Piracy or Fair Use? Evaluating the Welfare of Software Copyright Takedowns: Theory and Evidence from GitHub

Abstract

This paper presents a revealed preference approach to evaluate the welfare of the widely adopted software takedown policy that secures copyright in cyberspace. I build an analytical model to distinguish two hypotheses-the piracy hypothesis versus the fair use hypothesis. The piracy hypothesis predicts that copying is an unproductive investment to steal content; it reduces original contributions and copyright owners' revenue. The fair use hypothesis predicts that copying is a cost-saving method to expand and transform content; it invites original contributions and has little effect on copyright owners' revenue. The takedown policy is only socially beneficial in removing the piracy type of reproduction, but it is welfare-reducing in removing the fair use type of reproduction. An event study design using data from GitHub provides evidence that reproduction on this platform is most likely driven by the motive for fair use, and enforcing the takedown policy is thus inefficient. I conclude by discussing possible optimal policies.

Keywords: Content Takedown, Digital Copyright, Open Access, Fair Use, Social Preference, Property Rights, Event Study

JEL Classification: C72, D64, H44, K11, K24, L17, O34