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and whether other works can be considered substitutable and therefore competing.

If the copyrighted work is a book, musical performance or film produced for a general audience, there may very well be high substitutability among individual works as far as the ultimate consumer is concerned. In this situation, one author's exclusive right must compete with other exclusive rights in the marketplace to be selected or rejected by a typical consumer. However, since the competing works have a certain individuality about them, by the fact of their having the requisite originality for copyright protection, pure competition in a classical sense cannot exist. Nevertheless, the "monopolistic competition" which exists among the works may be very close to pure competition in the absence of externalities, collusion or restraints of trade by competitors. As Professor Mansfield states about competition in general, "...most firms face relatively close substitutes and most commodities are not complete ly homogeneous from one producer to another.... In other words, there is no single homogeneous commodity called an automobile; instead, each producer differentiates its product from that of the next producer. This,

. of course, is a prevalent case in the modern economy.


Thus, among certain classes of copyrighted works, there may be as much or more competition for consumer interest as exists among competitive hard goods or other "non-intellectual" properties. Competition among copyrighted works is assisted by the fact that although protection corers the author's specific expression, it does not extend "to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied...."37 Although a copyrighted work must be "original," it need not be novel or non-obvious, which are requirements for patent protection.

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The problem of monopoly has arisen in the music and motion picture industries on several occasions but not in the context of control exercised by virtue of an exclusive right in a single property. The problem in these industries has invariably related to attempted control over a market due to exclusive rights in at least several properties, and in some cases, exclusive rights in very many properties. The example of the potential monopoly over phonorecord recording which resulted in the compulsory license provision of the 1909 Act has been mentioned previously and is also described in Appendix A, Section A.4.6.3.

1950. 39

A number of monopoly-related cases in the performing rights area are mentioned by Taubman. 38 ASCAP consented to an anti-trust decree of the U.S. Dept. of Justice in 1941 and the decree was further modified in

In the 1948 decision, (Alden-Rochelle v. ASCAP) "ASCAP was declared to have achieved monopolistic domination of the music integrated in sound films, in violation of Section 2 of the Sherman Act."40 result, ASCAP "must license all qualified applicants, all licensees of the same class are charged the same fees, and any licensee or applicant

As a

may request the Court [the U.S. District Court for the Southern District of New York T to review the fees charged." (See Appendix A, Section A. In general, the result of a threat of market monopoly is additional Government intervention and regulation. Both the phonorecord manufacturing and ASCAP situations have resulted in compulsory licensing requirements. In one case, the royalty fee was fixed in law by Congress; and in the other case, the Federal Judiciary, although not fixing the royalty payment, required that ASCAP must license all qualified applicants and must provide equitable treatment to all licensees, with Court jurisdiction retained as a place of recourse.

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Problems in the development and maintenance of an efficient market for copyrighted works have been considered and some remedies have been discussed. Problems considered have included exclusion costs, the costs of information and communication, trade-offs in the design of royalty collection systems, royalty pricing schemes, economic implications in the "fair use" doctrine, price setting for compulsory licenses, and economic monopoly.

The presence of transaction costs is not necessarily a reason for abolishing copyright, despite the cost of Government regulation. There are transaction costs in any market. Without copyright, it is postulated that there would be cut-throat competition, increased secrecy and a reduced flow of information. A society must select which set of dissatisfactions it finds less onerous or more contributing to its overall goals.

Clearinghouses are one method of reducing the costs of communication and information. Blanket licenses assist similarly, but there are costs to the use of these systems as well. That payment mechanism that is least costly in time and effort to users, all other things being equal, will probably generate the least amount of deliberate evasions.

There are efficient royalty pricing schemes that distinguish different classes of users and which account for both fixed and marginal costs. Pricing may usefully distinguish institutions from individuals and may usefully offer a choice of schedules to suit both the heavy user and the casual user.

Fair use may be treated as a mechanism for the reduction of certain transaction costs. However, the doctrine of permitting an exemption from royalty fees for "worthy" uses that do not come under First Amendment or "lack of market impact" considerations can be criticized on efficiency criteria.

