Draft Proposal – November 16, 2012
Project Proposal: Empirical Research on Flexible Limitations and Exceptions to Copyright
Mike Palmedo & Sean Flynn
American University Washington College of Law, PIJIP
November 16, 2012
Contents
Abstract 2
Research Problem and Justification 3
IP Maximalist Studies 3
Studies Promoting Flexibility 4
Objectives 6
Methodologies 6
Short Term Econometric Studies 6
Longer term Cross Country Study: Industry Output Across Multiple Countries after Copyright Regime Change, Controlling for Other Factors 7
Case Studies 8
Management of Organizational Matters 9
Project Schedule 9
Results and Dissemination 9
Expected Findings 9
Dissemination 10
Obstacles to the Execution of research 10
Institutions and Personnel 11
Abstract
There is a recent and growing trend in both developed and developing countries toward recognizing more flexibility (or “openness”) in copyright limitations and exceptions (L&Es). Flexible L&Es allow for exceptions to exclusive rights based on a case by case balance of the social and economic interests of copyright owners, users and the public. The trend toward greater flexibility in L&Es is often motivated by a belief that flexible limitations and exceptions are better adapted to enabling and benefitting from rapid technological and social change of the digital era. But there is a dearth of empirical research documenting the potential benefits from such systems, and the conditions under which such benefits are likely to accrue. This proposal seeks fill this gap through two econometric studies and a series of country-specific case studies. The research will be conducted through the Global Expert Network on Flexible Limitations and Exceptions, currently chaired by the Program on Information Justice and Intellectual Property at American University Washington College of Law.
This proposal is for new work by the network and has a longer (2-5 year) time horizon. Over the last year, the network researched limitations and exceptions in other countries and developed a model flexible limitation and exception for national copyright reform processes. Separate to this project description, the network will propose shorter term work to (1) conduct technical assistance and dissemination workshops in countries actively considering copyright reform, and to (2) continue supporting the infojustice.org website, working paper series and newsletter.
Research Problem and Justification
Copyright law has long been described as promoting the public interest through a balance of exclusive protection for rights holders linked to limitations and exceptions to such rights for users. As described in a recent decision of the Canadian Supreme Court, promoting the public interest in the creation of and access to new works requires that “both protection and access must be sensitively balanced”; “users' rights are an essential part of furthering the public interest objectives of the Copyright Act.”[1]
IP Maximalist Studies
Despite this general recognition of the need for balance in copyright systems, and the integral nature of limitations and exceptions to reaching that balance, there is very little empirical literature documenting the social and economic impacts of different formulations of limitations and exceptions. The policy debate on copyright is dominated by studies of the contributions of “copyright industries” to local economies, originally developed by WIPO.[2] These studies purport to demonstrate the importance of certain industries, but they do not measure the impact of different constructions of copyright law to economic ends, and thus, properly interpreted, are of little utility to the kinds of decisions that commonly face policy makers in choosing between various legal reform options.[3]
Many associations and coalitions of associations have formed for the express purpose of strengthening global intellectual property protection, and they have funded many additional studies. A recent white paper by Allen Dixon for the International Chamber of Commerce argues that IPRs "have a vital role in growing the economies of developed and developing countries all over the world, in spurring innovation, in giving large and small firms a range of tools to help drive their success, and in benefitting consumers and society through a continuous stream of innovative, competitive products and services and an expansion of society’s overall state of knowledge.”[4] A paper by George Barker argues that “stronger copyright laws would substantially increase music purchases and music industry sales revenues and, by implication, increase artist income, industry employment, economic growth and government tax revenues.”[5] Necessary Elements for Technology Growth, a white paper by the BSA, argues that "strong copyright, patent and other forms of intellectual property protection are key to invigorating the information economy."[6] And of course, the IIPA continues to publish semiannual studies titled Copyright Industries in the U.S. Economy, by Stephen Siwek that report on the output of industries reliant on copyright.[7]
Studies Promoting Flexibility
There is a smaller body of literature opposing the IP Maximalist position, which is reviewed below. To date, the literature does not include studies that compare empirically compare the experiences of countries that have moved from closed systems of copyright flexibility to open systems.
Two recent studies have attempted to estimate the potential economic gains that could be realized from the expansion of limitations and exceptions to copyright. Ian Hargreaves authored a report for the UK government which warned that overbearing copyright law causes investors from expending funds in new or startup companies, and says that fair-use style limitations and exceptions give companies flexibility in innovating their products and services. Hargreaves estimates that expanding the flexibility of limitations and exceptions would increase annual GDP growth by 0.3 to 0.6 percent. [8]
A study by the Australian Digital Alliance analyzed the economic contribution and the particular activities of industries that rely on copyright exceptions in Australia. The studies found that the introduction of flexible copyright exceptions and better ‘safe harbours’ would make substantial contributions to Australia’s economic growth/innovation, while causing only negligible disadvantages for rights holders; and that implementing such recommended changes would improve productivity growth. The additional value added to the Australian economy is estimated to grow to around $600 million annually.[9]
There is only a small body of literature that has investigated the benefits of flexibility in copyright limitations and exceptions to economic ends. The Computer and Communications Industry Association (CCIA) applies the WIPO methodology in its report on industries that rely on fair use, and finds greater amounts of value added and greater employment in these industries than similar studies have found in industries that rely on copyright. However, it is notable that CCIA doesn’t report specifically how it determined which industries to include – and many successful industries are counted in both the IP maximalist reports and the CCIA report.
