On Intellectual Property Titling Systems

by F.

In today’s New York Times, Hal Varian describes one of the more obvious cracks in our broken US copyright system:

When some librarians at Carnegie Mellon University tried to request permissions to digitize a collection of out-of-print books, they were unable to find more than 20 percent of the rights holders, despite persistent efforts.

Failing to locate rights holders can be costly since copyright infringement may be subject to statutory damages of up to $150,000 an incident.

The costs of locating rights holders are an example of what economists call transactions costs. Not surprisingly, high transactions costs tend to discourage transactions from occurring.

There’s an obvious parallel here between copyright registration and land title systems. One way to fetter an economy is to have a weak or non-existent land titling system, as Hernando De Soto describes in The Mystery of Captial.

It’s fine that everyone has rights to trade; but if you can’t find out who owns what, deal making becomes costly or impossible.

Varian describes a proposed fix:

The so-called orphan works problem was examined by the Copyright Office in a 2006 report in which it proposed legislation to address the transactions costs issues.

Under its proposal, if you conducted a “diligent search” to locate a rights holder and still failed to find the owner, you would be off the hook. You could then incorporate the work in question into your own work, as long as you provided proper attribution. If the legitimate rights holder was subsequently found, he or she could not require that your work be withdrawn from circulation, but could collect “reasonable compensation” for use.

But what is a “diligent search?” The report leaves the interpretation of this phrase up to the courts but suggests some relevant considerations: whether the work includes identification, the age of the work, whether the work can be found in public databases like Copyright Office records, and so on.

His rherotical question about the meaning of “diligent search” highlights a typical problem with punting to the courts. What is the cost of looking up the meaning of “diligent search?” It could be the cost of a lawsuit, especially for the first person to whom the law applies or if your situation is ambigous. That’s a pretty high price. (The alternative may be no better, of course.)