Economic Realities of the Copyright Law History

(IPRinfo 2/2006)
Bengt Domeij
Riga Graduate School of Law
and the Royal Institute of Technology in Stockholm

Copyright, Mass Use and Exclusivity – On the Industry Initiated Limitations to Copyright Exclusivity, Especially Regarding Sound Recording and Broadcasting by Mikko Huuskonen
Helsinki, 2006, 264 pages. ISBN 952-92-0307-1.

The aim and content of Mikko Huuskonen’s thesis can be gleaned from the subtitle. He has primarily set himself the task of tracing how recording and broadcasting industries have initiated changes to copyright law. A historical and economic method is employed, inspired by institutional scholars such as Schumpeter, Coase and North.

The author rightly believes that historical readings of IP are becoming increasingly helpful to understanding the impetus for changes that occur. The historical/economic approach, however, comes at the expense of detailed legal analysis of individual copyright issues. Huuskonen also confesses that his attitude to “altruistic motives is rather sceptical; economic arguments seem more accurate, decisive and may challenge … existing doctrine”. The economic inclination is evident from the abundance of statistics explaining developments in copyright-dependent industries.

Huuskonen initially identifies fundamental technical developments in the cultural sphere (p. 49): 1. printing: reproduction of printed work; 2. sound recordings: the fixation of musical performance; 3. photography; 4. cinema; 5. broadcasting (voice and image); 6. photocopying; 7. VCR, musical cassettes for copying; 8. satellite and cable distribution; 9. Internet; 10. mobile communications.

Trying to grasp how copyright dependent industries have responded to these changes, Huuskonen re-visits battles fought over copyright from 15th Century Venice and England to 20th century changes to the Berne convention.

Huuskonen focuses on the emergence of sound recordings, movies/cinema, broadcasting and the Internet and the consequent changes to the Berne convention. The key motivating factors for these battles are: 1. protection of profits derivable from investments in production capacity or an author’s labour; 2. encouragement of new developing technology; 3. protection of the author’s human rights (moral rights); 4. certain public interests (education, freedom of speech, rights of minorities, etc.). Throughout the book the author tries to link these motivations to land-mark changes in copyright law.
In a particularly convincing section, Huuskonen discusses the reluctance to add protection of photographic works to the Berne Convention (p. 175). : “…photography itself did not form a separate … business model with a strong profit … Nor was there a … public interest element…” Photography did not gain “list status” in the Convention until the Brussels Conference of 1948.

From exclusivity to compensation
Another important observation is an on-going shift from exclusivity to compensation for right-holders (p. 245). Huuskonen believes that this is due to an increased uncertainty about the proper regulatory answers to copyright problems (p. 249): “…The legislator is indeed ‘surprised’, and will not want to decide in favour of any party to avoid too strong market positions. This typically is a pattern leading to compulsory licensing.”

Huuskonen clearly views this as a positive development. I am not convinced by his arguments. He seems to assume that right-holders who are not prepared to part with their rights in exchange for the market price, are behaving irrationally (cf. p. 137). Owners, however, have a reservation price, which is the minimum price a seller is willing to sell a good or service for. It will always be higher than the market price, or else the right-holder would sell his right.

The problem with compulsory licenses is that right-holders are deprived of the difference in value between the market price and their reservation price. I do not think that Huuskonen has considered in sufficient detail that voluntary licenses are the only way in which it can be ensured that buyers value the goods more than the sellers. Valuations must be revealed and should not be inferred from past valuations by other parties.

I have one other slight problem on a more general level: it is difficult to think of any change IP law that could not fairly be said to have arisen from the interests that he studies. A sharper focus might have enhanced the originality of the book and made it easier for policy-makers and subsequent researchers to apply its conclusions.

I would personally have preferred if Huuskonen had focused solely on the extent to which new technology has been allowed to gain momentum before copyright is being enforced in practice. He shows this has been important historically, but it is not always recognised in present-day discussions on IP.

All in all, Huuskonen has proved to be an acute observer with a keen sense and good intuition for economic realities. He has also managed to locate particularly telling parts parts in the history of copyright. The thesis amounts to a thought-provoking and enjoyable exposition over copyright.