Intellectual property Featured

8:00pm EDT July 26, 2007

There are many shades of gray in the area of intellectual property in this digital age. Google versus the book publishing industry. Apple iTunes versus copy protection for songs. The list goes on.

“There is a tremendous amount of conflict. Filesharing, movies, book publishers, YouTube — there is much disarray,” says Stan Liebowitz, Ph.D., Ashbel Smith Professor of Economics and founding director of The University of Texas at Dallas School of Management’s Center for the Analysis of Property Rights and Innovation. “Staying abreast of news, changes and developments regarding intellectual property laws in other parts of the world where you conduct business will be crucial to future success.”

Smart Business recently asked Liebowitz for his take on some of today’s pressing issues in this arena.

Discuss the concept of trade-off as it applies to intellectual property.

There is an economic trade-off that occurs when we try to induce innovation by limiting competition with the intellectual property owner while the protection is in place. The logic is that people who ‘create’ are providing a service for the economy. The fear is that there would be too little incentive for creating if we didn’t provide such protection. Under the U.S. Constitution, protection is provided for a limited time in order to encourage creativity and innovation. The academic literature is largely in sync with the Constitution in claiming that we don’t need infinite protection for intellectual property, although this is based more on guesswork than careful analysis. In the U.S. the copyright for individual works is the lifetime of the author plus 70 years — it is 95 years for works of corporate authorship. There is much dispute over this length of time. A group of economists submitted a brief before the Supreme Court arguing these terms are too long, but the court rejected the group’s arguments. I wrote a paper suggesting that these economists did not do a careful economic analysis.

Are protections as strong in other countries as they are in the U.S.?

In the U.S., we have strong enforcement on copyright and patent issues. Most other highly industrialized countries have similar laws and enforcement. This is not the case in many less-developed countries, however. As a producer of goods, when you decide to sell in another country, you need to be familiar with the laws — as well as the reality on the ground, which may be very different than the law. In some developing Asian countries, for example, there are strong copyright laws, but they are not enforced.

Provide an example of a current battle. How is it significant to corporate America?

Viacom is suing YouTube [Google] for approximately $1 billion over copyright infringement because YouTube’s users are posting tens of thousands of clips from Viacom’s copyrighted television programs. YouTube argues that it will remove individual clips when specifically asked to. Viacom argues that YouTube should remove them automatically without requiring Viacom to find each case of infringement. The question becomes, “Who should be responsible for finding the infringing work?” The economic point of view is that it is efficient to have the party that can find the infringing works at least cost bear the responsibility for doing so. This would probably be YouTube, particularly since there are thousands of other copyright owners who would need to monitor YouTube at a great potential cost of duplicative effort. But legal cases are based on law, not economics.

When has someone violated copyright?

There is no simple way to know for sure. There is a defense of ‘fair use,’ which is fairly vague. In general, the ‘more you take and the more money you make,’ the less likely your use is ‘fair use.’ If you have doubts, check with a copyright lawyer. If you know what you’re doing is wrong and you are caught, there may be a very steep price to pay. A few years back there was a company that was only purchasing one copy of a very expensive weekly newsletter and then copying it for other employees. When the corporate librarian told management it was violating copyright law, she was ignored. Eventually someone at the firm notified the copyright holder [for a large posted reward]. Because the firm knew what it was doing was wrong, it was potentially liable for very large statutory damages far in excess of the cost of the newsletter, and it ended up settling out of court for a very steep price.

STAN LIEBOWITZ, Ph.D., is the Ashbel Smith Professor of Economics and director of The University of Texas at Dallas School of Management’s Center for the Analysis of Property Rights and Innovation. Reach him at (972) 883-2807 or liebowit@utdallas.edu.