LAW, CONTRACT AND TECHNOLOGY

COPYRIGHT IN WONDERLAND

Giorgio Spedicato, LLM, PhDUniversity of Bologna

SUMMARY

Economics of Copyright Legal Architecture of Copyright Law Copyright and the Digital Millennium Legal provisions on Technological Protection Measures Shape of Copyright Protection Today

THE ECONOMIC RATIONALE OF COPYRIGHT

Properties of works of authorship as economic goods

Works of authorship are public goods as they are: non-excludable (it is impossible or extremely difficult to exclude an

individual user from consuming the good) non-rivalrous (use by one additional user doesn’t reduce the

availability of the good to others)

Moreover, works of authorship have: high costs of production (so called «cost of expression») and low costs

of reproduction

THE ECONOMIC RATIONALE OF COPYRIGHT

In such conditions, a person who is willing to create an original work, not having the certainty that he/she will get an adequate return for his/her investment (in terms of creative effort, time and money), may decide to not produce the good.

MARKET FAILUREThe market does not provide sufficient incentive

to produce works of authorship (positive externalities lost)

THE ECONOMIC RATIONALE OF COPYRIGHT

A legal solution for an economic problem

The attribution of exclusive rights to the author of the work artificially creates the excludability of the good and solve the market failure problem.

EXCLUSIVE RIGHTS = INCENTIVES TO CREATE NEW WORKS

THE ECONOMIC RATIONALE OF COPYRIGHT

A new economic problem created by the legal solution

The attribution of exclusive rights to the author of the work creates monopoly prices (i.e. prices above the marginal costs of production)

EXCLUSIVE RIGHTS = LIMITS TO THE ACCESS TO EXISTING WORKS

THE INCENTIVE/ACCESS TRADEOFF

«Striking the correct balance between access and incentives is the central problem in copyright law» (Landes, Posner, 1989)

THE TRADITIONAL STRUCTURE OF COPYRIGHT

In order to achieve a balance in the tradeoff between incentive and access the copyright law is traditionally structured as follows:

“INCENTIVE” TOOLS “ACCESS” TOOLS

Bundle of exclusive rights

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

THE TRADITIONAL STRUCTURE OF COPYRIGHT

In order to achieve a balance in the tradeoff between incentive and access the copyright law is traditionally structured as follows:

“ACCESS” TOOLSArticle 9.2 TRIPSCopyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such.

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

THE TRADITIONAL STRUCTURE OF COPYRIGHT

In order to achieve a balance in the tradeoff between incentive and access the copyright law is traditionally structured as follows:

“ACCESS” TOOLSArticle 1 Dir. 2006/116/ECThe rights of an author of a literary or artistic work within the meaning of Article 2 of the Berne Convention shall run for the life of the author and for 70 years after his death, irrespective of the date when the work is lawfully made available to the public

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

THE TRADITIONAL STRUCTURE OF COPYRIGHT

In order to achieve a balance in the tradeoff between incentive and access the copyright law is traditionally structured as follows:

“ACCESS” TOOLSSee e.g.:Article 5 EUCD (Exception and limitations)Section 107 US Copyright Act (Fair use)

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

THE TRADITIONAL STRUCTURE OF COPYRIGHT

In order to achieve a balance in the tradeoff between incentive and access the copyright law is traditionally structured as follows:

“ACCESS” TOOLSArticle 4.2 EUCDThe distribution right shall […] be exhausted within the Community in respect of the original or copies of the work, […] where the first sale or other transfer of ownership in the Community of that object is made by the rightholder or with his consent.

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

THE IMPORTANCE OF A FAIR BALANCE

See Preamble of WCT:

«The Contracting Parties, (…) Recognizing the need to maintain a balance between the rights of authors and the larger public interest, particularly education, research and access to information, as reflected in the Berne Convention, Have agreed as follows:»

See recital 31 Directive 2001/29/EC (EUCD):

«A fair balance of rights and interests between the different categories of rightholders, the different categories of rightholders and users of protected subject-matter must be safeguarded. (…)»

THE IMPORTANCE OF A FAIR BALANCE

What about this balance in the digital environment?

THE DIGITAL THREAT…

WIPOIntellectual property on the Internet: a survey of issues

[…]On the Internet (…) one can make an unlimited number of copies, virtually instantaneously, without perceptible degradation in quality. And these copies can be transmitted to locations around the world in a matter of minutes. The result could be the disruption of traditional markets for the sale of copies of programs, art, books and movies.[…]

…AND THE DIGITAL ANSWER

«The answer to the machine is in the machine» (Charles Clark, 1996)

THE DIGITAL ANSWER REVISED

THE DIGITAL ANSWER REVISED

DRM

Any technology (software and/or hardware) used to manage the uses of digital goods throughout their life cycle and to prevent or restrict anauthorized uses.

MANAGEMENT ENFORCEMENT

DRM

Any technology (software and/or hardware) used to manage the uses of digital goods throughout their life cycle and to prevent or restrict anauthorized uses.

MANAGEMENTTECHNOLOGICAL

PROTECTION MEASURES

TWO (VERY) DIFFERENT ANTI-CIRCUMVENTION PROVISIONS

Article 11 WCT

Contracting Parties shall provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors in connection with the exercise of their rights under this Treaty or the Berne Convention and that restrict acts, in respect of their works, which are not authorized by the authors concerned or permitted by law.

