The Legal Janitor

Preliminary Issues

I wanted to reply to the comments here, but decided that this warrants a whole entire post to itself.

This is for Huichieh. Despite the fact that Henninger writes for the WSJ, if you’ve read enough of his editorials, you would realise that he knows as much economics as he knows that he’s an asshat. I’m not the only one who thinks so.

———————————————————————————————————————
The Reason for Property Rights

Why do we have property rights? We can look at it from 2 perspectives.

First, we can say that it is only fair and right people to own the product of their labours. Thus, from this perspective, we can argue that property rights are natural rights, granted to protect individual freedoms and liberty. (I’m not going into the whole Marxist critique of property rights now, let’s just stick with this view ok? I’m already feeling like I’m in way over my head. -Han) You could say this view was borne out of the acute desire of individuals to resist the predations of kings, despots and dictators. How little has changed since then.

The other view is an economic one. We ask ourselves, what system of ownership of property is the most beneficial and least destructive to people and property. Most people would have heard of the Tragedy of the Commons, and private property rights are the precise remedy for the destructive competitive plunder of scarce resources.

Furthermore, individuals are best able to calculate the costs and benefits that accrue to themselves in relation to usage of property, hence private property rights also allow for the most efficient usage and allocation of property.

———————————————————————————————————————
The Limits of Property

If the justification for private property rights is rooted in the protection of human rights, the right to freedom and liberty, then surely it strongly suggests that property rights are not an end in itself, but a means to an end. Certainly, there are many rights that make up human rights, and quite often, these various rights come into conflict.

Certainly, under the law, property rights are not absolute. Singapore is not the only country with a Land Acquisitions Act. One can do a search on Google and find that most common law countries have legislation enabling the state to compulsorily acquire land.

In many common-law jurisdictions, such as the UK, US and Australia, there has been indication that the judiciary are increasingly willing to define certain spaces as quasi-public, for example, shopping malls, parks etc, where the power of private owners of property to exclude others at will may be limited by the law. If the private property relies on the open invitation to the public for its operation, such as a shopping mall, then to arbitrarily exclude people would be construed as an infringement on the human right to freedom of movement and assembly.

———————————————————————————————————————
Individual Liberty and ‘Intellectual Property’

The above examples are to show that property rights are not absolute. Depending on context, sometimes some rights are given weightier consideration than others. In the same manner, ‘intellectual property’ rights are not excluded from such limitations.

In fact, I would argue that ‘intellectual property’ rights should be even more aggressively constrained, for the simple reason that the ownership of ideas and expression of ideas fundamentally infringe on the human right to freedom of expresssion.

For example, under current copyright laws, it would be against the law to take 2 songs and remix them, without the permission of the rights owners. In fact, sampling any amount of a copyrighted song under current Singapore law is copyright infringement. This basically means that there is no de minimis exception for the using of copyrighted works in new works. Unfortunately, that is precisely how new works are created: through the remixing, mashing and synthesis of prior works. Mark Vidler of Go Home Productions provide an aurally vivid example. COMPASS is telling all amateur DJ’s, aspiring musicians and Garagebanders that they can go fuck themselves.

Musical works are always built upon the works of others before, and ‘new’ music is always a synthesis of prior forms of music. Factor in the consideration that COMPASS requires all members to assign copyrights to itself as a condition of membership. Does this not start to look suspiciously like monopolistic rent-seeking plus indentured servitude? COMPASS is telling us that “all your culture are belong to us”.

Amatuer musicians and DJs will not have the resources to apply for clearance with the various copyright owners. The cartel also have no incentive to license their copyrights. Why would they offer independent artists a chance to compete with themselves? Since sampling is not de minimis, any sequence of music can become copyright infringement, whether intentional or not. Heck, even silence is copyrighted. Is it even possible to avoid copyright infringement anymore?

Ultimately, this must remain foremost in our considerations: [taken from Matt Yglesias]

the issue in play here is that the purpose of intellectual property laws is “to encourage innovation and creativity, and not to create and preserve asset titles for corporations and individuals“

———————————————————————————————————————
The Economic Case for ‘Intellectual Property’ Rights

Exhibit A:

The number of CDs and other music products shipped from record labels to retail merchants rose 2 percent last year, to 814 million units, the first annual increase in five years, according to the Recording Industry Association of America.

