Introduction for Economics.org.au readers
— Quietly, many Australians are waking up to the myth of intellectual property. (For example, “Australia’s loudest free market think tank” had an “IP & Free Trade Unit” until recently.) By shifting position quietly, many other Australians remain asleep to its injustice.
— American patent attorney Stephan Kinsella disintermingles the fallacies of “intellectual property” in “Why intellectual property is not genuine property” and “On life without patents and copyright; or, But who would pick the cotton?”
— The closest Australia has to Kinsella are the following stirrings of IP discontent from Paddy McGuinness, inspired by a “Friedrich von Hayek”. McGuinness’s final paragraph in his fourth of four columns below is particularly encouraging. Without further ado:
1. “Revision time in copyright lore,” The Australian, 14/2/90
2. “Discordant disclosures …,” The Australian, 19/12/90
3. “Just for the record, consumers have their rights too,” The Australian, 15/8/91
4. “Wrong-headed thinking on copyright,” The Australian, 13/5/94

1.
Padraic P. McGuinness, “Revision time in copyright lore,”
The Australian, February 14, 1990, p. 11.

It is obvious that the Minister for Consumer Affairs, Nick Bolkus, is not too happy about the strange deal on book imports put through Cabinet by the Attorney-General, Lionel Bowen.

So he has effectively reopened the issue by giving the Prices Surveillance Authority (PSA) the reference announced on Monday relating to the record industry.

The PSA will now be able to look at another matter canvassed by the Copyright Law Review Committee (CLRC) with respect to the importation provisions of the Copyright Act, and to look at their effect on the prices of vinyl discs, compact discs and audio tapes in Australia.

As with the book trade, the report of the CLRC effectively concluded that the existing set-up ought to be protected, regardless of the interests of consumers. However, by the time the PSA reports on record prices, there will be a big difference in the governmental treatment of these issues.

Even if the ALP retains power (and Malcolm Mackerras is surely correct in putting that at a probability of 60 per cent, or odds of 6/4 on), Mr Bowen, whose “wise” decision was praised by the British book publishers and their complaisant Australian authors, will no longer be in Parliament. So by reopening the question by way of record prices, Senator Bolkus has ensured that the whole issue will be reconsidered by the next government.

The CLRC deal with both the book trade and the record trade as lawyers and without the benefit of any independent analysis of prices and markets. As it said with respect to records: “All the committee can say is that no evidence has been placed before it which would warrant the conclusion that prices charged for records in Australia are unreasonably high.”

This is not surprising, since the principal submissions the committee received were from record companies, music publishers and specialist record retailers. The last group was unhappy about the existing import provisions, but was mainly concerned to obtain the right to import small batches of recordings of interest to specialists who are not very price sensitive.

This is a worthy consideration — there is a number of people of especial skill or interest to whom the high-quality “audiphile” recordings made in the United States but not imported here are of importance. Recording quality is of much greater importance than printing quality.

But not only the interests of the elite need to be considered, either with respect to books or music. There is a serious issue of equity to be dealt with when existing monopolistic practices in trade mean that ordinary readers or ordinary listeners of ordinary books and records are soaked unnecessarily in the name of elitism.

It is a strange fact that writers and artists who for the most part find themselves on the Left of politics, and who generally believe that the owners of property should not have absolute rights, become vociferous defenders of property rights when their own interests are affected. This has been pointed out by that ancient scion of market economics, Friedrich von Hayek, in his latest book, The Fatal Conceit.

The book, incidentally, retails in Australia at more than double the Australian dollar equivalent of the price for which I bought a copy in New York last July. It is published in the United Kingdom by Routledge and in the US by the University of Chicago Press.

Coincidentally, I received a circular from the latter a few weeks ago which announced a change in its book prices in Australia from January 1. Henceforth, it will sell its books in Australia at the Australian dollar equivalent of the US domestic price list rather than the higher price that is otherwise in effect in export territories outside North America.

While it may well be that Routledge will claim the rights to the Australian market for the book, there is no doubt that US anti-trust law will uphold the right of the University of Chicago Press to sell direct to Australian retailers (which it proposes to do at the same discounts it offer to US retailers), and if the matter goes to court in the US there will be a declaration that any agreement with a UK publisher on the Australian market is invalid. So the UK claim to determine what US books we see is again under challenge.

