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Tuesday, March 31, 2009

Solving the Copyright Claim Clash

The New York Times recently published an article titled, As Rights Clash on YouTube, Some Music Vanishes. It highlights Juliet Weybret, a 16-year old who recorded a video of herself playing the piano and singing Winter Wonderland, and then posted it on YouTube. Weeks later, the video was removed "as a result of a third-party notification by the Warner Music Group, which owns the copyright to the Christmas carol."

According to the Times article, this happens all the time, and thousands of videos disappear for the same reason. Even common family home videos that happen to include a portion of a song playing in the background are removed with prejudice, along with videos that use music in goofy ways, from montages to mash-ups.

What I find particularly interesting are these facts:
  1. No human is involved in the infringement decision. It's an automated system that merely identifies songs; it does not distinguish whether the given use of the song actually constitutes an infringement.
  2. No human is involved in policing or overseeing this process, questioning it, objecting to it, challenging it, or even calling anyone's attention to it. (Well, except for the New York Times.)
  3. No entity at all—human or corporate—has any financial incentive to defend these claims: to intervene, question, object, or challenge.

It's certainly the case that Juliet's video is not an infringement (it's an unambiguous example of the Fair Use provisions of copyright law). But that doesn't imply that all cases are not infringements. Indeed, it certainly may be that some uses actually infringe. The important point is that no one is actually making that assessment and no one has a financial incentive to challenge them.

The consequences of all of the above have a cascading effect that, over time, has eroded the spirit and intent of copyright. One of the first things that happens is that the common perception of what constitutes a copyright infringement is being obfuscated. This is the exacerbated by additional factors. The complexity of copyright law is such that not a lot of people are aware of it or can interpret it easily without extensive experience. Even copyright lawyers often disagree over what kinds of uses are infringements and what are permitted under Fair Use. In fact, it is this very reason that "claims" of infringement need to be balanced by informed counter parties. The fact that there is an automated mechanism that forces content to be removed without "challenge" runs counter to the spirit of copyright.

Also, the reason why there is no challenge to these claims is that the size and financial wherewithal of the litigants have a disproportionate influence on their business partners. As the Times article sums it up, "Users have the right to dispute a take-down. But few have. People are somewhat intimidated by the possibility of being sued by one of the music companies, even if they have a free lawyer."

No matter how you look at it, it's pretty clear that the copyright system isn't working as it was intended for cases like this. But despite my characterization above, this isn't entirely due to large companies using their financial muscle to exploit the little guy, or the massive amount of copyright infringements that users do. The source is much more basic than that: the internet itself, where massive amounts of content is being created and used in quantities and ways that the original copyright infrastructure was never designed to handle.

Note: I said infrastructure; I did not say "laws." Copyright law is perfectly capable of addressing these cases, of discerning which of these uses actually are infringements, and which aren't, despite the hyperbolic claims of copyright holders. Hypothetically, if both sides of a dispute were properly represented by legal counsel, the court system would make use of existing law and find appropriate interpretations to maintain legal continuity. Granted, not every case is actually judged "fairly", as anyone who's ever lost a case knows. I'm not being naive. However, it's the aggregate net effect of rulings that has maintained consistency and stability in the general perception of the integrity of the courts.

But the reality is that both sides don't have balanced representation. Some have said that free market conditions will correct for such imbalances. The argument goes that the economic quandary for Google is that, on one hand, user-generated videos are important to YouTube's efforts to increase the flow of advertising dollars. On the other hand, their licensing deal with Warner (to display the professionally-made videos) generates significant traffic as well, which also contributes to advertising revenue. Is it the case that Google's competing objectives here would give them incentive to keep Warner Music from going too far? For Google to take a position on the matter would imply a delicate balance of economic interests. Is this a true balance of power?

The real answer is no, because unlike Warner Music, whose sole financial incentive is to represent their own interests, even (or especially) at the expense of Juliet's interests, Juliet has no one representing solely her interests. Google is not a fair arbiter here; it is only trying to determine what's in its own financial interests. Its decision is not based on what's "right", but who has the larger financial club.

It would seem like Google would realize that Warner Music isn't more valuable than the massive amount of user-generated videos like Juliet's. But the economic reality is that 1) end-users won't go away, 2) they won't stop producing and uploading content, and 3) they have no legal recourse. Hence, they have no economic influence, so Google and other social networks don't need to listen to them. By contrast, Warner Music is a single entity that represents a large volume of works, it does have legal recourse, and they could pull all their content. So Google listens to them.

