The Laws of Disruption

“The Law of Disruption,” writes Larry Downes in his new book of the same name, “is a simple but unavoidable principle of modern life: technology changes exponentially, but social, economic, and legal systems change incrementally.”

Today, we’re going to focus on one particular area of the legal system that modern technology is disrupting—copyrights. This is an area near and dear to The Sizemore Investment Letter. After all, we publish a paid newsletter subject to copyright protections. The same is true for our books.

We face the same basic tradeoff that all media and software providers face: do we want the broadest dissemination possible — in which case our works are more vulnerable to piracy — or do we clamp down with a strong defense of our copyrights, limiting our reach in the process? There is no easy answer here. “As the new world runs increasingly ahead of the old,” Downes begins, “social systems invariably break down, only to be dramatically reinvented to better suit the new environment to which human beings have already relocated.”

Copyright protections certainly do appear to be “breaking down” in Mr. Downes’s words. Fully 72 percent of Americans between ages 18 and 29 do not care whether the music they download is copyrighted or not.  This is a demographic problem that has no solution. And while there have been high-profile cases of music downloaders being sued and criminally prosecuted, the likelihood of being caught is still practically nil, giving very little incentive to change behavior.

Furthermore, this is a sensitive area in which the interested parties need to tread carefully. Some readers may remember the backlash that the rock band Metallica faced when they supported measures to sue and criminally prosecute illegal downloaders. The band’s popularity never fully recovered from that move. “Metallica is attacking their own fans!” was common cry among those affected. To an extent, this was a generational issue. The members of Metallica are in their 40s, about a decade too old to “understand” the mentality of music downloaders. To Metallica, file sharing was theft. To the fans, it was a way of supporting one of their favorite bands. The law is on the side of Metallica. But Mr. Downes raises the question, “should it be?”

Without wading too deeply into politics, the “War on Music Pirates” is somewhat analogous to the War on Terror. Some have argued that it’s well and good to kill terrorists, but unless you attack the underlying causes that breed terrorism, the problem will never go away. For every terrorist you kill, ten more rise up to take his place. In the same sense, illegal downloading of music, movies, books, and other copyrighted materials cannot be stopped by dragging a handful of offenders into courtrooms. The costs involved in prosecuting would overwhelm the court system. And draconian moves—such as fines in the millions of dollars for sharing even a small number of songs — violate the basic principle of justice that the punishment fit the crime or, in the case of civil damages, that the compensation to the plaintiff be a reasonable estimate of the damages done by the defendant. They thus far have also colossally failed to even make a dent file sharing. For every downloader dragged into court, ten more take his place. If anything, prosecuting may harden the resolve of others. With all of this said, let us now take a look at the “causes” of internet piracy. Downes recounts the history of how copyrights came to be:

In 1710, [the British] Parliament enacted “An Act for Encouragement of Learning, by Vesting the Copies of Printed Books in the Authors or Purchasers of Such Copies, during the Times therein Mentioned.” The Statute of Anne, as it is known, turned what had been a monopoly by the Royal Stationer upside down. It gave the rights to authors, not printers, and limited the times for which those rights existed. It introduced the radical idea that a copyright was not simply the codification of some natural right the authors had as creators. Rather, it was a gift from the government given for the specific purpose of encouraging the spread of information. The grant, in other words, was given only to the extent necessary to meet an explicit economic goal—the encouragement of learning.

Stop and think about that for a minute. The founding documents of the United States (the Declaration of Independence, Constitution, Bill of Rights, etc.) state a belief that certain rights are “natural rights” given to mankind by God. Interestingly, monopoly power over one’s literary and artistic works was not included in this list of natural rights. In the Anglo-Saxon legal tradition, this right was a gift from the government in the interests of performing a public good: encouraging the proliferation of learning, specifically that of “Science and useful Arts.” (Based on this criteria, does most of today’s copyrighted material deserve its copyright? Does a Britney Spears video or the latest episode of American Idol really constitute a “useful art”?).

Downes writes that the British-based copyright system worked well throughout the 19th and 20th Centuries. “The arts and sciences flourished, and piracy was minimal. The principal safeguard, however, was the market, not the law.”

Buying a printing press to illegally copy a book was cost prohibitive, as was buying a disc stamper to make illegal copies of records. So was the storage and transportation, for that matter. But, as Downes continues,

Thanks to the Law of Disruption, a succession of low-cost copying technologies has put increasing pressure on the system. Player pianos, invented in the late 1800s, allowed anyone to perform even the most complicated works without buying or studying sheet music. Cheap photocopying let consumers make unauthorized copies of printed material by themselves. VCRs brought video-copying technology right into the living room. As technology got smaller, cheaper, and faster, the need for intermediaries, capital investment, factories, and retail distribution channels disappeared. The expense and risk of infringement evaporated. Detection and enforcement became correspondingly more expensive.

