Principle 2: Maintaining incentives for creation of works and other subject matter

2.9 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’. Similarly, the objective of the Australian Government’s 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.^[8]

2.10 The ALRC considers that maintaining incentives for creation through appropriate recognition of property rights in copyright material is an important aspect of copyright reform.

2.11 In many submissions, ranked equally with (or above) the emphasis on authorship was recognition of copyright as a form of property—specifically property that provides remuneration as a critical component of ongoing creative effort. ^[9] It was said that ‘the incentive theory (for creativity and innovation) underlies and continues to drive copyright law’.^[10] 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’.^[11]

2.12 Historically, copyright has been included among laws which ‘granted property rights in mental labour’.^[12] 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.^[13] Indeed, the Copyright Act refers to copyright as ‘personal property’.^[14]

2.13 It is generally, although not universally,^[15] assumed that creation of personal property underlies the incentive^[16] to creation of copyright material.^[17] While copyright ownership does play a role in the incentives of commercial producers of copyright works, who provide employment for creators, ‘the extent of this role has not been extensively studied and may be less than is commonly thought’.^[18] The general proposition, however, is:

Orderly management of copyright is essential to promote the continued production of original copyright materials, to ensure sustainable business models and on-going investment and employment in Australia’s creative industries’.^[19]

2.14 No-one suggested that copyright creators and owners should not be fairly rewarded. 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’.^[20]

2.15 Professor Kathy Bowrey noted, ‘care needs to be taken not to conflate the position of original content creators with that of copyright owners’.^[21] She pointed out that many creators ‘earn very low incomes with considerable numbers living below the poverty line’.^[22] 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.

2.16 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’.^[23] However, no property rights are ever unconstrained and it was noted in the United Kingdom 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’.^[24]

2.17 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’.^[25] However, ‘this proprietary approach’ is seen as the basis of encouragement to create copyright material, albeit that motivation will ‘vary from industry to industry’.^[26]

2.18 Reform should encourage innovation and creation to enhance the participation of Australian content creators in Australian and international markets. It was submitted that ‘the purpose of granting rights of property in the products of creative labour is to reward and encourage creativity’.^[27] 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’.^[28]

2.19 An optimal system of copyright law will support individuals and enterprises as they establish new ways of doing business and seek out new commercial opportunities. Australia competes with other countries in a global digital economy.

2.20 The Australian Consumer and Competition Commission (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’.^[29]

2.21 If copyright law creates ‘a less conducive environment for a digital economy than the law of Australia’s competitors, this will put Australia at a disadvantage in attracting and retaining innovative digital companies’.^[30] Civil Liberties Australia stated that ‘copyright is an aberration in Australia’s traditional free market system’.^[31]

2.22 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.^[32] Many submissions which emphasised the proprietary nature of copyright also referred to the principle that copyright is a ‘balance between the rights of creator and user’.^[33] It was submitted that ‘the right balance between rights and limitations is one that preserves the necessary incentives for licensing’.^[34] On the other hand it was also argued that ‘high transaction costs, cumulative licensing requirements, and strategic behaviour make licensing prohibitive, resulting in the underproduction of valuable works’.^[35]

2.23 Other submissions put the view that ‘the relevant balance of interests in copyright law is not the balance between individual copyright owners and copyright users, but between public interest … and the right of copyright owners to profit at any point in time’.^[36]