Economics Of Copyright

 Any serious enquiry into the subject of IP and development has to consider the crucially important role of copyright and the copyright-based industries (including publishing, film, television, radio, music and now computer software too) in the production and dissemination of knowledge and knowledge-based products.  These industries supply the intellectual “raw material” for science and innovation, as well as for education and instruction in general, and they have helped bring about dramatic increases in productivity through aiding the creation of information-based products like desk-top publishing software, electronic mail or sophisticated scientific computer databases.  Moreover, the copyright-based industries have developed into a huge source of wealth and employment creation in the knowledge-based global economy.

The creation and ownership of knowledge products are of increasing importance because of the centrality of information and knowledge to post-industrial economies. The concept of copyright, originally intended to protect authors and publishers of books, has broadened to include other knowledge products such as computer programs and films… Copyright has emerged as one of the most important means of regulating the international flow of ideas and knowledge-based products, and will be a central instrument for the knowledge industries of the twenty-first century. Those who control copyright have a significant advantage in the emerging, knowledge-based global economy. The fact is that copyright ownership is largely in the hands of the major industrialized nations and of the major multimedia corporations placing low per capita income countries as well as smaller economies at a significant disadvantage.

The legal protection of copyright dates back to the 1700s with the Statute of Anne, and at the end of the 19th century it was enshrined in the Berne Convention.  Although the language of the Convention suggests a paradigm for the protection of the rights of authors and artists, in many cases copyright belongs not to individuals but to the firms that employ them.  Indeed, copyright is an essential element in the business model of publishers, television and record companies, and software producers because they grant their owners exclusive rights, inter alia, over the reproduction and distribution of protected works.  The new information and communication technologies (ICTs), and in particular the Internet enable unauthorised creation of unlimited, perfect and costless copies of protected works, as well as their almost instantaneous and worldwide distribution. This poses an unprecedented challenge to copyright law.  Some believe the future will see copyright become of far less importance as industries switch to technology-based protection, in the form of encryption and anti-circumvention measures, supplemented by contract law and sui generis forms of IP protection for databases.

Copyright deserves special attention now not only because millions of poor people still lack access to books and other copyrighted works, but because the last decade has seen rapid advances in information and communication technologies, transforming the production, dissemination and storage of information.  This has been accompanied by a strengthening of national and international copyright protection. Indeed, it was largely these technological changes that led the copyright-based industries in the developed countries to lobby for TRIPS and the WIPO Copyright Treaty. 

The crucial issue for developing countries is getting the right balance between protecting copyright and ensuring adequate access to knowledge and knowledge-based products. 

In this chapter we consider the following issues:

·        How important is copyright as a stimulus to cultural and other industries in developing countries?

·        How does copyright affect developing countries as consumers of products from abroad, particularly educational material, including via the Internet?

·        What should developing countries do about enforcement of copyright?

·        How does copyright on software affect developing countries?

COPYRIGHT AS A STIMULUS TO CREATION

As agencies such as WIPO, UNESCO and the World Bank have pointed out, it is important that developing countries develop mechanisms to protect and benefit from the commercial exploitation of their own past and present creative works.  On this view, copyright can play an important role in the development of cultural industries in developing countries by ensuring rewards through exclusive rights over copying and distribution. 

From a global perspective, the direct rewards from copyright protection are largely directed to the publishing, entertainment and software industries in Europe and North America. But, in some instances, copyright-based industries in developing countries are also flourishing and obtaining a share of these rewards.

Perhaps the most famous case is the Indian software industry.  Between 1994-95 and 2001-02, the industry’s gross earnings expanded from $787 million to $10.2 billion (a large proportion of which were software exports, which grew in value during the period from $489 million to $7.8 billion) and by March 2002, the software and services sector employed about 520,000 workers. And certainly there is a wealth of creative talent in developing countries – such as the musicians in Mali and Jamaica or the traditional artists in Nepal – which could be harnessed to generate more wealth for emerging economies.  But this will only happen if there is a local infrastructure for cultural industries, for example for publishing and recording.  Currently many writers and musicians in developing countries (particularly in Africa) have to rely on foreign publishers or record companies.

At the same time, whilst there are success stories like India’s software industry, there are also developing countries who have provided copyright protection as members of the Berne Convention for decades (such as Benin or Chad which joined in 1971) and have not seen significant increases in their national copyright-based industries or in the level of copyright-protected works being created by their people.