And of course, the internet massively accelerated these trends with file sharing.

It is interesting that just as copyrights were getting harder to defend, their protections have been massively expanding. The number of years a work remains under copyright has grown considerably in recent years. Downes reports that copyright terms have been extended eleven times in the past fifty years. In 1962, copyright lasted fifty-six years. Today, it spans the lifetime of the author plus an additional seventy years. By the time most works become part of the public domain, they will already be forgotten. How many works of literature (fiction or nonfiction), art, or music have any demand at all 70 years after the creator’s death? One percent? One tenth of one percent? The end result is that, for all intents and purposes, copyrights have become perpetual. Because by the time they finally do expire, the works in question have long since become obsolete.

This goes against the original purpose of copyrights — to increase the amount of learning available to the public. Authors were to be given a limited monopoly on the commercial use of their work for a period of time sufficient to compensate them for the efforts. But does it make sense that Ernest Hemingway’s novels are still under copyright forty-eight years after his death? (This is a major irritant to me because he’s my favorite author and I don’t want to re-buy all of his works to run on my Amazon Kindle, but I digress…). By the time a work of fiction is old enough to be included in a high school literature class, shouldn’t it be part of the public domain?

At any rate, Mr. Downes has made several recommendations for “fixing” the copyright system to be more in line with the realities of the information age: setting realistic time limits, restoring the concept of fair use, and undoing the damage caused by the Digital Millennium Copyright Act of 2000.

We’ve already discussed the issue of realistic time limits, but we’ll through in a few additional thoughts. The first would be that the term should vary with the nature of the work in question. For example, should a newspaper article, which relates information that is intended to be read and discarded within a day, be entitled to multiple decades of copyright protection? Or might a few days or weeks be sufficient? Books, which involve considerably more labor and which are less time sensitive, should be given a longer copyright. But how long? Ten years? How long is long enough to compensate an author for his or her time? This is hard to say. But to go back to Hemingway, does it make sense that his grandchildren are benefitting from works he authored in the 1920s? Should Michelangelo’s descendants be entitles to royalties for reproductions of works he created in the 1500s?

Finally, if we use the original purpose of copyrights — as a means to spread learning to the public—should pop music be given copyright protection at all? Not to pick on poor Britney Spears again, but can her work legitimately be said to be for the benefit of all mankind? Does it make sense to use the US court system — and taxpayer money — to give protections to something of such dubious societal value? And does it make sense to pay a royalty every time you sing “Happy Birthday” at your kid’s birthday party? (It’s a copyrighted song, so technically you’re supposed to pay every time you “perform” it in public.  This is why most restaurants have a cheesy alternative birthday song that they use for patrons.) It’s not for us to say, of course, but these are legitimate questions that should be asked.

This brings us to the issue of “fair use,” a concept that has been watered down considerably in recent years. I am able to quote bits and pieces of Downes’s work in this article based on fair use doctrine, and he would no doubt applaud my decision to do so. It’s good publicity for him, and he’ll likely get a few book sales out of it. But my right to do so has become murkier in recent years. In many cases, even short block quotes have been found to be copyright violations. This is unfortunate because it slows the transfer of information.

This is also true of video. Most people would probably agree that uploading an entire full-length movie or sporting event to YouTube is blatant copyright infringement. But what about one short little snippet that you spliced into a longer video? Shouldn’t that be ok? Often times, it can generate interest in the original work. As Downes writes, “widespread sharing accompanied by commentary and recommendations has positive value to the copyright holder. It’s free publicity.”

Downes recommends making all noncommercial use “fair use.” This may be a bridge too far, but it would certainly end most of the petty infringement lawsuits that are clogging up the court system and discouraging the flow of information.

As for the Digital Millennium Copyright Act, on this count Downes goes into arcane details that are beyond the scope of this article, mostly having to do with digital rights management. We’ll skip this for now.

All in all, we recommend Larry Downes’s The Laws of Disruption. His work is an interesting analysis of the new economy and the misplaced legal guidelines that govern it. He did tend to gloss over a few details, however, and leave a few questions unanswered. On the issue of music piracy, his somewhat muddled answer seems to be to abandon the idea of getting paid for music altogether. Musicians can make money the old fashioned way: by playing live. Similarly, his answer for publishers like ourselves is somewhat unclear, but seems to be something to the effect of “allow for more ‘fair use’ of your materials.” Not surprisingly, Mr. Downes is also an advocate of open-sourced software solutions and the idea of software as a “service” as opposed to a “good.”

At any rate, Disruption is a good read and raises several excellent points. Consider sending a copy to your congressman!

The Laws of Disruption: Harnessing the New Forces that Govern Life and Business in the Digital Age


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