A new paper by Roya Ghafele and Benjamin Gilbert compares the output of industries before and after Singapore implemented fair use in its copyright law. It examines data from the private copying industries – defined as “those industries that manufacture and sell technologies and related electronic components, infrastructure and services, that enable consumers to record, store and transmit copyrighted materials for their own personal use” – before and after 2007, when the new law went into effect. They find that “fair use policy is correlated with higher growth rates” relative to a control group of other industries.[10]
This model is stronger than the WIPO model. In econometric jargon, it uses a “difference in differences” approach which examines two groups of industries over two time periods to find the result of a policy intervention. The study shows that personal copying industries have been able to thrive under fair use, relative to 1) the absence of fair use, and 2) other industries that were unaffected by the change in copyright law. Furthermore, by reporting that the copyright industries were not significantly affected by the change, the study supports the argument that fair use is good for the economy as a whole.
The study does not, however, control for exogenous factors that could impact the industries in question. During the time period when the private copying industry experienced rapid growth in Singapore, other factors could have impacted the industries’ performance. Obvious candidates include new products and evolving customer tastes. It also does not show that the increased in output is unique to the country where the policy change was made.
Finally, there is a related body of academic literature on the link between intellectual property, innovation and growth in developing countries, which generally shows mixed results when strong IPR is applied in developing countries. Most of this literature is more focused on patents, or broad indexes of IPR protection, so it is of limited relevance to this literature review. It is not often cited by policymakers. However, the econometric analysis used in these studies will be useful for developing econometric models to test the effect of a change in copyright regime on economic outputs.
Objectives
Our study will provide empirical evidence on the impact of legal reform promoting flexible limitations and exceptions in copyright on a variety of social and economic interests. Two cross country econometric studies will measure changes in output and employment at the industry and national level when countries introduce changes to their copyright laws. In addition, survey-based case studies will examine alterations in perceptions and practice among copyright user-groups following legal reform. Taken together, the studies seek to examine the links between alterations in law on the books, alterations in perceptions about the law and practices under it (“law in action”), and economic and other ends.
Methodologies
Short Term Econometric Studies
Cross country studies will rely on industry level data from an aggregator such as the UN. We believe we will be able to purchase the data for under $5,000. We will then use well defined econometric methodologies to produce robust analysis of the effects of open models of limitations and exceptions to copyright.
The methodology employed by Ghafele and Gilbert can be replicated with data from another country that has implemented fair use or otherwise passed legal reform that includes open limitations and exceptions to copyright. This methodology examines value added as a percentage of GDP ands well as employment, in a country over time periods before and after a policy change (the opening of limitations and exceptions to copyright).
For our short term study, the same data should also be collected and reported from a country that has amended its copyright law within the last ten years, but not so recently that there is no data showing changes to the economy after the policy change.[11] Israel would be a good candidate for the test country, since it amended its copyright law in 2007 to include fair use. Other countries PIJIP has identified as moving towards fair use have tended to do so within the past five years, too recently for data to show the effect of the change. Another possibility could be Thailand, which has an article in its 1994 law permitting any use that can pass the 3 step test, without further restrictions.
We will expand the Ghafele-Gilbert methodology by adding a comparator country (or countries). To the extent possible the comparator should have similar characteristics to the test country (GDP per capita, location, etc.).[12] Expanding the Ghafele-Gilbert methodology this way will add another control to the experiment.
Once we decide on the countries and collect the data, the methodology is largely in place. The addition of the comparator country or countries allows us to run a further test of statistical significance to show whether the country that adopted an open model of limitations and exceptions to copyright experienced a greater change than the control.
Longer term Cross Country Study: Industry Output Across Multiple Countries after Copyright Regime Change, Controlling for Other Factors
The longer term econometric section will apply methodologies often used in the field of economic development (and international economics more generally). To develop the best methodology, we would undertake a survey of economic development literature, and conduct interviews with authors who have conducted these types of studies. This would be the beginning of a longer project, but the report could be completed within one funding cycle.
Though the final model specification is yet to be determined, we can describe it in general terms. The study will use industry or firm level data from multiple countries – some with open limitations and exceptions, some with a closed system – to provide further empirical evidence of the strength of open models. The dependent variable would be some measure of industry output, which could be defined in currency terms or as a percentage of national output. An option for expanding the project would be to repeat the regressions with other dependent variables, such as exports or employment.
The study would report the results of panel regressions estimating the factors that determine industry output (for instance, the size of the economy, the quantity of various inputs, etc.), and the inclusion of a binary variable indicating the existence of fair use or flexible limitations and exceptions to copyright in a country. A panel regression methodology could be used to show changes over time. Alternatively, cross-sectional regressions without a time element might be appropriate if we are more concerned with the differences between countries than in changes from one year to the next.
Case Studies
Case studies will be used to assess the perception of more openness and flexibility in the legal structures among user groups in countries that have promoted flexible limitations and exceptions in legal reform. This element of the research will aid the analysis of countries that have recently implemented legal change – and thereby lack the kind of longer term data analyzed above. Case studies will also enable the analysis of the perceived flexibility and changes in practice following legal changes through different processes (e.g. highly public and open debated change vs. technical amendments not subject to public debate) and substance (e.g. the “fair use” vs. “3-step” models). The results will indicate where legal reform itself may be insufficient to promote alterations in practice and where other measures, such as best practices projects, may be necessary to enjoy the benefits of law reform.
The case studies will follow a uniform survey methodology to ensure that the results from each country are comparable. The survey instrument will be designed through consultations with a planning and advising committee composed of experts who have previously implemented copyright surveys (e.g. Jeremy DeBeer and Kick Kawooya of the ACA2K project), as well as with methodology professionals (e.g. Professor Vidya Samarasinghe, who teaches Field Survey Research Methods at American University’s School of International Service).