Although the potential benefits from the development of copyright-based industries in some developing countries may be enticing in some cases, it is hard not to conclude from looking at the evidence from the developing world overall that the negative impacts of stronger copyright protection are likely to be more immediate and significant for the majority of the world’s poor.  Today, there is an enormous “knowledge gap” between the richest and the poorest countries.  As the World Bank has noted:

If knowledge gaps widen, the world will be split further, not just by disparities in capital and other resources, but by the disparity in knowledge. Increasingly, capital and other resources will flow to those countries with the stronger knowledge bases, reinforcing inequality. There is also the danger of widening knowledge gaps within countries, especially developing ones, where a fortunate few surf the World Wide Web while others remain illiterate. But threat and opportunity are opposite sides of the same coin. If we can narrow knowledge gaps and address information problems … it may be possible to improve incomes and living standards at a much faster pace than previously imagined.

In the long term, stronger copyright protection may help to stimulate local cultural industries in developing countries if other conditions affecting the success of such industries are also met. But in the short to medium term, it is likely to reduce the ability of developing countries and poor people to close this gap by getting the textbooks, scientific information and computer software they need at affordable cost.

WILL COPYRIGHT RULES ALLOW DEVELOPING COUNTRIES TO CLOSE THE KNOWLEDGE GAP?

In theory, international copyright rules should be able to deal with problems of access because they provide room for countries to include exemptions and relaxations of copyright in certain circumstances under their national laws.  So, for example, Articles 9 and 10 of the Berne Convention permit countries to allow limited copying of protected works without permission for certain purposes defined in national legislation such as teaching, research and private use, so long as these do not interfere with the normal exploitation of the work by the copyright owner.

At the 1967 Stockholm conference of the Berne Convention, developing countries argued for additional flexibilities within international copyright rules because of their needs for mass education. The conference produced a Protocol that allowed developing countries to provide a reduced term of protection of 25 years together with compulsory licensing for translations into local languages and, most controversially, for any protected use for educational, scientific or research purposes.  But the Stockholm Protocol was never ratified because of a lack of consensus between developed and developing countries.  Eventually, in Paris in 1971, agreement was reached on a watered down set of exemptions for developing countries, essentially allowing limited compulsory licensing of works for translation into local languages.  These are set out in an Appendix to the Convention, but it has been of very little direct benefit to developing countries, as shown by the fact that only a handful of developing countries have ever included the special provisions in their national law.

COPYRIGHT-BASED INDUSTRIES AND COPYING OF PROTECTED WORKS

copyright-based industries such as publishing and computer software play a major part in the global knowledge-based economy, and the products and services they provide have a central role in facilitating innovation and social and economic development in general.  The success of these industries is reflected by their tremendous growth, which has generated millions of high-paying jobs and billions in revenues, including in some developing countries.  The computer software industry is also a highly important source of innovation in its own right and its members argue that they have produced dramatic gains in the performance and functionality of many commercial software products in the last decade or so while prices have remained stable or even fallen.

In the past, however, the evidence shows that weak levels of copyright enforcement have had a major impact on diffusion of knowledge and knowledge-based products in certain cases, such as computer software, throughout the developing world.  Indeed, it is arguably the case that many poor people in developing countries have only been able to access certain copyrighted works through using unauthorised copies available at a fraction of the price of the genuine original product.  We are therefore concerned that an unintended impact of stronger protection and enforcement of international copyright rules as required, inter alia, by TRIPS will be simply to reduce access to knowledge products in developing countries, with damaging consequences for poor people.

Publishers, both of hard copy and on-line books and journals, and software producers should review their pricing policies to help reduce unauthorised copying and to facilitate access to their products in developing countries.  Initiatives being undertaken by publishers to expand access to their products for developing countries are valuable and we encourage an expansion of such schemes. The extension of free on-line access initiatives for developing countries to cover all academic journals is a good example of what could be done.

COPYRIGHT AND ACCESS

Educational Materials

In recent years, there has been a welcome expansion of primary and secondary education in developing countries, and aid has been concentrated rightly in these sectors.  Whilst there are still major challenges in achieving “Education for All”, developing countries and their donor partners are making significant progress. Access to books and reading materials at primary and secondary levels in some countries has also improved.  This is the result of increased levels of public expenditure on primary educationand international book donation programmes, such as Book Aid International.  And importantly, in some countries, it is also because local publishing industries, albeit often at an embryonic stage, are able to produce low cost schoolbooks and reading materials.

