Monday, April 22, 2013

US Congressional Study: Is Copyright the Free Market at Work?

In November 2012, the Congressional Republican Study Committee briefly launched - and subsequently retracted - an ideologically-unusual study casting skepticism on the state of American intellectual property law. While the study focuses on Copyright law, its conclusions are valid for intellectual property law at large. Overall the, the study challenges three standing ideas about IP law. 

1. The purpose of copyright is to compensate the creator of the content:
According to the study, purpose of the copyright system is to “promote the progress of science and useful arts.” IP law is supposed to incentivize innovation. To the extent that IP law fails to do so -as  has been the demonstrable case in the IT industry- IP law is not fulfilling its constitutionally-intended purpose. 

2. Copyright is free market capitalism at work:
In fact, IP law currently entitles the IP holder to a guaranteed, state-enforced monopoly. The retarding effect of this on the progress of economic growth cannot be overstated. 

3. The current copyright legal regime leads to the greatest innovation and productivity:
This echoes the claims many of economists who conclude that current IP stifles innovation and encourages rent-seeking, while interfering with productive participation in the economy as new information is systemically prevented from ever entering the public domain. Productive parties must deal with hampered access to useful knowledge, even decades after the initial discoveries.   

Ruffled Feathers
Responding to protests from congressional Republicans, the RSC removed the brief from its website in less than 24 hours and fired Derek Khanna, the study's constitutional strict-constructionist author. Khanna, a Yale Law Fellow, has subsequently become a contributor for Forbes. 

What Can Be Done?
A package of solutions was also proposed by the study. Currently, US has no disincentive against bogus IP claims, which do not actually have innovation behind them (such as attempts to copyright or patent traditional, folkloric knowledge). This could be reformed. Fair Use should also be expanded, and damages awarded for infringement should also be reformed. These measures would serve to discourage anti-competitive patent-trolling. 

The most significant reform that Khanna proposes, is to limit the length and renewability of IP protection, restoring IP protection to the competition-favoring, industrial-revolution-era version of itself. 
Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.