And therein lies the real problem. That's why it's an infrastructure problem, and not about the law. What I mean by "infrastructure" is the set of tools and conditions set up by the government to provide means and mechanisms that give strong incentives for companies to be "good citizens" in the copyright realm. When there are no incentives for anyone to assume the counter-balancing position, the infrastructure is out of balance.

One could say that this provides a great business opportunity: to create a company like Warner Music, but who represents all the individuals who upload their content to social networks. Imagine a hypothetical site called "your-content.com" with a marketing statement that said, "if you upload your content in exchange for letting us represent you legally, we will pay you commissions on anything that is licensed from us, or any damages collected if someone steals your work. You can place your content on any site anywhere on the internet, and if someone licenses it, we'll pay you a commission." While that's well and good, the problem is that none of this is actually possible unless each work is actually registered with the copyright office. And therein lies another major problem with the copyright infrastructure.

Because of how copyright law is set up—and this is for very good reason beyond the scope of this article—only those works registered with the copyright office enjoy an extra level of legal protection, which itself leads to financial incentive for others to comply with their copyright. Warner Music has registered its massive media library with the copyright office, which is what gives them the legal and financial strength to assert their will upon Google or anyone else that wishes to distribute their works. Juliet can't assert her rights in any practical manner because she never registered her video with the copyright office.

The hypothetical your-content.com could never exist today because end-users like Juliet don't register their works. And, at a minimum registration fee of $35 per application, it isn't likely that your-content.com will pay to register all those works either. As a consequence, your-content.com would never able to practically enforce its legal protections, which would prevent them from deriving revenue from potential licensees. User-generated content isn't that valuable on a per-unit basis. It's only valuable in massive quantities, since only a small proportion of it actually sells, and it's impossible to predict which units will perform.

There's another hurdle to the problem: even if the registration fees were zero, the copyright office has no infrastructure at all to handle all those applications. Even today, with only tiny fraction of even professional artists registering their works, applications for copyright still takes 5-7 months to process.

Once again, this illustrates that the current copyright infrastructure did not anticipate the volume or business models that the internet has created. Price, processing capacity, and financial incentives built into the system to encourage the private sector to give representation to individuals. These are what's missing.

To address these failings, I submitted a plan (in 2007) to revise the copyright infrastructure. In my article, Proposal for Privatizing the Copyright Registration Process, I proposed that the copyright office offload only its simple administrative task of processing copyright registrations to the private sector. These new companies would be called "Copyright Registrars," of which there could be an infinite number. Their role is two-fold: First, to process copyright registration applications using a more effective and efficient automated system than what the copyright office does today. Second, they would "legally represent" works that were processed within a defined set of parameters (with oversight) to assure integrity. This is the financial incentive as I just described. By delegating the administrative tasks to a large number of private sector companies who can automate the process en masse, the cost of registration quickly approaches zero, and the capacity to process infinite number of works rises. These remove two major barriers that allow companies to build and justify business models that ultimately lead to equal representation of people's interests.

Note, the proposal is not a transfer of copyright ownership, nor is it consent or permission for the registrar to use the work. It is simply a transfer of administrative tasks. Once a work is registered, there are three events that would involve the Copyright Registrar:
  1. If a third party wanted to license the work, the copyright registrar would then negotiate and collect the license fee. (This would largely be an automated process for most common uses.) Because the work could exist in any number of places around the internet, it doesn't matter where the work is found, it only matters that someone wants to use it in a manner that requires licensing. Here, the Copyright Registrar that processed that particular work would have the right to price it and collect fees. These fees would be shared with the copyright holder.
  2. If someone has infringed upon the work, the Registrar would pursue those infringers, possibly collecting statutory damage awards or license fees, either of which would be shared with the copyright holder.
  3. If a third party claimed the work infringed on another work, then the Registrar would assess the claim and either comply with the demand or challenge it.

This now lays the very incentive models for businesses like the hypothetical your-content.com to exist. So now let's consider a more realistic example: if Google were a Copyright Registrar. They would have YouTube be a site that automated the processing of the end-user's copyright registration application the moment the person uploaded one of their own videos of original content (assuming the work hasn't already been registered). Now, if Warner Music were to claim that Juliet Weybret infringed on its copyright, then Google would challenge it. Why? Because if they didn't, people would stop using YouTube, and move to another video site (that was also a Copyright Registrar) who did a better job of helping to monetize and protect users and their content.

