Harvard Journal o f Law & Technology Volume 10, Number 1 Fall 1996 INTELLECTUAL PROPERTY POLICY ONLINE: A YOUNG PERSON'S GUIDE James Boyle" This is an edited version era presentation to the "Intellectual Property Online" panel at the Harvard Conference on the Internet and Society, May 28-31, 1996. The panel was a reminder o'fb oth the importance o f intellectual property and the dangers of. legal insularity. Of approximately 400 panel attendees, 90% were not lawyers. Accordingly, the remarks that follow are an attempt to lay out the basics of intellectual property policy in a straightforward and non-technical manner. In other words, this is what non-lawyers should k~ow (and what a number o f government lawyers seem to have forgotten) about intellectual property policy on the Internet. The legal analysis which underlies this discussion is set out in the Appendix. I am going to start with a primer on intellectual property policy, followed by a very general impression of some of the current attempts to regulate copyright on the Internet: the "White Paper' '~ and the "Bills" 2 that would implement its recemmendations. This discussion may also be of interest because of its relevance to the World intellectual Property Organization ("WIPO'!) "Basic Proposals" now being considered internationally.3 These proposals repeat the significant elements of the White Paper's scheme, while adding a new sui generis scheme for the : * © James Boyle 1997. Professor of Law, Washington College of Law, American University. S.J.D., Harvard Law School, 1986. LL.M., Harvard Law School, 1981. LL.B., Glasgow University. Thanks to Terry Fisher, Peter Jaszi, and Jessica Litman. 1. INFORMATIONIN FRASTRUCTURET ASKF ORCE, INTELLECTUALP ROPERTYA NDT HE NATIONALI NFORMATIONI NFRASTRUCTURE:T HE REPORTO F THE WORKINGG ROUPO N INTELLECITJALP ROPERTYR IGHTS (1995) hereinafter WHITEP APER. For a broader view of the issue see JAMES BOYLE, SHAMANS, SOFFWAREA ND SPLEENS: LAW AND THE CONSTRUCTIONO F THE INFORMATIONS OCIETY {1 996). 2. S. 1284, 104th Cong. 0995); H.R. 2441, 104th Co~;g. 0995) hereinafter the Bills. 3. Basic Proposal for the Substantive Provisions of the Treaty on Certain Questions Concerning the Protection of Literary and Artistic Works to be Considered by the Diplomatic Conference on Certain Copyright and Neighboring Questions, World Intellectual Property Organization (Aug. 30, 1996) hereinafter Literary and Artistic Works Treaty; Basic Proposal for the Substantive Provisions of the Treaty on Intellectual Property in Respect of Databases to be Considered by the Diplomatic Conference on Certain . Copyright and NeighboringQ uestions, World Intellectual Property Organization (Aug. 30, ,..1996) hereinafter Treaty in Respect of Databases. 48 Harvard Journal of £aw & Technology Vol. 10 protection of databases. 4 My claim is that each of these regulatory efforts reveals a pattern of structural malfunctions in the way that policymakers think about intellectual property on the Internet. In other words, the White Paper and the Bills are not simply flawed; they are revealingly flawed, even usefully flawed. In the American tradition, intellectual property law is largely motivated by utilitarian concerns. It is not designed to give property fights solely as a reward for hard work or to provide creators with a dependable annuity for their children, though it may in fact produce those results in some cases. It is about setting up conditions under which creators can and will produce new works. As I have argued elsewhere, many policymakers seem to view intellectual property rights as a simple linear function. They act as if the more intellectual property rights we grant and the "larger" we make each right, the more creators will produce new books,movies, computer programs, and pharmaceuticals. But this view is wrong. Setting the proper level of intellectual property protection requires a complex ba!ancing act. Giiven the context of these remarks, the analogy I would use is an ele,,,:tronic one: computer simulation games such as SimCity, which rest on models similar to the so-called "predator/prey" equations, s Typically these games require the player to deal simultaneously with potentially contradictory goals: fostering economic growth, expanding transportation systems, minimiz- ing pollution, keeping taxpayers happy, and so on. Too little road-building will stifle economic development; too much will create excessive pollution and cause taxpayer flight. The player who single- mindedly pursues one goal, neglecting its feedback effects, is quickly deposed by an irate cybernetic citzenry. 