21 for 2021: Exceptions

This post is part of a series of evidence summaries for the 21 for 2021 project, a CREATe project within the AHRC Creative Industries Policy and Evidence Centre (PEC). The 21 for 2021 project offers a synthesis of empirical evidence catalogued on the Copyright Evidence Portal, answering 21 topical copyright questions for the 21^st century. In this post, Bartolomeo Meletti (Creative Director, CREATe) explores the empirical evidence on copyright exceptions.

Copyright exceptions enable lawful copying of whole or substantial parts of protected works without the need for the copyright owner’s permission. They are intended to allow uses that the legislator considers to be socially, culturally, politically or economically beneficial, such as education, the preservation of cultural heritage, or research, among many others. Together with other dimensions of copyright law that enable lawful copying, exceptions help the copyright system strike a balance between the interests of copyright owners and the interests of copyright users. Exceptions are best understood as explicitly permitted acts.

This blog offers a synthesis of the empirical evidence on exceptions catalogued on the Copyright Evidence Portal, with a view to suggesting potential directions for future research. A longer version of this synthesis is available as a CREATe Working Paper 2021/9: ‘A review of the empirical evidence on copyright exceptions’.

Exceptions have been subject to doctrinal and political debates for decades. The oldest study on exceptions available on the Copyright Evidence Wiki (Gordon 1982) characterises US ‘fair use’ as the ‘most difficult area of copyright law’. The complexity of exceptions is reflected in their varied form of drafting. On the international level, Art. 9(2) of the Berne Convention establishes that ‘[i]t shall be a matter for legislation in the countries of the Union to permit the reproduction of such works in certain special cases, provided that such reproduction does not conflict with the normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author’, the so-called ‘three-step test’. Certain jurisdictions such as the US have opted for an open-ended exception that can cover a wide range of transformative uses. Other jurisdictions including the UK provide an extensive list of specific permitted acts, carefully defined but still dependant on ambiguous notions and application criteria such as fair dealing. For decades, the European Union has tried to harmonise exceptions across member states, largely unsuccessfully. In 2019, the Directive on Copyright in the Digital Single Market (the CDSM Directive) introduces four more mandatory exceptions that member states ‘shall’ implement to enable text and data mining research, cross-border teaching activities, and the preservation of our cultural heritage. However, the CDSM Directive gives member states the freedom to limit the scope of application of these new “mandatory” exceptions in various ways. The fragmented legal landscape that results from this problematic approach to law-making adds to the complexity of exceptions, particularly in relation to cross-border uses.

Exceptions can be grouped according to at least three types of purposes or rationales: i) exceptions that promote innovation, enabling the development of new products and services; ii) exceptions that serve the public interest, such as those underpinned by fundamental rights (e.g. parody, criticism or review) and those supporting vulnerable groups, cultural heritage organisations, or education and research; and iii) exceptions induced by market failure, which cover uses that are socially desirable but cannot be accommodated by the market (e.g. private copying).

The Copyright Evidence Portal provides an interesting picture of the available empirical studies that address exceptions. At the time of writing this synthesis, the Wiki includes 137 empirical studies relating to exceptions published between 1982 and 2021.

Figure 1. Timeline of empirical studies on exceptions stacked by industry from Copyright Evidence Viz, available at https://www.copyrightevidence.org/viz/ (last access 04/11/2021).

According to the Wiki, the papers that examine policy issues relating to exceptions, among others, ‘distinguish exceptions and limitations for the purposes of innovation or public policy, open-ended provisions from closed lists, and commercial and non-commercial uses’. Most of these studies adopt qualitative methods and concern the ‘Publishing of books, periodicals and other publishing’ industry (64), followed by ‘Sound recording and music publishing’ (46), ‘Creative, arts and entertainment’ (43), ‘Film and motion picture’ (43), and ‘Cultural education’ (39).

Figure 2. Industry and Policy Issue tab of the Copyright Evidence Viz, available at https://www.copyrightevidence.org/viz/ (last access 04/11/2021).

A common theme across the 137 catalogued studies appears to be a motivation to reduce the complexity and so increase the predictability of the application of exceptions. Empirical studies on exceptions aim to help courts to interpret exceptions consistently; policy and law makers to draft them; and users to understand and rely upon them. They can be grouped into five categories: i) judicial interpretation; ii) evaluating policy options; iii) impact of exceptions; iv) public domain and incentives; and v) technology and compensation.

