Quick Thoughts on AI and Intellectual Property

April 15, 2023

There has been a lot of concern in recent days about the impact of AI on people’s intellectual property. The latest AI programs screen millions of documents, songs, pictures, and videos posted to the web and freely grab any portion that seems to fit the commands given the program. As it stands, the creators of the material are not compensated, even if a large portion of their work appears in the AI product.

This raises serious questions about how AI will affect the future of intellectual property. To my mind, we should keep the focus on three distinct points:

  • Creative workers need to be compensated for their work;
  • Copyright monopolies may not be the best route, especially in a world with AI;
  • There are alternative mechanisms that we already use and which could be expanded.

Compensating Creative Workers

Starting with the first point, we have long recognized that a market that does not have some explicit mechanism for subsidizing creative work will underproduce creative work. People write, sing, paint, and do other creative work because they enjoy it, but we cannot expect to get as much of these products as society wants if we don’t pay people to do them. A musician or writer who has to spend eight hours a day bussing tables to pay the rent is not going to be able to devote themselves fully to developing their talents in these areas.

For this reason, we have long recognized the need for mechanisms to support creative work. This is the logic of copyright monopolies. By granting creative workers a legally enforceable monopoly on their work, we give them more of an opportunity to get compensated than if everything was immediately available in a free market. If a song could be immediately copied endlessly, with no compensation to the songwriters or musicians, they would get no compensation for any recorded work. The same would apply to writers, photographers, and many other creative workers.

Copyright monopolies can enable creative workers to get compensation, and possibly substantial compensation, if their work is popular. This is the logic of the clause in the Constitution allowing Congress to grant copyright monopolies.

It is important to recognize that the provision in the Constitution providing the basis for copyright quite explicitly describes it as serving a public purpose; it is not an individual right. The provision, Article 1, Section 8, clause 8, sets it out as a power of Congress:

“To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

This appears alongside other powers of Congress, such as the power to tax and the power to declare war. The logic is quite clear: copyright is to serve the public purpose of promoting the “progress of science and art.” It is not a right of individuals included in the Bill of Rights along with freedom of speech or freedom of the press. This is an important point to keep in mind when assessing the merits of copyrights and alternatives in the AI age.

The Cost of Copyright Enforcement

Copyright enforcement has always been expensive, meaning that the costs of policing copyright, including legal fees and related costs, are high relative to the money actually given to creative workers. At the most immediate level, the creative workers who are ostensible beneficiaries of copyright monopolies often have to pay substantial sums to have their copyrights enforced.

The American Society of Composers, Authors, and Musicians (ASCAP), which is the major agent for collecting royalties for creative workers, reports that it pays out 90 percent of the money it collects in royalties. While that may sound pretty good, the money that a creative worker might have to pay to lawyers and agents comes out of this 90 percent. While creative workers are likely to need agents in any case, any legal fees they face will likely be associated with copyright issues. If legal fees associated with copyrights average 10 percent of their royalties for creative workers, then copyright related costs would be around 25 percent of their income from copyrights.

It’s also worth noting the sort of money involved. In 2021, ASCAP took in $1,335 million in royalty payments. The organization has 900,000 members, which means the average amount was less than $1,500 per person. Given the enormous skewing of these payments, with a relatively small number of creative workers getting a grossly disproportionate share of royalties, it is likely that the annual royalties for many ASCAP members are in the double or even single digits.

While copyright monopolies may mean little income for the vast majority of creative workers, they can impose large costs on society. This is largely due to how we have chosen to structure copyright law. In addition to actual damages, a person alleging copyright infringement is also eligible for statutory damages. These can run into the thousands, or even tens of thousands, of dollars. The person alleging infringement can also win attorney fees, which can run into the thousands of dollars as well.[1]

Spotify pays musicians between 0.3-0.5 cents per stream. Suppose someone posts infringing material on a website, which allows for 10,000 people to hear a copyrighted song. The actual damages in this case would be in the neighborhood of $30 to $50. Nonetheless, the infringer could end up paying many thousand dollars in damages and legal fees, an amount that could be easily hundreds of times the actual damage.  

The Digital Millennial Copyright Act (DMCA) applies copyright law to the Internet. The DMCA requires Internet intermediaries, like Facebook or Twitter, to promptly remove content posted by third parties after being notified by a copyright holder, or their agent, of risk liability. According to several analyses, intermediaries typically err on the side of over-removal, taking down items which are arguably allowable under Fair Use, or where the infringement allegation does not come from someone who had a clear copyright claim.[2]

As a result, people go to great lengths to avoid inadvertently using copyrighted material. For example, anyone producing a movie or television show would thoroughly screen all the material to ensure that none of it is copyright protected. An independent producer would likely have to pay for insurance before a television station or streaming service would circulate their movie or show.

