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Forseeability and Copyright Incentives

By Senior Copyright Counsel, Google Inc.

Professor Shyamkrishna of the University of Chicago Law School has an article called "Forseeability and Copyright Incentives, coming out in volume 122 of the Harvard Law Review but available here in draft form at ssrn. The topic is an intriguing one -- if copyright is instrumental, meaning incentive based -- how is that so little of how copyright actually works does not bear the slightest resemblance to incentives? This was the topic of then Professor Stephen Breyer's 1970 "Uneasy Case for Copyright " article (also in the Harvard Law Review). I regret to say that in my opinion Professor Shyamkrishna's work doesn't approach the Breyer article in its rigor or in making its case. Even worse, I think Professor Shyamkrishna's work contains a number of basic errors that should cause some rethinking.

His basic point is one I agree with and which I think deserves serious scholarship. The point is this: if copyright is instrumental -- and it is hard to look at the relevant Supreme Court opinions, the language and history of the Constitutional clause and think otherwise regardless of one's own views -- then it is incumbent to determine whether that instrumental goal is being fulfilled, not just as a systemic issue, but at the micro level. At the micro level, it is hard to look at the current level of protection and think there is any correlation at all between that protection and incentives to create. (It is a very different question whether the failure to match incentives to protection rises to the level of a constitutional infirmity, as Eldred illustrates).

To his credit, Professor Balganesh takes on a number micro issues, such a new uses, substantial similarity, and fair use. He proposes employing, as a common law tool, the foreseeability theory/behavior economics theory approach to deciding these issues. Both take as a starting point the idea of "bounded rationality": we each only know so much. This is in contradistinction to the neoclassical economic assumption that we are perfectly rational and readily respond to utility-enhancing incentives. Put crudely in Chicago terms, are you with Richard Posner or Cass Sunstein? I think you can be with neither, and that is part of my disagreement: many articles create a whipping boy that is then used to show why your pet theory is superior. OK, but the proof is always in the pudding on how your theory works out.

And again to Professor Balganesh's credit, he takes the bold step of offering some hypos and seeing how they would pan out with his theory. Here are some of my issues with how he approaches the hypos and works them out. First, the new use issue -- in 1955 did an author think of VCRs in authorizing his or her work to be "exhibited" -- is not a copyright issue at all, and is instead a contract issue, and a state contract issue at that. The Second Circuit has made this clear many times. Second, on fair use, it is not true as Professor Balganesh states that "the doctrine of fair use is of statutory origin." (page 11). It is a common law doctrine. Nor do I agree with his remark that "It remains common consensus among copyright scholars that the fair use doctrine -- as it is structured and applied today-- remains deeply flawed." (page 5, note 16). I appreciate that academics don't regard me as a scholar, but others who also aren't scholars but who are respected, like Judge Leval, take a very different view. More to the point, Professor Balganesh's interpretation of how transformative use is intended and works in practice is simply wrong; for example, he states "for uses that don't directly modify the substantive content of the work, the transformative use test becomes somewhat meaningless." (page 12). Not only has Judge Leval rejected this erroneous view of what is after all his own theory, but there are many cases to the contrary, such as the Perfect 10 v. Amazon.com case, which Professor Balganesh doesn't cite, and two that he does cite, one incorrectly for holding that such change is required -- the Bill Graham case -- and the Kelly Arriba case which he acknowledges but then cites another law professor who describes Kelly as a misapplication of transformative use. One can regard Kelly as a misapplication if you like, but that doesn't mean the opinion is menaingless; quite the opposite, the P10 case followed it, and Judge Leval has endorsed it as well.

One final example of my problems with the article; this one illustrates Professor Balganesh's failure to appreciate the role that Congress plays. Professor Balganesh discuses the Supreme Court's 1908 White-Smith opinion holding that perforated piano roles were not a copy of the underlying music. Professor Balganesh interprets the parties' briefs to have raised his foreseeability theory, but is upset that the Supreme Court decided the case on statutory interpretation grounds. Then, and this is regarded as particularly bad, having decided the case on statutory grounds, Congress went ahead and amended the statute, rendering, it is said, the Curt's reasoning as redundant. Had the Court decided the case on the foreseeabilty ground allegedly argued, Professor Balganesh argues, the Curt "might have reached the same conclusion -- but on much surer footing."

Really? I doubt it. But in any event, Congress had been deliberating amendments on point years before White Smith and, moreover, Congress did not reverse the Court's interpretation of the term "copy": that interpretation remained the law until the 1976 Act. What Congress did was to create a compulsory license, a license that had nothing to do with forseeability, but which neatly both gave copyright owners for the first time remuneration for the mechanical reproduction of their compositions, and which broke the tying arrangement that underlie the White Smith case.

Professor Balganesh has taken on a very important issue, and he may be the person to see it through, but the article as presently written doesn't.

Full post as published by The Patry Copyright Blog on May 07, 2008 (boomark / email).