US scholarship on judicial interpretation of fair use finds that ‘since 2005 the transformative use paradigm has come overwhelmingly to dominate fair use doctrine’ (Netanel 2011). Although ‘before 1995 no case of transformative use was ever successful’, now ‘transformative use cases make up 90% of all fair use decisions’ (Liu 2019). According to Sag (2012), ‘transformative use by the defendant is a robust predictor of a finding of fair use’. Netanel (2011) and Sag (2012) argue that the fair use standard is not actually as unpredictable and indeterminate as some of its critics claim, and it is therefore a desirable legislative option for other jurisdictions. Both empirical studies find that ‘the fair use doctrine is more rational and consistent than is commonly assumed’ (Sag 2012). In contrast, Liu (2019) notes that ‘the nature of transformative use in itself was built on dubious policy foundations’ and the paradigm ‘falls short of streamlining fair use practice or increasing its predictability’.

Lemley (1997) proposes the adoption in copyright law of a ‘radical improvement doctrine’ which in patent law ‘through the blocking patents rule and the reverse doctrine of equivalents offers a better protection for radical improvers than copyright law does’. Fuller and Abdenour (2018) finds that a ‘pure market substitution’ theory is applied to most fair use cases concerning music sampling, suggesting that a ‘market enhancement’ would be a better guiding principle.

EU scholarship on judicial interpretation of exceptions is more limited. However, the discourse analysis conducted in Kalimo, Meyer and Mylly (2018) suggests that the ‘CJEU should adopt a more inclusive discourse in order to provide a more balanced view of copyright issues, including the voices of consumers, users, and dissenting opinions from other interested parties’.

Most studies commissioned as part of the UK 2010-2014 copyright reform support the recommendations made by the Hargreaves Review (Hargreaves 2011). Public and Corporate Economic Consultants (2013) recommends that ‘the government should legislate to enable licensing of orphan works’, while Favale, Homberg, Kretschmer, Mendis and Secchi (2013) more specifically suggest a ‘limited liability system’ to enable archives and other not-for-profit institutions to make orphan works available to the public, and ‘up-front rights clearing’ to provide more appropriate incentives for commercial uses of orphan works. Erickson, Kretschmer and Mendis (2013) concludes that ‘[t]here is no substitution harm from the presence of parodies, reputation harm is very limited, and there are considerable benefits from permitting parodies for innovative producers and consumers that are likely to translate into economic growth’. Camerani, Grassano, Chavarro and Tang (2013) finds that ‘private copying is already largely or fully priced in the UK market’ of music, film and software.

The Hargreaves Review was ‘specifically asked to investigate the benefits of Fair Use and how these might be achieved in the UK’ (Hargreaves 2011, p. 44). However, also considering many responses from established UK businesses which ‘were implacably hostile to adoption of a US Fair Use defence in the UK’ (p. 44), the Review concludes that ‘importing Fair Use wholesale was unlikely to be legally feasible in Europe and that the UK could achieve many of its benefits by taking up copyright exceptions already permitted under EU law’ (p. 5). Similarly, in Australia, the recommendation by Australian Law Reform Commission (2013) to introduce fair use to ‘promote innovation and enable a market-based response to the demands of the digital age’ generates positive responses from academia (Aufderheide et al. 2018) and resistance from industry (PricewaterhouseCoopers 2016). In South Africa, Pistorius and Mwim (2019) concludes that the new exceptions introduced in 2017, including an open-ended fair use provision, ‘are too radical, and perhaps in some instances unworkable’.

Whether the social, cultural, political and economic benefits that the copyright system intends to realise are better served by open- or closed-ended exceptions has been subject to a long, mostly theoretical debate. In 2020 though, Hudson (2020) concludes a 14-year long empirical study into how exceptions operate in practice in the GLAM sector in Australia, Canada, UK and the US. The study, ‘through its analysis of the law in action, provides support for fair use, albeit not as a panacea that can and should be rolled out universally’.

The empirical literature on the impact and practical implementation of exceptions tends to focus on sectors and communities that are excluded from the rights clearance system due to its complexity and high costs. The excessive complexity and costs of rights clearance for GLAM organisations, researchers, users and primary creators is recognised in several academic studies – including Cave, Deegan and Heinink (2000), Aufderheide and Jaszi (2004), Dickson (2010), and Meletti and van Gompel (2021), among others – as well as in industry responses to Hargreaves (2011).

