465, 489–91 (2005) (arguing the derivative works right is best explained by a natural law theory). 68. See, e.g., Brief for Recording Industry Ass’n of Am. as Amicus Curiae Supporting Respondent at 19–20, Eldred v. Ashcroft, 537 U.S. 186 (2003) (No. 01-618), 2002 WL 1836673; Wendy J. Gordon, A Property Right in Self-Expression: Equality and Individualism in the Natural Law of Intellectual Property, 102 YALE L.J. 1533 (1993); Sterk, supra note 4, at 1197–1204, 1227–44 (reviewing the role of desert justifications in copyright history). 69. See, e.g., Justin Hughes, The Personality Interests of Artists and Inventors in Intellectual Prop- erty, 16 CARDOZO ARTS & ENT. L.J. 81 (1998); Margaret Jane Radin, Property and Personhood, 34 STAN. L. REV. 957 (1982). File: BambauerMerged2 Created on: 1/31/2008 4:34 PM Last Printed: 2/13/2008 3:38 PM 354 Alabama Law Review [Vol. 59:2:345 sacrificing considerable pecuniary gain, as when cartoonist Bill Watterson refused to license characters from his Calvin and Hobbes strip for merchan- dise.70 Watterson’s views resonate strongly with justifications for copyright that posit the fusing of the author’s personality with her expression and pro- vide controls over works to protect it.71 European copyright law relies heav- ily upon this theory, but American law has adopted it only in limited areas.72 However, certain features of the U.S. copyright system limiting the creator’s influence over uses of her work, such as the “cover license” for recorded music73 or protection for parody under the fair use doctrine,74 complicate this rationale’s application. While such justifications may have merit, they contrast sharply with the dominant, economically-oriented method and language of copyright analy- sis in the United States Exploring these theories is beyond this Article’s scope. However, this paper implicitly pleads for truth in advertising. If the adaptation right depends upon labor-desert or personality grounds, we should expressly assess the right and tailor its scope, using these method- ologies, rather than blending them into an economically-based theory of copyright. In short, many new creations adapt existing works. Technological ad- vances make generating derivative expression increasingly easy and inex- pensive, offering the promise of greater creative output, more interaction by consumers with content, and enhanced diversity of artistic offerings. Legal rules that impede such production, and their underlying rationales, should be scrutinized. III. COPYRIGHT’S UNUSUAL ECONOMICS Economically, copyright is an anomaly. Copyright law deliberately cre- ates a monopoly over certain creative expression, tolerating the concomitant harms (increased prices, decreased consumption, and deadweight loss) as a necessary evil.75 This is at odds with how American law generally organizes production: by creating market competition. This Article now examines briefly why the United States typically prefers competition to monopoly as a backdrop to analyzing how necessary copyright’s evils actually are. Economists view competition, which generates incentives to innovate and to minimize costs, as presumptively superior to monopoly based on empirical research and practical experience.76 With multiple, competing 70. See Neely Tucker, The Tiger Strikes Again, WASH. POST, Oct. 4, 2005, at C1. 71. See Neil Netanel, Alienability Restrictions and the Enhancement of Author Autonomy in United States and Continental Copyright Law, 12 CARDOZO ARTS & ENT. L.J. 1, 2–24 (1994). 72. See id. at 7–9; see also 17 U.S.C. § 106A (2000) (granting moral rights-like protection for certain visual art). 73. See 17 U.S.C. § 115. 74. See, e.g., Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994) (holding that “parody, like other comment or criticism, may claim fair use”). 75. See infra note 87. 76. See RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 278–83 (6th ed. 2003).