would have been known to Madison was Englishman John Locke (1632-1704). Locke has been called "first advocate of the modern conception of civil liberties and definer of the limitations of property and the powers of the common wealth...the formulator of constitutional law and the democratic processes as we know them.' Locke had written, in his Second Treatise on Civil Government, (Chapter V, para. 27):

3

"...every man has a property in his own person...The labor

of his body and the work of his hands we may say are properly
his...It being by him removed from the common state nature
placed it in, it hath by his labor something annexed to it
that excludes the common right of other men..."

It is useful to note at this point that common law copyright in all unpublished works (with its basis in the British common law to which Madison referred) will continue to be in force in the United States through December 31, 1977. Pforzheimer notes that a principle of British common law that has been carried down to us, and is in effect at this time, is that the author has complete dominion over his work until publication, after which his rights conform to the statute then in effect. The case of Donaldson v. Becket decided in 1774 in Great Britain confirmed this situation.

However, on January 1, 1978, the 1976 General Revision of Copyright Law takes effect, and under this new statute, common law copyright is ended for all unpublished works fixed in any tangible medium of expression. As of that date, such works will be covered by the Federal copyright statute and will not be subject to the common law or statutes of any State. Works not fixed in any tangible medium such as unscripted utterances or performances will continue to be subject to common law as interpreted by the Judiciary.

2.2 NATIONAL UNIFORMITY IN THE FACE OF MOBILITY

In calling in The Federalist for a Federal copyright law, as opposed to a set of State laws, Madison recognized the natural mobility of information (recently proclaimed by some to a 20th century concept) and the inefficiency of different requirements for intellectual property rights in the separate States. Professor Redford has noted that this attempt at uniformity was part of an overall pattern of Constitutional provisions that had a strong economic impact. As Redford states:

"the framers of the Constitution_/ made certain decisions
that were necessary to allow the free flow of persons, in-
vestment money, and commerce over the nation as a whole,
thus opening a vast area and a vast market to the entre-
preneurial genius of Americans, wherever located . .

The framers 7 made possible national uniformity in cer-
tain facilities for commerce, such as coinage, patents
and copyrights, uniform weights and measures, and a post-
al system."6

2.3 PRIVATE ACTIONS IN THE PUBLIC INTEREST

Finally, in asserting in The Federalist that "the public good fully coincides .. with the claims of individuals for copyright and patent protection_7" Madison made a bold statement with profound economic as well as political implications. The statement implies, first, that there exists a "public good" that is distinct and separate from individual or private goods. Second, it is implied that the Government may grant incentive benefits or remuneration to individuals for private and voluntary activities that are consistent with the public good. Third, in the cases of patents and copyrights, the private benefits to be granted by the Government will have no public effects except good effects; and fourth, the value of benefits granted is equivalent to the public good thereby obtained.

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These implications raise issues that even today, have not been fully analyzed and may never be fully resolved. They are in the arena of what has been referred to as the theory of public goods or public expenditure analysis, but which Professor Peter Steiner has broadened to call "the theory of the public interest."7 These economic theories "concern the way in which demands for public activity arise, are articulated, and are legitimatized.' The theories include the definition and classification of public goods and the mechanisms of their creation, financing, and distribution. In the case of intellectual property, the specific public good is the protection offered to copyright proprietors by the Government through its registration and enforcement mechanisms. Note that the Government protection is the public good; the individually-held copyright is a private asset.

2.4 MARKET FAILURES AND PUBLIC GOODS

Public goods may be differentiated in general from private goods and from collective goods. The necessity for public provision of a good may arise because the technical nature of the good is such that a private market, however perfectly competitive, would not be able to provide it.

The need for a public good may arise also if the imperfections of a real market create public "bads" (e.g., an externality, for example, pollution) which only Government action can cause to correct. In either case, "market failure" is said to occur. If some group of persons acting together take cognizance of the inability of the market to supply the good and provide the good for themselves outside of the free market activity, a collective good results. "Any publicly-induced or provided collective good is a public good," according to Steiner.

In the case of copyright protection, a conventional economic analysis would state that the need for a public good arises because intrinsic technical characteristics of an intellectual work prevents the operation of the perfectly competitive market for such works without Government intervention. One technical characteristic is simply that an original authored work fixed in any tangible medium of expression (i.e., a

copyrightable work) is typically reproducible at a very low cost in the same or similar medium. The work is also subject to plagiarism. In the presence of these technical facts, and with the condition that the author or his assignees have a property right in the work, a market failure would result without the protection and enforcement power of the Government. The market failure is that without copyright protection the author or rights proprietor would not be able to fully appropriate the economic value of originality through sale.

