An Economic Model for the Incentive/Access Paradigm of Copyright Propertization: An Argument In Support of the Proposed New 514 to the Copyright Act

Abstract

This article proposes an economic model of the incentive-access paradigm for copyright designed to correspond to the goal of maximizing societal welfare. The article begins with a discussion on the foundations of copyright and the objectives of the Constitution’s Copyright Clause. The article adopts the majority view that the Constitution mandates that the copyright regime is designed to optimize the positive welfare impacts from copyright protection. Under this view, similarly as antitrust “protects competition, not competitors”, the copyright regime should protect creativity, not creators. The result of this underlying policy objective is that the level of copyright propertization becomes a balancing test where Congress and the courts should set the extent of the rights granted in the Copyright Act to a level that maximizes the aggregate societal benefit from copyrightable subject matter. After laying this legal foundation, the article analysis the strengths and weaknesses of some economic models presented in academic literature. The focus of this discussion is the model proposed by William M. Landes and Richard A. Posner, but also includes a scan of some of the other relevant academic models. The majority of the economic models that have been proposed for intellectual property are built around marginal unit cost analysis, and the article questions whether -- especially in a digital environment that analysis presents a valid basis for modeling. The article then proposes a microeconomic formulation of the incentive-access paradigm that captures the economic concepts needed for Congress and the courts to derive policy decisions that maximize societal welfare. The article concludes with a discussion of an implicit real-world application of the model. In its recent report on so-called “orphan works” the Copyright Office proposes that copyright protection where the owner is unidentifiable is reduced to a liability rule. This is consistent with the model’s conclusion that reducing access costs at the outer perimeters of copyright protection will result in a net increase in output, and thereby in a net societal gain. The article suggests that policymakers and courts should view changes to the level of copyright protection through the lens of the proposed model to ensure that the copyright regime evolves in a manner consistent with the utilitarian objectives of the Constitution.