Compulsory licenses have been established in three new areas under the 1976 Act. Price-setting of royalty fees for compulsory licenses is

essentially an adversary proceding between producers and users before an impartial panel empowered to set rates.

Copyright is a limited monopoly over a single work. In the markets for works of general interest (e.g. phonorecords, musical performances) anti-trust problems have concerned, in general, attempted control over many works. The results have been imposition of a compulsory license or judicial intervention.

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Following the development in the preceding chapters, the questions of copyrightability in computer-readable data bases, full text, and computer programs may be considered. First some of the issues raised in 1967 hearings are reviewed, so that some of the arguments can be aired and the situation can be placed in context. Then, the current situation resulting from the passage of the 1976 General Revision is described. The issue of registration and disclosure is then considered in the context of public policy about information transfer.

The technical issues of copyrightability are then pursued, with the economic aspects of data base uniqueness and computer network distribution of copyrighted works considered. The conditions of sale of computer-readable works which need to be different than works in hard copy are discussed.


The questions of copyright in literary works entered into a computer and of copyright in computer software were raised substantially in testimony before the Senate Committee on the Judiciary concerning revision bill S.597 in March 1967.41 Authors and publishers appeared concerned by the possibility that, in the near future, a significant amount of publishing would be done in machine-readable format with extensive distribution of works accomplished by computer networks without hard copy. Clearly, there were serious copyright implications in this concept. Professor Jesse Markham, speaking on behalf of the American Book Publishers Council and American Text Publishers Institute stated that:

"The present state of technology suggests that the computer
will affect conventional publishing in two distinct ways:
(1) The initial versions of some types of information that
are reduced to writing, copyrighted and published, will
very likely be computerized, thus by-passing conventional
publishing altogether; and (2) The contents of published
works will be stored in computers and, once stored, serve
as a substitute for additional printed copies ..



Similarly, Mr. Lee C. Deighton, also appearing on behalf of the
American Textbook Publishers Institute, stated that:

"The same kind of transmission (as closed-circuit television]
is now technologically possible in computer network systems.
It is contemplated that in these systems, a central com-
puter will store copyrighted works, and that they will be
transmitted by wire to hundreds of individual console
screens upon demand. It is merely displayed on the con-
sole screen to be read at leisure by the user. The computer
in effect becomes the library."43

Ms. Elizabeth Janeway, appearing on behalf of the Authors League of
America, was more certain of the arrival of electronic publishing. "It
is clear that computers and computer networks will soon become a prin-
cipal means of disseminating much that authors write," she stated.44
As a reference, Ms. Janeway cited a study copyright and Intellectual
Property published (in paper) by the Fund for the Advancement of
Education.45 This study was cited also by another testifier,
Mr. Charles Gosnell, chairman of the Committee on Copyright issues of

sues the American Library Association and director of the libraries of New York University. 45 The cited study included the following quotes:

"The library of the future will be unrecognizable to the
librarian of today; it will be so dependent on the hard-
ware of the new technology, that apocryphally speaking,
the librarian of the future will be a mechanic with a
screwdriver, ever alert to repair breakdowns in the

service. "47

"Audio-visual dial-access teaching machines, operated
by remote control, will provide hundreds and even thou-
sands of students with simultaneous audio and visual
access to a journal article or excerpts from a book."48

the computer, in essence, assumes the role of a duplicating rather than a circulating library. One copy of a book fed into such a system can service all simultaneous demands for it; of course this substitution for additional copies will vitally affect the publishers' traditional market. -49

"The information world of the future will revolve around
information systems, educational programs, and library
complexes in which the complete documentation of the
system concerned will be equivalent to a computer memory.
In a sense, therefore, by providing copies of works
stored in the computer, these systems become publishers.
Traditional publications will also be available from
commercial publishers, but it would seem that 'nonbook'
production will predominate.

The cited study quoted an article from the New York Times which was mentioned also by Professor Jesse Markham. 5T This articTe had reported that:

"The medical libraries of three major eastern universities
will be tied together in a network of computers and tele-
phone lines to give scholars virtually instant access to
their pooled resources ... the three libraries will
then contain 1,025,000 items. These can be searched by
computers in seconds

When telecommunication and
photographic reproducing devices are added to the network

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