Overall, copyright law has a negative effect on these communities. GLAM organisations and academic libraries struggle to preserve (Hackett 2015), digitise and make available their collections (Astle and Muir 2002; Dryden 2008), particularly when these include – as it is often the case – unpublished and orphan materials (Korn 2009; Vuopala 2010). Although the WIPO-administered Marrakesh Treaty introduced mandatory exceptions to ensure accessibility of cultural products for disabled persons, contractual terms can limit libraries’ ability to make accessible copies of copyright works (Giannoumis and Beyene 2020). Stobo, Deazley and Anderson (2013) shows that risk management is often the only viable approach to rights clearance for mass digitisation GLAM projects. Exceptions designed to enable preservation and digitisation of collections are often not fit for purposes (e.g. Corbett 2011); or are not known or misunderstood (Morrison and Secker 2015; Todorova et al. 2017; Masenya and Ngulube 2019), causing risk aversion and self-censorship among GLAM practitioners (Dryden 2008).

Research on user generated content recognises the increasing role of fans and users in the creative industries, such as users entering the animation industry by producing Machinima Haefliger, Jäger and Von Krogh (2010); or questioning ‘the cultural industries’ current model of global distribution’ through voluntary translation and fan-subbing of cultural products (Lee 2011). Recent scholarship (Flaherty 2020) shows that ‘most research into copyright and fan studies is clustered in the US, with less consideration given to the UK’; and as ‘most fan fiction writers are unlikely to litigate due to high costs and uncertainty of outcome, there is a lack of legal precedent on how fair dealing might apply to fan works’. Users and fans report ‘low levels of copyright knowledge’ (Katz 2019) and are confused about the ‘legal specifics of copying’ (Poor 2012). They ‘show a lack of understanding, and misconception of fair use which centre around ethical considerations as opposed to legal fact’, and as a result ‘fans self-censor by not uploading adapted content’ (Fiesler 2018).

Primary creators also have limited knowledge or understanding of copyright law and exceptions (Heins and Beckles 2005; Pappalardo, Aufderheide, Stevens, and Suzor 2017; Ekiz 2019; Meletti and van Gompel 2021), which leads to self-censorship (Pappalardo, Aufderheide, Stevens, and Suzor 2017) and reluctancy to rely on exceptions (Meletti and van Gompel 2021).

Determining what is in the public domain and what is protected by copyright is difficult, also due to the lack of a harmonised term of protection across jurisdictions (Angelopoulos 2012) and the ambiguous copyright status of certain types of work such as advertisements (Pritcher 2000). As a result, ‘cultural treasures [are] locked in dark archives, vaults and basements’ (Gerhardt 2014) and creative businesses tend to opt for ‘licensing a less-suitable copyright work or hiring-in a replacement original work’ rather than incurring the high transaction costs of searching for and using public domain materials (Erickson, Heald, Homberg, Kretschmer and Mendis 2015). A synthesis of empirical evidence related to the copyright term can be found in Paul Heald’s 21 for 2021 post ‘Term of Copyright: Optimality and Reality’.

Most empirical studies find that a robust public domain and weak intellectual property rights encourage innovation and creativity. According to Akerlof, Hahn and Litan (2002) and Charness and Daniela (2014), stronger and longer copyright protection do not necessarily increase creative output. Handke (2015) finds that unauthorized digital copying ‘has increased competition between suppliers of content, and the record industry has become more productive over recent years’. Flynn and Palmedo (2017) argues that more open user rights ‘correlate with higher firm revenues in information industries, computer system design, and software publishing’ and with increased, higher-quality scholarly output. Reimers (2019) analysis concludes that the 1998 copyright term extension in the US ‘decreased welfare for the publishing industry’. In contrast, Javorcik (2004) argues that weak IP rights may discourage foreign direct investment; and Png and Wang (2006) finds that the extension of copyright term in 19 OECD countries between 1991-2002 ‘increased movie production’.

Akester (2009) and Favale (2011) find that permitted acts are negatively affected by DRMs and TPMs. While Favale (2011) suggests a technological solution (‘optical disks have to embed fixed usage rules that allow copyright permitted uses’), Akester (2009) proposes amendments to EU law ‘to enable expeditious access to works by beneficiaries of privileged exceptions’. In 2007, Guibault, Westkamp and Rieber-Mohn (2007) observes ‘a dangerous tendency […] to use TPMs to protect business models rather than content’. While ‘a standardisation of TPMs could help avoid such abuses’, the study suggests that ‘legal solutions to this problem […] are best found in consumer law and competition law rather than copyright law’. In South Africa, Pistorius and Mwim (2019) recommends ‘a New Zealand style model’ which under certain circumstances allows the use of TPMs circumvention devices to exercise permitted acts.