There also are undoubtedly many cases where material is altered due to ambiguities on copyright. Since there is no registration requirement, it can be almost impossible to determine if a copyright is applicable.

For example, if someone producing a documentary on the Sixties uncovered an old photograph, with no obvious commercial value, that would be useful for making a particular point, they would be taking a risk to include it. The person who took the photograph, or a family member, may be able to claim copyright ownership, and file a suit for an amount that exceeds whatever the filmmaker hoped to earn from the documentary.   

Copyright can also impose a cost by obstructing the production of derivative works. There have been endless battles over people seeking to write fiction, parodies, songs, or other types of creative work based on famous fictional characters, such as Harry Potter or Sherlock Holmes. Arguably, we suffer a loss as a society by preventing these creative ventures. Fortunately, William Shakespeare’s work was no longer copyright protected when Tom Stoppard wrote “Rosencrantz and Guildenstern are Dead.”

There are also endless examples of copyright enforcement absurdities, such as when the Girls Scouts were threatened by ASCAP with a lawsuit for singing copyrighted songs around campfires without permission. (ASCAP later backed down and apologized.) More recently, Carol Highsmith, a photographer, got a cease and desist letter from Getty Images for posting her own photograph, which she had placed in the public domain and donated to the Library of Congress, on her own website.

There is a pretty much endless supply of these sorts of stories, but the point should be clear: copyright enforcement creates all sorts of issues that would not exist in a copyright free world, where basically all digital material could be obtained immediately at zero cost. Copyright is a way to support creative work, but arguably not a very good one. The Internet already raised the costs associated with copyright enforcement substantially. If we have to impose all sorts restrictions on AI, in order to protect copyrights, then the cost to society of copyright enforcement will rise further.

Alternatives to Copyright Monopolies for Supporting Creative Work

There are many other ways we can and do support creative work. The most obvious is with direct government subsidies. These subsidies are far more common in Europe than in the United States, but governments can pay out money to musicians, movie producers, writers and other creative workers. Even in the United States, we do commit relatively small amounts of money for this purpose through agencies like the National Endowment for the Arts.

However, having government agencies support creative work does raise political issues about what work should be supported. Fortunately, we have an alternative that already exists, even if it is not generally considered as a mechanism for supporting creative work.

The charitable contribution tax deduction is a way the government supports a wide variety of non-profit organizations. In many cases, such as orchestras, operas, art and culture programs, these contributions support people doing creative work. As it stands of course, the vast majority of these deductions are not for creative work, and the bulk of the benefit goes to high income people who both itemize on their tax returns and also are in the top marginal income bracket, which means the deduction would be worth more.

However, the charitable contribution tax deduction can serve as useful model. Instead of having a tax deduction, we could create a tax credit, say $100 to $200 per person. And, we could stipulate that the credit can only be used to support creative workers or organizations that support creative work. The latter could be organizations that commit themselves to supporting say, mystery writers or country music singers, which would serve as intermediaries for people who don’t want to use their credit for supporting specific individuals.

To be eligible to receive the funding, a person or organization would have to register in the same way that an organization has to register now with the I.R.S. to get tax exempt status. This would mean effectively saying what it is they do, as in write music, or play guitar. As is the case now, there would no effort to determine whether a particular individual or organization is good at what they do, just as the I.R.S. doesn’t try to determine if a church is a good church or a museum is a good museum. The only issue is preventing fraud, ensuring that they do what they claim to do. [3]

The other condition of eligibility is that workers would lose copyright protection for the time they are in the tax credit system and a substantial period (e.g. five years) afterwards. The point is that we only subsidize creative work once. If we pay the worker to produce a book or movie or song, we don’t have to pay them a second time by granting them a copyright monopoly.

The logic of having a ban on copyright protection for a period after being in the system is to avoid having people using the tax credit system as an effective farm system, where they develop a reputation and then join the copyright system. They would still have the option to change systems, but they would have to wait for a period of time.

