Legal metadata, open content distribution and collecting societies
Herkko Hietanen (a), Ville Oksanen (b)
Abstract
This paper describes the economic impact of legal metadata and open content in information society. The paper also analyses the challenges that individual digital open licensing poses to collecting societies. In the first part we define open content and the meaning of legal metadata. In second part of the paper we concentrate to the economics of open content and how it changes the way creative communities work. In third part we describe the European collective societies system and how they use their dominant market position to block authors from using open content licensing.
Résumé
Cet article décrit l'impact économique des métadonnées juridiques et du contenu ouvert dans la société de l'information. L'article analyse aussi les défis que posent les mécanismes individuels et ouverts de licence numérique aux sociétés de gestion collective. Dans la première partie, nous définissons les concepts de contenu ouvert et de métadonnées juridiques. Dans la seconde partie, nous nous concentrons sur les aspects économiques des contenus ouverts et les changements introduits sur le fonctionnement des communautés créatives. La troisième partie décrit le système européen de gestion collective et la manière dont leur position dominante sur le marché empêche les auteurs d'utiliser les mécanismes de licence de contenus ouverts.
Introduction
The world of (popular) culture is currently living exciting times. More and more content is created by non-professional authors with the aid of personal everyday devices. Camera phones and cheap digital cameras combined with powerful personal computers make it easy for general audience to produce digital content. Similarly the advances in different categories of the music making software have opened the world of studio quality sounds to amateurs. Homemade movies are quickly reaching and exceeding the level of special effects that the big Hollywood studios used to have only one decade ago. Internet and P2P-networks offer cheap and perhaps more importantly, global channel for distribution. As the results we are currently living the era of democratisation of mass culture.
While producing this content is technically easy, the same cannot be said about the legal side. This is especially true for copyright even if the basics of copyright are actually relatively simple: it is a group of rights granted exclusively to author of creative work; these rights include the right to make copies of the work, make alterations or derivative works, publish, present and perform the work and change the format of the media it's saved; copyright is exclusive, anyone who wants to utilize the right of the copyright holder needs to get permission - license- from the copyright holder.
The problems start to arise while reusing and mixing existing material for derivate products. How much can be added? How the author should be mentioned or compensated? The list of open questions looks suddenly long and scary. It does not help that writing a good and clear copyright license can be extremely demanding work. Copyright licenses are normally negotiated and written by highly specialized group of lawyers and even these people make mistakes. Also, using specialists means extensive fees, which are typically out of the reach of ordinary citizens.
Luckily there is a solution. Licensing transaction costs can be lowered by automating the licensing procedure as far as possible. Albeit the licenses are expensive to write, they can be used over and over again with minor modifications. These modifications can be done automatically by a licensing engine. This way the licensing can be fixed to the workflow.
Research on automated copyright systems has concentrated to Digital Rights Management systems (DRM). Digital Rights Management involves the description, layering, analysis, valuation, trading and monitoring of the rights over an enterprise's tangible and intangible assets. DRM systems define the way how the content can be used and protects the content so that it can't be accessed or used against the terms of use. There has been a problem of implementing secure DRM systems and consumer acceptance has prevented the wide use of DRM systems. Many have seen DRM as a solution for illegal file sharing. With DRM systems contents producers can exclude customers who don't pay for the license. Without excludability, the relationship between producer and consumer becomes more akin to a gift-exchange relationship than purchase-and-sale one. When commodities are not excludable, people simply help themselves. (1) Or as Barlow and Brand have stated: "Information wants to be free". DRM systems don't serve the free flow of information because they are designed to limit it.
While content production was in the hands of professional artist and authors, the incentive for creating and distributing the content was mostly economic. Artists typically need time, extensive training and expensive equipment to produce their work. They need to get compensation from their works just to be able to continue their profession. Amateur authors have different motivations. They usually don't have training nor do they need expensive materials to create their art. New technology has made it easy and cheap to produce high quality material which was just ten years ago solely created by professionals.
Amateurs and hobbyists have proved that they can produce valuable content. GNU Linux operating system and Mozilla web browser are good examples of community produced premium products. They have proved that open and non-commercial communities can produce the same level of quality or even higher than proprietary companies. Hackers who want to share their code with the world have used free and open source licenses as their tools. Recently the openness has spread to distribution of other kind of content. Open content movement is devoted to expanding the range of creative work available for others to build upon and share.