But what Hayek says, discussing the economics of copyright, is:

Those very intellectuals who are generally inclined to question those forms of material property which are indispensable for the efficient organisation of the material means of production, have become the most enthusiastic supporters of certain immaterial property rights invented only recently, having to do, for example, with literary productions and technological inventions (i.e., copyrights and patents).

The difference between these and other kinds of property rights is this: while ownership of material goods guides the use of scarce means to their most important uses, in the case of immaterial goods such as literary productions and technological inventions the ability to produce them is also limited, yet once they have come into existence, they can be indefinitely multiplied and can be made scarce only by law in order to create an inducement to produce such ideas. Yet it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process.

I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopaedias, dictionaries, textbooks and other works of reference could not be produced if, once they existed, they could be freely reproduced.

Interestingly enough, as the PSA report on recordings will bring out, the actual position of original artists in music is rather different with respect to copyright than that of those in literature. In principle, there is no power in a musician, once having granted a licence to record music, to prevent a re-recording of that music.

There is in law a “compulsory licence” to re-record an existing import, provided royalties at 6.25 per cent are paid to the copyright holder. So control of the trade hinges on the importation provisions to a much greater degree than in the book trade.

This is suggestive; it may be that the copyright law with respect to books and other literature should be amended to allow a similar right of unlimited republication on payment of royalties. And a provision ensuring the payment of royalties to Australian copyright holders at the full rate on both books and records, with respect to imports would overcome the alleged problem of dumping.

The fundamental issue, however, is that of the status of copyright. There is no such thing as an absolute ownership of property in our society, unaffected by considerations of law and public policy. Perhaps it is time to reconsider the whole basis of copyright and other intellectual property law.

***
2.
Padraic P. McGuinness, “Discordant disclosures …,”
The Australian, December 19, 1990, p. 11.

The recommendations of the report of the Prices Surveillance Authority do not really come as a surprise. After its report on the British publishers’ territorial copyright in Australia, the flavour of the thinking of the PSA was clear.

That is, it was concerned to question any existing arrangements which inhibited genuine competition and which resulted in unjustifiably high prices to Australian consumers. Since the Australian recorded-music industry has been dominated by large foreign companies for years, and it has been well known that the prices of records, cassettes, compact discs, etc. in Australia have for many years been far higher than in comparable overseas markets, it would take a good deal of ingenuity to discover an explanation for this state of affairs which would show it to be in the interests of the Australian public.

This is, of course, what the recording industry associations, especially the main industry association, the Australasian Recording Industry Association (ARIA), attempted. Without success.

However, its opposition to the whole exercise did have a very useful effect. It forced the PSA to be rather more careful and thorough even than it was in the book prices inquiry, and as a result the report on The Prices of Sound Recordings has proved to be an excellent and informative study of an industry from which much is heard, even if little has hitherto been known.

It is also a very useful exposition of the state of Australian copyright law (and related government provisions) with respect to sound recordings; and a somewhat less satisfactory account of the reasons for the existence of copyright on economic grounds. The PSA has simply accepted the standard arguments for the existence of copyright. There is, however, a good case to be made for the abolition of copyright in literary, musical and artistic works.

There is a case to be made for copyright in such excellent products of industry as Groves Musical Encyclopedia, or indeed the late Lilian Roxon’s Encyclopedia of Rock. Such works would only be produced for profit. But there is good reason to doubt whether the existence of copyright provides a necessary and sufficient inducement to the creation of works of art. History for many years evidenced the contrary.

And, indeed, when we have gigantic systems of literary and artistic patronage, however incompetent and misguided, like the Australia Council, it is arguable that the recipients of such patronage should forgo their copyrights in exchange for assistance received. However, without going to such logical extremes the PSA does remind us that copyright is not an absolute property or moral right, but exists only for reasons of public policy. Its existence and use has to be justified, therefore, in terms of the public interest, and not the private interest of the copyright holders.

The big difference between the music industry and the book industry in the present context is that the same kind of people who howled for absolute control over copyrights and the abolition of parallel imports in the case of books are only a tiny minority of the consumers of recorded music. Their interest, to the extent that they are genuinely cultured, is in the import of high-quality recordings of classical music (4 per cent of total recorded music sales) and jazz (2 per cent). And here it is clear that the prohibition of parallel imports is directly contrary to their interests. For it makes either unavailable or excessively high prices the kind of records they are interested in.

