This is the third chapter of Part III of this manuscript. While Chapters 6 and 7 focused on the theme of scope of protection, this chapter analyses the theme of enforcement of rights. In the regard, the underlying research question of this chapter is “What are the dynamics of intellectual property in broadcasting markets?”
[7]-1 INTRODUCTION
As stressed throughout this manuscript thus far, broadcasters’ related rights are independent of any copyright that may subsist in the content embedded within a broadcast.291 This layering of rights can lead to certain issues, such as possible anti-commons effects.292 Such anti-commons effects arise where a user wishes to make use a particular work (as accessed through a broadcast transmission), and must obtain authorisation for usage by both the copyright owner and broadcasting organisation. This results in a possible overall exacerbation of the existing problems of a copyright system that seems to be subject to a general trend of an expanded scope of protection.293 Another social cost of broadcasters’ rights is that it may result in an enclosure of the public domain and creation of deadweight losses, specifically for works which are not subject to copyright protection, or whose term of protection has expired. Hence, it is important to analyse whether and how the various aspects of broadcasters’ related rights contribute to market outcomes. One process through which such outcomes might be generated is the in the enforcement actions taken against infringements in broadcasting markets.
This chapter develops a framework to discuss how market characteristics affect the distribution of possible outcomes. It then concludes by suggesting a system of reassigning enforcement standing from copyright owners to broadcasters as an alternative to implementing unique and independent intellectual property rights for broadcasting organisations.
[7]-2 BROADCASTERS’ RIGHTS IN THE MARKETPLACE
Before moving on to creating a model to analyse enforcement, this section briefly recaps some basic premises of broadcasters’ rights, and how they function within the broadcasting market.
291 Article 1 of the Rome Convention (which deals with Related Rights including the Rights of Broadcasting Organisations), provides for the safeguard of Copyright Proper, and states that protection of all related rights “…shall leave intact and shall in no way affect the protection of copyright in literary and artistic works.”
292 An anti-commons effect arises when a property right over a resource is fragmented over multiple rightsholders, leading to coordination problems, market inefficiencies, and reduced social welfare through general under-utilization; for a general overview, see Buchanan and Yoon (2000).
293 This observation is discussed in Chapter 5.
[7]-2.1 Elements of Broadcasters’ Rights
Like most forms of intellectual property, including general copyright, the ‘rights of broadcasting organisations’ should be considered as a bundle of different inter-related rights. There are several possible constituent elements of the ‘bundle of rights’ that are the intellectual property rights of broadcasting organisations in relation to their own transmissions. Generally, broadcasters’ rights dictate activities between the broadcaster and two groups of second parties: (i) end-users (consumers), and (ii) competing broadcasters.
For analytical purposes, this discussion shall generally focus on the ‘Right of Fixation’, i.e. the ability of the broadcasting organisation to authorise or prohibit fixations (e.g. recording in material form) of the material from their broadcasts.
However, it is noted that some aspects of this analysis can be generalised to cover other elements of the bundle of rights. Furthermore, this discussion focuses on the enforcement of this right in terms of the relationship between broadcasters and end-users.
[7]-2.2 Fixation Rights and Consumers
In relation to consumers, broadcasters’ rights can be seen as tools to preserve market relationships that prevail at the level of primary copyright protection. In particular, this refers to the intermodal relationships between different media platforms, including both physically distributed forms (e.g. DVDs) and intangible modes of communication (e.g. broadcast signals or live performances). The idea is that a given copyright protected work can be delivered to consumers via different platforms and media formats, and that these platforms and formats have some inherent degree of substitutability. Hence, control over consumers’ use of broadcast signals minimises potential losses in other horizontal markets.
For example, a broadcaster’s right to fixation provides that authorisation is needed for fixation (e.g. recording) of a broadcasting signal; hence, the inability of a consumer to freely record a television programme (i.e. produce their own physical reproduction) preserves the consumer’s willingness to pay for an authorised physical reproduction in the horizontal market (e.g. purchase a DVD).
However, it is not necessarily immediately obvious whose market interests a broadcaster’s fixation right preserves. Certainly, a broadcaster’s ability to limit a user’s ability to fix a transmission of a particular work indeed somehow relates to the interests of primary copyright holders.