This article briefly describes the primary tool "metadata" that open content uses for digital distribution. Second part presents the economic rationale of why legal metadata should be used and how open content distribution balances copyright as an exclusive right. We also describe Creative Commons (CC) which one of the most prominent open content licensing systems. Given that open content distribution might be beneficial to authors, why aren't the biggest right holders, collecting societies, using it? Third part examines how collective rights management relates with open content distribution. It tries to give answers to what collecting societies role should be in the future.
Open content and legal metadata
Open content can be shortly defined as creative work that comes with a license which explicitly allows reproduction and distribution. Works must be in a format that explicitly allows the copying and distribution of the information. Public domain works are also open content.
In digital environment it is possible to attach a license into a work. Licensing information is part of metadata that describes the content. W3c Glossary defines metadata as: " Data about data on the Web, including but not limited to authorship, classification, endorsement, policy, distribution terms, IPR, and so on. " Metadata can hold pricing information, author info and licensing terms. Most of the new music, image and text formats have a reserved field for metadata. Metadata can be easily attached and read from mp3, PDF, mpeg4 and HTML files.
Attaching metadata which describes the works copyright status is called Digital Rights Expression (DRE). DRE uses Rights Expression Language REL to let users know of the permission that the users have. Rights Expression Language is a language for specifying rights to content, fees or other consideration required to secure those rights and other associated information necessary to enable e-commerce transactions. Unlike the most Digital Rights Management (DRM) and enforcement systems, Digital Rights Expression doesn't include technical means to restrict users from violating license terms.
One of the most used metadata framework is W3C's Resource Description Framework (RDF). It provides a foundation for processing and exchange of machine-understandable information on the Web. RDF can be used for cataloguing (to describe the content which is in digital form on a web page, digital library or at p2p network), resource discovery (for example to let search engines search for works that have certain licenses), and by intelligent software agents (to facilitate knowledge sharing and exchange, in content rating) ."
The Open Digital Rights Language (ODRL) Initiative is an international effort aimed at developing and promoting an open standard for the Digital Rights Management expression language. ODRL does not enforce or mandate any policies for DRM, but provides the mechanisms to express such policies. Because ODRL was designed to serve traditional DRM system it isn't suitable for pure digital rights expression. ODRL has started Creative Commons profile working group which aims to develop an extension of the ODRL REL to capture the semantics of the CC licenses. The purpose is to enable the use of the ODRL REL - with all its advanced features and facilities - to express the CC licenses.
Economics
Attaching DRE information serves many purposes for open content distribution. The main economic factor for using DRE is the significant lowering of the transaction costs and more generally information costs. DRE allows also some new business models, which are bound to change the way the content industry works. Though, many of these business models rely heavily on DRM and thus are not in the scope of this article.
Transaction costs are typically divided into three categories.
Search and information costs
These occur while looking for the party, which could offer the requited good. Also the costs of evaluating the possible goods typically belong to this category.
Bargaining costs
These are born while negotiating the agreement with the possible party. Attorney fees and time used to negotiation belong to this category
Policing and enforcement costs
These costs take place after the contract is accepted by the parties. Monitoring the compliance and taking actions against possible contact violation cause most the costs in this category. (2)
The less valuable the trade is, the more important it is to keep the transaction costs low. The real challenge is the combination of low costs and high volume. DRE is among other things a mean for this end. In case of the digital content distribution, the value of single transaction is on average very low. There are of course significant exceptions. Negotiating a distribution deal for Madonna's new song requires totally different level of attention than using a song as part of PowerPoint presentation given in a K12-school. DREs are most effective lowering the transactions costs in two first categories. Unless DRM or watermarking is involved, they really don't have that much of effect on the enforcement costs.
DREs are designed to be searched and interpreted by computers. This means that it is very easy to configure the search engines to find content, which fits to the needed requirements also in legal sense. This can bring down the cost of search ten to hundred-fold compared to the situation, in which there is no such service available. DREs typically include information about the owner of the content. This makes is easier to actually locate and contact the owner if the planned use of the content is not in the scope covered by DRE (e.g. using the music in a blockbuster movie).
DREs don't entirely solve the problems related to search and information costs. One big question is, can the buyer actually believe that the information is up-to-date and correct. So far there has been little work done on building the trust-systems into DREs.