Exhibit B:

There is only one logical integration of all these statistics with the recent Soundscan data: even though actual point-of-purchase sales are up by about 9% in the US - and the industry sold over 13,000,000 more units in 2004 (1st quarter) than in 2003 (1st quarter) - the Industry is still claiming a loss of 7% because RIAA members shipped 7% fewer records than in 2003.

Forget the confusing percentages, here’s an oversimplified example: I shipped 1000 units last year and sold 700 of them. This year I sold 770 units but shipped only 930 units. I shipped 10% less units this year. And this is what the RIAA wants the public to accept as “a loss.”

Apart from the conclusion that RIAA and COMPASS are lying bastards, we also can start to perceive the real effect that P2P downloads actually have on the sales of copyrighted works.

Mark Cuban says:

DVDs - Huge Increase in Sale
Digital Photographs - Huge Increase in Sales (see Corbis and other outlets)
Video Games - Huge Increase in sales
Software - Not huge increase percentage wise, but increases in actual dollars? I couldn?t find a specific reference. Anyone have one?
Ringtongs - Huge increases in Sales

So, using Mitch Bainwol/RIAA logic. If 5 digital based products sold since filesharing came on the scene are showing flat at worst, up huge at best sales, doesn?t it hold true that filesharing can?t hurt and must BENEFIT digital product sales?

I don’t think there is any doubt that file-sharing has decreased on any level. Anyone who has ever heard of Bittorrent would conclude that in terms of volume of data traded, the amount has never been greater. Music, movies, all manner of digital media are being copied 24/7 over the net. How then does one explain the increase in revenues and profits by the copyright cartel?

Again, let us be reminded that copyright laws are not meant to benefit industry incumbents. Matt Yglesias points out:

P2P probably is a problem for the major record companies, both because infringement will reduce their sales potential, and also because it will make it easier for public domain and independent works to be distributed and publicized. This, however, simply isn’t something IP law is supposed to prevent. The health of music-production as an endeavor is not at all the same thing as the financial status of the RIAA’s membership.

Will people stop making music if they cannot sell through the labels? Will bloggers stop blogging because they don’t get paid per article? Do we despair of human ingenuity such that we cannot imagine new and alternative ways of monetizing our talents?

Exhibit C:

In 2002 and 2003, Fiona Apple recorded what would have been her third album, “Extraordinary Machine.” Its producer, Jon Brion, has said that Ms. Apple’s label, Sony Music’s Epic Records, shelved the album because it didn’t hear potential hit singles. An Epic spokeswoman said, “Fiona has not yet delivered her next album.” Lately, what purports to be the full album, 11 songs, has been leaked onto the Internet, where - despite the efforts of Sony’s legal department - a simple search will find multiple sources of downloads. The album is an oddball gem…

Had it been released, “Extraordinary Machine” would have been a fine counterbalance to a pop moment full of monolithic, self-righteous sincerity. As it stands, mysteriously leaked and proliferating, the album is an object lesson in how an Internet that’s not controlled by copyright holders can set artistic expression free.

The real question we must ask ourselves, is whether stronger copyright laws truly benefit the real providers of creative fuel for artistic works, the musicians, the songwriters, the singers etc. Keep in mind, who the true copyright owners are. I provide the evidence, you be the judge.

Remember when I said that “ideas and expression of ideas are inherently non-rival and non-excludable…information and data can essentially be replicated infinitely“? Huichieh asks:

what’s all that got to do with the justifiability of copyrights?…The question for us all is: do we want to do without the profit motive in the realm of ideas (even while keeping another option open for those who are not in the ideas business for profit).

And again, Matt Yglesias provides the answer:

With rivalrous goods, theft can never be a Pareto-optimal exchange (i.e., it always makes the property owner worse off)… Intellectual property isn’t like that at all… with intellectual property, unlike with physical property, the socially optimal amount of infringing is non-zero.

Pareto-optimal instances of infringing use — which is to say instances that make some people better off, and no people worse off, than they would have been had the infringing not taken place — are exceedingly common. Indeed, it seems to me that most copyright infringement is like that. People “steal” a file that, had they been unable to “pirate” it, they simply wouldn’t have bought. In a case like this, the infringer is made better off, and the copyright holder is no worse off than he would have been had the infringement not taken place. Indeed, the copyright holder may benefit through, e.g., higher concert ticket or merchandise sales or because the infringer exposes the work to a broader audience, some proportion of which winds up paying for the work. But — and it’s important to keep this in mind — the case for infringement in these cases where there’s no crowding out of purchases does not depend on the notion that the holder may reap some spillover benefits. The infringement itself, as long as it’s not a crowding infringement, is a benefit to society just on its own.