Only in instances where (i) the broadcaster is also the producer of the work and hence owner of the underlying copyright, or (ii) the underlying work is not eligible for copyright protection in the first instance, will the broadcaster be the main and
sole beneficiary of enforcement of fixation rights. Sports broadcasts are the primary example of this type of scenario.294
In the more typical ‘base case’ however (i.e. where the work being broadcast is licenced from a programme supplier who holds copyright), the commercial interests of the primary copyright holder in horizontal markets come into play. As such, broadcaster’s rights that affect consumer incentives in horizontal markets presumably create positive externalities for primary copyright holders.295
[7]-2.3 Basic Example
The following discussion sets out the basic premise on which the Models in Sections 3 and 4 are based.
Consider for example, a consumer ‘X’ who wishes to obtain a copy of a certain programme, where the content owner ‘C’ holds the copyright in the programme.
In addition to licensing the work for broadcast to broadcaster ‘B’, C also markets authorised copies of the programme in some horizontal media market.
It becomes known that X has obtained a copy of the programme by unauthorised fixation of B’s broadcast. X is assumedly infringing on both C’s right of reproduction (a component of primary copyright), and B’s right of fixation (a component of the broadcaster’s right).
It is now interesting to analyse what B and C’s incentives are to pursue an enforcement action against X.
As B has already transmitted the programme, it is inferred that the relevant benefits to B have already been gained from X. In particular, X has already been subjected to the advertising contained in same transmission in which the infringed programme was embodied (hence giving commercial value to the overall transmission), or has done their part to finance B through the legitimate receipt of the transmission (e.g. by paying their statutory television use licence fee, or subscription fee).
Therefore, it would appear that only C has incentive to pursue enforcement action as the unauthorised activity represents lost potential revenue in the horizontal market for physical distribution (limited of course by the price in that market relative to X’s willingness to pay). As such, while C might be interested in passing off the costs of enforcement to B, it is questionable whether B has any real private incentive to enforce.
294 As discussed in Chapter 4, sports performances are generally not considered as eligible for traditional copyright protection, and hence broadcasters’ rights somewhat fill in this gap of subject matter protection eligibility.
295 These externalities are only positive where the copyright holder is a profit-maximiser. In certain cases, a copyright holder’s goal may be that of maximum distribution – in such cases, enforcement actions by the broadcaster may restrict access and distribution, and hence create a negative externality.
Now, consider the case where C has licensed the work to two broadcasters: B1 and B2. For simplicity, and assuming the absence of embedded metadata to prove otherwise, it cannot be known with certainty whether a particular copy was obtained from a fixation of the transmission of either B1 or B2. Indeed, if there is only one single fixation, the incentives do not change much.
[7]-2.4 Subsequent Distribution
The situation changes if X seeks to distribute copies of the programme to another consumer Y. Firstly, each copy made is a successive infringement on C’s reproduction right. The exact infringement of the broadcaster’s rights however depends on how that bundle of rights is constructed. As with before, there is the infringement of unauthorised fixation of the broadcast transmission. However, there may now be the related additional infringement of subsequent distribution of an unauthorised fixation.296 As such, there are multiple infringements of C’s copyright, as well as infringements of the broadcaster’s fixation and subsequent distribution rights (though it is not known whether it is B1 or B2).
For each reproduction and subsequent distribution, there is an additional loss to C in terms of potential revenue in the horizontal market, in addition to that from the first fixation. Additionally, there is some loss to the broadcaster in the form of a contraction of its potential audience. This would mean a marginal decline in the size of the audience reach for advertising (meaning an erosion of advertising space value), or loss revenue in terms of a potential subscription or statutory licence (as each consumer Y chooses not to consume the content through the medium of broadcasting at all).
Therefore, B1, B2 and C all have incentives to enforce against X, where X is engaging in subsequent distribution. However, they all also have an incentive to try to free ride off of each other’s possible enforcement efforts.
Generally, it is reasonable to consider that C’s stake is likely to be larger than B’s (for example, the lost revenue from a potential DVD sale is greater than the lost revenue from a marginal viewer).297 Also, it should be noted that the loss in revenue to the broadcaster is relative to the significance of the infringed programme in the overall programming schedule. As the number of separate unauthorised programmes that are fixed and distributed by increases (as a proportion of the broadcaster’s overall programming schedule), the broadcaster’s stake in enforcement action increases.
296 Conceptually, a fixation rights are distinct from post-fixation rights, which include subsequent distribution of the content of a fixed signal. For an overview on the debate regarding this distinction, see paragraph 23 of WIPO SCCR/17/INF/1 (2008).
