Cut in Tiny Pieces: Ensuring that Fragmented Ownership Does Not Chill Creativity

Abstract:     
The market for video entertainment is growing and becoming more diverse as technology reduces barriers to entry for small, independent moviemakers and distributors and increases consumers’ ability to access the media of their choice. The growing complexity of the market, however, increases transaction costs for new entrants who must obtain licenses to copyrighted music, characters, storylines, or scenes that they incorporate into their movies. The entertainment bonanza offered by new technologies may not be realized in practice because of market failure. The purposes of the Copyright and Patents Clause are frustrated because creators of new works wishing to use new technologies to build on prior creative effort confront a legal regime intertwined with older technologies and industry structures.

This Article argues that the market needs new public and private law mechanisms to make it function more efficiently, by making it easier for creators of new works to (1) find the owners of preexisting content and (2) overcome other barriers to obtaining licenses, such as strategic behavior, irrational protection of entrenched bureaucracies, and obsolete, embedded capital. This Article begins with a hypothetical story of an independent moviemaker. It explains the problems that he confronts in making his movie, explores the relationship between the structure of the market for entertainment works and the circumstances that have traditionally justified legal intervention in a market economy, analyzes various models for such intervention, and proposes legislative, common law, and equitable solutions to mitigate the problems. The proposals afford a privilege for a new creator to use preexisting works when he cannot identify the holders of rights in the preexisting work, when he is unsuccessful in communicating with those rights holders, or when he proposes a reasonable royalty and is rebuffed.

The purpose of copyright law is to encourage and reward creative effort. Current conditions frustrate achievement of that goal by making it easy for copyright owners to hide and then ambush creators of new works that build upon existing works. Amendment of the Copyright Act or application of the interpretive principles proposed in this article would further the law’s purpose.

Number of Pages in PDF File: 79

Keywords: video entertainment, technology, independent moviemaking, copyright law, Copyright Act, creativity, story

JEL Classification: K10, K30, L82, O34

Accepted Paper Series