IN THE DIGITAL ERA
Building Evidence for Policy
Committee on the Impact of Copyright Policy on
Innovation in the Digital Era
Board on Science, Technology, and Economic Policy
Policy and Global Affairs
Stephen A. Merrill and William J. Raduchel, Editors
NATIONAL RESEARCH COUNCIL
OF THE NATIONAL ACADEMIES
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NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance.
This study was supported by Contract/Grant No. 2009-10-15 between the National Academy of Sciences and the Alfred P. Sloan Foundation; Contract/Grant No. ll05-0789 between the National Academy of Sciences and the Ford Foundation; Contract/Grant No. LG-00-10-0247 between the National Academy of Sciences and the Institute of Museum and Library Sciences; and Contract/Grant No. SMA-l014801 between the National Academy of Sciences and the National Science Foundation. Additional funding provided by the American Chemical Society; the Business Software Alliance; the Entertainment Software Association; Google Inc.-Tides Foundation; Intel; Microsoft; the Motion Picture Association; and Pamela Samuelson and Robert J. Gulshko. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the authors and do not necessarily reflect the views of the organizations or agencies that provided support for the project.
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COMMITTEE ON THE IMPACT OF COPYRIGHT POLICY ON INNOVATION IN THE DIGITAL ERA
William J. Raduchel, Chair, Independent Director and Investor
Peter S. Menell, Vice Chair, Robert L. Bridges Professor of Law and Director, Berkeley Center for Law and Technology University of California at Berkeley, School of Law
Michael A. Keller, Ida M. Green University Librarian and Director of Academic Information Resources, Stanford University
Christopher M. Kelly, Independent Consultant
Ruth Okediji, William L. Prosser Professor of Law, University of Minnesota, Minneapolis
Marilyn Hall Patel, Judge (retired), U.S. District Court for the Northern District of California
Mitch Singer, Chief Digital Strategy Officer, Executive Vice President, New Media and Technology, Sony Pictures Entertainment, Inc.
Christopher Sprigman, Class of 1963 Research Professor in Honor of Graham C. Lilly and Peter W. Low, University of Virginia School of Law
Scott Stern, Professor of Technological Innovation, Entrepreneurship, and Strategic Management, Sloan School of Management, Massachusetts Institute of Technology
Molly S. Van Houweling, Professor of Law and Faculty Director, Berkeley Center for Law and Technology, University of California at Berkeley, School of Law
Paul Vidich, Independent Director and Consultant
Joel Waldfogel, Frederick R. Kappel Chair in Applied Economics, Carlston School of Management, University of Minnesota
Stephen A. Merrill, Study Director
Aqila Coulthurst, Program Coordinator
Cynthia Getner, Financial Officer
Daniel Mullins, Program Associate (through 2011)
BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY (STEP)
For the National Research Council (NRC), this project was overseen by the Board on Science, Technology, and Economic Policy (STEP), a standing board of the NRC established by the National Academies of Sciences and Engineering and the Institute of Medicine in 1991. The mandate of the STEP Board is to advise federal, state, and local governments and inform the public about economic and related public policies to promote the creation, diffusion, and application of new scientific and technical knowledge to enhance the productivity and competitiveness of the U.S. economy and foster economic prosperity for all Americans. The STEP Board and its committees marshal research and the expertise of scholars, industrial managers, investors, and former public officials in a wide range of policy areas that affect the speed and direction of scientific and technological change and their contributions to the growth of the U.S. and global economies. Results are communicated through reports, conferences, workshops, briefings, and electronic media subject to the procedures of the National Academies to ensure their authoritativeness, independence, and objectivity. The members of the STEP Board and the NRC staff are listed below:
Paul Joskow, Chair, President, Alfred P. Sloan Foundation
Ernst Berndt, Louis E. Seley Professor in Applied Economics, Massachusetts Institute of Technology
Ralph J. Cicerone (ex-officio), President, National Academy of Sciences
John Donovan, Senior Executive Vice President, AT&T Inc.