297 Of course however, the loss in revenue to the copyright holder is tapered by the consumers’
willingness to pay and likelihood of purchase in the horizontal market.
Furthermore, since the work was licenced to another broadcaster B2, uncertainty arises as to which broadcasters’ right of fixation was violated. Hence, as the number of ‘co-broadcasters’ increases, everyone’s incentive to enforce changes due to the desire to free-ride on each other’s enforcement actions.
Essentially, a public good game arises in terms of the copyright owner and various broadcasters’ investments in monitoring and enforcement actions.298
The following Sections now aim to discuss a simple model of how the enforcement behaviours of copyright holders and broadcasters interact. Section 3 presents a model of a single copyright owner licencing content to multiple broadcasting organisations. It seeks to analyse the circumstances that affect how broadcasters’
related rights influence market outcomes or create externalities for primary copyright holders.
[7]-3 MODEL 1: MULTIPLE BROADCASTERS AND SINGLE COPYRIGHT OWNER
This Model summarizes the interactions between the Copyright owner (C), and n different broadcast licensees Bi (who are assumed to be uniform in behaviour and structure).
The scenario is premised on the following:
i. Copyright owner C licences a programme to n different (identical) broadcasters ii. X illegally records one of the broadcasts and distributes m copies.
iii. Each copy is a loss of R to the broadcast market (R/n for each broadcaster) iv. Each copy is a loss of P to the copyright owner (in a horizontal market)
v. Either a broadcaster or the owner can pursue enforcement at cost E
Variable Meaning
m Number of distributed infringing copies n Number of content licenced broadcasters P (WTP-Adjusted) price in horizontal market
E Cost of enforcement
R Revenue from single broadcast viewer Table 7.1: Summary of Model Variables
For a given user, the work can either be accessed through broadcast media (i.e.
one of the n broadcasters), or through the horizontal market (i.e. either a legitimate copy from C, or an unauthorised from X).
298 It is important to note that in this chapter, enforcement actions are understood as actions which stop infringements or result in injunctive relief only. This part of the chapter does not consider the issue of award of damages for intellectual property right violations.
If there is effective competition between the broadcasting and horizontal markets, then there should be an equilibrium of relative prices. In other words, the prices in the two markets should be equal when adjusted for (i) the contribution of the specific work to the overall broadcast service, and in (ii) any premium that the consumer places on the ‘horizontal’ copy over enjoying the programme via broadcast.299
Consider that Ṙ is the price payed for a broadcasting service (e.g. either the subscription fee, or the per-user average commercial value of the adverting space on a terrestrial service), while Ṗ is the price paid for a legitimate copy in the horizontal market. Ṙ and Ṗ represent the income that a broadcaster or copyright owner gets from a legitimate user/consumer.
Since the broadcast is comprised of several programmes, the specific programme contributes only a proportion of the total value of that service (αṘ). Consumers might also gain more utility from one form more than the other, so consider that there is a higher wiliness to pay for the good in the horizontal market by some factor β. Hence, consumers are indifferent between the broadcasting service and the horizontal market where the adjusted prices are in equilibrium at (αβṘ = Ṗ).
When some legitimate enforcement action is undertaken which results in an injunction against the infringing distributor (no matter by whom), the consumers who were previously served by the infringing market would now be redistributed between the n broadcasters and the market for legitimate copies sold by C.
Suppose that a proportion µ of these users are not redistributed, and they leave the market as that they are no longer able to utilize the possibly lower priced (or free) infringing copy. Of the remaining consumers, Ɵ might uptake broadcasting services (as under equilibrium prices they are indifferent), while the remaining purchase legitimate copies.
Enforcement against the infringer therefore creates a direct gain to the collective broadcasting sector, valued at (ƟαβṘ); the gain to the copyright holder would be (1-µ -Ɵ)Ṗ. As these additional parameters are inconsequential to this analysis, the per-unit gains to the broadcasting sector and the copyright owner can be simplified as just P and R respectively. P and R in themselves hence account for the fact that only some consumer would ‘legitimise’ their consumption in line with their willingness-to-pay.
Furthermore, these gains would be uniformly distributed between the n broadcasters. For each infringing sale stopped, the individual broadcaster would gain R/n, or a total of (m/n)(R) for the total of m infringements stopped. The copyright holder on the other hand, will gain a total of mP.
