Principle 2: Maintaining incentives for creation and dissemination

2.15 The Terms of Reference for this Inquiry refer to ‘the objective of copyright law in providing an incentive to create and disseminate original copyright materials’. The ALRC considers that reform proposals in this Report recognise and facilitate this objective.

2.16 This principle is taken to mean that copyright reform should ensure the maintenance, and indeed, enhancement of incentives to create works and other subject matter, and to allow the dissemination of that material. In many submissions, ranked equally with (or above) the recognition of authorship and creation, was recognition of copyright as a form of property—specifically property that provides remuneration as a critical component of ongoing creative effort.^[13]

2.17 The objective of Australia’s 2013 Cultural Policy is to increase the social and economic dividend from the arts, culture and the creative industries. This ALRC Inquiry is referred to in the Cultural Policy as being:

designed to ensure Australian copyright law continues to provide incentives for investment in innovation and content in a digital environment, while balancing the need to allow the appropriate use of both Australian and international content.^[14]

2.18 In this Inquiry, most submissions espoused the ‘innovation incentive’ theory of copyright but views differed as to how far the incentive reached. The Centre of Excellence for Creative Industries and Innovation noted, for example, that ‘the evidence points to the need for caution in assessing claims that copyright as it currently operates is central to the ability of creators to earn a living from their creative works’.^[15]

2.19 However, it is generally accepted that: ‘the incentive theory (for creativity and innovation) underlies and continues to drive copyright law’.^[16] Universities Australia submitted that the guiding principle for this Inquiry should be ‘to ensure that copyright law does not result in over regulation of activities that do not prejudice the central objective of copyright, namely the provision of incentives to creators’.^[17]

2.20 Historically, copyright has been included among laws that ‘granted property rights in mental labour’.^[18] In this tradition, Australian copyright law has been regarded primarily as conferring economic rights focusing on the protection of commercial activities designed to exploit material for profit.^[19] Indeed, the Copyright Act refers to copyright as ‘personal property’.^[20]

2.21 It is generally, although not universally,^[21] assumed that creation of personal property underlies the incentive to creation of copyright material.^[22] While copyright ownership does play a role in the incentives of commercial producers of copyright works, who provide employment for creators, ^[23] ‘the extent of this role has not been extensively studied and may be less than is commonly thought’.^[24]

2.22 The general proposition, however, is: ‘the purpose of granting rights of property in the products of creative labour is to reward and encourage creativity’.^[25] Indeed, the ‘objectives of copyright regulation are to support an environment that promotes the creation of new content for the benefit of Australian society as a whole’.^[26]

2.23 The proprietary analysis was expressed by a number of stakeholders as a ‘need to correctly frame the discussion as one sensitive to the notion of property’, that is, the starting point in a discussion about copyright reform should not be ‘that consumers are entitled to use and exploit the products or property of another person who has privately invested in them’.^[27]

2.24 It has been said that to talk of copyright as property is to employ a different ‘dominant metaphor’ than the traditional ‘bargain between authors and the public’.^[28] However, ‘this proprietary approach’ is seen as the basis of encouragement to create copyright material, albeit that motivation will ‘vary from industry to industry’.^[29]

2.25 While the link between encouraging creativity and ownership of property rights is not inevitable, most stakeholders believe the property rights created by Australian copyright legislation provide the major incentive to creativity and production of new material. The ALRC considers that maintaining incentives for creation through appropriate recognition of property rights in copyright material is an important aspect of copyright reform.

2.26 Some submissions emphasised that creation without dissemination is of little value, Pandora, for example, submitted:

the financial return to creators and rights owners only comes from distribution through successful and viable businesses—the benefits for creators and rights owners cannot sensibly be considered in isolation from the need to also deliver a commercial benefit to those companies investing in making the creators’ works commercially available. As such, we consider that there is a pressing need to also deliver a commercial benefit to those companies investing in making the creators’ works commercially available.^[30]

2.27 In similar vein other submissions emphasised the importance of intermediaries in that promotion of the continued production of original copyright material was significantly due to ‘industry’s role in the development, discovery and dissemination of scholarly communication that fuels innovation, job creation, and economic growth’.^[31]