Negotiations are typically the most expensive part of the trade. In mass markets this has been traditionally solved by using standard agreements, which are not tailored separately for each of the transactions. The buyer has two options i.e. take it or leave it. This model is also in use for today's commercial digital content distribution. For example iTunes sells their songs with single license agreement. It is also good to notice that the collecting societies offer this kind of service for commercial content for certain kinds of digital distribution (e.g. Web radios).
DREs offer a simple and effective way to describe to the buyer what he can get and they basically play the same role as traditional mass agreements have played before. Sometimes additional negotiations are needed. For example, getting some guarantees (or even insurance) from the seller that he really has the right he is proposing to give the distributed material is sometimes needed. This raises inevitably the transaction costs but on the other hand happens probably only in cases, where licensing is only small part of the total costs.
Metadata can also include pricing to various uses. This helps to segment markets and can be used easily on price discrimination. Same product can be sold with different licensing terms to different groups. Consumers are in most cases happy with "use only" license. Content producers need a permission to make derivative works, distribution rights and right to make copies of the work. Pricing serves different groups and helps rights holder to reap more profits from the content than from the static pricing. Predefined dynamic pricing lowers transaction costs because less bargaining is needed. Internet creates some problems for dynamic pricing. It is not easy to get information about person's identity. Thus a seller, which offers cheaper price for students, may be surprised how many students there are among his or her customers
Open content and metadata
Most of the previous arguments are true for Open Content distribution. In fact, very low transaction costs are absolutely indispensable for an environment, in which the value of single transaction is minuscule. Traditionally this possible market failure (3) has been partly bypassed in legislation by using the restrictions of copyright (in Europe) or fair use doctrine (United States). Unfortunately danger of sanctions for infringement has made this approach too risky in current heavily sanctioned Internet environment and thus the clearly defined Open Content opens possibilities for projects, which would be otherwise economically infeasible.
In Creative Commons (CC) special attention has been given to the ease of use. Creative Commons provides a simple user interface, where licensors can tailor an open content license that suits their needs. Distinguishing between three different license types (lawyer, machine and human readable) gives reasonable level of details for different users groups with different needs. As a result the process to get a license is very swift i.e. the cost is very low for the person getting the license. This means that works, which wouldn't be otherwise licensed, will be licensed.
Another very important and unique feature of the CC is the level of standardization it has been able to achieve as the de-facto license for Open Content distribution. This brings down the transaction cost in two ways. First, people are already familiar with the licenses, which mean that they don't have to spend time to read the text. Second, the authors and users alike are able to trust the quality of the licenses, because they are carefully reviewed. Most likely the licenses will be also tested in court one day and thus get additional validation. This all adds to the legal predictability and thus boost the transactions.
Collecting Societies and open content
Stanford University's law professor Lawrence Lessig describes Creative Commons as a complement rather than replacement of the current copyright system. (4) Creative Commons uses copyrights in creative way. While CC is compatible with copyright system, it isn't compatible with some of the other systems that are based on copyright. One of the biggest mismatches of Creative Commons is with collective copyright licensing and collecting societies.
Licensing of literal and artistic works is a complex task. Individual authors haven't traditionally handled copyright management, except for some computer hobbyists. Publishers and collecting societies have helped authors to take care of the licensing and the collection of license fees. Authors have a lot better bargaining power with publishers than with collecting societies. Open content publishing has seen few successful titles like award-winning Sci-fi author and copyright activist Cory Doctorow's first novel "Down and out in magic kingdom" (5) and Lawrence Lessig's "Free culture" that have sold several printed editions, albeit the books are available online for free. Later on this article concentrates only to collecting societies .
Collecting societies' role
Collecting societies are collective managers of authors' copyrights. Collecting societies are organized mostly as association or societies. Authors and right holders are obliged to transfer their rights to a collecting society when they decide to join it. After that only collecting society can 1) transfer non-exclusive rights for the use of works; 2) collect authors' royalties3) distribute collected royalties to authors; and 4) enforce authors' rights before courts. Collective society gets a mandate every year from its members to license their works for users in predefined terms. The content of the mandate is decided among the members and its terms are imposed on every member. In general, each national collecting society for authors' rights holds a de facto monopoly in its territory, where practically all significant composers' and songwriters' are members of the organization. (6)
What about if a copyright holder decides to license his works with Creative Commons-licenses before he joins a collecting society? Some of the European countries have given collecting societies authority to collect royalties even for non-members. If they want to relinquish the royalties, they have to do it in a written form to a collecting society.
