Digital technology under scrutiny

USA Today (Society for the Advancement of Education), August, 2004

America's creative energy and entrepreneurship are known the world over. Property rights, contracts, and voluntary markets have played a primary role in the development of vibrant industries in the U.S. University of California-Berkeley Law School professor Robert P. Merges argues that these, the "building blocks of all creative endeavors," are just as relevant in the digital era as ever, and, in fact, underpin the conditions for "future growth and diversification" in intellectual property.

In his study, Merges dissects a concept in copyright law called compulsory licensing, which has developed a following among prominent intellectual property experts and users of digitally-based technologies. Falling midway between granting full, unlimited copyright to owners of creative works, and denying it altogether, compulsory licensing forces copyright owners to allow use of their works under price and usage restrictions set by Congress.

Some supporters of compulsory licensing contend that full copyright gives creators too much control, while artists complain that they have no incentive to design if they do not receive compensation for their work. To mitigate these differences, compulsory licensing has been established in certain industries where "transaction costs"--the trouble of locating, negotiating with, and paying individual creators for their works--were too high. Merges feels there is no need to establish such an initiative for digitized works because the Internet drastically has reduced those costs.

Besides its unsuitability in today's digital world, there are two inherent weaknesses with compulsory licensing: First, because prices users pay to creators of works covered under the licensing regime are set by Congress, the process of determining that price is subject to lobbying from self-interested parties. Second, once a price is set, it could be locked in for decades, eventually becoming "unreflective of supply and demand."

Merges points out that voluntary mechanisms already exist for regulating intellectual property transactions-collective rights organizations (CROs) with excellent track records such as Broadcast Music incorporated and the American Society of Composers, Artists and Publishers. "There is no reason to believe that CROs will not emerge in the Internet arena," he surmises.