Parallel imports, it must be said, are not at all the same as pirated records, although it suits the music industry (like the book publishers) to try to confuse the issues. They are imports of legally recorded editions which do not infringe copyright in the country where they are recorded, or the international conventions on copyright. It is not difficult to continue to prohibit pirate editions and allow the free importation of legally made records — and this the PSA establishes convincingly.

The record industry has already claimed that its control over imports of records is necessary to the existence of a domestic Australian popular music industry, to the encouragement of new talent, and to the necessary publicity and advertising which goes with the industry. All these arguments are effectively demolished by the PSA report. The example of Sweden, which freely allows parallel imports, provides a neat demonstration that such protection is not necessary.

Evidence as to the kind of contracts composers and performers receives shows that their incomes depend far more on overseas marketing and distribution than on Australia — and, moreover, the profits are largely retained overseas. The principal argument as to publicity and advertising by the recording companies does not hold up, either: it mainly serves to divide up shares of the market, rather than increase the size of the market.

What the PSA demonstrates convincingly is that Australian buyers of recorded music — and by far the greater part of the market is contemporary music (mainly pop and rock) — are being charged unconscionably high prices by international standards. There are no convincing arguments to justify this, and it is made possible by the legal provisions which prevent the free importation of legal recordings made overseas.

The PSA recommends, therefore, that any Australian seller of music should be able to source its imports from whatever country it likes. It is the impossibility of doing so at present which allows the majors in the record-publishing industry to exploit the Australian public.

Now, it is clear that there are no issues of “high culture” or creativity involved. However talented the composers and performers of pop music, they are not contributing a vital and essential part of our culture. They are entertainers. So the kind of hypocritical cant which surrounded the debate about allowing free import of books does not work so well. It is a much simpler issue: the consumers of pop music, who are predominantly young and low-income, are being mercilessly ripped off. There is nothing — whether it be sponsorship of local talent, fostering of local manufacturing industry, or special cultural contribution — which we are getting in exchange.

Not even a performing industry. For the PSA points out that the one real gap in the protection of “creative” rights in the music industry is the lack of any form of copyright in performance. Thus, a group can record a track on disc, and have that used in (say) a film, with no automatic right to royalties from the performance like those which accrue to the composer. There is clearly a case for some kind of right here, and the PSA recommends it.

Not only has the recorded-music industry abused its control over imports to rip off consumers, it has also used it as a form of market power over distributors and retailers, by using its powers to refuse supply as a means of debt collection, effectively appointing itself judge in its own cause.

Of course, there will be the usual campaign of denunciation of the PSA, of “theoretical economists”, of claims that somehow existing privileges must be preserved. But the simple issue is this: why have we been such mugs in the past as to pass laws to help other people rip off the Australian public? If the world wants Australian music it will buy it without our having to pay Danegeld to a foreign record industry.

***
3.
Padraic P. McGuinness, “Just for the record, consumers have their rights too,” The Australian, August 15, 1991, p. 11.

The protests of the pop musicians against the Prices Surveillance Authority recommendations about record pricing would be amusing if they were not so breathtakingly cynical. Predictably, they have aligned themselves with the writers who protested also about the PSA recommendations on book imports and pricing.

The findings of the PSA in both cases were that the use of copyright provisions to establish a monopoly for overseas-owned companies over the import of books and records, so that both high prices could be charged and the availability of overseas product restricted, was an abuse and contrary to the interests of consumers. In the case of both books and records, the interested companies have successfully conned the local artists and writers into believing that their future incomes depend on continuing the isolation of Australian from foreign writers, artists and performers.

In the case of writers, the effrontery is amazing. These are the people who commonly condemn censorship or restriction on the free circulation of ideas in any form. Yet it is impossible for an Australian bookseller to legally import stocks of books published in the United States, because of copyright provisions. There is a huge output of books, fiction and non-fiction, in the US every year. Many of them are of direct interest to Australian readers. Yet we will never see most of them in our bookshops because British publishers who have no interest in Australia, except as a collection of mug punters, are not interested in republishing them for the parochial British market.

Dogs in the manger, they still hold the copyright powers granted them by our law to prevent our booksellers importing anything Australians might be interested in direct, without waiting for the inefficient and high-cost British publishing industry to decide whether it wants to bring out an edition to sell in our market. The modification of the law does not really change this — to be free, booksellers must have the right to order direct from the US any book they think they might be able to sell, without the intervention of British publishers. At present, the free dissemination of ideas in this country is blocked by Britishers who know little and care less about our literary and intellectual interests.