Creative Commons licenses are perpetual for the duration of copyright in the work. (7) Author, copyright holder or collecting society can't revoke the license. Eventually collection society will have Creative Commons content in their catalogue, which can be used with CC licenses or with the terms that the society poses. If the user has a CC-licensed copy of the work he can use it according to the license terms. Collecting society can also distribute the work with more restricting license.
Monopoly of collecting societies and antitrust regulation
Strong role of collecting societies as the protectors of authors' interests has been easy to defend in the past. Collecting societies were a parallel phenomenon to labour trade agreements and labour unions. Their ratio was to create balance, cut extravagant and exploitative licensing clauses and lower transaction costs. The era of vast trade unions seems to be in the past, because the role of smokestack-industry diminishes. Collecting societies are relics from the bygone days of strong industry cartels. Later transaction costs have been emphasised while they have been too high for individual authors to negotiate licenses and collect licensing fees themselves. (8) Saves in administration costs and the ease of making copyright use reports to one organization have led to a situation where in Continental Europe monopoly positions of collecting societies are rather the rule than the exception. Monopoly status has been beneficial not only to authors and right owners but also to users. In many cases the law requires efficient administration of rights in order to obtain authorisation for the society. This has excluded authorisation of competing collecting societies. (9) It has also led to a situation where authors can't choose competing society if they don't like the terms of the membership.
As in all intellectual property rights regulation, antitrust and competition law control is present. The control aspect must be taken into account, since collecting societies often act on the basis of monopoly positions. Competition law limits collecting societies' hands. They can't license domestic music with different terms than foreign music. It also means that the fees must be discriminatory for everyone. It doesn't mean that collecting societies couldn't grant free licenses to public at large.
The Santiago Agreement is an agreement signed by several collecting societies. It provides that users of online services should obtain a license for the music repertoire of all collecting societies participating in the Agreement from the collecting society of their Member State. The license would be valid all over Europe. However, since the Santiago Agreement insists that companies wishing to purchase music rights do so from a collecting society in their own country, the Commission sees that the system is anti-competitive. The European Commission has opened proceedings against sixteen European collecting societies in the field of music copyrights. A company looking to sell music online should be allowed to purchase rights from any licensing body in the EU rather than from only the domestic body that sells rights. The opening of proceedings against European collecting societies on the subject of the Santiago Agreement is another measure of the European Commission to break down the monopolies of national collecting societies and to create competition in the field of collective management of copyrights. The Commission also considers that online-related activities must be accompanied by an increasing freedom of choice by consumers and commercial users throughout Europe as regards their service providers, such as to achieve a genuine European single market. (10) If the "one stop shop" would be implemented, the collecting societies could compete with online licensing terms and policies. The lack of competition between national collecting societies in Europe is one reason of unjustified inefficiencies as regards the offer of online music services.
Internet has shown marks of the birth of collecting society competition. Magnatune is an online record label that uses Creative Commons licenses for publishing downloadable audio content. Companies like Magnatune that are compatible with Creative Commons system have created business logic that uses Internet as a marketing tool. All their songs are available for downloading with Attribution-NonCommercial-ShareAlike CC license. Magnatune creates revenues by selling licenses for commercial use, physical records and high fidelity music files. The licensing procedure is fully automated. Licensee has to fill in information about the intended use and the licensing system calculates the license price. Half of the revenue goes to the artist. In Finland collecting society's administrative fee is less than 15 percent of the royalty revenues. Still Magnatune managed to pay more (about 1500 $, Buckman 2004) to its average artists in a year, than Finnish collecting society Teosto disbursed to their average member (990 €, Teosto 2004).
Solutions for copyright societies to adopt open content
673 artists out of 15 327 received more than 5000 euros compensation from Teosto during the year 2003. At the same time half of the customers didn't receive any royalties. Collecting societies should make a difference between popular and less popular works: the vast majority of works whose rights are managed by collecting societies and publishers have a very short, if any, commercial lifespan. Getting this content to distribution for non-commercial use would benefit users and create demand for commercial use. This way the commercial lifespan of the work would be longer. It is difficult to argue why a collecting society should make the Internet as a marketing and distributing medium so difficult to use. (11) Mark Nadel (2004) also comes to a conclusion that "copyright law's prohibition against unauthorized copying and sales may , counter to the law's purported goal, have an overall negative impact on the production and dissemination of creative content".