6 4. Compare WHITEP APF.R,s upranote I, with Literary and Artistic Works Treaty, supra note 3, andTreaty in Respect of Databases, supra note 3. Some of the most directly relevant articles of the Literary and Artistic Works Treaty are: art. 7, Scope of the Right of Reproduction (paralleling the White Paper's RAM copy theory while allowing nationally legislated exceptions); art. 10, Right of Communication( providing an even more extensive right than the "reproduction right" proposed in the Bills and apparefitly subjecting Intemet Service Providers ("ISPs") to strict liabilityi n a manners imilart o the White Paper); art. 12, Limitations and Exceptions (apparently cutting back on fair use and similar limitations on the rights of content providers in a manner similar to the White Paper); and art. 13, Obligations conceming Technological Measures (paralleling in many respects the anti- circumventionp rovisions of the Bills). The Treaty in Respect of Databases would provide a suigeneris right for databases which is beyond the scope of this article; it has been widely criticized and is arguably unconstitutional. 5. See generally J. ROUGHGARDEN, THEORY OF POPULATION GENETICS AND EVOLUTIONARYE COLOGY: AN INTRODUCTION( 1979). 6. Informatione conomists would describe the issue as the contradiction between the incentivest o create informationa nd the efficiency with which markets spread information. See Sanford J. Grossman & .I6s,o.ph E. Stiglitz, On the Impossibility oflnforraationally Efficient Markets, 70 AM. ECON.~t~EV.3 93, 405 (1980). No. 1 IntellectuaPlr operty Policy Online 49 These simulations offer an insight for intellectual property policy. If the level of intellectual property protection is t.co low, negative effects follow. Prospective authors turn to other careers. Drug companies decrease investment in research and development. Yet every intellectual property r.ight granted diminishes the public domain of freely available material. If intellectual property rights are set too high, future creators will be deprived of the raw materials they use to create new works. For example, could Bill Gates have created MS-DOS if BASIC and CP/M had been proprietary systems protected by an expansive intellectual property regime7 We must remember that the system is not a linear function with each additional property right producing a corresponding increase in future production. It is just as dangerous to produce a system with too much intellectual property protection as one with too little. Each proposed expansion (and even the current state) of intellectual property rights should be approached with the same skepticism as any other state-backed monopoly. We should ask whether the monopoly has been shown to be necessary. We should worry about all of the effects of enforcement of the monopoly, not just the diminishing public domain but also possible side effects on free speech, competition in information products, and privacy. We should see whether there are other available ways for creators to receive a return adequate to promote future investment. It is important to understand the significance of the empirical issues about the level of protection necessary in the digital environment. Content providers can receive a return on the investment of their time and ingenuity in many ways, for example by being first to market, offering service packages and upgrades, advertising, eneryption, steganography, or digital rights management. At present, we lack even the most rudimentary understanding of what kind o f returns these methods will bring, yet, inexplicably, the attempt to expand copyright in the digital environment proceeds apace. Some analysts seem to think that the methods mentioned above are merely additions to the market strategy that a content provider might pursue - - as if expansive intellectual property fights were somehow an entitlement to which one might add other strategies. 7 But the converse is true. It is only if 7. See, e.g., Loft Lesser and Susan Arafeh, moderators, Notes from Intellectual Property Online (last modified June 4, 1996) <http://www.harvnet.harvard.edu/online/ notes/ip-online.html> (describing comments of Mr. Henry Gulman). Some of Mr. GuUnan's comments at the conference appeared to move towards this argument~ however, he limited his remarks to the extent of rights under current law. "Gutman then noted the important distinction between one's legal IP fights and one's business strategy for maximizing profit from them. The legal rights are clear, he noted, that an author is entitled to a copyright and an inventor is entitled to a patent. These rights must be preserved on the Intemet. What is less clear, Gutman added, is what works as a business strateg~ and what laws should govern 50 Harvard Journal o f L a w & Technology Vol. 10 monopoly fights are necessary to produce an incentive to future production that the Congress is economically justified (and constitution- ally authorized) to provide them. 8 If content providers earl receive a return adequate to provide the incentive for future production without being granted a legal monopoly, then the monopoly should not be granted. Prudent skepticism of the need for monopolies is particularly needed with "information products," where economic phenomena variously referred to as "increasing returns on production," "network effects," and "tippy markets" often disrupt standard assumptions about market operation.9 In slightly more familiar terms, the issue is often connected with standardization and "sunk costs." Imagine that there