In the case of records, the same restrictive provisions have been turned into a means of exploiting the young. First of all, the misleading propaganda of ARIA (Australian Record Industry Association) has to be dismissed. The PSA has amply proven that Australian record prices, especially for compact discs, are substantially higher than those in other comparable countries, and that this is a result of the import monopoly. Second, the notion that our single disc manufacturer might suffer from an expansion of the market for popular music is nonsensical, and in any case irrelevant. Surely we have realised by now that there is no future for Australia in protecting industries unable to compete with the rest of the world. Sony has weighed in, suggesting that it may delay its plans to establish a CD plant in Australia if the market is freed up. Tough.

Why on earth would we want a subsidised foreign-owned plant of any kind? Like the writers, the musicians have been conned by the recording companies into believing that their future careers and incomes are at stake. Even if this were true, if they cannot compete in the world market, why should they be given special subsidies? And, to be snobbish about it, while there may be a case for subsidising Australian writing, what is the case for subsidising vulgar howlers?

In all the argument about copyright provisions preventing the direct import of books and records, there is the assumption that intellectual and artistic property rights are sacred, whereas no other kinds of property rights are. Peter Garrett, the lawyer who has made a career out of pop music and pop environmentalism, certainly does not believe that the property rights of mining companies, rural producers, foresters or paper manufacturers are sacred.

Neither should they be. There are overwhelming community interests in restricting those property rights.

Equally, there are compelling community interests in regulating and restricting the property rights of writers or musicians in the way in which they market or otherwise dispose of their product. But there is a common belief among writers, artists and others that there is only one form of property which is sacred and not subject to legislative restriction and regulation — their own.

In fact there is a good case to be made for greatly restricting and reducing the scope of copyright protection of “intellectual property” — and a large part of this case can be based on the fact that most authorial and artistic creation is in any case highly derivative. There are very few genuinely creative writers or musicians, especially pop musicians, around. They usually buy or steal their themes, their lyrics and their ideas. Even the genuinely original are drawing on the common heritage of all of us.

Virtually the only argument of the defenders of the way in which foreign corporations’ interests are protected by our copyright legislation which has any force is that based on the fear of dumping and remaindering. Bear in mind that, despite hysterical claims to the contrary, the PSA has never recommended imports of books and records in breach of copyright. What it has argued is that books and records legally published in the US and elsewhere should be able to be imported freely into this country.

The scenario which underlies the tears of both writers and musicians is that they might sell rights into the US market and the Australian market, and then find surplus output from US publishers being remaindered into the Australian market, undercutting a local edition. The problem is that most publishing contracts do not provide for the payment of royalties to author/artist on copies which are not able to be sold at the normal shop price, and that these are sold very cheaply. Look around the bookshops in any large city which specialise in this kind of thing, and you will see what the writers and musicians are afraid of.

But of course no one sells newly published books or records as remainders. It is only when they are old or no longer topical or fashionable that books and records are remaindered — that is, when they can no longer in any case be sold at anything like list prices.

The threat to our book and record market only exists because foreign book and record publishing companies are not prepared to give us immediate access to books and records published in the US. That is, we get the stuff late, if at all. If we are six months or a year behind US publication and release dates, then there will be the possibility of importing remaindered stock to Australia profitably to compete with local pressings or US printings. In other words, the failures are those of the foreign book and record publishers who treat Australia as a captive market.

There is no good reason why a book or record by an Australian writer or musician published in the US should not be made available at the same time, or within a week or two’s shipping time, in Australia.

Once this is allowed the whole problem of dumping of unfashionable remainders disappears. Our writers and musicians have been fooled by the publishers of books and records into supporting an unconscionable rip-off of the Australian public, which relegates us to the status of a secondary, colonial market subject to ruthless exploitation.

***
4.
Padraic P. McGuinness, “Wrong-headed thinking on copyright,”
The Australian, May 13, 1994, p. 15.

Is there any justification for copyright, and can it be enforced in the electronic age? This is an issue of wide significance. There are very strong arguments to be made against copyright, a relatively recent historical invention. They become even stronger when it is expensive and difficult to police.