This brings us to the practical question of how could one apply more liberal licenses such as Creative Commons to already published works at the societies' catalogues. First option would be for publishers and collecting societies to change their policies. Typically the author transfers to his publisher (in the case of music and books) or copyright collecting society all transferable economic rights. After the transfer, single author is unable to influence to licensing policy which means that re-license with CC is impossible.
Second option would be to force policy reforms on collecting societies. Free uncontrolled distribution of some of the collecting society's work would hinder other members' profits. Free in this case means also terms that also allow free commercial use. Handling reports of free use of catalogued content would eat collecting societies' resources without providing administrative overheads. If the freedom would only stretch to free non-commercial distributing, the commercial use would create profits and benefit the collection society at large. Forcing copyright societies to allow right holders to decide of licensing their content to free distribution would serve the general ratio of copyright protection. This could help to solve central problem in copyright law; correcting the balance between public access and authors' incentives. (12) Free distribution would raise the demand of distributed works, because it would act as marketing tool. (13) The public would have free access to works and right holders would still get compensation for commercial use of works. After saying this, it should be emphasised that the final decision of letting the works to free distribution should lie on the rights holder. Unless it is highly probable that distribution licensing would make a strong business case for a given work, the default action should be to license it for free non-commercial distribution. (14)
Collecting society could register the open content works and provide a verification server for checking that content is open. This way people who want to use and distribute music can avoid infringements by verifying right holder's permission from the collecting society. Users would be used to legal metadata and educated to respect copyrights. Verification server could also include pricing information of the commercial rights, peer evaluation of the music, recommendations links to similar music and an ecommerce site where commercial rights would be for sale.
Third option would be to develop the copyright law in a way that the author can get his copyright back in limited cases for re-licensing under reasonable circumstances. Germany has recently enacted a law on copyright contracts with an intention to balance the negotiation power between individual authors and publishers. (15) Under certain conditions, it is even possible for an author to terminate the publishing contract and republish the work under new terms. - Such an exception in copyright law is not necessarily a good idea, though. It would only hurt more liberal licensing systems if it could also be possible to withhold from "CC-publishing contract" for example because the public has too much power over the work and because the license is perpetual. (16)
Conclusions
Legal metadata defines the rules for the use of content and the rights involved. Open content distribution by definition requires legal metadata. Creative Commons is one of most sophisticated freely available open content licensing tool.
Legal metadata helps to lower transaction costs and benefits the right holders and content users. Lowered transaction costs can make even low value transaction possible. Metadata also enables dynamic pricing and smart content searches.
Digital distribution has changed the prerequisite for collective rights management. Individual licensing should co-exist with collective management with in the collection societies. There are no technical obstacles for right holders to exercise some of the individual rights while being a member of collection society. Legislators should encourage competition and cross border compatibility. One can easily imagine cases where more liberal licensing should be beneficial. Benefit to society is larger when the works in question have little commercial value and high cultural significance. The final decision of opening the content must be in the hands of the right holder of the work.
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This article is available under a Creative Commons license
Notes :
a. Herkko Hietanen, researcher, LL.M., Helsinki Institute for Information Technology, P.O. Box 9800, FIN-02015 HUT, Finland, Email: herkko.hietanen@hiit.fi
b. Ville Oksanen, researcher, LL.M., Helsinki Institute for Information Technology, P.O. Box 9800, FIN-02015 HUT, Finland, Email: ville.oksanen@hiit.fi
1. DeLong, Froomkin p. 11.
2. See Ku (2003), Cohen Burg (2000), Cohen (1998) for the development of the recent discussion. Even if transaction costs form the basis of Coarse theorem, he has not actually coined the term.
3. E.g. Gordon (1982), Gordon (2002), Landes (2000)
4. Lessig (2004).
5. The book was downloaded over 20,000 times, 24 hours after launching the site: http://www.craphound.com/down/ from where the novel is available for downloading for free.
6. Vinje, Paemen, Romelsjö p. 16
7. Creative Commons license term 7b
8. Välimäki, Hietanen
9. Dietz p. 905
10. The European Comission press release.
11. Välimäki, Hietanen 2004
12. Landes, Posner, p. 326
13. Oberholzer Felix, Strumpf Koleman
14. Välimäki, Hietanen 2004
15. Gesetz zur Stärkung der vertraglichen Stellung von Urhebern und ausübenden Künstlern, 22.03. 2002, BGBl I, 1155-1158.
16. Välimäki, Hietanen 2004