are two competing systems, for example, VHS and Betamax or DOS/Windows and the Macintosh OS. If one o f them starts to pull ahead in terms of number of units s o l d - - or even bootlegged or pirated there may come a point where the market suddenly "tips" and the competitor is wiped out as consumers and secondary service providers flee the "loser" the moment they judge the battle to be over. The flip side of this point is that producers of the more widely used system gain an important market advantage as their system is adopted by each new user - - even, remarkably, if it is given away for free. This is the strategy behind Netscape's free distribution of its Web browser. (This logic indicates that a few software producers may even have received some benefit from the piracy of their products!) These economic phenomena have a number o f important implica- tions for intellectual property policy. First, policymakers and lawyers should realize that simplistic analogies to markets in physical goods are profoundly misleading. In what other market might one strive to achieve dominance by giving one's good away? Second, the "tipping effect" this. Whethert o have an IP right, and whether one can appreciate such a right without having it be part ofyour business plan are two entirely different questions." ld. 8. "To promotet he Progress of Sciencea nd the useful Arts, by securing for limited Times to Authors and Inventors the exclusive Rights to their respective Writings and Discoveries." U.S. COtqST.a rt. I, § 8, cl. 8. 9. See Joseph Farrell, Standardization and lntellectual Property, 3O J u ~ c s J. 35 (1989); Michael LKatz & Carl Shapiro, Systems Competition andNetwork Effects, J. ECON. PERSF. 93 0994); S.J. Liebowitz & Stephen E. Margolis, Path Dependence, Lock-In, and History, 11 J.L. ECON.& OR6. 205 (1995); MichaelL . Katz & Carl Shapiro, Network Externalities, Competition, and Compatibility, 75 AM. ECON.P ~v. 424, 424 (1985) ("Therea re man),p roductsf or which the utilityt hat a user derivesf romc onsumption of the good increasesw ith the numbero f other agents consuming the good."); W..Brian Arthur, Competh)g Y.echnologies Increasing Returns, and Lock-In by Historical Events, 99 ECON.J . 116 (1989):"F or a shghtiy more skepticalv aew( at least about the lmphcations for antitrust policy),s ee S.J. Liebowitz& StephenE . Margolis,S houM Technology Choice Be a Concern of Antitrust Policy? 9 HARV.J .L. & TECH.2 83 (1996). No. 1 IntellectuaPlr operty Policy Online 51 mentioned above can transform an apparently insignificant legal monopoly, a copyright on an operating system or a patent on a video- recording device, into a situation of market domination. Polieymakers should exercise a corresponding degree of care. Third, the very unfamiliarity of these phenomena means there is a danger that analysts might be better at spotting the costs of a new technology than its benefits. The Internet makes copying, both licit and illicit, easier. Because we think of copying in terms of infringement and loss to the owner, we assume that rights-holders will have a diminished return ov their investment. But the ease and near-costlessness of digital duplication also provide benefits and opportunities such as diminishing the costs of advertising and lowering search costs for detecting piracy, t° Even more strangely, the features of this environment transform the way in which rewards and market share operate m as in the Netseape example, above. Because this market environment just doesn't fit our "common sense" or intuitive assumptions about markets in more tangible goods, the hunches and anecdotes that now dominate our discussion of these issues are likely to provide a poor footing for intellectual property policy. Now, I will turn to the current proposed reforms of copyright protection on the Internet. These proposals come in two parts: (1) a White Paper that purports to describe the state of current law and (2) the Bills now stalled in Congress, which would implement the supposedly minor changes the White Paper claims are necessary. Interestingly, the more controversial of these two documents is the White Paper, which purports simply to describe current law. By comparison, the Bills are more modest in the transformations they recommend, although they too would make major changes in the law and have been strongly criticized by a wide range of groups including libraries, teachers, writers, civil liberties groups, and online service providers." The Appendix provides a guide to the problems with the White Paper's depiction of current law: in particular, its distressing tendency to concentrate almost entirely on decisions, quotations, and analyses that 10. People normally think of cheap copying as an aid topiracy, not piracy-detection. Yet it is only because copying is so easy and cheap that the AltaVista search service, <htlp'.