It is fair to say that in general the economic theory profession has not considered in any detail the relationship between the legal institution of copyright and the types of contracts that are written along the value chain for copyright goods. The topic of contracts has been looked at mainly in terms of royalty contracts, and then only really between creators and intermediaries (e.g. publishers, distributors, etc.), whereby copyright itself is not explicitly brought into the picture. Perhaps the most important research gap, then, is to consider exactly how alterations in copyright protection (either some measure of enforcement, or perhaps some measure of scope, or of course the duration of copyright) would affect the terms that would be agreed to via royalty contracts. Of primary interest is the question of exactly how certain changes in copyright would end up affecting the welfare of the signatories to royalty contracts, thereby altering the balance of revenue flows and incentives.
Providing Government with strategic, independent and
evidence-based advice on intellectual property policy. ADVISORY BOARDSTRATEGIC
FOR INTELLECTUAL PROPERTY
POLICY
SABIP
PAPER 1 - ECONOMIC THEORY OF COPYRIGHT CONTRACTS
A second important research gap would involve theexplicit consideration of the perceived ‘fairness’ of copyright contracts to the parties involved, and how (or indeed if) copyright law can be altered so as to ameliorate any perceived unfairness. Not so long ago such a study would not have been considered overly relevant for economics scholars, who are renowned for concentrating much more on issues of efficiency than issues of equity or fairness. However, there does exist an established general literature on the economics of fairness, which is based on solid economic theory ideals, and which could (in principle) be applied to the case of copyright contracts.
It is also interesting to consider whether copyright and contracts are always to be understood as complements, or whether they can also maintain a substitute relationship. That is, we are generally comfortable with the idea that a contract for a work of authorship might not be able to be written unless there is a copyright law that establishes the title of ownership, and what that owner may legally contract to. But it is also the case that contracts, being freely negotiated agreements, can also establish what can and cannot be done by the parties involved, including the remedies available for breach. Thus, in a well-defined sense, contracts can work as devices that substitute for copyright law, at least as far as the signatories to the contract are concerned. An important research gap, therefore, is to consider the nature of the substitute- complement relationship between copyright and contracts, and above all, to determine what the nature of the relationship depends upon (with transaction costs being the most logical element). Once a clear idea has been achieved of the type of relationship that exists, at least for specific points along the value chain, then one can determine with much more authority the type of policy conclusion that is suggestive of how copyright law might be amended in order to provide the incentives for individuals to use contract terms as protection measures instead.
Finally, a fourth interesting aspect that provides a research gap is the relationship between what I have called the ‘contractable space’ and copyright law itself. If we understand that copyright law sets the boundaries of the contract space, then clearly the former affects the latter. But it is also likely that the types of contracts that are written may well affect copyright law, or at least the interpretation of copyright law. I therefore suggest as a fourth research proposal the issue of the study of the interrelationship between the contract space and the contracts that are written within it, and copyright law’s parameters and interpretations.
Overall I think that a more careful, methodological, and above all a more formal application of the well-known principal-agent framework to the specific case of copyright constitutes the most logical first step forward for economists. Of course the principal-agent model is very well known to economic theory, and it relates directly to the issue of contracting. As parameters around the model one can easily bring in copyright law with a variety of free variables defining the legal protection parameters. This would then allow the researcher to study how alterations in the legal copyright standard affect the final equilibrium outcome.
Providing Government with strategic, independent and
evidence-based advice on intellectual property policy. ADVISORY BOARDSTRATEGIC
FOR INTELLECTUAL PROPERTY
POLICY
SABIP
PAPER 2 - CREATOR CONTRACTS
ABSTRACT
Cultural markets are winner-take-all markets. They are very risky for both creators and
investors. The earnings data available from labour market statistics, tax and insurance audits, and surveys indicate that the top 10% of creators receive a disproportionally large share of total income in the creative professions. The top 10% of literary authors earn about 60-70% of total income; the top 10% of composers/songwriters earn about about 80% of total income. This can be compared to earnings data for the total population of employees. Here the top 10% of earners earn about 20% of total income (Annual Survey of Hours and Earnings (ASHE), UK Office for National Statistics). For most creators, ‘portfolio lives’ are typical: about two thirds of professional creators have earnings from a second job. Overall, the income of creators is well below the national median income. There are some variations by sector, but broadly the picture is consistent across the developed world.
The bargaining outcome over rights is tilted towards bestsellers. Creators with a track record of success are able to negotiate contracts that preserve their interests. For most others, in particular new entrants to the entertainment industries, assignment of rights are common. Mechanisms of collective bargaining (for example through unions, professional associations and collecting societies) appear to have a greater effect than statutory (ownership) rights because the latter, typically, will be varied and/or transacted by contract.
The comparative international review of the regulation of copyright contracts uncovered a range of regulatory tools that attempt to balance the bargaining powers of the parties. These provisions relate to Ownership; Requirements of form; Scope of rights transferred; Rights to remuneration; Effects on third parties; Revision and termination; and Unfair contracts. Very little empirical evidence is available about the effectiveness of these provisions, but this paper contains a number of methodological suggestions how regulatory tools could be assessed (if policy was to desire to adjust the bargaining outcome between creators and investors). Options identified by the literature include intervening in situations of non-exploitation; strengthening rights that cannot be transferred (such as the right to be credited as the author); and privileging instruments of collective bargaining.