March 21, 2023
The grant of copyright monopolies is a mechanism the government uses to support creative work. It is far from the only mechanism. The government funds creative work through agencies like the National Endowments for the Arts and Humanities, the Corporation for Public Broadcasting, and indirectly through its support of colleges and universities. It also provides support through the charitable contribution tax deduction, which subsidizes contributions that wealthy people choose to make to organizations that support creative work at the rate of almost 40 cents on the dollar.
The fact that copyright is just one of many tools for supporting creative work should be a central part of any discussion about ramping up in enforcement rules. Incredibly, this simple fact is altogether absent from a Washington Post column, by T Bone Burnett and Jonathan Taplin, arguing for the need for enhanced enforcement measures in the era of artificial intelligence (AI).
Copyright, AI and the Internet Age
Burnett and Taplin are concerned that AI programs will be able to freely surf the web, grabbing and recycling copyrighted material, without making any payments to the people who created the material. This is a very realistic concern.
As Burnett and Taplin point out, file sharing over the web has already cut sales of recorded music almost in half. (Actually, as a percent of GDP, the decline would be close to 70 percent.) The spread of AI programs is virtually certain to lead to even further declines in the future. Their response to this threat is to call for “new laws and regulations governing AI and safeguarding the human core of creative artistry.”
It’s important to realize that we already have created new laws and regulations to protect copyright in the Internet Age. Specifically, Congress passed the Digital Millennial Copyright Act (DMCA) in 1998 to establish rules for enforcing copyright on the Internet.
The DMCA requires website owners and Internet platforms to promptly remove infringing material after they have been notified by the person claiming infringement in order to protect themselves from an infringement suit. This threat is taken very seriously, since the law provides for statutory damages, and also legal fees.
This is a big deal. The actual damages resulting from most alleged acts of infringement would be trivial. Spotify compensates performing artists at an average rate of 0.4 cents per stream. That means that if the unauthorized posting of a copyrighted song allowed for 10,000 people to play the piece, the actual damages would be in the neighborhood of $40.
No one would pursue a lawsuit for such a small amount of money. However, the statutory damages allowed under the law can run into the thousands of dollars for even minor acts of infringement. In addition, a successful lawsuit can mean the defendant also has to pay several thousand dollars in legal fees.
As a result of these large potential damages, websites and platforms take removal notices very seriously. In fact, there is evidence that we see over-removal, with websites and platforms removing material where the notice may not properly represent someone with a legitimate copyright claim, or the material may reasonably qualify as “fair use.”
Whether or not we actually see over-removal, it is clear that copyright enforcement on the web imposes a substantial cost on society. Not only does it prevent direct acts of infringement, it also requires that third parties (the website or platform) police items that others post.
This cost is important to keep in mind when we consider Burnett and Taplin’s call for “new laws and regulations” to protect copyrighted material from AI. Almost by definition this means still larger costs for a mechanism that is providing relatively little revenue for creative workers.
An Alternative to Copyright
Rather than developing new laws and enforcement mechanisms to protect the relatively small revenue stream produced by copyright monopolies, we might look to alternative mechanisms for supporting creative work. We could go the route of increased funding for agencies like the National Endowments for the Art and Humanities, but this would raise political issues over who gets to decide what work is funded.
An alternative would be to build on the mechanism we already have in place with the charitable contribution tax deduction. As currently structured, this contribution benefits a small share of the population, since the vast majority of taxpayers take the standard deduction, which means they are not able to benefit from the charitable contribution tax deduction at all.
The deduction is also regressive, with higher income taxpayers effectively able to get a far larger subsidy for their contributions than middle income households. And of course, most of the contributions are not going for creative work.
But we could build on the basic logic of the charitable deduction where we give a public subsidy for individuals’ support of what very broadly are considered socially desirable ends. However, instead of making it a deduction, we could make it a refundable tax credit, and specify that the money go to support creative workers. (I outline this system in somewhat more detail in chapter 5 of Rigged [it’s free].)
On the first point, if some billionaire decides to give $100 million to their favorite church, the taxpayers are on the hook for $37 million of this payment, which is the reduction in their tax liability. Under a tax credit system, we would give every person the same amount, say $100 to $200, to contribute to whatever creative worker, or organization supporting creative workers, they want.
This would provide an enormous amount of money to support creative work. If we assume 70 percent of adults decide to use this free money, it would mean $17.5 billion to $35 billion a year, roughly 0.07 percent to 0.14 percent of GDP. The latter figure is more than twice as much as what is now paid for recorded music.
The condition for being eligible to get the money is that a creative worker or organization has to register with the I.R.S., or other designated agency, saying what it is they do. This is similar to what tax-exempt organizations must do now. They must say they are a church, a research organization, or charity providing food to the poor. The I.R.S. does not evaluate whether they are a good church or a good charity; its only obligation is to ensure that the organization is not committing fraud and is in fact what it claims.
In this case, a person would say they are a musician, singer, or some other type of creative worker (the law would have to specify how broadly this would be defined). If they are getting money as an organization, they would have to say that they support country music, mystery writers, or some other type of creative work. Just as is the case with tax-exempt organizations now, the government would not evaluate the quality of the work, just that the person or organization does what they claim.
There would also be another condition. If you get money through the tax credit system, you are not also eligible for copyright monopolies. The government gives you one subsidy, not two.
The neat part about this aspect of the system is that it is self-enforcing. There would be a public record of everyone getting money through the tax credit system. If any of these people subsequently tried to claim copyright infringement, their case would be immediately dismissed, since they were not eligible to get copyrights. This sort of subsidy would generate an enormous amount of material that could be freely distributed over the web, with no concerns about copyright.
It’s true that this system would lead to public support for work that people didn’t like. Virtually everyone would likely be able to identify something supported through the tax credit system that they found objectionable, and perhaps highly objectionable.
But this is also the case with the current system with the charitable deduction. Many of us find the activities of some organizations that get millions, or even billions, of tax subsidized dollars highly objectionable. We would have the same story here, but an organization that got a large amount of money would need to have a large number of people who supported it, not just a single billionaire.
There are issues that need to be addressed in constructing this sort of tax credit system. It can be sliced and diced in thousands of different ways. Should we make the dollar amount larger or smaller? Perhaps we should also allow a match, where if a person decides to contribute $100 of their own money, the government throws in another $100 or even $200.
We also have to decide which work qualifies. Presumably music and writing are obvious (how about journalism – seems very important), but what about movies or television shows? How about video games? I would argue for making the boundaries as large as plausible, which would presumably make a case for a larger credit, but this is the sort of thing that would need to be debated.
The key point is that we have options other than trying to revive a 500-year-old copyright system that is already on life support. Our creative workers may not be very creative when it comes to designing mechanisms to support their work, but the rest of us have to be.