And let's face it, if such conditions were to exist, then Warner Music wouldn't even bring the case in the first place, nor would Google permit the automated robot that sent out the take-down notice. So, already there would be a stabilizing effect by the very nature of there being a balanced weighting of legal representation. There would be less Copyright obfuscation, less exploitation, and a better, more efficient economic model for growth.

The other thing to consider is that Warner Music itself could also be a Copyright Registrar, and Juliet could very well have registered her little video with them, and still put it on YouTube. In this case, the music company would have more incentive to keep it there, since they would be receiving a portion of its ad revenue. With that kind of financial incentive spread across massive amounts of user-generated content, this translates to real money. Now there would be no incentive in falsely demanding that non-infringing works be removed from YouTube or anywhere else.

Predictably, everything stated above needs to stand to scrutiny. So, let's get into that.

Is there really economic value in Juliet Weybret's video? Perhaps not hers, but one needs to consider the aggregate value of massive amounts of user-generated content, especially when its collective weight adds up to substantial negotiating power. This is all part of the latest modern-day financial model called "long-tail economics." This is where money is made not by selling "the best" content available, but to amass as much of it as possible—irrespective of quality—and letting the natural sorting and searching mechanisms of the internet allow things to be "found" and subsequently sold. Given the massive amount of user-generated content on sites like YouTube, Flickr, MySpace, Facebook, and thousands of others, the aggregate value of licensible content is enormous.

This has been the focus of my research for close to ten years, which I have written about on my blog here. The most recent articles that pertains to this can be found here, and here.

Content is king, and everyone from social-networks to search engines knows it. The holy grail has been figuring out a business model that can capitalize on it. Facebook itself tried to change its end-user agreement that gives them rights to use content that people uploaded to their site, but they had to back-off because their "deal" wasn't fair—people weren't going to be compensated for their contributions.

The whole idea of the Copyright Registrar is for this very objective to be more open, transparent, and competitive. As more Copyright Registrars come online in their various forms, critical masses of people gravitate and congregate around those sites that are known to perform well in licensing and protection. There's no risk of monopolies or price/performance shenanigans because the competition would be diverse enough to keep anyone from cornering the market.

As higher quality content (along with higher quantities of it) add more and more to the global media library, all of which now have equal opportunities for licensing, it would be extremely rare for individuals to represent themselves anymore; almost all content online would be represented by someone with far more power and capability than individuals have on their own. Furthermore, licensing terms and disputes regarding infringement would be exchanged between more equally-sized parties, who have more balanced legal weight and economic power. Gone would be the days of individuals stressing over how much to price a photo that someone wanted to license, or how to deal with a company that stole their photo from Flickr for use in a brochure, or having to pout because Warner Music forced her song off of YouTube.

As for licensing fees, again automation comes into play. There's already models built in other industries for auction-based license-pricing systems, very similar to those used by Google to set advertising rates. Applying them to the lion's share of user-generated content would not only be simple, but lucrative. Distribution of commissions to the creators would be part of this business segment.

The last part, which is really where the potential cost and complexity comes into play, is the legal entanglements: assertion and protection of rights. Determining whether the use of a given work is an infringement is the elephant in the middle of the room. Copyright law and its various provisions for Fair Use and issues concerning the First Amendment make for a never-ending set of challenges. But I don't want to overstate the concern either—it's certainly manageable once you're dealing with informed parties of equal weight and economic interests. Deals are struck, middle ground is found, and balance is achieved.

This, combined with the more ubiquitous and nationwide use of the copyright infrastructure, would actually reduce the number of infringements, since it would be too easy to be caught, and you'd be caught by very large and powerful interests. This would increase the rate of legitimately licensed material, which has a multiplier effect on economic activity. Best of all, the people who create the content would be recipients in the system for a change. This itself has a stimulative effect on participation: people have more incentive to participate and to produce better, more competitive content when there is a merit-based compensation model.

The lesson that history teaches is that "economic incentives" is the great equalizer.

This article is by no means a detailed description of my copyright infrastructure proposal. For that see the link to the original proposal I cited above, which can be found here. In it, I also address questions and criticisms that have come up, as well as necessary and detailed policy issues that would have to be considered.

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