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and unauthorized sale and use of computer-readable works may need study. The question of the practical value of copyright protection can be raised if significant infringements can be shown to be occurring without discovery, prosecution and conviction.
New types of technologically-based intellectual property may be invented and new copyright problems may arise. Continuing review of inventions and innovations might be undertaken to examine the possibility of the need for further changes in the copyright statute.
The electronic journal, while strongly forecasted by some, has not materialized. A useful study would be a consumer-oriented (user-pull) survey, determining to what extent such a product would be acceptable and purchased by potential users.
5. The "worthy use" exemption from copyright royalty payments has been suggested to be economically inefficient. It could be hypothesized that innovations of intellectual products serving the market in which there is a worthy-use exemption would be stifled because of the potential for lesser returns. It would be useful to examine this hypothesis in a research project. Additional examination of whether it would serve the public interest if computer programs were protected under a more-encompassing concept than copyright appears to be worthwhile.
While the concept of price descrimination between individual and institutional purchasers of scientific and technical information has been shown to be economically efficient, the legal ramifications controlling its use have not been examined in this report. Such an examination may prove valuable.
2. THE FOUNDATIONS OF COPYRIGHT
2.1 COMMON LAW AND THE PRINCIPLE OF NATURAL EQUITY
Article I, Section 8 of our Constitution gives to Congress the power
"To promote the progress of science and the useful arts,
The extant documents that might describe for us the original basis used by the framers of the Constitution for inclusion of this clause are very limited. The Federalist, written in 1787 and 1788 by Alexander Hamilton, James Madison, and John Jay in an effort to explain, defend and obtain support for the ratification by the States of the then-pending Constitution devotes just five sentences to the clause. In Federalist No. 43, James Madison wrote:
"The utility of this power of Congress 7 will scarcely be
Into Madison's short sentences are packed a wealth of social, economic and political philosophy. In his statement that "copyright of authors has been solemnly adjudged in Great Britain to be a right of common law, Madison implied that basic principles of British common law were valuable, and in addition, continued in effect in the United States; at that time newly-formed out of British colonies. Walter Pforzheimer, in a scholarly historical review of copyright law, has similarly quoted an 1807 Massachusetts decision as stating:
"Our ancestors, when they came into this new world, claimed
Professor Emmette Redford, in describing our legal and ideological heritage, has noted that "...early English judges looked not alone to custom, but also to reason and natural equity for their decisions."2 Thus, by citing British common law, Madison implied principles of natural justice which included the concept that each person has an inherent right to control of the products of his own creation.
The philosopher most associated with this principle and whose writings
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."3 Locke had written, in his Second Treatise on Civil Government, (Chapter V, para. 27):
'...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
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_7 made certain decisions
The framers / made possible national uniformity in cer-
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.
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, "9 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. 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