2.5 PROTECTION FOR PUBLICATION AS WELL AS CREATION

The conventional economic analysis given above has been discussed in a perceptive paper on "The Economic Rationale of Copyright" "10 by Professors Robert M. Hurt and Robert M. Schuchman. One question these authors ask is: "Does the copyright system induce the creation of new goods which would not have been created in the absence of copyrights?"11 The authors answer that "copyright does lead to the creation of new goods by encouraging the assumption of greater risks."12

It is necessary to comment, however, (as Hurt and Schuchman imply) that many kinds of works are subject to copyright, and the importance of copyright for the creation of new works varies with the type of work. In particular, for scientific and technical research papers, copyright is typically of minor importance to the authors of such papers even though publication is very important to them. The remuneration to authors of research papers occurs indirectly through increased salary, improved job security, prizes, travel opportunities and prestige, but not typically from the sale of papers.

However, copyright is extremely important to the publishers of such papers because (as is pointed out in Appendix B of this report), copyright protects the publishers' opportunities to cover their fixed costs. Thus in the case of research papers, copyright does not lead directly to the creation of new goods, but rather to the direct protection of channels of publication for already-existing goods. (This may lead, as a secondary effect, to the further creation of new goods of a similar type for distribution through the protected publication channels.)

2.6 THE VALUE JUDGMENT OF COPYRIGHT

Under the assumption, then, that copyright increases the creation and/or publication of some original works of authorship, Hurt and Schuchman then inquire "whether the reallocation of resources induced thereby is conducive to general welfare. "13 One argument is that copyright encourages literature, which like education, has greater intrinsic merit than its alternative product. Thus social welfare in enhanced. Hurt and Schuchman state that this assumption is in the nature of a value judgment. This is undeniable. It may be noted, in addition, that such a judgment was conceivably in the minds of the Constitution ratifiers who voted "to promote the progress of science and the useful arts" without conclusive proof that copyright protection (along with patent protection) was the most economically efficient or socially equitable method of

pursuing that goal.

However, the Judiciary has held that this Constitutional qualification is explanatory and not prescriptive; and that a copyrighted work need not specifically promote anything as publicly valuable as science or the useful arts, however those terms might have been defined in the 18th century or are defined in the 20th. At present, the judgment of (U.S.) society is, as expressed in law, that any "original works of authorship fixed in any tangible medium of expression "14 that are accepted for copyright protection are more valuable than the alternatives, whatever they might be.

Furthermore, copyright protection provides society with no comparative value judgment as to the inherent worth of a particular work of authorship; although the availability of copyright may be a Lockean/Madisonian judgment that all such works are qualitatively worth something. Copyright protection is primarily a mechanism designed to correct a flaw or failure in the competitive economic market. As such, it carries no intrinsic predetermined dollar value for any work so protected. It may be, therefore, that "copyright seems to be an inefficient device for simply rewarding authors "15 as Hurt and Schuchman suggest, but specific financial reward for an individual never has been shown to be the function of copyright. Copyright is directly pertinent to the market for works, and certainly pertinent to the rights of authors, but secondary to authors' specific income. Although copyright protection makes possible a certain monetary compensation for all those involved on the producer side of the economic market for works of authorship, remuneration occurs. only to the extent of the revenue that can be obtained from the set of costs, prices, and quantities of sale that market conditions permit. As persons of uncommon taste or strongly-held belief can attest, market prices and revenues rarely reflect an individual's sense of basic priorities or fundamental values. The just rewards to the creators of intellectual works of lasting value that advance the state of civilization will not be through the market mechanism, however protected, by copyright or otherwise.

2.7 SUMMARY

This chapter has provided a background in the foundations of copyright, both ideological and economic. It has considered the question of who gains from copyright protection and the extent, if any, of value judgment in copyright.

The ideological basis for copyright has been shown to be closely related to the concept that each person has the right to control the products of his own creation. This natural right evolved into common law copyright in Great Britain; and the limitations of the protection inherent there was part of the rationale for the Copyright Clause in the Constitution.

Because of the rights of the creator or his assignees, a technical failure exists in the market for intellectual property. The technical

failure, which is the ease of misappropriation through copying or plagiarism, is corrected through a public good, the Government protection of copyright. Note that if there were no inherent right in the copy, there could be no misappropriation, and consequently no implicit market failure. Thus, there would be no reason for Government intervention in the free market.

Copyright is of importance to the publisher as well as the author. This is particularly true in the case of scientific journals. However, the fact of copyright carries with it no comparative value judgment of works so protected. The economic worth of a work is determined in the marketplace where remuneration for the author and/or publisher may (or may not) be obtained. Copyright is not a financial subsidy for authors nor was it ever meant to be. It is a tool through which an author or his assignees may earn an income in the marketplace, if they so choose to use the tool in that manner.