The issue is often treated as closed when it comes to ordinary “authorial” copyright. It is a strange phenomenon that writers who believe in the confiscation of other peoples’ property and income make a firm exception when it comes to what they perceive as their own intellectual property. In fact, the arguments for both patents and copyright in “original” or “creative” work, in the writing of computer software and in the invention of new technology are very weak. There is no convincing evidence that these property rights have any social value, as distinct from private value, to their owners.

Such general considerations were not much noticed, however, by the Copyright Law Review Committee in its report on the issue of journalists’ copyright, which was dropped in Canberra on Budget day without the usual full text of the report.

The issue in question resulted from a peculiar interpretation by the Federal Court some years ago as to the relative rights of journalists on the one hand and newspaper and magazine publishers on the other as to who owned the copyright in the material published. In effect, the decision was that a newspaper that employed a journalist full-time owned only the copyright in first publication, while the journalist controlled all other reproduction rights.

This was a peculiar judgment, since it was inconsistent with all other areas of copyright and patent law, which state that an author or inventor employed by an institution does not own the rights to his or her creation. Thus an invention by a person working for a corporation employed by that corporation, and which was developed in that corporation’s time and using its facilities, is the property of that corporation.

Why should a report, a feature article, a column, written on a salary, using a newspaper’s facilities, representing himself to contacts as an employee of that newspaper, with the material checked, sub-edited, and headlined by employees of the newspaper, and often enough written at the suggestion or direction of the editors of the newspaper, with the newspaper bearing all related risk, be any different?

This is an important issue because of the increasing importance of electronic dissemination of information by newspapers and the use of newspaper material by government departments and others by photocopying and other means, as well as use by educational and other institutions and corporations.

The majority of the committee recommended that there really is no case for journalists’ copyright in the case of employed journalists. It is an anomaly and puts excessive restrictions on the electronic dissemination of information. But they said it was mainly an industrial issue.

The minority agreed that journalists’ copyright should not extend to electronic publication of a newspaper, but should cover the storage of material in an electronic edition of the newspaper itself. That is, the whole committee weaseled out of making a firm recommendation as to law and tried to pretend that it should be an industrial issue.

This is not true. Copyright and intellectual property rights generally are not industrial issues, they are matters of law and property. To that extent, they are properly a matter for individual negotiation between authors and publishers, not collective bargaining.

Of course it is often difficult to sort out the contributions to any particular piece published in a newspaper. This column, for example, is being written on my own personal computer in the office I am allocated in the building of the newspaper in which it is published. Most of the telephone calls I have made in connection with this whole matter over the years I have been interested in it have been made at my employer’s expense. The reading that informs it stretches over many years and takes place at any time of the day or night.

The material is transmitted by the employer’s telephone line, using the employer’s modem, into the employer’s computer system. Once there it will be sub-edited by a sub-editor, formatted and headlined, and fitted into a page before publication. The whole page is overseen by another journalist. The editing of the paper is a large intellectual contribution; and the paper is managed, marketed and distributed by a huge staff.

In many cases, the contributions of the sub-editors are absolutely essential, and the published report of a journalist owes a great deal to the work done on the original version. Usually it also involves a great debt to other journalists whose work is retrieved from the “cuts” — physical or electronic. How can any just division of copyright be achieved by industrial negotiation? It clearly cannot be.

Much more important, however, is the fact that the demand made that payment should accrue to by-lined authors, or journalists generally, for electronic database use (and photocopying) is an unreasonably onerous imposition on the dissemination of information in the most rapidly growing form.

There is, in fact, no simple or reasonably cheap manner of controlling electronic dissemination of information. To demand that every single issue of an article published in a newspaper be identified and charged back, with a division of copyright fees between putative authors, is to demand both the impossible and the prohibitively expensive. (The efforts of the Copyright Agency Limited have so far been inefficient and inequitable — no payments have been made to other than by-lined journalists — and themselves involve a misappropriation of royalties to the extent that they have been earmarked for union funds.)

There are public-interest considerations. Even as stated by the Communications Law Centre, they are essentially arguments against any copyright at all in electronic diffusion, save to prevent the alteration of material. The same consideration applies, of course, to all Crown copyrights.

The committee, by selling the rights of individual authors down the river, has polluted the argument. Intellectual property rights must be either genuinely individual, or consistent with the copyright law for all other employees besides those of newspapers.

And as far as the existing law is concerned, I hereby grant free licence to anybody to disseminate electronically anything I write in this newspaper, subject to accurate and complete reproduction. Nobody has the licence to negotiate my property rights away from me.