If no enforcement takes place, the infringements will continue, and neither the broadcasters nor the copyright owner will gain or lose anything. However, if at
299 For example, consumers may be will to pay more for a physical copy as it can be enjoyed multiple times, and at any time unlike a transient broadcast.
least one party enforces, all parties gain their respective amounts, but anyone who enforces will also incur an enforcement cost E.
As each of the broadcasters and the copyright owner can choose to either pursue enforcement action or forbear, their choices and relevant payoffs can be summarised as presented below.300
B: Broadcaster i
Enforce Forbear
C: Copyright Holder Enforce
C: (mP – E) B: ((m/n)(R) - E)
C: (mP – E) B: (mR/n)
Forbear
C: (mP)
B: ((m/n)(R) –E) C: 0
B: 0
Table 7.2: Enforcement Model 1 Payoffs
It is not immediately possible to define an equilibrium for the above game, particularly because the dynamics of behaviour depends on the multiple exogenous variables (E, P, and R). However, it is obvious to note that either party (C or a single broadcaster ‘Bi’) would only consider enforcement when the costs of enforcement are outweighed by the private benefits of enforcement.
As such, the different possible outcomes can be summarised as follows:
1. No Enforcement Necessary – The sum of the total private gains to all parties from enforcement is less than the cost of enforcement. Neither will any party choose to enforce, nor is enforcement even socially desirable at all.
2. Duplication of Efforts – The private gains from enforcement for both parties individually are greater than the costs of enforcement. Hence, both parties have an incentive to unilaterally enforce. This may result in a duplication of efforts and costs, which is a socially undesirable outcome.
3. No Enforcement Pursued – The like with ‘duplication of efforts’ above, the net private gains for both parties might be positive, but both parties may choose to forbear in an attempt to free-fide off of the other. As a result, no enforcement action is pursued, even though it would have been socially desirable to do so.
300 This analysis generally assumes that gains are only from stopping infringement or attempting to legitimise consumption. In principle, these gains can hence be actually ex ante the act of infringement through promoting compliance. In any instances, the gains are not in the form of damages ordered by an adjudicating body.
4. Public Good Failure – The sum of the total private gains to all parties from enforcement is greater than the cost of enforcement. However, the individual private gains for each party are less than the cost of enforcement. No party has the incentive to unilaterally enforce, despite the fact that enforcement would be socially optimal.
5. Single Party (One way) Free-riding – The private gains are greater than the cost of enforcement for only one party. This party has the incentive to unilaterally enforce, while the other does not. However, the party without an incentive to enforce will still enjoy some positive gain without spending.
In order words, the enforcing party creates a positive externality from which the non-enforcing party benefits. A key feature in this case is that the certainty that one party will enforce and the other will not.
These various possible outcomes, as linked to the relevant parameters, can be
(Neither does any party has a unilateral incentive to enforce, nor would it even socially beneficial) externality for Bi.; i.e. Bi free-rides ‘one-way’) 2.2 Individual Bi’s benefits is greater attempt to free-ride off of the other. Both of these outcomes are socially inefficient)
Given the above set-up, a market may be conceived as being defined by the following variables:
(i) ‘m’ which is essential a rate of infringement;
(ii) ‘n’ which is the number of broadcast licensees; and (iii) Exogenous parameters: 301
i. P - average willingness to pay in the horizontal market ii. R- average revenue from a single broadcast consumer iii. E – cost of monitoring and enforcement
This gives a distribution of outcomes over various values of ‘m’ and ‘n’ as illustrated in Figure 1 below. For analytical purposes, it can be assumed that various markets are characterised by some distribution of ‘m’ and ‘n’. Hence, if this distribution is assumed to be uniform, the relative areas on the plane ‘m vs. n’
represent relative probabilities.302
Figure 7.1: Multiple Broadcasters with Unitary Elasticity
301 For convenience of graphical analysis, it is assumed that R<P<E, as per the discussion on the relative losses to the different parties. However, this assumption is only for the ease of graphical presentation of the discussion. It is not a strict limitation on the interpretation of the results.
Furthermore, it acknowledged that a major limitation in this analysis is that E is likely to be several magnitudes of order greater than P and R; as such, any enforcement actions would only be viable
Furthermore, it acknowledged that a major limitation in this analysis is that E is likely to be several magnitudes of order greater than P and R; as such, any enforcement actions would only be viable