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1.

EXECUTIVE SUMMARY AND CONCLUSIONS

1.1 ORIGIN OF THIS STUDY

This study began in October, 1974, and has been sponsored by the Division of Science Information of the National Science Foundation. The problem seen at that time was that copyrighted works were being fixed in computer-readable media and the copyright law concerning the use of such works was unclear. The copyright law had not been fully revised since 1909, a time when the possibility of copies of literature fixed in media that would make the copies invisible to the unaided eye was unthinkable.

A major issue in 1974 and for several previous years was whether a copyright owner deserved compensation when his work was first encoded into electronic form, or for the time it continued to be stored, or only upon each instance of a hard-copy being created. In addition, a sense of urgency had been created at Congressional hearings in 1967 with predictions that in the near future, hard copy distribution of technical books and scientific journals would be replaced by a single copy, converted into computerized form, being replicated at hundreds, perhaps thousands of remote terminals. The implications for copyright owners were severe. As a result of those conditions, what was desired was a multi-disciplinary, "policy-oriented" study which would clarify the issues, including the issue of economically-sound, technical mechanisms in such automated systems that would enable reporting of the data on which royalties could be based.

However, the National Commission on New Technological Uses of Copyrighted Works (CONTU) was established at the very end of 1974, with the function of recommending to Congress changes in the copyright law with respect to uses of copyrighted works in conjunction with computers. In October, 1976, the General Revision of Copyright Law was enacted, which did much to clarify the rights of copyright owners to their works when fixed in any tangible medium, but did not finally resolve the issues of computer-readable works.

CONTU has not yet submitted its recommendations to Congress, and the copyright laws with respect to computer-readable works will remain ambiguous until Congress acts on those forthcoming recommendations.

This study analyzes the issues of copyright in computer-readable works and is pertinent to current policy considerations.

1.2 CONTENT OF THIS REPORT

The purpose of this report is to present the results of the study, and to recommend mechanisms that will maximize the long-term availability of computer-based information.

The subject of this study does not concern an activity in which there

is a comprehensive or coordinated investment program aimed at achieving a specific goal. Consequently, recommendations are not based on a quantification of benefits and a resulting cost-benefit comparison. In order to establish a firm basis for recommendations, basic principles of copyright have been surveyed; and an analysis has been made of the impact of information technology on copyright law as that technology has advanced during the twentieth century. In addition, fundamental concepts of economics have been reviewed to assure that recommendations are well-grounded in that discipline.

As an outcome of the evaluation of fundamentals, and of the historical analyses, it has been possible to enumerate a set of basic principles that are employed as the foundation of the recommendations. In addition, insights have been developed and conclusions drawn about the reduction of transaction costs, the impact of technological change and about the existing and expected mechanisms of policymaking in copyright. It is hoped that the recommendations and conclusions will be of value to decisionmakers, as well as to policy analysts and researchers. Certainly the findings, conclusions and recommendations of this report are not to be taken as the final, definitive view. Other analyses of the legal and historical precedents may reveal different interpretations and consequently different conclusions and recommendations. Additional contributions to the literature are welcomed.

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1.

The concept of common law copyright conforms to the philosophy of the Enlightenment, enunciated by Locke, that each person has the right to the fruits of his creations.

2.

Due to the inherent rights in the copy, an intrinsic market failure results from the ease of copying or plagiarism of intellectual property. Correction of the failure requires the

public good of statutory copyright protection. 3. The principle of inherent ownership and consequent statutory

protection do not imply a value judgment as to the relative merit of an individual work or the inherent right to financial remuneration. The economic value of a work is to be determined in the marketplace where copyright protects the distributors of intellectual works as well as the creators.

4.

If free economic competition is possible, opportunities for it should be maximized, including opportunities for entry of new products and new competitors.

5.

Copyright protection assumes the concept of the quid pro quo
of a social contract. The application of this concept requires
that in return for protection of law, the copyright holder
makes a public disclosure of his work.

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