likely forgo such investments if they are unlikely to recoup them due to infringing copying and distribution by others who seek to profit without compensating the copyright owners. The economic justification for copyright—and for most other forms of intellectual property—thus lies in ensuring that creators have appropriate incentives to engage in creative activities by granting them a bundle of exclusive rights to use their works. Although copyrighted works can be commercial failures, this proprietary approach affords copyright owners the opportunity to charge a price above the cost of the medium—e.g., film, recording, screen, network, or printed page—on which the copyrighted work is distributed. Exclusive rights for authors can also impinge on subsequent creators and technological innovators, however. The key to ensuring that copyright serves the public welfare lies in balancing the social benefits and costs of providing economic incentives for creation by limiting the duration of copyright, making exceptions, and ensuring that copyrights are mandatorily available for licensing in some circumstances.

For those readers less familiar with the origins and evolution of copyright protection, an appendix to this report summarizes this history and compares copyright and patent law. In the remainder of this section, we focus on legal developments in the digital age.

Advances in the technologies for creating and distributing works of authorship have played a critical role in shaping copyright law throughout its history. Although computer technology became a reality more than half a century ago, it is only in the past two decades that the digital age has begun to disrupt the foundations of the traditional content industries—publishing, music, film, photography, and television. Their long-standing business models—selling books, newspapers, magazines, and recordings, exhibiting films (and later selling and renting home videos and DVDs), and broadcasting music and television shows—had proven quite resilient to the early generations of computer technology. The relatively late onset of the digital piracy threat can be attributed to the sheer informational magnitude of music and film and the ability, only fairly recently, to bring to market affordable, high resolution means for listening to and viewing digital content. Even with the introduction and rapid popularity of digitally-encoded compact disks (CDs) and the proliferation of microcomputers beginning in the early 1980s, content industries did not appreciate the dramatic changes that would be brought about by the emerging digital technologies. Availability of microprocessors, the low fidelity of computer peripherals, and limitations of memory storage capacity prevented content from being stored, perceived, and reproduced efficiently on computer devices until the mid-1990s.

The rollout of the World Wide Web, with its unprecedented ability to distribute digital content instantly and broadly and at no additional or



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