Forseeability and Copyright Incentives

Professor Shyamkrishna Balganesh of the University of Chicago Law School has an article called "Forseeability and Copyright Incentives, coming out in volume 122 of the Harvard Law Review but available here in draft form at ssrn. The topic is an intriguing one -- if copyright is instrumental, meaning incentive based -- how is that so little of how copyright actually works does not bear the slightest resemblance to incentives? This was the topic of then Professor Stephen Breyer's 1970 "Uneasy Case for Copyright " article (also in the Harvard Law Review). Professor Balganesh's work might provide a new look at the issues 38 years later, but in order for that effort to succeed, there are some basic errors that need to be corrected, as well as some rethinking.

His basic point is one I agree with and which I think deserves serious inquiry. The point is this: if copyright is instrumental -- and it is hard to look at the relevant Supreme Court opinions, the language and history of the Constitutional clause and think otherwise regardless of one's own views -- then it is incumbent to determine whether that instrumental goal is being fulfilled, not just as a systemic issue, but at the micro level. At the micro level, it is hard to look at the current level of protection and think there is any correlation at all between that protection and incentives to create. (It is a very different question whether the failure to match incentives to protection rises to the level of a constitutional infirmity, as Eldred illustrates).

To his credit, Professor Balganesh takes on a number micro issues, such a new uses, substantial similarity, and fair use. He proposes employing, as a common law tool, the foreseeability theory/behavior economics theory approach to deciding these issues. Both take as a starting point the idea of "bounded rationality": we each only know so much. This is in contradistinction to the neoclassical economic assumption that we are perfectly rational and readily respond to utility-enhancing incentives. Put crudely in Chicago terms, are you with Richard Posner or Cass Sunstein?

And again to Professor Balganesh's credit, he takes the bold step of offering some hypos and seeing how they would pan out with his theory. Here are some of my issues with how he approaches the hypos and works them out. First, the new use issue -- in 1955 did an author who authorized use of the work on black and white television think of VCRs in authorizing his or her work to be "exhibited" on television. This is a common issue, but it is not a copyright issue at all; instead, it is a contract issue, and a state contract issue at that. The Second Circuit has made this clear many times. Second, on fair use, it is not true as Professor Balganesh states that "the doctrine of fair use is of statutory origin." (page 11). It is a common law doctrine. Nor do I agree with his remark that "It remains common consensus among copyright scholars that the fair use doctrine -- as it is structured and applied today-- remains deeply flawed." (page 5, note 16). I don't know about copyright scholars, but Judge Leval who knows a thing or two about the question, takes a very different view. In recent speeches, he thinks fair use is working well. Professor Balganesh's interpretation of how transformative use is intended and works in practice is, regrettably, simply wrong; for example, he states "for uses that don't directly modify the substantive content of the work, the transformative use test becomes somewhat meaningless." (page 12). Not only has Judge Leval rejected this erroneous view of what is after all his own theory, but there are many cases to the contrary, such as the Perfect 10 v. Amazon.com case, which Professor Balganesh doesn't cite, and two that he does cite, one incorrectly for holding that such change is required -- the Bill Graham case -- and the Kelly Arriba case which he acknowledges but then cites another law professor who describes Kelly as a misapplication of transformative use. One can regard Kelly as a misapplication if you like, but that doesn't mean the opinion is meaningless; quite the opposite, the P10 case followed it, and Judge Leval has endorsed it as well.

One final example of my problems with the article as currently written; this one illustrates Professor Balganesh's failure to appreciate the role that Congress plays. Professor Balganesh discuses the Supreme Court's 1908 White-Smith opinion holding that perforated piano roles were not a copy of the underlying music. Professor Balganesh interprets the parties' briefs to have raised his foreseeability theory, but is upset that the Supreme Court decided the case on statutory interpretation grounds. Then, and this is regarded as particularly bad, the Court having decided the case on statutory grounds, Congress went ahead and amended the statute, rendering, it is said, the Court's reasoning as redundant. Had the Court decided the case on the foreseeabilty ground allegedly argued, Professor Balganesh argues, the Court "might have reached the same conclusion -- but on much surer footing."

I doubt it, and I disagree that deciding a case by interpreting a statutory term represents less footing than deciding the case on behavioral theories espoused in briefs. But in any event, Congress had been deliberating amendments on point years before White Smith was decided, and therefore did not act in response to the opinion, nor did Congress's legislative action render the Court's opinion redundant. The Court was construing the pre-1909 Act statute and Congress was passing a new, omnibus statute. Moreover, Congress did not reverse the Court's interpretation of the term "copy": that interpretation remained the law until the 1976 Act. What Congress did was to create a compulsory license, a license that had nothing to do with forseeability, but which neatly both gave copyright owners for the first time remuneration for the mechanical reproduction of their compositions, and which broke the tying arrangement that underlie the White Smith case.

Professor Balganesh has taken on a very important issue, and he may be the person to see it through, but the article as presently written doesn't. I would love to see the article reworked so that his insights could be more forceful.