A nice feature of this provision is that it is effectively self-enforcing. If a person breaks the rules and seeks to get a copyright for their work a year after they leave the tax credit system, they would find themselves unable to enforce the copyright. If they attempted to take legal action against someone for infringement, the defendant need only point to the fact that they had been registered in the tax credit system the prior year. Therefore, their copyright is not valid. (I discuss this system in somewhat more detail in chapter 5 of Rigged [it’s free].)  

This sort of system could produce a vast amount of creative work that could be freely reproduced and transferred without any concerns about copyright. If AI programs wanted to scrape them to create new works, there would be no issue of compensation, the producers having already been compensated. A rule that could be applied (obviously this requires more thought) is some sort acknowledgement in an AI-produced work, much as any scholarly article includes a reference section for work that it draws on. This would prevent outright plagiarism by an AI program and also give credit to the creative workers who it relied upon for a derivative work. This is also something that presumably could be very easily programmed into any AI system.

I have heard people complain about the fact that this tax credit system would mean that creative workers would lose control over their work. For example, if some racist politician wanted to use their song at a campaign rally, they would have no way to stop them. This is true, but there are a couple of points worth keeping in mind.

First, even under the copyright system many creative workers sign over the rights to their work, so they already would not have the ability to prevent their work from being used in ways they found distasteful. Second, most people in society don’t have the ability to control what is done with their work. For example, jokes can’t be copyrighted. If someone writes a joke that a racist politician decided is the perfect line to start their campaign stump speech, there is nothing the joke writer can do about it, except complain. It’s hard to see why a musician or songwriter should have more right to control what is done with their work than a comedy writer.

Second, many people find their work used for purposes of which they strongly disapprove. Many of the physicists whose discoveries laid the groundwork for the development of the atomic bomb were pacifists. They were appalled that their work could be used to create a weapon of mass destruction. But there was nothing they could do about it. That seems a more serious complaint that a distasteful politician using a song without permission.

Copyright with a Tax Credit System

In principle, there is no reason that a tax credit system could not exist side by side with the copyright system. There could be many creative workers, which would likely include many well-established stars, who would opt to stay in the copyright system. In any case, there would still be a vast amount of material already protected by copyright.

As a general matter of principle, it is a good policy to respect property rights after they have been granted, even if it may have been a bad idea to grant those rights in the first place. For this reason, it would be appropriate to continue to respect existing copyrights. However, we can make an important change in the rules.

Copyright suits need not be eligible for statutory damages. If my neighbor knocks over my fence with their SUV, I can sue them for the cost of repairing my fence. I don’t also get statutory damages and usually would not be able to collect attorney fees. We don’t have to give this special status to those bringing lawsuits for copyright infringement.

This is likely to mean far fewer occasions for lawsuits for copyright infringement, which means fewer resources would be wasted contesting these suits and taking steps to prevent them. This could also make the copyright system less attractive relative to the tax credit system. If that turned out to be the case, that seems like a great outcome.

Time to Re-evaluate Copyright Monopolies, not AI

This is obviously a very superficial discussion of issues arising with AI. It also only a portion of the copyright related issues. For example, copyright also comes up with software and there are likely to be many instances where AI programs arguably infringe on copyrighted software.

However, the key point is that we should not treat our current rules on intellectual property as set in stone. When the Internet first became an important development in the 1990s, at the urging of the music industry, Congress rushed to pass the Digital Millennial Copyright Act, to ensure that copyrights would be enforced on the web. This limited the potential of the Internet as a means to freely transfer information, articles, books, music, and movies and other digital material.

Now we are hearing similar concerns about how AI will affect the value of copyrighted material. Rather than limiting AI, it might be more appropriate to reconsider copyright and determine whether it is still the best mechanism for supporting creative work. As I argue here, there are good reasons for thinking that is not the case.   

[1] A provision in the Trans-Pacific Partnership would have required countries to have criminal penalties for copyright infringement.

[2] Note that the law with regard to copyright enforcement is the exact opposite of what it holds for third party content with regards to allegations of defamation. As a result of Section 230 of the Communications Decency Act, Facebook, Twitter and other Internet intermediaries can freely host defamatory material, and even profit from it directly when they sell ads, without any risk of legal consequences.  

[3] It would be necessary to have rules to prevent simple scams. For example, in order to be able to receive the credit, there could be a requirement that a person gets at least $3,000. This would prevent any simple trading scheme where people exchange credits with each other. While it would still be possible have some pooling and kickbacks even with a $3,000 or similar size minimum, this would require a lot of work for relatively little money. Furthermore, it is much easier to organize a much larger kickback scheme with the current chartable deduction.


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