Innovation is under siege. Techdirt has cataloged the threats posed by increasingly aggressive copyright laws. I'd like to offer three reasons why we find ourselves in this situation.
- The first reason is the overheated rhetoric used by copyright holders. Today's debate takes place on a playing field marked by "theft," "piracy," "absolute property," and "rogue websites." The terms are trumpeted from the highest echelons of government. They are bellowed from Hollywood and the record labels. And they have controlled the debate.
It does not matter that the assertions are false. Nowhere (other than in the mythical world propounded by copyright holders) do property owners have absolute rights. The rights to exclude, use, and transfer that make up property law are subject to at least 50 limits, such as easements, zoning, eminent domain, public access to beaches, and anti-discrimination laws.
It is also crystal clear that taking a physical good (and leaving nothing for others) is far different than "taking" a copyrighted work (which, as sampling shows, can increase demand). The nonrivalrous nature of the copyrighted work means that one person’s consumption does not diminish the amount left for others to consume. In fact, "pirates" often are some of the entertainment industry's best customers.
- The second reason for the threats to innovation is copyright owners' panic upon the introduction of new technologies. John Phillip Sousa thought the player piano would lead to "a marked deterioration in American music." Jack Valenti famously thought the VCR was to the American public as "the Boston strangler is to the woman home alone." The panic has extended to numerous technologies, including MP3 players, p2p software, DVRs, and digital radio and TV.
But in fearing the potential of the new business models, copyright holders offer a classic example of market leaders that fail to appreciate disruptive innovation. Clayton Christensen famously showed that, when faced with a new technology that threatens to upset a profitable business model, market leaders tend not to appreciate the full potential of the new paradigm.
A decade ago, the recording industry responded to Napster, which was striving to be "the online distribution channel for the record labels," not by striking a deal that would have seamlessly transported the industry into the digital era, but by suing it. While the record labels may have won the battle in shutting down Napster, they began to lose the war, as former users migrated to other p2p networks.
- The third reason is what I call the "innovation asymmetry." By that I mean that courts and policymakers overemphasize the importance of infringement. Infringing uses of a technology are presented on a silver platter by copyright holders that have every incentive and ability to highlight figures of "massive" infringement, however flawed they may be.
In contrast, the noninfringing uses are more abstract and not advanced by such a band of zealous advocates. It is difficult to put a dollar figure on the benefits of enhanced communication and interaction. In addition, the uses are more fully developed over time. When a new technology is introduced, no one, including the inventor, knows all of the beneficial uses to which it will eventually be put.
Just to offer two examples, Alexander Graham Bell thought the telephone would be used to broadcast the daily news, and Thomas Edison thought the phonograph would be used to record the wishes of old men on their death beds. Nor is the disappearance of the new technology likely to be lamented, as it will not disrupt settled expectations. This asymmetry, combined with costly litigation (which ensnares small technology makers in a web of complex tests and unaffordable lawsuits) explains why courts do not appreciate innovative technologies.
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