Harvey V. Fineberg (ex-officio), President, Institute of Medicine
Alan Garber, Provost, Harvard University
Ralph Gomory, Research Professor, Stern School of Business, New York University
William H. Janeway, Partner, Warburg Pincus
Richard Lester, Japan Steel Industry Professor, Department of Nuclear Science and Engineering, Massachusetts Institute of Technology
David Morgenthaler, Founding Partner, Morgenthaler Ventures
Luis M. Proenza, President and Chief Executive Officer, University of Akron
William J. Raduchel, Independent Director and Investor
Kathryn L. Shaw, Ernest C. Arbuckle Professor of Economics, Graduate School of Business, Stanford University
Laura D’Andrea Tyson, S.K. and Angela Chan Professor of Global Management, Haas School of Business, University of California at Berkeley
Hal Varian, Chief Economist, Google, Inc.
Charles M. Vest (ex-officio), President, National Academy of Engineering
Alan Wm. Wolff, Senior Counsel, McKenna, Long & Aldridge LLP
Stephen A. Merrill, Executive Director
Charles W. Wessner, Program Director
Sujai Shivakumar, Senior Program Officer
David Dierksheide, Program Officer
McAlister Clabaugh, Program Officer
Paul Beaton, Program Officer
Aqila Coulthurst, Program Coordinator
David Dawson, Senior Program Assistant
Cynthia Getner, Financial Associate
After 10 years studying the economic and research impacts of the patent system, it was apparent to members of the National Academies’ Board on Science, Technology, and Economic Policy (STEP) that another intellectual property regime, copyright, exhibited similar characteristics. Over the course of several decades, copyright protection has been extended and strengthened through legislative changes occasioned by national and international developments. The domestic industries reliant on copyright and its exceptions, and in some cases balancing the two, have become more important economically as sources of growth, high-paying jobs, and exports. And these industries have undergone a technological revolution that raises questions about the feasibility of some types of copyright protection, how incentives for content creation, distribution, and use are changing, and the copyright system’s impact on technological innovation.
Unlike the patent system, however, copyright has not historically attracted the same level of research interest and effort that helps inform public policy choices. As a result, copyright debates are poorly informed by objective data and empirical research. The STEP Board concluded that in these circumstances a useful step would be to develop an agenda for empirical research on copyright in the digital era, explore its feasibility primarily in terms of data requirements, and encourage public and private research funders to pursue it.
The STEP Board is not the first Academy committee to recognize the need for empirical research on the effects of copyright. In its 2000 report,
Research should be conducted to characterize the economic impacts of copyright. Such research might consider, among other things, the impact of network effects in information industries and how digital networks are changing transaction costs.
Research should be initiated to better assess the social and economic impacts of illegal commercial copying and how they interact with private noncommercial copying for personal use.
Despite this call, in the intervening 13 years, only very modest progress has been made.
The Academies sought diverse and balanced public and private funding for the project. Two federal government agencies, two philanthropic institutions, a scientific society publisher, three industry trade associations, three corporations, and two individuals responded generously. The Academies are grateful for support from the following:
National Science Foundation
Institute of Museum and Library Services
Alfred P. Sloan Foundation
American Chemical Society
Business Software Alliance
Entertainment Software Association
Motion Picture Association of America
Google Inc.-Tides Foundation
Pamela Samuelson and Robert J. Glushko
The Chairman of the National Research Council appointed a committee including economists, legal scholars, individuals with expertise in the film, music, publishing, software, and social networking industries, an author, a university librarian and publisher, and a Federal District Court judge. The Research Council’s Governing Board Executive Committee presented the committee with the following charge:
An ad hoc committee under the auspices of the National Academies’ Board on Science, Technology, and Economic Policy (STEP) will evaluate and propose how to expand and improve research on the impacts of copyright policy, particularly on innovation in the digital environment.
