The Dual-Grant Theory of Fair Use
68 Pages Posted: 17 Oct 2015 Last revised: 22 Nov 2016
Date Written: 2016
Fair use is one of modern law's most fascinating and troubling doctrines. It is amorphous and vague, and notoriously difficult to apply. It is, at the same time, vitally important in copyright and perhaps the most frequently raised and litigated issue in the law of intellectual property.
This article offers a novel theory of fair use that provides both a better understanding of the underlying principles and better tools for applying the doctrine.
In contrast with the dominant understanding of fair use in the literature — that fair use addresses market failure — the article proposes viewing fair use as a doctrine that aims at calibrating the allocation of uses among authors and the public. Specifically, fair use allocates directly to users certain privileges expected to maximize utility for the public. The fair use doctrine, we argue, is an integral part of copyright's sorting mechanism for, on the one hand, granting authors intellectual property rights based on their expected incentives for creation and, on the other, granting the public privileges based on the expected utility from direct allocation. The article's theory thus accords with recent Supreme Court cases by conceptualizing fair use not as an exception for costly transactions, but rather as a central feature of the copyright system that ensures productive efficiency.
This theory supports a reconceptualization of the basic structure of copyright law that both broadens fair use and makes the doctrine easier to apply. This article favors a prima facie finding of fair use whenever the user’s category of use is one that produces widespread follow-on utility to non-users (such as the categories of political speech or what we call "truth-seeking"). This prima facie finding can only be defeated by showing that allowing such uses with respect to this particular copyrighted work would eliminate sufficient incentives for its creation.
Keywords: copyright, fair use, allocational efficency, transaction costs, positive externalities, nonpecuniary benefits, property rights, direct allocation
JEL Classification: D2, K11, K39, O3, O34
Suggested Citation: Suggested Citation