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Economic Theory of Copyright Contracts

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Economic Theory of Copyright Contracts 2010 (04) The Relationship Between Copyright and Contract Law Research commissioned by SABIP Providing Government with strategic, independent and evidence-based advice on intellectual property policy Research commissioned by the Strategic Advisory Board for Intellectual Property Policy, and carried out by Martin Kretschmer Professor of Information Jurisprudence, Director, Centre for Intellectual Property Policy & Management (www.cippm.org.uk), Bournemouth University, [email protected] Estelle Derclaye Associate Professor & Reader in Intellectual Property Law, School of Law, University of Nottingham, [email protected] Marcella Favale Postdoctoral researcher, University of Nottingham, [email protected] Richard Watt Associate Professor, Department of Economics, Canterbury University (NZ), [email protected] CONTENTS SUMMARY CHAPTER ............................................................................................................ 1-15 THE DIGITAL SHIFT ........................................................................................................................... 1 STRUCTURE AND METHODOLOGY OF THE REPORT .................................................................. 2 FINDINGS ............................................................................................................................................ 3 CREATOR CONTRACTS ............................................................................................................ 3 Creator contracts ........................................................................................................................ 3 User contracts ............................................................................................................................. 4 EVIDENCE ON CURRENT RANGE OF REGULATORY TOOLS .............................................. 5 Creator contracts ........................................................................................................................ 5 User contracts ............................................................................................................................. 5 RESEARCH GAP I: EFFECTS OF KEY REGULATORY TOOLS .............................................. 5 1. Creator contracts: Effects of rules on first ownership ............................................................. 5 2. Creator contracts: Effects of rules on moral rights .................................................................. 6 3. Creator contracts: Effects of rights to remuneration ............................................................... 6 4. Creator and user contracts: Effects of reversionary term ....................................................... 8 5. User contracts: Effects of mandatory exceptions ................................................................... 8 RESEARCH GAP II: NORMATIVE AIMS OF CONTRACTUAL REGULATION ......................... 9 1. Fairness .................................................................................................................................. 9 2. Artistic motivation .................................................................................................................... 9 3. Information freedoms ............................................................................................................ 10 RESEARCH GAP III: SOLUTIONS FROM OUTSIDE COPYRIGHT AND CONTRACT LAW . 10 1. Self-regulation ........................................................................................................................11 2. The regulation of utilities ........................................................................................................11 RESEARCH GAP IV: CONTRACTING FOR DIGITAL SERVICES .......................................... 12 PRIORITIES FOR RESEARCH ......................................................................................................... 13 1. USER CONTRACTS (RATIONALE OF EXCEPTIONS) ....................................................... 13 2. USER CONTRACTS (LICENSING PRACTICES) ................................................................ 14 3. CREATOR CONTRACTS (TERM REVERSAL) ................................................................... 14 4. CREATOR CONTRACTS (MORAL RIGHTS) ...................................................................... 14 5. COMPETITION LAW ............................................................................................................ 15 6. SELF-REGULATION ............................................................................................................. 15 7. COPYRIGHT BUSINESS MODELS ..................................................................................... 15 PAPER 1 - ECONOMIC THEORY OF COPYRIGHT CONTRACTS ..................................... 16-40 ABSTRACT ....................................................................................................................................... 16 1.1 CONCEPTUAL FOUNDATIONS ................................................................................................ 16 1.1.1 Copyright and the contractable space ............................................................................. 17 1.1.2 Copyright law and the parties to contracts for copyright goods ....................................... 19 1.1.3 Standard contract theory, and special characteristics of copyright contracts .................. 19 1.2 INDIVIDUAL CONTRACTING .................................................................................................... 23 1.2.1 The structure of royalty contracts – royalty vs. buy-out ................................................... 24 1.2.2 Copyright royalty contracts and risk sharing .................................................................... 24 1.2.3 Contracts and infringement (piracy) ................................................................................. 27 1.2.4 The effect of copyright law on royalty contracts ............................................................... 28 1.3 ASPECTS RELATED TO THE ‘FAIRNESS’ OF COPYRIGHT CONTRACTS........................... 34 1.4 COLLECTIVE ADMINISTRATION OF COPYRIGHT CONTRACTS ......................................... 35 1.5 OTHER ALTERNATIVES............................................................................................................ 38 1.6 CONCLUSIONS ......................................................................................................................... 39 PAPER 2: CREATOR CONTRACTS (‘SUPPLY SIDE’) ....................................................... 41-81 ABSTRACT ....................................................................................................................................... 41 2.1 CREATORS, AND THE PURPOSE OF COPYRIGHT LAW ...................................................... 41 2.2 SOURCES OF EARNINGS ........................................................................................................ 44 (a) Statutory right: Individually negotiated income .................................................................... 45 (b) Statutory right: Collectively negotiated income ................................................................... 45 (c) Income from artistic activity: Non-statutory subject matter .................................................. 45 (d) Income from non-artistic sources ........................................................................................ 45 2.2.1 Two professional profiles .................................................................................................. 46 The electronica artist ........................................................................................................ 46 The children’s book illustrator .......................................................................................... 46 2.3 EMPIRICAL EVIDENCE ON COPYRIGHT EARNINGS ............................................................ 48 2.3.1 The distribution of earnings in the cultural professions .................................................... 48 2.3.2 Earnings from principal artistic activity ............................................................................. 58 2.4 THE ‘HARMONY OF INTERESTS’ ASSUMPTION ................................................................... 65 2.5 THE REGULATION OF COPYRIGHT CONTRACTS ................................................................ 68 2.5.1 Ownership ........................................................................................................................ 68 2.5.2 Specific contract formalities ............................................................................................. 69 2.5.3 Scope of the rights transferred ........................................................................................ 70 2.5.4 Rights to remuneration .................................................................................................... 71 2.5.5 Effects on third parties ..................................................................................................... 75 2.5.6 Provisions relating to the revision and termination of contracts ....................................... 76 2.5.7 General contract doctrine / Unfair contracts .................................................................... 77 2.6 CROSS-COUNTRY EMPIRICAL RESEARCH........................................................................... 78 2.7 CONCLUSIONS ........................................................................................................................
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