First, the organizing committee will identify key issues for and methods of investigation and the experts best able to address them. The committee will also commission a small number of background papers. Second, the committee will convene a multi-disciplinary workshop with experts in the field. Third, following the workshop, additional experts will be invited to comment on the ideas and proposals discussed at the workshop via the project’s public website. Fourth, the committee will prepare a final report assessing the current state of the research field, identifying policy-relevant research questions that need attention, suggesting how to approach these topic and recommending how public agencies and private institutions might support such work.
In the course of preparing this report, the committee met three times. At two of these meetings, presentations were made by individuals from government and the private sector. The committee commissioned four original background papers that are summarized in this report. These papers were discussed in an online forum and with invited participants in a public workshop in Washington, DC, on June 8, 2011, at which the newly appointed Register of Copyrights, Maria Pallente, made opening remarks. The June 2011 workshop consisted of two parts: a facilitated discussion with approximately forty invited legal scholars, economists, government officials, and representatives of content owners and civil society organizations; and a more unstructured discussion with a larger group of respondents to a public announcement. The first part of the workshop was instrumental in helping to formulate the framework of research questions and data needs described in this report, both of which were further elaborated in the broader exchange and in the committee’s deliberations. For logistical reasons the online discussion preceded rather than followed the workshop and focused entirely on the commissioned paper drafts.
One other observation about the committee’s statement of work is in order. In addition to suggesting research topics and methods, we offer research funding organizations guidance about coordinating their efforts, consulting with investigators on data priorities, and assisting in data acquisition. We make no recommendations about the process of awarding research grants nor about the scale of investment needed.
The papers listed below were commissioned by the committee and are available on the Academy website at http://sites.nationalacademies.org/PGA/step/copyrightpolicy/index.htm#papers:
“The Impact of Digitization on Business Models in Copyright-Driven Industries: A Review of the Economic Issues” by Lisa Cameron and Coleman Bazelon, The Brattle Group
“Economic Effect of Copyright: The Empirical Evidence So Far” by Christian Handke, Erasmus University, The Netherlands
“Online Access and the Scientific Journal Market: An Economist’s Perspective” by Mark J. McCabe, University of Michigan
“Copyright-Protected Assets in the National Accounts” by Rachel Soloveichik and David Wasshausen, Bureau of Economic Analysis, U.S. Department of Commerce
A fifth paper, by committee member Joel Waldfogel, University of Minnesota, was not commissioned by the committee but was presented and discussed along with the four papers listed above and is available on the website:
“Bye, Bye Miss American Pie? The Supply of New Recorded Music Since Napster”
The committee is grateful to these authors, whose backgrounds are described in Appendix B, and their supportive organizations for greatly contributing to our understanding of the copyright system, its economic and technological context and effects, and the limits of our knowledge about these phenomena.
The committee discussed its conclusions and prepared its recommendations at a final meeting hosted by the Berkeley Center for Law and Technology. We appreciate the assistance of the Center’s executive director, Robert Barr, and staff.
This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies’ Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the process.
We wish to thank the following individuals for their review of this report: Jonathan Band, Georgetown University; Rob Chandhok, Qualcomm; Carol Corrado, The Conference Board; Peter DiCola, Northwestern University; Daniel Edelstein, IBM; Joan Feigenbaum, Yale University; Shane Greenstein, Northwestern University; Christian Handke, Erasmus University, Rotterdam; Ian Hargreaves, Cardiff University, Wales; Joe Karaganis, American Assembly of Columbia University; Stan Liebowitz, University of Texas-Dallas; Michael Nelson, Georgetown University; Marybeth Peters, Oblon, Spivak, McClelland, Maier & Neustadt, L.L.P.; Charles Phelps, University of Rochester; Dan Rubinfeld, University
Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations, nor did they see the final draft of the report before its release. The review of this report was overseen by Joe Cecil, Federal Judicial Center, and William Press, University of Texas at Austin. Appointed by the National Academies, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution.