Dan Heller's Photography Business Blog: Reprise of a Proposal for Privatizing Copyright Registration

In 2007, I submitted a proposal to the Copyright Office for how it could positively benefit the public interest by allowing for the creation of "authorized Copyright Registrars." These new entities would assume the administrative tasks of copyright registration processing, the effect being a reduction in processing fees and a massive increase in processing capacity. The copyright office itself should focus on policy and oversight. The economic incentives given to the private sector would create a positive economic stimulus by setting the stage for more business interests to engage in and encourage more people to register their works, and for more users of those works to be more compliant with copyright law. Since submitting the proposal, I was asked to provide deeper analysis and to substantiate it with background data. This article reintroduces the proposal with that information.

Synopsis

The amount of content online produced by consumers is enormous; it's also growing by orders of magnitude, the result of social networks and content-sharing sites of Web 2.0. As Web 3.0 emerges, where search algorithms that semantically analyze content for its true nature, a greater proportion of old and new content alike is showing up in mainstream search results.
Because businesses use the internet to find content for both commercial and editorial uses, more user-generated content is being used in ways that should require licensing, but isn't.
Both creators and users of works are largely unaware of whether and how to comply with copyrights, partly because copyright law itself is not well understood, but mostly because people's behaviors are established by "common usage" on the internet. This applies to how they use others content, but also of how they view their own creative works. Consumers are entirely unaware of "copyright registration," and corporate policies do not assure compliance when user-generated content is found and used. This lack of awareness on both sides has been the basis for an incorrect perception that user-generated online content is free, unmonitored, and "valueless."
The lack of truly effective economic penalties for "stealing from the consumer" further perpetuates the corporate culture of "passive infringement," resulting in both wasted and lost economic opportunities.
The reason there are no counter-balancing interests (companies that would help people monetize their content and enforce effective protection), is because it's impossible to build a viable business model. For reasons discussed in this article, an entire industry (and a shift in how online content is monetized and protected) hinges on one thing: the cost and process associated with copyright registration, which, if solved, opens the door for investment into business models and technologies that solve these inefficiencies.
Of the many proposals that have been proffered to alleviate this problem, only one achieves the dual objective of not altering existing copyright law, policies and structures, while also creating stimulative conditions for economic growth. And that is for the copyright office to delegate the copyright registration process to the private sector.
This article proposes a "Copyright Infrastructure" modeled after the same model as the ICANN infrastructure that manages domain names and numbers. A new entity, a "Copyright Registrar," would be created to assume the administrative responsibilities that the copyright office currently does. These new entities would scale up the processing of billions of copyright applications, thereby reducing the costs (and fees) to negligible amounts, and making the database of all registered works available online.
The online database would be accessible by applications through open, standardized protocols that allow third party applications and services to access to build a new economy that facilitates transactions that benefit both buyers and sellers.
Registrars would then be able to act in the interests of the copyright holders, by helping sell/license content to interested parties, and to protect works from infringements. The creators of works would themselves have financial incentives to participate in the global economic system of content creation and licensing.
The result would be a huge economic boom of licensing of micro-valued content.

Introduction

Let's start with this simple quiz. Which of the following is a form of copyright infringement?

A product marketing manager copies photos from a photo-sharing website to use for his company's website.
A teenager goes to someone's personal website and downloads a photo to use as a wallpaper for her computer monitor.
A guy copies to his iPod a song he got from a local band's MySpace page and uses it to mix in his own guitar work on top and share it with his friends.

If you said that the product marketing guy's use of the photo is copyright infringement because he's using the photo for business purposes, while the teenager using the photo for a computer wallpaper is not an infringement because it's a personal use, and that you aren't really sure about the song on the MySpace page, then you're as confused as most people are.

Here's the twist: It was a trick question. We don't really know whether any of these are infringements because I didn't say whether any of the artists stipulated "usage terms" associated with their works. Unless copyright owners indicate which uses (if any) are permitted, then some uses of these works may be copyright infringements, while other uses would not be. Trying to figure out which uses are permitted and which aren't is actually besides the point for the moment. People are aware of what "copyright" is, but that doesn't affect their understanding of "compliance." Far more importantly, it doesn't affect their online behaviors. The economic and social consequences to this reality of 21st century culture are profound in ways that most people are only now beginning to appreciate. The question is what to do about it.

Copyright law lies at the core of two critical aspects of society: it is the financial basis for many industries, which is responsible for an enormous amount of economic activity that creates jobs and fuels growth; and it's an important element in the expression of creative thoughts and ideas, not to mention free speech. Copyright acts as a catalyst for education, dissemination of information, and a stimulus for innovation, all of which intertwines back into the economic engines that finance the mechanisms that make it all possible. So, the mutual dependency between "finance" and "freedoms" creates a paradoxical relationship between "access vs. infringement".

Before the internet, managing copyright issues has been a manageable process because the dissemination of copyrighted works was difficult and more easily monitored. Access to and use of content was controlled through publishers and others that represented the interests of the copyright holders. But the internet has complicated things significantly because works are now being created by everyone—mostly consumers—and scattered throughout the internet without any of the structure of traditional distribution models. This has been largely a good thing for society and economics on the whole, but it has also introduced some serious problems. Many of the uses of such content by certain types of entities are copyright infringements, and the rapid growth of it has ballooned to proportions that the original framers of copyright law never anticipated. Because the copyright holders of such content are consumers, they generally have no awareness of the value of their works, nor would they have any practical or meaningful legal representation, even if they were magically aware of such value.

The article, Stock Photography, the Consumer, and the Future, describes how corporate use of user-generated content is extremely prolific, but that the licensing of it is so inefficient (even where it exists), that the transaction costs alone (not including the actual license fees, if any) account for billions of dollars of wasted or lost economic activity. Among copyright infringements, these claims cost both sides thousands of dollars, totaling billions more in wasted economic activity (not to mention the indirect costs time and productivity that such actions siphon from both sides of the legal dispute). Most of these cases are settled out of court with confidentially clauses attached, so you'll never hear and read about them in the media.

Web 3.0: Content has Value
The increased "use" of user-generated content (in ways the should require licensing) reflects what is emerging as the next "new economy." The article, The Economics of Migrating from Web 2.0 to Web 3.0, describes how the quantity of this sort of user-generated content is not just growing exponentially, but all of it—old and new—is becoming better understood and "mined" more efficiently via semantic search algorithms. Searches engines are now unearthing dormant data that's been online for years, but were previously unknown. With all this new content being found and better understood, the economic byproduct of Web 3.0 is that content is king, no longer just traffic, as it was for Web 2.0.

One measurement of this trend towards content acquisition is the rapid rate of end-user agreements being rewritten by social networks and content-sharing sites. The revised language in these agreements require end-users (who never read them, and just click the "Accept" button) to unwittingly grant the hosting site unrestricted and unlimited use of whatever it is they contribute. Some of these agreements include redistribution and relicensing rights, terms that would otherwise cost thousands of dollars under more traditional licensing terms. These companies are grabbing these rights because they know there's future value; they just don't know how to monetize it yet.

But their ambitions also come with risk. If someone uploads content that isn't their own—an extremely common occurrence—and the site thinks they now have rights to use it, there's a lawsuit waiting to happen. And these sites will never effectively get indemnification from these end-users; they're consumers. So the company may have access to content that is, in the end, too risky to use.

Risk aside, the basic presumption is correct about the value of that content, that it has intrinsic value. That no one has figured out an effective way to monetize it is due, in part, to the barrier just outlined—they can't necessarily trust the content or the person that contributed it. Addressing that concern is therefore a pivotal lynch pin in unlocking the future to the next "new economy."

People often look at record labels, movie studios, television networks and stock photo agencies as potential trail-blazers to lead the way for figuring out how to capitalize on user-generated content, since they're already in the business of managing and licensing media. But those business models only work (and marginally so on very thin margins) because they limit the amount of content they represent. And they do this because—as is the old business model before the internet—they have to invest in each piece (even at minimum levels) in order to get a return on their money. Such business models are impractical for dealing with an unlimited amount of user-generated content. So, existing media companies are no more capable of finding a solution to this problem than anyone else.

Of the many proposals proffered to address this array of problems, they can be broken down into two distinct camps: One is to either rewrite or dispense with many copyright laws, and the other is to develop "digital rights management" (DRM) technologies to use as an oversight and policing mechanism. Both approaches are premature at this juncture. It's not that I dispute the potential value of each: there are deficiencies in copyright law, and DRM instruments could be effective under certain market conditions. But my position is that they don't solve the problem directly.

Though it may sound odd to hear it, there is one and only one barrier for solving this business problem: Copyright Registration. To understand that, I'm going to start with basic mechanics and work my way back to this point.

The Role of Copyright
Copyright is the mechanism that provides accounting, accountability, and protection by way of copyright law. This is because only works that are registered with the copyright office can be protected in a manner that has any real, economic leverage and protection for a company to build a business representing such works. Under copyright law, only registered works are eligible for statutory damages. Here, if someone "steals" a work, fines start at $750, and can grow to $30,000, per infringement. In fact, they can rise to $150,000 if the infringement were deemed to be willful. (This particular deterrent will be important to remember later.) By contrast, the fines for infringing on a non-registered work is whatever the prevailing rate would be if it were properly licensed in the first place. (Ok, there are other values that can be calculated, but that's besides the point in the bigger picture, since those are more rare than common.) Since we're talking about micro-valued works such as songs and photographs, a "prevailing rate" of $.99 (or less) per unit is too minimal to justify the legal effort in pursuing infringements. It was for this reason that statutory damages were created in the first place; it's the only way to give meaningful protection to micro-valued works as a disincentive to steal them. Without statutory damages, protecting the underlying asset is impractical, thereby making investing in building a business unlikely, if not impossible.

So, any business model that represents a creative work must have that work be a registered copyright. Here's the problem with that: the cost of filing a copyright registration online starts at $35. The paper fee is $45. If you wish to correct a mistake, it is $115. If you wish to record a transfer or lien, it is $95. To get a claim registered in 10 business days it is $685. But, even the lowest fee of $35 per registration, it is financially impossible to invest in a business that represents an unbounded, infinite supply of content. Remember, we're talking about billions of works produced by millions consumers; no one's going to spend money on copyright registration on a per-filing basis. Not the publisher, and not the consumer. For reasons discussed later, the rate of return on a per-unit basis is inconsequential, so any investment on a per-unit basis will never be acceptable by anyone. (Media companies register the works that they represent, which is why they limit the works they choose to publish.)

In short, high registration fees is the first barrier to clear before any business model can evolve. The second barrier is that, even if the fees were zero, the copyright office doesn't have the resources to process that many filings on a regular basis anyway.

So, how do you reduce the registration fees and increase the administrative capacity for an unbounded number of applications? Simple: Let someone else do it—a lot of people. By outsourcing the processing to private-sector companies, costs can come down (reducing fees), and capacity increases.

While that sounds well and good, the devil is in the details. For such a solution to evolve, we must start by setting up a basic infrastructure for all these companies to work together. This requires both a technical architecture, and policy mechanisms that also provides economic incentive to stimulate both investment and participation by authors and buyers of such content.

There's one more extremely critical factor: to avoid disrupting existing internet culture of creating, sharing and exchanging content between people in the most open way possible. This must be preserved in order for the system to work at all, since it was that very foundation that prompted people to create this content in the first place. If this can be done while assuring copyright compliance, then the goal is achieved.

Introducing the Copyright Infrastructure
Whenever you have lots of "stuff" used by lots of people, what do you usually have? An accounting system. And that's the elephant that's missing from the middle of the copyright room: there is no infrastructure for registered works to account for anything. So, the proposal begins by defining a Copyright Infrastructure. This is more of a technology backbone that includes a series of protocols and services that allows for universal access to information about registered works. (Not all works, just registered works.) Its function is to perform three very basic, but critical services:

Account for what's out there.
This is necessary so that anyone that wishes to use any given work has access to a centralized information center that can identify it. It's not so much that people would search for content like a search engine, but rather, to identify information about content they already have or want. This kind of identification is now possible through significant advancements in "digital fingerprinting" for all sorts of media types. There are various technologies that do this, and support varying degrees of "quality," as well as varying media types. That aside for the moment, the point is that any given work can not only have a unique ID, but aspects about it can be analyzed to identify one or more other works potentially embedded in it, were it to be a composite. For example, a mash-up of different songs into one; or a composite of more than one photograph. Digital fingerprinting is addressed again in the section on Policy.
For example, if you create a home video and overdub a small portion of a popular song, and then upload it to YouTube, the site will prompt you with a warning that it contains copyrighted material and that it could be removed. Similarly, tineye.com can not only uniquely identify a photo, but it can determine whether other works are embedded in it withing different levels of proximity. It's beyond the scope of this article to get into details of these technologies; the only point is that it is possible to uniquely identify works for purposes of the Copyright Infrastructure.
Certify and authenticate who owns works.
Here, it's critical that the owner of a given work is unambiguously identified and authenticated. Remember, we're talking about registered works, where this information is already required for certification. Having this information in the Copyright Infrastructure not only minimizes fraudulent selling or licensing of content, but protects others from buying content from unauthorized sellers, who may do so in order to entrap them into lucrative copyright infringement claims. It's incumbent on the publisher to protect himself by assuring the credentials of their sources, so the Copyright Infrastructure's role is critical in this regard.
Assign an authorized representative of the work.
This is the key to the economic functioning of the system. That is, just accounting for information is only useful if the person querying the system knows where to go to get it. The agent would do more than just sell or license the work, but it could also act as a formidable negotiator for both pricing and any legal claims. This would balance the playing field between content owners and users, thereby providing incentives for parties to strike larger-scale licensing deals. I get into the details of this in the next section.

The easiest way to illustrate why these three components are essential is by citing a similar kind of infrastructure used by Apple to manage its relationship to music labels and television networks for distributing songs and TV shows through iTunes. There are two things to observe here. First, there's a lesson in behavioral economics: Consumers don't fear copyright infringement consequences, companies do. Markets don't grow by educating individuals about copyright; compliance is achieved—and business grows—by creating convenient and automated mechanisms that make both access to and use of content easier. The recent announcement by Apple and record companies to remove copy protection mechanisms in songs further reflects this economic reality.

Secondly, iTunes makes money not just because the songs are protected by copyright, nor because these companies vigorously enforce those copyrights, it's because there are economic incentives for these companies to strike licensing deals to work together. True, those incentives wouldn't exist without copyright, which brings me back to the Copyright Infrastructure. One of its key goals is to create a series of mechanisms and incentives that encourage companies to work together. If user-generated content were registered works that were represented by formidable business interests, these works would be participating in similar licensing mechanisms along side music, TV shows and movies. Better yet, there would be incentives for companies to build "convenient, automated mechanisms" into their products that deal with this content appropriately. This would not only reduce the number of infringements of user-generated content, but would have a significantly positive economic effect for many players along the supply chain—all the way down to the urban kid that created the song or photograph in the first place.

If such an opportunity for growth exists, why can't companies build similar distribution mechanisms like iTunes? Put bluntly, they can't. It's literally impossible to do anything with user-generated content because there are no mechanisms to know anything about any given work. If a marketing guy downloads a bunch of photos from a photo-sharing site that he wants to use for his company's website, but leaves them in a random folder on his computer for a few weeks before he begins to design the site, how can he recall where he got the photos? What work and effort is required for him to track all this down? What incentive does he have to do so, other than the good will in his heart? Put another way, what disincentive does he have not to infringe? Currently, he isn't even aware he has to do anything—he just uses the photos and goes off to his next task. An infringement that few people know about, and few will ever do anything about. It's also lost economic opportunity that, in the end, also harm's the company.

To wit, consider if his production software were copyright-aware. Whenever he opened a photo in, say, Photoshop, it could query a copyright server online, which would identify the authenticated copyright owner, and return a web link to the authorized agent for licensing. Photoshop could then use this information to alert the marketing guy (via a dialog box) that he was editing a registered copyrighted work, and it ask if he'd like to license it for $.50 (as indicated by the automated licensing agent's server). The guy could choose to either license it or not— after all, only he knows if he's using the work in a way that would require licensing. If he ended up using the photo, but not licensing it, the licensing agent's own web crawler might eventually find it and look up whether it was properly licensed. If not, it would contact the company and ask for proper payment, or be potentially liable for an infringement claim.

Since the marketing guy that used the photos was given prior notice and opportunity to properly license them, opting out might be deemed as a "willful" infringement by a court, which would escalate the damage awards. Such automation would more likely encourage him to comply with the initial licensing request, which wouldn't have been expensive or time-consuming. Not only are there economic incentives to comply with copyright, but if the process were automated through non-human means and built into products and other services, then we are even more assured of compliance: it's easy.

Scaling up such an automated system to support an unlimited supply of works is not complicated, and it doesn't take an economics wizard to appreciate how such a business with very low overhead can be very profitable, even with micro-valued content like photos and songs. The original copyright holder wins too, because he'll be collecting revenue from the vacation photos he took on his Hawaiian vacation.

At this point, let me be clear: I am not concerned with teenagers that download music and photos for personal creative experiments of mixing and remixing to create derivative works that they share with their friends. At least, not directly. It is only if those works end up in the hands of a publisher that wishes to monetize that content, or use it in ways that would have required licensing, does copyright become relevant.

One of the other prime directives is to avoid disrupting existing internet culture, or of dissuading users from is creating and sharing content freely, so the Copyright Infrastructure is designed to be agnostic of finance, or of provisions of copyright law itself. It does not determine "right and wrong," or permitted uses of works, or even of policy. It is merely a grand accounting system; a mechanism by which the services that sit on top of it define the objectives of various service providers. Even free and public domain content needs to have some sort of accounting mechanism to give assurances to those who wish to use it that it is what it claims to be, and that it is, in fact, either free or in the public domain. These are also issues I'll address in detail later.

Copyright Registrars

Unfortunately, the Copyright Infrastructure isn't something that an innovative entrepreneur can conjure up and implement—at least, not one that anyone would ever use. Remember, the two key barriers to entry are high registration fees, and the limited capacity of the copyright office to process all these applications. So, in order for an infrastructure to be built at all, the US government has to put it into motion by addressing these two problems.

When it comes to fees, the reason they are high is because the copyright office is the sole entity that can process applications for copyright registration. Therefore, it's a costly process. It also happens to be the only entity that knows all of the works that has been registered, and it also controls the registration fees and the timeliness by which applications are processed. There are no third parties that can do any of these functions at all. And that is the problem. So, my proposal is:

The copyright office should divest itself of its administrative duties of registering copyrights, and institute a program where private companies can become certified Copyright Registrars, where their role is to accept and process copyright applications. Additionally, there should be the creation of a worldwide, publicly accessible database that contains all registered works.

Copyright Registrars would offer at least one basic service: process copyright registration applications. Because there would be many such companies, the higher volume of servicing agents would not only lower the cost of processing applications (thus, lowering fees), but also increase the capacity of applications that can be processed.

If this sounds complicated, it's already been implemented quite successfully via domain name registration. The policy-setting and oversight functions are performed within the not-for-profit public-benefit corporation, ICANN. Their mission, as their own website states, is to "keep the Internet secure, stable and interoperable. It promotes competition and develops policy on the Internet's unique identifiers."

The copyright office should have the exact same organizational structure, including a similar relationship to Copyright Registrars. The government sets policy and performs oversight, just as ICANN does over domain names and numbers. A copyrighted "work" is, in fact, a unique identifier of sorts, where the work is associated with an owner for a period of time. It can be transferred, or even released into the public. All of this is possible today with copyright, but the mechanisms to do so are opaque and onerous. Similarly, the works themselves, like domain names, are held in a global, unified, distributed database, which can be viewed by all, and updated by the registrars. The moment a new work is registered with any registrar, it's propagated to the internet much like domain names are. More on that later.

The role of the copyright office, like ICANN, would be to "keep the copyright registration process secure, stable, and interoperable, while also promoting competition and developing policy on how copyright is administered by its registrars."

Also, nothing has to change about copyright. The laws, legal interpretations, court rulings and precedents, and almost everything else remains in tact. There would be a number of things to address from a policy perspective, discussed in the Policy section later. But it's important to understand that the proposal is merely a shifting of administrative duties from the government to the private sector, and the formation of a grand network-based, distributed accounting system. The copyright office's responsibilities should be to policy and perform oversight duties, also addressed in the Policy section.

As for the database of all registered works, it would be centralized, distributed, and world-readable, complete with a series of network protocols and APIs for applications to mine it. Each work in the database would contain information that's already required by the copyright application process, including the work itself, the author's identity, and so on. Once a work is registered, it would be immediately certified (the need for a certificate should be eliminated), and it would immediately show in up the copyright database for all to see using the web or any other copyright-aware application.

Though people could look up what works have been registered by viewing them directly, the visual representation should be as close to a "read-only" format as possible. For example, most content could be rendered as a lower-res visual and embedded with watermarks. If the searcher wanted to find original source material, contact the authorized selling agent.

NOTE: In my original proposal to the copyright office of this idea, only the idea of the online database of registered works found its way into the text of the Orphan Works Act of 2008. But it was very loosely and ambiguously described. The act passed the senate, but not the house.

There is one more item that would be in the only copyright database (not necessarily part of the copyright "record" for the work or collection): the legally assigned agent authorized to sell or license the work. As I described in my example scenario above, if the marketing guy found a photo that he wanted to use for his business, there would be automated mechanisms that could query the copyright database for the authorizing reseller agent, who would then conduct the transaction.

The fact that there is a reseller agent is critical to the economic viability of the Copyright Infrastructure proposal. This is actually where the incentives are for massive investment—not in capital or other resources, but in business opportunity with a very high ROI. Technologically, a Copyright Registrar is very simple because accepting and processing applications isn't very complicated, nor does it require much capital. In fact, being nothing but a registrar wouldn't make much sense, as competition would drive registration fees too low to to make money. (Remember, low fees was one of the primary goals.) Therefore, companies would have other incentives to be registrars, and that would be centered around acquiring the right to be the designated licensing agent for the works being registered. Therein lies the real value, and how the business model evolves: the right to represent the sales and other legal interests associated with massive amounts of works has high value—high enough that it provides incentive to offer these registration processing services in exchange for those rights. The free market of many competitors would result in a likely distribution of proceeds of the licensing fees to go back to the copyright holder, which feeds back into the economic incentives for people to want to register their works.

Note that a registrar can operate many different business functions at the same time. Indeed, this is expected. It may also happen to be a social networking site, or a content-sharing site, or a discussion forum, or even a law firm. In fact, as will be discussed below, it's likely that registrars would have multiple business models from many different business sectors because the more services it offers, the more likely it can gain representation rights to more content.

As for the role of the licensing agent, it's not rocket science either. In the simplest case, selling and licensing can involve little more than a shopping cart application. As the market evolves, even that aspect is likely to be automated by an auction-based pricing system similar to how online advertising rates are derived. For Google's adsense product, you display the ads, and let the open-market determine the price you get for clicks. Same thing with copyright: you take the pictures, and let the open market determine the price someone pays to license it. I'll discuss the more complex effect on market pricing in detail later.

As for the legal representation, the registrar can perform all its duties and responsibilities itself, or it can outsource various tasks to third parties. For example, copyright infringement claims can be farmed out to law firms. If the concern of a world full of litigating lawyers causes your eyebrows to rise, see the Policy section later.

Whatever the registrar's rights and responsibilities, it doesn't have to affect the copyright holder's actions with his own works. In fact, that's the whole intent, as will be described more fully later. He still owns them, so he can still post them on social network websites or send them in email to friends. It's only if someone wanted to license a work would the copyright database be queried to determine who the licensing agent is.

Registrar Business Incentives
Though it would probably shock most people to believe that some guy's vacation photos to Hawaii will yield him any money in licensing fees over the course of time, this represents an old, bygone era of economics. The financial model in being a registrar has its basis on a proven and modern principle that didn't exist until the internet came about: long tail economics. To many, this is a fundamental paradigm shift.

Long-tail economics states that everything has potential value, and profit is made when the per-unit cost of sales and of warehousing becomes independent of quantity. Amazon.com brought it to public light—and the term was coined—when an editor for Wired Magazine once noted that amazon's sales of little-known books exceeded the sales of very well-known, "best-selling" books. The reason for this was that sheer volume of these little-known books, sold in quantities of ones and twos, was so numerous, that it outpaced the smaller number of top-sellers, even though those per-book sales volumes were quite high.

When it comes to non-physical goods like user-generated content, the model is even more compelling. That is, if the cost of doing business is roughly the same whether you represent 10,000 photos or 100 trillion photos, you might as well take in as many as possible. As the per-unit cost quickly approaches zero, why limit the supply of content available for purchase at all? Therefore, the real objective is to acquire as much content—better yet, the rights to it—as you can, and let the buyers find and pay for what they want through an automated process.

To forecast where this is going, consider these scenarios:

Record companies could make billions more dollars if they accepted all songs ever submitted to them, provided that they didn't spend money to market them. Instead, they merely "sold" whatever someone was interested in buying.
Photo agencies could make billions by accepting all photos ever submitted to them, provided they didn't have to do anything to promote them. They merely handled the transactions in the event that someone wanted to buy or license them.
Movie studios could make billions if they accepted all videos, films and screenplays if they didn't have to actually do anything with them, other than to license them to potential buyers the same way as the other publishers of creative media.

The skeptic would counter that there are two fundamental flaws. First, "no one would submit their creative works to any of these publishers that would 'do nothing' in return." The response to that is that people already submit these works freely to the internet everyday—and they do so in return for nothing. Consumers may not understand or care about copyright, nor the economic value (or potential) of their creative works, but they put their stuff online anyway. Now, imagine if they were told that they could do exactly the same things they do today, but could potentially make money as well? (In a survey I've done of over 300,000 random visitors to my website, 91% said they would participate in such a plan. I'm guessing the other 9% didn't quite understand it.)

Better still, in the event that someone did want to buy or license a given work, the consumer who snapped the picture would be much happier if someone more experienced, influential and powerful did the price negotiation and asserted the terms of use.

The second thing the skeptic would say is, "these publishers don't represent unlimited content because it would be cost-prohibitive to manage." That would be true if the management process was the same as how they handle their existing library of works. But that wouldn't be the case in the scenario I propose here. These companies wouldn't have to do a thing with all content submitted to them, other than reply to requests to buy them through automated mechanisms. If it turned out they were representing works that someone else expressed interest in, they would be more than happy to assess its value and monetize it.

None of this suggests they would otherwise cease or alter their other business activities. Music labels would still promote bands that tour well and sell tons of songs; movie studios would still spend hundreds of millions of dollars making and promoting blockbuster action films; and stock photo agencies would still make invest in their featured pro photographers. They can do all this and also monetize content submitted by people who create content and upload it to the internet.

Author Motivations

The concept of any work having potential value—and that value being protected—presents a completely new and different marketing paradigm of this next "new economy."

Traditionally, people have sought "publishers" of various sorts to not only represent and sell a work, but to promote it. But here, it is the creators of such works who do this, just as they already have been throughout the Web 2.0 era. The very act of uploading content and advocating others to share and distribute them, or even to modify and redistribute them, only serves one's own interests. It doesn't matter whether a work is emailed around, or sitting on someone's personal computer, the Copyright Infrastructure would always be able to identify it, even if it were combined with other works. In the event someone would use the work in a way that would require licensing, the work would be identified, the licensing agent would conduct the transaction, and the author would be compensated.

Any other use of the work, such as those that wouldn't require licensing (as permitted under Fair Use provisions), would just be yet another form of distribution and promotion that, again, increases the chance that someone else would want it someday. In a system where there is proper accounting, protection and enforcement, freely sharing and distributing content actually rewards people.

Regardless of the author's intention when he creates a work, there would be many registrars to choose from. Choosing one would be based on either financial or social objectives. Perhaps even both. Note that any given registration filing represents one or more works at a time—no one is obliged to use the same registrar for all his works as a general rule—so he may have multiple personal objectives.

Below are some of the candidates likely to become registrars that would be most desirable by content creators:

Search Engines and Domain Registrars
Google, Yahoo, MSN and other sites have the infrastructure and wherewithal to immediately and instantly scan the copyright database (if not help set it up in the first place), index it, and serve up content relevant to search queries. They have the administrative and technical resources to realize the backbone very quickly. Creators of works may choose these entities simply out of convenience and reliability—they're first, they're there, and more people use search engines than any other site, making them first in line to attract sign-ups. The search engine may choose to start some level of media promotion for the content it represents, which itself would attract even more people.
Social Networks and Content-sharing Websites
These already have strong name brand recognition, thereby attracting a lot of interest from their existing end-user community. Photo and video sharing sites are already heavily trafficked by companies that seek content hosted there, so it's a natural sales pitch for consumers to use them as registrars.
Media Agencies and Publishers
As has already been discussed, record labels, movie studios, television networks, photo agencies, and other publishers and producers of media content would be good candidates to be Copyright Registrars. Technically, their lack of significant traffic for user-generated content may appear to put them behind the 8-ball, but they already have inroads with many media companies, and also have more sophisticated licensing models that may help translate to higher license fees, which translates to more income for contributors.
Special-interest Groups
Industry trade associations for creatives could each act as registrars for individuals who create particular or specialized forms of content. These organizations may provide value-add by having re-distribution or re-licensing relationships to others that may benefit content creators. They would act somewhat like a meta-agency (an agency that licenses work to other agencies).
Existing Content Aggregators
News outlets, magazines, newspapers and other media outlets could attract more content from contributors and at all levels, including their readers. Like the media publishers above, creators of works might choose any of these entities because of their specialized positions within particular industries, but may also be the go-to place for authors that don't want to work directly with a single media agency or publisher.
Specialized Technology Companies
Companies like Picscout and Idee (who develop image-recognition technologies and provide some extra services) already charge fees to track whether registered works are used by others on the web, but they may provide additional incentives to those who use them as copyright registrars as well. Their decisive advantage would be to find infringements.
Creative Commons
For those who wish to make their works available for free (in exchange for credit and/or attribution), the Creative Commons could be an option as a registrar, should they choose to become one. The CC is an organization that promotes and advocates the free use of intellectual property (including copyrighted works). Here, the CC would assure compliance by "licensees" of these works (even though no money would be exchanged) by enforcing the creator's copyrights via the registration process. In other words, if attribution isn't given for using a CC-licensed work, the user could be liable for copyright infringement and be awarded statutory damages. It's not likely such a thing would happen if the use of the work was free in the first place, and the internet would be laden with web crawlers looking for such infringements.

So, let's consider an example: Say a musician registers his songs with a record company as his Copyright Registrar. He then posts his actual songs on MySpace (in addition to other sites), where he promotes it and gains traffic. If someone wanted to buy it, the user would be automatically directed to the record label's ecommerce page where the transaction is made.

Why would the musician pick the record label and not MySpace as the Copyright Registrar? His choice might be that he also gets grouped together with other similar bands where he may receive extra exposure by association. Or, the label itself may do more broad netcasting of itself and the kinds of bands and music it represents, which may also stimulate sales of his particular songs. Maybe he was given other incentives by the record label.

As for MySpace, it may have seen the lost opportunity, but it would be impossible to stop it. Identifying the source of copyrighted material would be enabled by copyright-aware applications, which would include the web browser, and would have nothing to do with MySpace. While the MySpace page might not display the specific link for the buyer to use, no site can stop a user from navigating away to another location. Here, merely displaying content does not require the site to also display copyright information or list the licensing agent. See the Policy section for further discussion. The web browser's support of the Copyright Infrastructure would be a more likely conduit for this kind of information anyway.

Remember, no site is required to host or display content it doesn't want to. Here, MySpace could adopt a policy of only permitting content that it, itself, is the licensing agent. Or, it could strike co-marketing and co-licensing relationships with other websites or registrars. That's just a matter for the free-market to work out on its own.

But there is the market reality at hand. There's still quite a bit of money to be made in the old Web 2.0 model, where merely having the content reside on a site attracts traffic and advertising revenue. A site like MySpace would have to do some critical analysis to be so draconian as to not host content it doesn't necessarily have the rights to.

Ultimately, content creators will help registrars discover which models work best. The same musician may choose to register different songs with different registrars, just to test which performs better insofar as revenue is concerned. (The Copyright Registrar only gets to represent the works registered with them; it may not necessarily choose to promote him.) In the end, competition is good.

Economic Evolution

Because the Copyright Infrastructure would be designed so that registrars would have exceedingly minimal costs in processing registrations, and a great deal of financial incentive to act as the representatives for such works, it follows that the nature of competition will be such that "fees" that creators would pay to register copyrights would be either zero, or absorbed into the existing "membership fees" members pay anyway.

This is extremely critical for the system to be accepted; it won't take very long for many consumers to realize their works aren't going to generate much (if any) income, even though it's never possible to predict what kind of sales diffusion might result. But, since the laws of long-tail economics state that it doesn't cost any more to represent an infinite amount of contents—or save any money to accept less—it's always in the best interests of registrars to encourage everyone to participate, even the losers. If participation fees are either free, or included along with other desirable or useful services consumers would otherwise already sign up for, then this helps with innovation uptake.

On a related not, there may be those who wish to only register their works, and not give up representation rights. that is, people may want to represent themselves—for example, professionals, like photographers. Here, the Copyright Registrar could perform the service for whatever fee the market would bear.

Of course, in order for Copyright Registrars to pass on low fees, the copyright office should charge as little as possible to registrars. It's too soon to know what the copyright office would need in order to fund its minimal operations, but the economic objectives must be kept in mind in order for the entire system to succeed.

Evolution of Pricing Models
It would be impossible to predict how prices would evolve. However, classic Economic Evolutionary theories can predict the path of price evolution under the conditions proposed here, because they are similar enough to other models. The greatest unknown is the time it takes for buyers and sellers to become "rational players"—that is, when they understand that content is to be licensed, not stolen. This when I would start the comparisons with other models.

One such model is the pricing volatility associated with online advertising rates before Google stabilized the market. Prior to Google, online ads were sold the same way as most online content is today: peer-to-peer, with no "intelligence" in pricing structures. Some sites were getting thousands of dollars for banner ads, whereas others were getting only a few dollars, exactly the same way photo licensing prices swing today. (My own sales data for my stock photography licensing corroborates broader industry data.) In old online advertising, pricing inefficiencies were aggravated by a lack of standards to test and verify traffic metrics; nor was there a true understanding of what end-users actually wanted when they visited a site (a concern that ultimately lead to keyword search data as a metric for setting advertising rates). The same metrics are currently unavailable for stock photo licensing as well.

What Google did to stabilize advertising pricing volatility would be similar to what might happen with license fees for arbitrary media content online, once empirical sales data was collected under the new Copyright Infrastructure model. Here, that evolution of pricing models will include many components that may share some attributes with advertising rate analysis, such as site origin's ranking and historical sales trends, keywords, and so on. Another component for automated pricing structures for media would include the use of automated content-recognition algorithms that recognize certain patterns, subjects, and various other attributes and assessing which sell for more or less. When combined with appropriate metadata and other known features, categories emerge that can assist in producing the beginnings of pricing formulas that could apply broadly to many different media types.

Evolutionary Economics also predicts that pricing tiers would naturally evolve later as well. One can see this very phenomenon in the music industry, where Apple's new licensing deals with record companies are migrating away from a flat $.99 price to a tiered structure: new releases would be priced at $1.29, traditional music sold at the current $.99 rate, and older music would be priced around $.69. It is entirely likely that licensed content used for business purposes would follow a similar path towards eventual tiered pricing. Here, factors would depend on usage terms such as advertising, promotion, editorial publishing, and products and services. Additional variables may later incorporate the timeframe in which the work is used, terms of exclusivity, and size and/or "resolution" of the media.

As pricing becomes more "intelligent," it would likely happen that Copyright Registrars might get out of the business of setting prices themselves and instead, outsource such "market rate" intelligence to third parties in exchange for a percentage of the revenue. Again, this is similar to Google taking a cut of ad revenue in exchange for providing the service.

Any concern over price manipulation would be alleviated by virtue of there being many competitors, and the likelihood of a universal auction-rate mechanism, similar to how Google's ad rates are calculated.

"Fee or Free"? Ownership is Separate
There's another important factor to consider when it comes to price: the concept of free. First, understand that copyright ownership and monetary remuneration are entirely independent from one another. If you take the picture, you own the picture. You may want to give it away for free, or charge a lot of money for it, but the role of copyright registration is independent of that. In fact, the ability to enforce pricing, including "free", is weaker without having registered the work.

Consider the buyers: Can they trust you? Not just that that you won't sue them, but that you actually own the work and have the right to charge nothing for it? How do they know the work really isn't owned by someone else who will then sue them for infringement? Because of this risk, buyers have to be wary of any work they acquire in an environment where legal action is potentially heightened. This, especially if one promotes "free" usage of otherwise valuable content—it could easily be a ploy to entrap.

On the other hand, the "buyer" could also be a bad actor—he could claim (also by lying) that the work did have a CC license, which would allow him to avoid license fees. This would complicate the copyright holder's efforts in winning an infringement claim.

It is for reasons like these that courts look at one and only one thing when deciding copyright infringement cases: documents between the parties that grant consent by name. This documentation does not have to be complex or even written. It can be a digital transaction on a website. The terms of use can be a CC license agreement, but it's the direct granting of consent that's critical here, and the role of the "licensing agent" in my Copyright Infrastructure proposal gives assurance to both parties that the exchange is authorized.

Digital Rights Management

So long as someone has a business interest in selling content, it implies an equally important interest in protecting it. There are different kinds of entities that infringe, which require different protection methods and models, but they essentially differ as "consumer infringements" and "corporate infringements."

For consumers, there are two ways to deal with infringements: psychology and technology. On the tech side, there are Digital Rights Management (DRM) technologies that publishers use to assure that people only gain access to content they purchased. On the psychology side, we have behavioral economics, which, as I've already discussed, treats the problem using more carrots than sticks. Apple's recent announcement that it will no longer use DRM mechanisms is an example of this approach.

But the reason why the Copyright Infrastructure model helps both sides is because it is rooted in mechanism, not policy. That is, the mechanisms are open-ended enough so that people can enforce whatever policies they want within the same infrastructure. Having policy-agnostic mechanisms like this is becoming increasingly more useful because more and more applications and devices are internet-enabled. This gives them access to copyright servers where they can query copyright records for any given content in real-time. Works themselves do not have to have restrictions embedded in them—rather, their "status" (and that of the end-user and/or device) can be held elsewhere (i.e., in the cloud).

For example, if someone tried to play a movie on an iPod that was connected to the internet, the following would take place:

The movie's digital fingerprint (a value that can be determined in real-time using open-systems algorithms) would be sent to the Copyright Infrastructure for identification.
If the work were a registered copyright, the iPod would be given a link to a URL associated with the licensing agent for that movie.
The iPod would exchange information with it, such as the ID of the iPod player and/or other identifying data for the device or user (including the ability to enter a password that may be affiliated with a debit account for playing movies).
The licensing agent would then return a confirmation or rejection code.

Implementation of the communications protocols over the wire would almost assuredly be open-source software and made available for free to any application and device maker; embedding it into applications would be effortless. This doesn't guarantee that Apple or anyone else would cooperate in such a mechanism, but its simplicity makes it a whole lot easier to "switch on" later if license agreements were later established. The advantage is that decisions can be made at any time without having to revamp technology, or alter or regenerate digital content, or update firmware.

This greatly simplifies the entire architecture and implementation of any DRM technologies that anyone would choose to develop. Such simplification could also unite many of the fractured entities battling it out to see whose technology would be used. One such example is a consortium of companies called the Digital Entertainment Content Ecosystem (DECE), which almost everyone is a member of, except for Apple. But since Apple commands more than 70% market share for at least music sales, the DECE's influences are minimal. However, the Copyright Infrastructure's potential to simplify and even unify approaches to DRM technologies, it would completely reshape the way companies cooperate on DRM.

The goal here is not necessarily to settle DRM disputes within other consortiums. It's broader than that. Future media will come from a lot more user-generated content, not just movie studios and record labels. And those consumers who generated this content have exactly the same rights as the larger media companies in the eyes of copyright law. Gadgets like the iPod will have to deal with an infinite number of licensing agents, not just bigger companies, simply because these user-generated would be represented by formidable registrars, ready to pounce with punitive infringement claims for non-compliance.

People don't currently understand that today because most consumers don't have powerful companies behind them with batteries of lawyers to assert their rights. This is a failing of the copyright system itself, not its laws or enforcement procedures. Hence, the goal of the Copyright Infrastructure is to remedy this.

Policy Issues

The role of government is to establish frameworks (laws and policies) that stimulate growth through incentives for participation and good behaviors, and disincentives for disruption. It can do this best by providing mechanisms to build and innovate new business models that can expand, and setting policies that rewards behaviors that have a positive social or economic effect. The purpose of the Copyright Infrastructure is to provide the means and specifications for companies to participate in the copyright process without promoting or advocating any particular licensing model. The marketplace can do that. However, in order to provide those mechanisms, the copyright office must assure that certain business-critical issues are addressed, or this infrastructure cannot be realized.

One of the main goals is to provide as many incentives as possible for people to participate in the copyright system: for creators to want to register their works, and for users to want to use those works. By not mandating anything, but instead, providing incentives, then the unexpected nature of the free market can do whatever makes sense.

In keeping with this spirit, the copyright office should attempt to derive its revenue in ways that don't discourage creators from participating in the process, and the primary factor here is the minimum registration fee. By keeping it as low as possible—by incentivizing Copyright Registrars to do so as well by not charging them per-unit fees—this goes a long way towards that goal.

It is also important to recognize that the registration of works can be a very powerful deterrent for people to infringe, but it can also be a tool for bad actors to spoil the system. Therefore, policy needs to assure that people's interests are protected, for those on both sides of a work: the creator and the end-user of it. For example, policies should be written to ensure that registrars do not engage in practices that dupe contributors into unknowingly granting permission to represent their works, or by using opaque and difficult to understand user-agreements. Full disclosures must be made as to the implications of granting representation rights, and the penalties of fraudulent actions as dictated by copyright law. This would be coupled with the contributor's requirement to provide personal identity information, a requirement also mandated by copyright law. Users of all sorts should also reminded that registration of a work is never mandatory, that not every work on the internet would have to be registered, nor are potential users of works required to use "only registered works."

Submitting Works to a Copyright Registrar
Currently, copyright law specifies that a "best edition" of a work to be submitted when applying for copyright registration, but this is a product of the print-media world. In today's environment, the copyright office no longer uses this terminology for online registration—in fact, it's ambiguous. The leading presumption is that authors submit works in a "sufficient resolution necessary to identify the work unambiguously in an infringement claim."

Needless to say, this policy needs to be nailed down and codified. The goal should be to allow copyright holders to register the minimum size necessary, thereby avoiding making a commercial-usable edition of the work publicly available. A photo would only practically need a lower resolution for most cases; a song would not need to be the highest bit-rate or at full audio quality; a movie or video wouldn't have to be HD format or even full frame-rate. So, if a user uploads his photo to a social-networking site that also acted as the user's Copyright Registrar, he shouldn't be required to upload the full-resolution edition.

There may also be reason to permit a method of a "hidden filing," where the content is submitted, but not visible through the open-access viewing mechanisms. Traditionally, such a thing has never been necessary because copyrighted works have never been publicly visible through any means anyway. But, once an online database were instituted, there could be many reasons why copyright holders (or their clients) may need to shield the visibility of works from public view. However, since this is antithetical to the intent of the Copyright Infrastructure and its underlying incentives and motivations, hidden views should be more than exception than the rule—perhaps requiring special application subject to approval? Note that if such a thing were considered, the work itself would still be in the database, and it should still come up as a "match" if someone submitted a copy of it to the database mechanisms to query whether it has been registered. After all, if someone already has a copy of the work, determining whether it's been registered should be permitted. These functions are fundamental to the operation of the Copyright Infrastructure.

Access to the Copyright Infrastructure
Section 1202 of the copyright code prohibits impeding or circumventing copyright management systems. This was originally designed to stop people from messing with devices like DVD players and iPods so they could play stolen movies or songs. However, this section may need to be amended to address issues associated with the Copyright Infrastructure. It should never be required for any given application, device or website to access a copyright database server, but if any such item attempts to do so for purposes identifying a work, or to communicate with a licensing agent, that access cannot be impeded or circumvented. The presumption should be that anything trying to access the server is essentially a copyright management system, and should be treated accordingly with the provisions of 1202.

Implementing this could be tricky, especially because there is often a long chain of devices that lead to the internet from any given starting point. For example, if someone with an iPod is passing by someone's house or office where there is a closed network, one should not find that network to be in violation of 1202 because it doesn't permit access to the copyright server.

There are similar considerations for each node along the network: even if access up to any given node is possible, there's always the next layer up that could have similar restrictions. It is the right of any given portal to block access to any IP address, network mask, or domain that it wants, but assuming that one is actually on the network in the first place and can access "something" on the net, the question is whether authorized copyright servers should be exempt from filtering or blocking. At a minimum, one should not be permitted to block access to copyright servers as a matter of policy. Policy-makers should also look into nuances of how interested parties could achieve the same end (blocking access to copyright servers) without appearing to.

Lastly, there should be severe penalties for schemes akin to phishing, where users or devices themselves are duped into believing they are talking to the Copyright Infrastructure cloud, whether it's a registrar, a licensing agent, or parties related to the transaction.

Technologies
This document is a proposal and economic analysis of a Copyright Infrastructure. It is not a technical document. Though I've mentioned that the technology to build and deploy this infrastructure is not difficult, that doesn't mean there aren't going to be problems that policy needs to address. For example, I mentioned earlier that there are many technologies that can do "digital fingerprinting" of various media types. The problem is that there needs to be uniformity on which technologies are used by clients and servers (between the applications or devices and the copyright database server in the cloud). If an iPod uses one technology to determine the fingerprint of a song, the Copyright Infrastructure has to use the same one when determining if it's a match to a known copyrighted work, or they'll each come up with different values, resulting in a failed match. The policy question is whether the government wants to review all available technologies that can do certain technical functions like this and come up with a "standard," or should the protocol remain "open" so that the nodes on either end of a communication channel can negotiate which to use during the initial handshake?

Copyright Infringement Claims
The issue of infringements is a big one. Because the internet is not new, and content is already online, and third parties are already using it, the sudden deployment of a copyright database that already has millions of registered works (with billions more to come online in short order) would create an instant shift in public awareness and liability. Studies already show that millions of photos alone are already infringed upon by companies that should be licensing them (see prior articles for data). Under today's environment, these are incredibly hard to find; even sites like picscout.com and tineye.com have only been able to identify a small fraction of the internet's contents to find potential infringements. However, once the copyright database became live, the rate of infringement filings would probably spike to unprecedented numbers.

Anticipating such an event is a policy matter that should be taken up by the copyright office, though it's not clear how it should be handled. Should there be a temporary moratorium of statutory damages? A period of time where existing infringers would have the right to legitimately license whatever works they would otherwise by sued for? Would there be new statutes of limitations during this period? All this should be discussed in open debate.

Whatever that time frame window might be, it should be very short. The very same event that unearth millions of infringements would also cause an abrupt end to future infringements, since everyone would be aware of it and want to avoid liability, and it is desirable to have this happen sooner than later.

While infringements as we know it would go away, there would be a new concern: false claims of infringements. To be clear, I'm not talking about ambiguous claims, where it isn't clear whether the use of a given work falls under the Fair Use provisions of copyright law. Such occurrences happen all the time—that's why we have courts. Rather, I'm talking about rogue licensing agents who file false claims in the hope of gaining settlements. This is where the copyright office's policy needs to be clear and effective.

The copyright office's oversight responsibilities should monitor the actions of registrars to be sure they are not trying to make a business out of filing infringement claims, or misleading or coercing people into thinking they need to license works, or to take a position on whether any given use requires licensing. These are, and always have been, open to debate. Though educating people is a different challenge, that is not something that the copyright office or Copyright Registrars should be engaged in as a matter of conflict of interest. That said, the concern on how and whether people will be properly informed will likely evolve as a natural byproduct of there being many parties involved in the process, representing those on both sides of a transaction.

Since copyright law and Fair Use provisions are complicated, it's certainly expected that conflicts will arise and actions will be taken. While monitoring Copyright Registrars is important, it's not easy because rarely do claims reach the courts; settlement payments are made instead, and they can add up to millions of dollars before someone were to take notice. Therefore, Copyright Registrars should be subject to periodic (and mandated) monitoring, including an accounting of the number of infringements claims made. Obviously, since settlements often contain nondisclosure language to protect companies from public exposure, such monitoring of claim activity among Copyright Registrars would have to be kept private as well, unless malfeasance is discovered, in which case, appropriate remedies would need to be made to affected parties.

Registrars may need to be given specific guidelines and parameters on how they may file claims. Use of specific language, contact information for suspicious activity, and so on. At the same time, Copyright Registrars should also have minimum requirements to actually engage in protecting works they represent. Copyright holders should have some way of forcing Copyright Registrars to take action, and ways to back out of their legal relationship with them. Policy language and procedures for this should also be discussed in open debate.

It should be noted that companies that already engage in representing the copyrights of many others—such as stock photo agencies and the like—have never shown a preponderance towards massive litigation against corporate users. As a matter of course, companies like Getty, Corbis and even smaller microstock companies have taken a much more lax approach to copyright infringements, often settling matters without legal action, or even punitive claims. The motivation has been largely to preserve relationships with buyers to stimulate new business. This very same motivation may be a similar incentive in a world where there are many Copyright Registrars, and where competition is heavy.

Choosing and Changing Representation
Another matter to be considered is that of changing which registrar a copyright holder uses as a licensing agent. (This only applies if the registrar is also the work's licensing agent.) There may need to be an ordained mechanism by which people can use in the event that they aren't happy with the performance of their current registrar. At the same time, registrars need protection in the event they are already in the process of licensing negotiation with a buyer. And then , what do you do about disputes between these parties.

Policy needs to assure that only authorized agents can act on behalf of copyright holders, and that those people are not duped into changing representation improperly. On a related matter, there is also the matter of predatory practices by some companies trying to persuade copyright holders to change their legal representation. Because the online database would be made available to everyone, there would be those constantly scouring the net, looking for high-value content creators, or of potential infringements, whereby those companies would try to inappropriately convince people to switch representation. This was a serious problem with phone companies trying to get people to change carriers all the time, a practice that the government eventually was able to stop through legislation.

If authors opt to represent themselves or hire their own legal representatives, they wouldn't be subject to the same litigation policies noted above. This is how the law exists today, and is sufficient. Copyright Registrars need to be treated specially because they would be representing billions of pieces of works, millions of people, and could therefore be able to do great harm. Thus, their behaviors and actions must be more closely legislated and monitored.

Duplicate and Derivative Works
One potential area that may need to be addressed by policy is the handling of bad or ambiguous content. This may be due to either quirks of the data being submitted, or by bad intentions. For example, if someone tried to register a work that isn't theirs, especially one that has already been registered by someone else, it is currently considered a federal code violation, punishable by fines that go up to $2500. More punitive punishment can be asserted for gross violations as well. But this may be rather excessive when dealing with mass registration applications by consumers—mistakes will likely be frequent. At the same time, there must continue to be strong deterrents for those with bad intentions.

Complicating matters is the question of ambiguity: it is possible to register works that appear similar (or even identical) to others, so long as they are not literally the same physical work submitted by two separate people. So, the copyright office would have to define new procedures for handling these issues, including that of dispute resolution.

Next, there is the matter of "derivative works," which is when a given work is derived from other copyrighted works, often called "mash-ups", "re-mixes" or "enhanced modifications." The new works are themselves considered unique and can be copyrighted separately, provided that consent was given by the original copyright holder(s). The fact that the new work may or may not have to be properly acquired from the original artists is a concern, but it has traditionally not been a matter under the purview of the copyright office. It is (and always has been) strictly a legal matter handled by the courts, which would only come up if someone filed a claim against another. Yet, if policy is going to address duplicate submissions and other anomalies that trigger errors in the submission process, it needs to treat them all consistently, which raises the question about the matter of derivative works here.

I mention these because people will no doubt use them as insurmountable problems, but the fact is, any and all problems that people might cite in objection to the Copyright Infrastructure idea, already exist in today's system. The copyright registration process has traditionally been used solely as a vehicle to register works. If policy is going to change to engage the copyright office ahead of the courts, that could be a large undertaking.

Tax Issues
Long ago, the government recognized that, in order to stimulate participation in online commerce, there should be sales tax exemptions from transactions conducted online (except for within-state sales). Many consider this as having a stimulative effect on the adoption and growth of the internet itself by the consumer public. There are similar tax-related issues here that would also affect adoption and growth of copyright participation and compliance.

Since so many people would be engaged in potentially monetizing their works, they would potentially have income that would otherwise be taxable. However, if the government were to tax them, then people would then be eligible to claim all sorts of things as tax deductions for creating those works. The guy who took a vacation to Hawaii and ended up getting a check (or credit) for $10 from his Copyright Registrar would then try to claim the cost of his vacation as a "business expense." The government would likely lose considerable tax revenue because people's expenses would clearly exceed the income derived from it.

Having an income tax moratorium on commissions derived from Copyright Registrars (as opposed to self-representation or by the use of other licensing agents) for a period of time, provided that the income is below a certain minimum (and does not include proceeds from infringement claims) would help incentivize people to participate in the system.

Modification of Copyright Law
Though the intent of this proposal is to be merely an infrastructure that sits on top of—and is agnostic of—copyright law, its existence requires that certain aspects of the law be re-examined. For example, the requirement for having a certificate for a registration to be "complete" seems obsolete In fact, copyright law currently states that having a certificate is necessary in order to file an infringement claim, although courts have ruled differently on this. (One claiming that the date of application is sufficient; another threw out a claim because the copyright holder had not yet received his certificate.)

Consider the eye-fi memory card that can be placed in digital cameras. It has wi-fi built into it, so the the moment a photo is taken, it's instantly uploaded to the net through whatever wi-fi network it can find. The image can be directed to on any number of photo-sharing sites, or a personal site, a stock agency, or even a news service. The need for instant copyright registration and certification is already past due.

Politics

Because copyright is at the heart of so many very powerful industries and business interests, most of those companies have already spent lots of money to build infrastructures to support their "current" business models. And many of them consider these to be their competitive edge in their particular industry. Therefore, there are those who would not like to see many changes in copyright.

These are valid concerns, which is, in part, why my proposal requires no change whatsoever to copyright law, nor does it compel anyone to do anything they don't already do. It is merely an infrastructure designed to address pitfalls in how copyright operates within a modern economy. It provides means and mechanisms by which the free market can build new businesses that correct for past economic inefficiencies, while providing more incentives for people and companies to be more compliant with copyright.

Still, there are those who will still oppose the Copyright Infrastructure, for a variety of other political or economic motivations. I've heard many of the dissenting arguments, so I'd like to address them here.

Some have argued that there are already those who have a business interest in helping consumers, both with information and assistance in copyright registration and protection. There are law firms and small companies that offer these services, but what they do is all over the map. Most not only do not perform copyright registration; they lure users into thinking they have protection, when, in fact, they don't. In order to meet a price consumers are willing to pay, they don't register works, but instead, provide a "timestamp" for when works are sent to them. Their "pitch" is that it keeps people from infringing because the timestamp that the company received the submission predates the infringer's use. This provides absolutely no protection at all; in fact, it's meaningless in the eyes of copyright law.

Some copyright registration services do properly register works, but of course, what they do is procedurally no different what someone can do for himself on the copyright office's website at http://www.copyright.gov/eco. In the best case, it's sort of like tipping a bag handler at a hotel to take your luggage from the taxi to the front door ten feet away: it's nice to have, but it doesn't solve the real problem. With filing fees at $35 per registration (at the minimum), that's not something that works for billions of works created by consumers.

But, by and large, the loudest voices in opposition to the Copyright Infrastructure are those who oppose many aspects to copyright itself. They feel that copyright interferes with artistic freedoms and free speech, or that copyright can be exploited for unfair monetary gain, and of course, it may compete with their own economic objectives. My goal here is to illustrate how copyright actually helps each achieve their objectives, not harms them.

Free Speech
The first group to address is the one feels that copyright is antithetical to the free flow of ideas: that it obstructs creativity because creative ideas cannot be owned and controlled. Creativity is often built from prior works and ideas, which "inspire" new works. If someone can own and assert control over their ideas, so the argument goes, then others cannot build upon them.

The misunderstanding here is based on confusing copyright itself with "copyright law," which are two separate things. Copyright is merely a source of identification. Think of copyright as an official passport that associates a work to its origin. Its "official" status is from the fact that it's federally recognized, which itself implies a higher degree of credibility than if were identified by an arbitrary online registry from an unregulated entity. Obstruction does not come from the fact that a work has an origin, it comes from the goals of the individual himself.

It is copyright law where some feel that it harms creativity and freedom of speech. Some want to adjust the law to permit all sorts of adaptations of prior works to encourage the creation of more works. Irrespective of whether copyright law is adjusted, copyright itself still exists underneath it. However the law may be revised, one still needs an accounting system that identifies a work so that it can be more efficiently and effectively protected—this, whether it's sold or freely used.

It should be noted here that the Fair Use provisions of copyright law already permit most of the kinds of creative expressions that some feel aren't permitted. The common example they use, which I noted earlier in this article, is the teenager who mixes and remixes content to create new works and share them. Despite common misunderstanding (and disinformation), these actions are largely legal and do not trigger copyright violations. It is only certain forms of publishing those works that consent may be required from the copyright holders. Fair Use is a very broad (though complicated) set of provisions, and courts face new cases all the time in determining whether infringements take place. It is impossible to expect to eliminate conflict like this by removing or altering copyright law without having an extremely disproportionate effect on global economies.

Copyright is needed within any transaction involving creative works for the simple reason of assuring identification and authorization. There has to be appropriate checks and balances that assure accountability, that people are who they say they are, that they own what they claim they own, and that their price is what they claim it to be—free, or a gazillion dollars.

Unfair Exploitation
Then there are those who object to statutory damages under the premise that people use them as a form of easy entrapment into extortion. Publishers, media companies, search engines and web portals, for starters, are all subject to infringement claims on a regular basis, the vast majority of which are frivolous and/or baseless. But therein lies their concern: by having more registered works would raise the likelihood of more and higher infringement claims.

This fear is at the heart of many companies' concerns, which is reasonable on the face. But the Copyright Infrastructure would be far more effective as abating this problem than aggravating it, especially if there were policies instituted proscribed above. There's no question there are "trolls," but it's not always made up of those looking to file claims. There are also those who troll the internet looking for content to use for free—to infringe. Filing legitimate infringement claims, even frequently, is often necessary for those who produce copious amounts of highly desirable work. This is especially problematic now, since the majority of online content is unmonitored and rarely pursued.

Real "copyright trolls" use deceptive tactics to entrap people into bad behaviors, such as using leading or deceptive promotional language that entices people into using works in a way that lead to infringement claims. But, one needs to discern between those acts and that of protecting one's own economic interests.

Other Registries
Another argument copyright detractors use is that you don't need copyright registration to provide protection—any kind of public registry can serve that purpose. For example, The Creative Commons has just such a registry where the "owners" of works can submit their content to be registered as freely available. I put the word owners in quotes because there is no assurance that the person who submitted the CC attribution is, in fact, authorized to do so. Such registries can be exploited by bad actors on both sides of a transaction. A company that wished to use a work for free could easily manage to have it show up in the CC registry. Without secure and trustworthy authentication, who's to know the better? If the original author of the work were to file an infringement claim saying he didn't register the work with the CC, how would a judge really know? Is the author trying to exploit the end-user? Or, is the end-user trying to get to use the image for free?

The reason why copyright registration is the better mechanism for claiming ownership is because it's backed by federal law, which ratchets up the penalties and consequences substantially, which in effect, gives more credibility to the data within the registry. The "federal" aspect to copyright also reduces attempts by bad actors because such people go out of their way to avoid federal crimes. (This is why smart criminals don't use postal mail, or cross state lines for certain illicit activities.)

As for the Creative Commons, it is a perfectly reasonable and adequate mechanism for stating "license terms" for works. Once works are registered with the copyright office (irrespective of the existence of a Copyright Registrar, which may very well be the Creative Commons), then the CC registry would be adequate for expressing your desire to have others use your work freely.

Summary

The main objective of my proposal for reorganizing the copyright office is basically very simple: the copyright registration process needs to open up to private industry so that market forces can help people participate in both the economic development and in the protecting of their creative works. Once that model is spun into motion, new industries will take off in a directions that will have unbound economic stimulative effects for years to come.

What secures that economic development is one that behavioral economists can understand. When you institute policies that reward good behaviors and punish bad ones, the byproduct is a cultural shift. When consumers realize they can make money from their photos or other works by doing exactly the same things they currently do online today, they will be more participatory in the system, and therefore, more aware, changing the mentality of how copyrights are perceived.

And this mindset percolates up the food chain to the corporate level: A guy works at a big company, and his job is to produce brochures, advertisements and reports. Does he search the web for photos and use them in work-related documents without seeking permission? How might his views change if he's also the one who's registered his own stuff with the copyright office and is on the watch for infringers of his works? Even if we don't necessarily trust him to turn over a new ethical leaf for his personal actions at home, there's the simple fact that he's now aware of the new domain, and that there's a new industry of tracking and policing how works are used.

It should also be pointed out that this proposal is not to create an Orwellian-style police state, where the government spies on and prosecutes people for minor and frivolous infractions. This is instituting an economic infrastructure that can percolate throughout every business sector from the consumer to the Fortune 500 companies. It creates both economic incentives to participate, and disincentives for cheaters. When the risk of getting sued for copyright infringement is a more realistic disincentive than what is available today, especially since the cost of legitimately licensing works is incredibly cheap (even free in many cases), the goal of why copyright law was conceived in the first place will have been achieved.

Labels: analysis, copyright, creative commons, economics, financial analysis, infringement, investment, legal, legislation

Dan Heller's Photography Business Blog Industry analysis from www.danheller.com

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Tuesday, January 27, 2009

Reprise of a Proposal for Privatizing Copyright Registration