2.28 The interests of creators and disseminators are not always the same. Professor Kathy Bowrey noted, ‘care needs to be taken not to conflate the position of original content creators with that of copyright owners’.^[32]

2.29 It was argued that the intermediaries involved in the dissemination of cultural products (such as record labels and music publishers) engage in ‘commercial cultural production’, which is less desirable than ‘individual and independent cultural production’ and furthermore ‘potentially consumes a much larger proportion of the revenue from copyright protections than goes towards the originators of intellectual property’.^[33]

2.30 The Australian Society of Authors describes publishers and intermediaries as ‘part of the cost of business’ for an author, being the ‘margin that goes to publishers where they act as a form of agent for the author in control, management and exploitation of their copyright’.^[34]

2.31 However, in this Inquiry, the ALRC notes that the arguments against reform advanced by disseminators and intermediaries are also adopted by, or on behalf of, creators.^[35] One such argument is that introducing fair use to Australian copyright law ‘will impact negatively on artists’ income’.^[36]

2.32 Research shows that many creators ‘earn very low incomes with considerable numbers living below the poverty line’.^[37] In fact, actual remuneration to creators is ‘negotiated outside the copyright statute’ and is ‘much more a contractual arrangement issue than a copyright issue’.^[38] The alleged threat to creators, culture and creativity from copyright reform is not supported by evidence presented to the ALRC.

2.33 An alleged ‘pro-author’ approach that sees a narrow role for unremunerated exceptions may be said to benefit existing rights holders, but it may also hinder the activities of new creators, for example, by limiting the scope of permissible derivative works, or increasing licensing costs. Indeed, it has been argued that exceptions should be seen as protective of authors and authorship, rather than antithetical to these concepts.^[39]

2.34 No property rights are ever completely unconstrained and it was noted in the UK Hargreaves Review that property principles cannot alone form the basis for copyright law as protection of creator’s rights may today be ‘obstructing innovation and economic growth’.^[40] The ACCC similarly points out that, paradoxically, too much copyright protection can reduce the number of works created; for example if materials are prevented from entering the public domain, where this would be appropriate.^[41]

2.35 The ACCC pointed to the important role that copyright plays in ‘establishing incentives for creation of copyright material’ but also noted the costs associated with placing too much weight on incentives, resulting in an inefficient copyright system ‘which could place Australia at an economic disadvantage in relation to the copyright industries as compared with countries that have a more efficient system’.^[42]

2.36 The ACCC considers that competition in markets for copyright material will generally maintain incentives for the wide dissemination and efficient use of copyright material and that ‘there may be significant costs for economic efficiency and consumer welfare if protections for IP rights are too extensive and not balanced by appropriate exceptions’.^[43]

2.37 An aspect of recognising that copyright reform should do nothing to disturb innovation and creativity is understanding what does, or does not, impose ‘substantial harm’ to the incentives of copyright owners.^[44] It is quite clear that a great many uses of copyright material would not harm the incentive to create: ‘copyright treats and protects equally works of economic value as well as those of no economic value’.^[45]

2.38 The ACCC considers that there are some uses of copyright material that do not necessarily result in extraction of additional value, and may even work against benefits flowing to the copyright owner or rights holder, while at the same time exposing users to possible infringement proceedings. The ACCC submitted that in such circumstances an unintended effect of disrupting efficiency in the digital economy could be occurring.^[46] These circumstances include ‘incidental’ use of copyright material,^[47] private use,^[48] and some ‘unauthorised copying’ as much of this activity tends to boost the demand for copyright products.^[49]

2.39 There is an increasing weight of research indicating that ‘new technologies and innovations have been a key industry growth engine for the creative sector, as they have resulted in increased market reach and consumption opportunities, and introduced new types of creative products that all contribute to increased consumer spending’.^[50]

2.40 Reform should encourage innovation and creation to enhance the participation of Australian content creators in Australian and international markets. Incentives to creation and dissemination of copyright material will be enhanced by the introduction of flexible and adaptive copyright rules, as recommended by the ALRC.