//altavista.digital.com/;% can keep a continuously updated index of almost all the material on the Web and in Usenet newsgroups. Such a service provides an unparalleled resource for copyright holders, who can now pinpoint exactly where their work is being offered. At the very least, such services provide a strong deterrent to widely publicized and generally available (i.e., effective) piracy. As with distribution and advertising, the existence Gflowered copying costs cuts both ways. 11. See, e.g., Letter from the Digital Future Coalition to Congress (Nov. 9, 1995) (visited Dec. 14, 1996) <http'J/www.epic.org/privacy/copyright/dfc_llr.txt>; Welcome to the Digital Future Coalition (last modified Dec. 12, 1996) <http://www.ari.net/dfc/>. 52 Harvard Journal of Law & Technology Vol. 10 extend the scope of intellectual property rights, misstating or ignoring contrary authority, statutory history, and legislative policy. Summarizing brutally, I will make three points. First, the White Paper is demonstrably and repeatedly wrong about the state of current law, always tilting in the same direction. The most charitable descrip- tion one could provide is that it is a shockingly careless piece of work. Second, the White Paper bases much of its rhetoric on the claim that it is describing settled, uncontroversial law, and hence that little justifica- tion for its proposals is required. Yet, a substantial portion of the intellectual property community, including some of those philosophically in agreement with the White Paper itself, disagree with its claims. When much of your audience disagrees, you can claim to be right, but you cannot claim to be uncontroversial, particularly not if you intend to transform those "descriptive" statements into the basic framework for intellectual property in an entire medium. Even the most distinguished scholarly defense of the White Paper's approach is careful to acknowl- edge that one of its basic tenets ha,; been "questioned or even strongly criticized. ''~'- Third, even if the White Paper were correct about the state of current copyright law, it would still be necessary to work out whether this would be a desirable legal regime for the Internet. The very existence of a task force on intellectual property and the National Information Infrastructure shows that a mere statement of current practice is not enough, yet the White Paper fails to take seriously the true complexity of the positive and negative changes that the Internet will bring to the production and distribution of "information products." Without an examination of these changes, its tendentious summary could not be an adequate guide to future policy. The White Paper's basic philosophy is two-fold. First, it argues that content will drive the Internet. I agree. Second, a close reading of the document and of the hearings ~3 over the Bills shows that the authors of the White Paper see the Intemet as a giant copying machine, a threat to content providers rather than an opportunity for them. Indeed, if there is a theory behind the White Paper's curious vision of copyright law, it seems to be this: more copying equals more copyright violation, thus it is necessary to increase copyright protection as a compensation for 12. Jane C. Ginsburg, Putting Cars on the "Information Superhighway": Authors, Exploiters and Copyright in Cyberspace, 95 COLUM.L . REV. 1466, 1476n .39 (1995); see also Jessica Litman, The Exclusive Right to Read, 13 CARDOZOA RTS & E~rr. L.J. 29 (1994). 13. See Ni l Copyright Protection Act o f 1995 (H.R. 2441 and S. 1284) - - Joint Hearing before the Subcommittee on Courts and Intellectual Property and the Senate Committee on the Judiciary, 104th Cong. (1995);N11 Copyright Protection Act o f 1995 ( H R 2441) "- Hearing before the Subcommittee on Courts and Intellectual Property, 104th Cong. (1996). No. 1 Intellectual Property Policy Online 53 declining revenues. The White Paper achieves this increase in copyright protection by mischaracterizing current law using the following devices. (1) An extremely narrow definition of the "fair use" exception in copyright. (Fair use is a defense to infringement whereby certain educational, journalistic and other uses of copyrighted material are excused from liability). ~4 (2) An expanded definition of "copying" on the Interact, whereby even loading material into RAM counts as copy- ing, though such a "copy" is transitory and fleeting. Under this definition, browsing, not just downloading, could itself be an infringement.ts (3) The imposition of strict liability upon online service providers for copyright infringement by their subscribers.~6 The White Paper's simplistic and absolutist vision of intellectual property is apparent elsewhere. For example, it offers a program for educating pre-sehool children in a particular view of intellectual property; the tone alternates between George Orwell and Barney the Dinosaur. Clearly, children should know that it is wrong to steal and that copying can be a form of theft. Yet one searches this section invain for a suggestion that questions of how extensive intellectual property rights should be, what legitimate exceptions are made to them, and what effect they have on economic development education and free speech, are a little more complicated and politically controversial than teaching children not to swipe each other's Power Rangers. The Software Publishers Association may not be the most disinterested moral instructor in the meaning and sanctity of these particular property rights. The White Paper's account of fair use has the same tone. It always argues as if the possession of an extensive monopoly in the form of an 14. See infra text accompanying notes 68-86. 