But access to books and materials is important for other parts of the education system as well.  Developing countries need educated people such as doctors, nurses, lawyers, scientists, researchers, engineers, economists, teachers and accountants.   Without people skilled in these professions and a system of life-long learning and education, developing countries will be less able to absorb new technologies, generate innovation, and compete in the global knowledge economy.  For example, even if developing countries can obtain cheap medicines they will still need trained doctors and nurses to administer them properly in order to save lives.

However, in many developing countries, particularly in Sub-Saharan Africa, the tertiary education sector has sunk to levels where it may soon no longer be able to provide minimum levels of teaching and research – and this at a time of growing demand for admissions for undergraduates. With many developing countries already spending a significant proportion of GNP on education, they may be unable to find the additional resources required simply to maintain current levels of tertiary enrolments, let alone improve quality.  Clearly, copyright is not the only issue with the weak tertiary infrastructure but high prices of books and materials and limited access to Internet-based resources are still important parts of a worsening crisis.

In the tertiary sector, the evidence indicates that access to books and other materials for education and research remains a critical problem in many developing countries, particularly the poorest.  Most developing countries remain heavily dependent on imported textbooks and reference books, as this sector is often not commercially feasible for struggling local publishers to enter.  The prices of such books are beyond the means of most students.

Libraries

University libraries should play a key role in supporting research and ensuring access to copyrighted books, journals and on-line materials for poor students in developing countries, but they are typically in a very poor state.  Donor agencies have provided funding to modernise and re-stock libraries in a number of countries, including providing Internet connectivity and photocopying facilities. More of this assistance is urgently needed. But donors’ systems are just too slow and bureaucratic to enable libraries to maintain up-to-date textbook collections. Generally, the situation for university libraries in the poorer developing countries remains very bleak, particularly in Africa.

But developing countries also need to be allowed greater freedom to relax international copyright rules to meet their educational and research needs.  As we have noted, delegates at the Stockholm conference proposed a package of such amendments to the Berne Convention in 1967.  Developed countries rejected these proposals because they were considered to place too radical limitations on copyright protection.  Examining the evidence 30 years later, it is clear to us that the special provisions for developing countries that were added to the Berne Convention in 1971, as set out in the Appendix, have not been effective.  Further reforms are therefore needed, and different measures may be more or less important in meeting the specific needs in individual countries. As one commentator has put it:

In some cases, access to scientific journals and books at subsidized prices for a limited period would help greatly. In others, local publishers with limited markets need easy and inexpensive access to foreign books in order to translate them into the local language. In a different context, permission to reprint books from the industrialised countries in the original language is needed to serve an indigenous population literate in English or French but unable to pay the high cost of imported books. And for some countries, most of the elements of an indigenous publishing industry are missing and there is a need to build it up from scratch. Copyright may not be the key element in all of these circumstances, but it does play a role.

In order to improve access to copyrighted works and achieve their goals for education and knowledge transfer, developing countries should adopt pro-competitive measures under copyright laws.   Developing countries should be allowed to maintain or adopt broad exemptions for educational, research and library uses in their national copyright laws.  The implementation of international copyright standards in the developing world must be undertaken with a proper appreciation of the continuing high level of need for improving the availability of these products, and their crucial importance for social and economic development.

COPYRIGHT AND COMPUTER SOFTWARE

As others have noted, there is a digital divide between the developed countries and the developing world. In the knowledge-based global economy, computer technologies are an essential requirement for accessing and using information, accelerating technology transfer and boosting the growth of productivity.  At the same time, computer software products are perhaps the most heavily protected of all forms of knowledge-based products.  Under the TRIPS Agreement, computer programmes now qualify for copyright protection just as any other literary work, as well as for other forms of IP protection, including by patents in some nations, such as the US.

Developing countries, of course, have a range of requirements for computer software applications in their industries, hospitals, schools and government offices.  But most commonly, they need affordable access to off-the-shelf business software packages, such as word-processing, spreadsheet, e-mail and Internet browsing products. Companies in Europe and North America, with Microsoft being the major player, dominate the global market for these products.  The software industries of developing countries, even in India, are mostly absent from the off-the-shelf, packaged computer programs sector.