Most empirical research on copying devices suggest that the claims by the creative and cultural industries on the harm caused by private uses of protected materials are often overstated. In the 1980s, US scholarship finds that ‘the independent effect of taping on pre-recorded music sales may not have been as high as the recording industry has claimed’ (Widdows and McHugh 1984), and that ‘photocopying has not harmed journal publishers’ and actually may be beneficial (Liebowitz 1985). More than 25 years later, in the UK, both Hargreaves (2011) and Camerani, Grassano, Chavarro and Tang (2013) find that a certain amount of private copying is already priced into the first retail purchase (the de minimis argument), and therefore no additional compensation is justified. In contrast, Sanchez-Graells and Santaló (2007) – funded by Groupement Européen des Sociétés d’Auteurs et Compositeurs – argues that the economic impact of the private copying remuneration system ‘is not negative and could increase total welfare’.

As an essential component of the copyright system, exceptions and other dimensions of the law that enable lawful copying are to remain at the centre of the copyright debate. The implementation of the CDSM Directive offers a fresh opportunity to investigate empirically the purposes of exceptions and how to best achieve them.

The relationship between copyright and innovation is subject to a global policy debate, with a focus on Artificial Intelligence. At the time of writing this synthesis, the Government of Canada recently closed a consultation on a ‘Modern Copyright Framework for AI and the Internet of Things’, while the UK IPO just opened one on ‘Artificial Intelligence and IP: copyright and patents’. In the US, in April 2021 the Supreme Court ended the Google v. Oracle dispute by holding that Google’s copying of 11,500 lines of code (out of 2.86 million lines) from the Java API into Android was fair use. This important decision will attract further empirical research on the judicial interpretation of fair use in the US, while raising once again the question of whether innovation and creativity are better encouraged though open- or closed-ended exceptions. Would technical innovations of this kind be permitted under closed-ended exceptions such as those in UK or EU law? Empirical evidence on how courts interpret exceptions in jurisdictions other than the US is needed.

The synthesis above also shows how sectors and communities who are excluded from the rights clearance system struggle to rely on exceptions because of limited knowledge or understanding of what uses are permitted.  The research strand pioneered by Aufderheide and Jaszi (2004) suggests that one way of increasing awareness and creating better understanding of what exceptions permit is to document best practices, which in turn leads to positive change in practice and behaviour. According to Hudson (2020), best practice norms in GLAM organisations ‘influence decision-making more so than legislative reforms and landmark cases’. The research being conducted by Meletti and van Gompel (2021) for ReCreating Europe aims to identify best practices in documentary filmmaking and immersive digital heritage in the UK and the Netherlands. There is an opportunity for researchers to adapt these methods to document best practices in other communities such as fan creators and assess their compatibility with existing exceptions in different jurisdictions.

Overall, empirical research on exceptions should continue to pursue what appears to be its primary goal: to reduce the complexity and so increase the predictability of exceptions, with a view to helping courts interpret exceptions consistently, policy and law makers to draft them, and users to understand and rely upon them.

A review of the empirical evidence on copyright exceptions by Bartolomeo Meletti

Click on image to download

CREATe Working Paper 2021/9

Abstract

Exceptions are an essential part of the copyright system. They aim to encourage innovation, serve the public interest or respond to market failures. While extensive theoretical and doctrinal research has examined the history, nature, justification, and judicial interpretation of exceptions, empirical evidence in this area of copyright law is limited. This article aims to synthesise the empirical studies on exceptions currently catalogued on the Copyright Evidence Portal. After a short introduction to the topic, the article reviews the debates and questions addressed by scholars investigating exceptions empirically. In doing so, it identifies five main areas of study: i) judicial interpretation; ii) evaluating policy options; iii) impact of exceptions; iv) public domain and incentives; and v) technology and compensation. Under each area of study, the article summarises the main findings of the catalogued studies with a view to generating a picture of existing evidence and research agendas. Finally, the article highlights recent legislative and policy developments that may suggest potential directions for future research.

The full paper can be downloaded here.