This is especially relevant when dealing with Henninger’s parting cheap shot in the WSJ editorial:

Some who will spend hundreds of dollars for iPods and home theater systems won’t pay one thin dime for a song or movie. So Steve Jobs and the Silicon Valley geeks get richer while the new-music artists sweating through three sets in dim clubs get to live on Red Bull.

This statement is so devoid of economic reasoning that I find it laughable Henninger writes for a supposed business newspaper. Comparing iPods to music and movie is like comparing Henninger to an economist.

Consider:

While production of iPods and music/movies both have initial startup costs (fixed costs), where both diverge is at the point of production. The marginal cost of producing 1 more unit of iPod is X, while the marginal cost of producing 1 more unit of song/movie is zero. Yes, that’s right, it costs zero to replicate a song or a movie file.

This is the fundamental difference between a physical object, and an idea/expression of an idea. And this is the precise reason why the fact that “information and data can essentially be replicated infinitely” is relevant. It is not possible to give iPods away for free because of marginal costs of production. Producers of music and movies bear no such costs to produce an additional unit of music or movie. That they have chosen to confine their product to a physical medium (CDs, DVDs, Cinema) is irrelevant. If consumers wish to buy the physical product, it is their choice. But where marginal costs of production is zero, how is it justified for them to force consumers to pay (via civil and criminal provisions)?

The real point, is that Huichieh is asking the wrong question. No one is saying that the profit motive no longer matters. The question should be “how should I pursue profits in light of new opportunities“. It is obvious then that Huichieh has been mislead by the economic ignoramus that is Daniel Henninger.

———————————————————————————————————————
Conclusion

I have demonstrated that as a matter of human liberty and freedom, rights are never absolute, and must always be weighed against other fundamental human rights. Under the law, property rights are not absolute, but rather, are limited when balanced against other human rights such as freedom of movement and freedom of speech. Rights in intangible property are no different.

Keeping in mind that the purpose of copyright law is to promote and encourage innovation and production of creative works, I have also demonstrated that strong copyright protections have, at best, an ambivalent effect on the creation of new works. Instead, it is very likely to hinder cultural production precisely because overstrong and overbroad copyright protections provide existing rights-holders with an implicit subsidy, protectionist barriers to entry, and tools for monopolistic rent-seeking.

For Singapore to become a world-class cultural exporter, we cannot legislate purely based on the lies of a few entrenched corporate interests. Public policy must be formed with rigorous empirical research. In this respect, our Parliament has failed us. Don’t be surprised that in 10 years time, Singaporeans will own none of the creative works that they produce.

As the Americans would say, all your culture are belong to us.

From a Singapore Angle - On Copyright *reply to them*
John Holbo - No matter who wins, we lose *agree with them*
COMPASS *the copyright cartel’s flunkies in Singapore*
Henninger - Can Justice Scalia Solve the Riddles Of the Internet? *editorial from an asshat*

*reference reading for economics*
The Library of Economics and Liberty - Property Rights
The Library of Economics and Liberty - Tragedy of the Commons

*evidence of lying by copyright cartel*
CNet - Music sales rise in United States via Boing Boing - Record sales up, P2P sales up — RIAA’s story doesn’t add up
KNIS - Nielsen Rating System At Odds With RIAA’s Claim Of “Lost Sales”
NYTimes - MUSIC | BOOTLEG REVIEW - The Lost Apple [registration required]
BBC News - Silent music dispute resolved

*supporting arguments*
Mark Cuban - Let’s test the RIAA logic
Matthew Yglesias - Socially Optimal Piracy
Matthew Yglesias - Impact?

*academic research and case studies*
Stanford Centre for Internet and Democracy - Mark Cooper - Time for the Recording Industry to face the music; The Political, Social and Economic benefits of Peer-to-Peer Communications Networks
Eric von Hippel - Democratizing Innovation

*forthcoming peer-reviewed journal papers*
Orbach - Antitrust and Pricing in the Motion Picture Industry
Hovenkamp - US Antitrust Policy in an Age of IP Expansion