15. See infra text accompanying notes 42-67. 16. See infra text accompanying notes 87-93. The White Paper correctly notes that copyright is a strict liability system. It fails, however, to answer the more basic question, given the goals of copyright and the communicative importance of the Web, should we view an ISP, whose computers automatically duplicate and repost all messages, as more like the person who rents out copying machines (who is not liable if infringing copies are made) or the photofinishing lab (who is liable for innocently reproducing an infringing photograph)? The only court to confront this issue squarely had no doubt. "If Usenet servers were responsible for screening all messages coming through their systems, this could havea serious chilling effect on what some say may turn out to be the best public forum for free speech yet devised." Religious Technology Cir. v. Netcom On-Line Communication Servs., 907 F. Supp. 1361, 1377-78 (N.D. Cal. 1995). 54 Harvard Journal o f Law & Technology Vol. 10 intellectual property right were the norm; thus, any deviation would somehow be a"taking" from the copyright holder. At one point it goes so far as to describe fair use as a "tax" on copyright holders. Yet by the same (or shghtly befler) logic, one could descnhe copyright itself as a "subsidy." ~" The Bills go even further. New definitions would widen the copyright holder's distribution right to cover every transmission of the work. Civil liability would be imposed on creators of any device with the primary purpose or effect of interfering with an author's copy protection system. This sounds eminently reasonable, until one realizes that it could be used to attack everyone from the shareware creator o f a macro designed tO maintain browser privacy on the Web to the software company that creates a device to crack open a program's protective system, even though the device was created for the legitimate goal of decompiling the program in order to make it interoperable with other programs. By expanding copyright liability dramatically, the effect of the White Paper and the Bills is to shiR power from users and future creators to current copyright holders. What car, we learn from this? Quite a lot. In fact, these proposals are a kind of checklist of ways to fail at the task of fashioning a good intellectual property regime. First, the current proposals show tha::;.~:is always easier to imagine an infringing use of a new technology than to imagine the ways in which the technology will lower costs and offer new markets. Consequently, we tend to over-protect; we are thinking about losses, not corresponding gains. The authors of the White Paper and the drafters of the WIPO proposals focus on ways that the Interact will lead to widespread copying of digital products, rather than thinking about how it might also allow producers to make money through different business strategies or to gain a greater return from a lower investment. This kind of technological tunnel vision seems to afflict content providers and their allies whenever any new copying technology arrives. When VCRs first came on the market, Hollywood and the TV industry wanted them taxed to compensate for revenues lost through home taping of protected material. The issue even went to the Supreme Court in the Sony Betamax case, L7 where home taping was upheld as fair use and therefore excused under the copyright laws. Congress and the Supreme Court refused to tax VCRs; their prices dropped; they achieved unprece- dented market penetration, boosting demand for new "content.", As a result, video rentals became one of Hollywood's largest sources of revenue. A "copying" technology tumod out to produce gaim as well as 17. Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984). I am indebted to Pamela Samuelson for the development of this point. No. 1 Intellectual Property Policy Online 55 losses. If the maximalist intellectual property agenda had triumphed, content providers would have been wedded for longer to their old business strategies, at a net loss to all concerned. On the Internet, the same is likely to be true. The distribution of the Netscape browser is a nice illustration: the company believes, and the market seems to agree, that there are lots of ways to extract value from information products without forcing users to pay for each drop. To put it briefly, both the impact of a new technology and the economics of a networked enviro~unent are complicated. Congress and WIPO are rushing to %ave" the Interact-- perhaps the most vigorous and rapidly expanding of all m e d i a - and doing so without understanding the technologies, business strategies, and economic realities produced by the new medium. This is a big mistake. Second, these proposals show that policymakers undervalue the importance of the public domain as a prerequisite for future creation. The White Paper, theBills, and the WIPO proposals seem to be caught in the thrall of the simplistic "linear function" approach to intellectual property described earlier. Elsewhere, I have suggested that there are deep conceptual roots to this tendency. Under current law, something has to be "original" to receive cop)right protection. By focusing on the term "original," we inevitably underestimate the extent to which the work we are protecting depended on material in the public domain. The romantic idea of originality tends to produce a notion of creators who produce works "out of thin air." Third, these proposals show the difficulty that a formalistic model of copyright policy has in dealing with the distributed architectme of the Internet. As a legal regime, copyright premises liability (largely) on copying. If one sees inf~llectual property as the kind of SimCity balancing act that I described earlier, then the question of how to achieve that balance will depend in part on the technology by which works are created, used, and sold. Cop) right marks the attempt to achieve for texts and other works a balance in which the assumption of the system is that widespread use is possible without copying. The relative bundles of rights of the user and the owner achieve their balance based on a set of economic and technical assumptions about the meaning of normal use. The user can do a great deal with a book without copying it; she can borrow it from a library, browse it in a store, buy it, and then lend or resell it. The relatively expansive rights of the copyright holder are thus confined in practice to those occasions and uses for which copying~e would be necessary. But on the Internet, transmission means the 18. Or an exercise ofone of the holder's other exclusiver ights. 56 Harvard dournal o f Law & Technology V'ol. 10 generation o f lots o f temporary, unstable copies. 19 That's what transmis- sion gs. Thus i f one labels each o f these temporary evanescent copies as "copies" for the purposes o f copyright, one has dramatically shifted the balance o f power from users and future creators to current fights-holders, solely on the basis ~0f a technological accident. Given the legislative history o f the copyright statute, 2° this definition o f " c opy " is bad law on very traditional grounds. It is also an extremely silly way to choose (or fail to choose) the property structure o f the information age. It vi~lates what Laurence Tribe calls the principle of"technological transparency" or technological neutrality, the principle that the social meaning o f rules and standards should not be undermined or inflated, simply because an accidental technological change transforms one o f the triggers to liability. 21 Fourth, and perhaps most important, the reaction to these proposals shows that we do not yet have a politics of intellectual property." Media coverage o f intellectual property issues is intermittent and uncritical; "cyberporn" interests journalists more than the economic ground rules for the information age. The privatization o f public lands is likely to draw a much more heated reaction than the privatization o f the public domain. Coalitions o f those injured by over-expansive intellectual property rights m civil libertarians, innovative software developers, librmians, teachers, and so on m are only beginning to form. It seems that a lot could be learned from the history o f the environmental movement. That movement not only alerted the public that the political process was falling to take account o f an important set o f values that in the long run would affect everyone, but offered a set o f conceptual tools that helped us both to understand those issues and to build coalitions around them. We need an equivalent set o f tools for understanding the effects o f intellectual property on the cyberne~c commons. But that is a subject for another essay. I began with an intellectual property policy primer for non-lawyers for a reason. Lawyers will continue to have an-important role in the development o f intellectual property, but we need a democratic politics o f intellectual prope~f< protection. When presidential candidates propose a flat tax, everyone understands roughly what the issues are, what the distributional effects are likely to be, the competing claims 19. Though,t o reiterate,e ven undert he traditionald efinitionm osto ft hose copies are too'm~table and evanescent to count as copies for the purposes of the CopyrightA ct. 20. H.R. Pep. No. 94-1476 at 53 (1976). See infra text accompanyingn otes 41-66. 21. LaurenceH . Tribe,T he Constitutioni n Cyberspace,K eynoteA ddress at The Fimt Conference on Computers, Freedom & Privacy (Mar. 26-28, 1991) (prepay! remarks available at <http://www.cpsr.org/Rp/cpsr/conferences/cfp91/papers/tribe>). 22. See James Boyle, Sold Out, N.Y. TIMES,M ar. 31, 1996, at E 15.