Developing countries and their donor partners should review policies for procurement of computer software, with a view to ensuring that options for using low-cost and/or open-source software products are properly considered and their costs and benefits carefully evaluated.  Developing countries should ensure that their national copyright laws permit the reverse engineering of computer software programmes beyond the requirements for inter-operability, consistent with the relevant IP treaties they have joined.

DELIVERING THE POTENTIAL OF THE INTERNET FOR DEVELOPMENT

There is reason to hope that the information technology revolution has the potential to increase access to information and knowledge in developing countries.  Rapid advances in two key technologies – digital information storage/processing and satellite/optical fibre communications – are creating faster and cheaper ways of accessing and using knowledge around the world.  The growth of the Internet is a prime example. In mid-1993, there were fewer than 200 websites on the Internet but by late 2000, there were 20 million; and the number of Internet users is expected to reach 1 billion by 2005, though most of these will still be in the developed countries (UNDP 2001).

The growth of the Internet offers real opportunities for improving access and transfer of knowledge for developing countries.  For example, the growing size and number of digital libraries creates unprecedented kinds of access to all published information anywhere in the world.  In the future, developing countries may be able to build a national digital network to provide access to library resources from around the world to every remote village, as is being done in Australia.

Technological Restrictions

But there are also threats to access and diffusion of knowledge and technology from these technological changes.  There is a growing trend within the publishing and software industries towards distribution of content on-line, together with access restrictions enforced by digital rights management systems, such as encryption technologies.  This sophisticated form of technological protection rescinds traditional “fair use” rights to browse, share, or make private copies of copyrighted works in digital formats, since works may not be accessible without payment, even for legitimate uses.  For developing countries, where Internet connectivity is limited and subscriptions to on-line resources unaffordable, it may exclude access to these materials altogether and impose a heavy burden that will delay the participation of those countries in the global knowledge-based society.

It is clear that the issues surrounding access to information and knowledge over the Internet are still emerging. In some respects, they are of limited immediate importance in many developing countries, given these nations’ limited Internet connectivity.  However, Internet issues are crucial to universities and scientific research in the developing world, and may soon be central to secondary and even primary education in developing nations since Internet access will be much less expensive than the construction and stocking of libraries. The Internet has remarkable potential for development and it is imperative that this is not lost.

More analysis needs to be undertaken about the best means of protecting digital content and the interests of rightsholders, whilst at the same time honouring principles that ensure adequate access and “fair use” for consumers. More specifically, policymakers need to gain a better understanding of the impacts of the trend towards on-line distribution and technological protection of content on developing countries.  There is a possibility that much such material will be protected technologically or through contractual provisions that are imposed as a condition of accessing the material.  And it is not clear how reasonable requirements of “fair use” will be guaranteed in such an environment.

Bearing in mind this considerable level of uncertainty, we conclude that it is premature at the present time for developing countries to be required to go beyond TRIPS standards in this area.  We believe developing countries would probably be unwise to endorse the WIPO Copyright Treaty, unless they have very specific reasons for doing so, and should retain their freedom to legislate on technological measures.   It follows that developing countries, or indeed other developed countries, should not follow the example of the DMCA in forbidding all circumvention of technological protection.  In particular, we take the view that legislation such as the DMCA shifts the balance too far in favour of producers of copyright material at the expense of the historic rights of users.  Its replication globally could be very harmful to the interests of developing countries in accessing information and knowledge they require for their development.  Similarly we have concluded that the EU Database Directive goes too far in providing protection for assemblages of material and will restrict unduly access to scientific databases required by developing countries.  

Users of information available on the Internet in the developing nations should be entitled to “fair use” rights such as making and distributing printed copies from electronic sources in reasonable numbers for educational and research purposes, and using reasonable excerpts in commentary and criticism.  Where suppliers of digital information or software attempt to restrict “fair use” rights by contract provisions associated with the distribution of digital material, the relevant contract provision may be treated as void.  Where the same restriction is attempted through technological means, measures to defeat the technological means of protection in such circumstances should not be regarded as illegal.  Developing countries should think very carefully before joining the WIPO Copyright Treaty and other countries should not follow the lead of the US and the EU by implementing legislation on the lines of the DMCA or the Database Directive.