TWO (VERY) DIFFERENT ANTI-CIRCUMVENTION PROVISIONS

Article 6, paragraphs 1 and 3 EUCD

Member States shall provide adequate legal protection against the circumvention of any effective technological measures, which the person concerned carries out in the knowledge, or with reasonable grounds to know, that he or she is pursuing that objective.[…]For the purposes of this Directive, the expression “technological measures” means any technology, device or component that, in the normal course of its operation, is designed to prevent or restrict acts, in respect of works or other subject-matter, which are not authorised by the rightholder of any copyright or any right related to copyright as provided for by law or the sui generis right provided for in Chapter III of Directive 96/9/EC. (…)

EFFECTS ON THE SCOPE OF PROTECTION

Authorised by the Rightholder = PermittedNot Authorised by the Rightholder = Forbidden

(no matter if the law permits the unauthorised act)

TECHNOLOGY + LAW reshape completely the scope of copyright protection

TPM VIS-À-VIS EXCEPTIONS AND LIMITATIONS

Article 6, paragraphs 4, EUCD

Notwithstanding the legal protection provided for in paragraph 1, in the absence of voluntary measures taken by rightholders, including agreements between rightholders and other parties concerned, Member States shall take appropriate measures to ensure that rightholders make available to the beneficiary of an exception or limitation provided for in national law in accordance with Article 5(2)(a), (2)(c), (2)(d), (2)(e), (3)(a), (3)(b) or (3)(e) the means of benefiting from that exception or limitation, to the extent necessary to benefit from that exception or limitation and where that beneficiary has legal access to the protected work or subject-matter concerned.

TPM VIS-À-VIS EXCEPTIONS AND LIMITATIONS

Article 6, paragraphs 4, EUCD

A Member State may also take such measures in respect of a beneficiary of an exception or limitation provided for in accordance with Article 5(2)(b), unless reproduction for private use has already been made possible by rightholders to the extent necessary to benefit from the exception or limitation concerned and in accordance with the provisions of Article 5(2)(b) and (5), without preventing rightholders from adopting adequate measures regarding the number of reproductions in accordance with these provisions

TPM VIS-À-VIS EXCEPTIONS AND LIMITATIONS

Article 6, paragraphs 4, EUCD

The provisions of the first and second subparagraphs shall not apply to works or other subject-matter made available to the public on agreed contractual terms in such a way that members of the public may access them from a place and at a time individually chosen by them.

EFFECTS ON THE PERSISTENCE OF EXCEPTIONS AND LIMITATION IN THE DIGITAL ENVIRONMENT

If a work or other subject-matter is made available via the Internet through a combination of contract and technology,

exceptions and limitations simply cease to exist.

CONTRACT + TECHNOLOGY + LAW reshape completely the relationship between exceptions

and limitations and exclusive rights

THE EXHAUSTION PRINCIPLEIN THE DIGITAL ENVIRONMENT

Recital 31 Directive 2001/29/EC (EUCD):

The question of exhaustion does not arise in the case of services and on-line services in particular. This also applies with regard to a material copy of a work or other subject-matter made by a user of such a service with the consent of the rightholder.

CJEU, case C-128/11, UsedsoftThe right of distribution of a copy of a computer program is exhausted if the copyright holder who has authorised, even free of charge, the downloading of that copy from the internet onto a data carrier has also conferred, in return for payment of a fee intended to enable him to obtain a remuneration corresponding to the economic value of the copy of the work of which he is the proprietor, a right to use that copy for an unlimited period.

BUT SEE

THE EXHAUSTION PRINCIPLEIN THE DIGITAL ENVIRONMENT

Sale of books = Sale of goodsSale of e-books = Supply of services

LAW abolishes the exhaustion principle as a general rule in the digital environment

TPM AND LIMITED DURATION OF RIGHTS

TPM may technically restrict access to works which are already in the public domain.

TECHNOLOGYcreates the risk of an economic abrogation of limited

duration the exclusive right

TPM AND THE IDEA/EXPRESSION DICHOTOMY

By restricting access to works TPM restrict as well the access to the elements of the work which are not protected

by copyright (ideas, information, data, etc.).

TECHNOLOGYcreates the risk of a technological and economic

abrogation of the idea/expression dichotomy

TO SUM UP…

When we look at the digital environment, are we facing the end of the balance of interests?

Scope of protection

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

Unilaterally determined by the

rightholder through TPM

TO SUM UP…

When we look at the digital environment, are we facing the end of the balance of interests?

Scope of protection

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

Risk of technological and economic

abrogation

TO SUM UP…

When we look at the digital environment, are we facing the end of the balance of interests?

Scope of protection

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

Risk of economic abrogation

TO SUM UP…

When we look at the digital environment, are we facing the end of the balance of interests?

Scope of protection

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

Cease to exist if a work is made

available via the Internet through a

combination of contract and TPM.

TO SUM UP…

When we look at the digital environment, are we facing the end of the balance of interests?

Scope of protection

Idea/expression dichotomy

Limited duration

Exceptions and limitations

Exhaustion of the distribution right

Abolished as a general rule in the

digital environment

THE FINAL QUESTION

Is there still room for a balance?

THANK YOU FOR YOUR ATTENTION

Giorgio Spedicato, LLM, PhDUniversity of Bologna