Copyright: locks, levies, lawsuits or licensing? Part 2: levies

(First published on IT World Canada blog)

I have expanded this discussion to include licensing (Part 4), with this being the obvious option that doesn’t get discussed. Sometimes instead of trying to use locks (part 1), levies or lawsuits (part 3) to enforce a specific business model, that using an alternative licensing mechanism would work better.

I covered the topic of levies before on this blog with an article titled “Analyzing when copyright levies are a good idea, and when they are a very bad idea.“. In this article I spoke about what are called “compulsory licenses” where a copyright holder can no longer require permission for an activity, but where a royalty fee is imposed. I gave a suggested test for the extreme situation that warrants such an exception to copyright, and tried to apply this test across a few different proposals (The Songwriters Association of Canada proposal that I support, and the Creators’ Copyright Coalition proposal which I strongly reject).

We must treat compulsory licensing as an extreme situation, given removing the requirement for permission removes the ability of the copyright holder to use licenses/contracts to enable a wide variety of business models. The best way to be compensated for creativity changes over time, and only a system which enables innovation in methods of production, distribution and funding can possibly harness the best ways. We need to recognize that there can and must be innovation in business models, not only innovation in the outputs of creative processes. We must not underestimate the damage to the marketplace from the government stepping in and imposing a compulsory licensing model for uses of copyright where copyright holders are already licensing their works.

There is a trend I have noticed in the debate around levies, which is a radical change in what people believe the purpose of compulsory licensing is: from dealing with a refusal of copyright holders to license their work, to believing it should be a compensation system where copyright users sometimes refuse to pay.

In the past compulsory licensing was only used in situations where copyright holders were refusing to license uses of works which were seen as socially beneficial. The copyright holders didn’t want compensation for a use, they wanted to prohibit a use entirely. Possibly the best known example was music composers and their publishers when equipment to record music was first invented. The following quote by composer John Philip Sousa is an example of how offended composers were at the mere existence of audio recording equipment.

“These talking machines are going to ruin the artistic development of music in this country. When I was a boy…in front of every house in the summer evenings, you would find young people together singing the songs of the day or old songs. Today you hear these infernal machines going night and day. We will not have a vocal cord left. The vocal cord will be eliminated by a process of evolution, as was the tail of man when he came from the ape.”

Many governments felt that recording music was a socially beneficial thing, so created a compulsory licensing system where anyone could perform and record a performance of music as long as the composer was paid a government set royalty rate. Some countries still have this system in place today, while other countries have removed the compulsory license given most composers now voluntarily license their music for many uses. Notice that as the market corrected itself, this extreme measure of the government imposing a single licensing model on copyright holders was removed — as was done in Canada, which has far fewer compulsory licensing regimes today than we did in the past.

When compulsory licensing is used as a mechanism to compensate creators where copyright users are refusing to pay, harmful market distortions result. This removes business model choices for creators, which for many creators can be as harmful or even more harmful to their ability to make a living than copyright infringement. Using this justification for compulsory licensing also removes the incentives of copyright holders to move towards workable licensing models, and simply passes the buck from copyright holders to society as a whole for a problem which I don’t think can reasonably be placed on average citizens.

One of the questions we really have to ask ourselves is whether the problem is people not being willing to pay, or whether the problem is copyright holder not being willing to license their works on reasonable terms. Last month I asked “Where is that “buy me now” button for Copyright“, noting that there are many situations where copyright holders have thus far refused to license their works under reasonable terms.

This situation may be improving. The Songwriters Association of Canada has a proposal to monetize music file sharing. The idea is simple: rather than trying to use locks or lawsuits to try to stop people from sharing music online, they would instead license for a reasonable fee that would be paid by those who wish to share music.

There are a variety of licensing mechanisms which I will discuss in more detail in a future article, but it is important to remember that this does not need to be a government imposed compulsory license. The idea which the songwriters are proposing can be implemented in a variety of ways, including the voluntary collective licensing method proposed by US based Electronic Frontier Foundation (EFF).

What we should avoid is the thinking behind the controversial Private Copying regime. The primary proponents of the system, the recording labels, are already opposed to this system. Consumers of multi-purpose recording media are upset that they are paying money to the music industry when they use this media for entirely different purposes, and composers and performers are upset at the mechanism used to distribute the royalties (based on commercial radio airplay and soundscan CD sales, which are not an appropriate proxy for online distribution statistics).

In the music industry there are 3 different copyright holding groups that have their own separate copyright: the composer, the performer and the “maker” of the recording (the recording label).

While I believe that composers and performers would move to a voluntary licensing system, I’m not so sure about the “makers” which are often major labels. The rhetoric used by the major labels to describe filesharing (authorized or not) is not that different (or any more reasonable) than the initial attitude of composers to the introduction of the technology that allowed the recording industry to exist in the first place. If given a choice it seems obvious that these recording labels will refuse to license recordings for online sharing given they want to retain tight control over the music industry. I believe that this becomes an obvious example where compulsory licensing may be necessary, given that this tight control by the increasingly redundant incumbent recording labels is the source of many of the problems in the music industry.

Makers are already under more compulsory licensing systems than composers. Section 19 of our current copyright act describes a compulsory licensing system that applies to performers and sound recording makers for performance in public (example: playing recorded music in pubs) or communication to the public by telecommunication (example: radio).

While I’m not sure if performers need to be lumped together with “makers” at this stage of the marketplace, I do think that extending these types of provisions to non-commercial music file sharing makes obvious sense. As with performances in public and the communication by telecommunication, music composers would be compensated through their existing voluntary/extended licensing system.