Imagining Enron: CROs and Collective Licensing

Peter Brantley -- September 24th, 2012

Ever since the Google Book Search (GBS) settlement, interest in collective licensing of books has mushroomed. Now, a recent international survey by Jonathan Band, PLLC of Policy Bandwidth, “Cautionary Tales About Collective Rights Organizations,” suggests that the agencies responsible for managing collective licenses, Collective Rights Organizations (CROs), are prone to drifting into overreach, accounting mismanagement, and occasionally fraud due to a lack of sufficient oversight and safeguards. Judging from Band’s study, the establishment of a CRO appears all too often tantamount to creating an opportunity for hanky-panky and the kind of fiscal sleight of hand that the Enron scandal made infamous.

As Band observes in his sad litany of abuses, imbroglios such as the recent GSU copyright case funded by the Copyright Clearance Center or the ASCAP compensation claims against the Girl Scouts in 1996, and mobile ringtones in 2009, are not isolated. Rather, CROs often advance their own interests, and sometimes that of their management, at the expense of the public and the artists they are supposed to represent. Band notes his stories “reveal a long history of corruption, mismanagement, confiscation of funds, and lack of transparency that has deprived artists of the revenues they earned. At the same time, CROs have often aggressively sought fees to which they were not legally entitled or in a manner that discredited the copyright system.” Bullying, greed and fraud are not what collective licensing systems are supposed to facilitate.

The promise of collective licensing is that a defined group of rightsholders can benefit from the licensing of specified uses of works without requiring case-by-case determination or decision-making. Typically, rightsholders can opt-out of such arrangements, but the default is automatic inclusion, or opt-in. Professor Pamela Samuelson of UC Berkeley Law analyzed the Google Books settlement proposal, now defunct, as an extended collective license for in-copyright, out-of-print books. GBS resembled a collective license because a quasi-independent agency would have been established – the Books Rights Registry (BRR) – that would have administered payments to rightsholders for commercial uses that Google was entitled to make. However, Google’s settlement windfall would have been singular, approved only in the context of a court judgment, and would not have been subject to legislative deliberation – all aspects of true collective licensing systems.

Drawing from the lessons of GBS, collective licensing frameworks have been invoked as a mechanism for facilitating access on a mass scale to works that frustrate straightforward rights clearance. For example, commercial uses of unclaimed or orphan works – many of which would have fallen under the terms of the GBS settlement proposals – theoretically benefit from a collective licensing solution because attempting to conduct acceptable “diligent searches” for rights holders in the context of constructing a digital library would be financially crippling. Depending on how orphan works legislation could be drafted, improper construction of diligent search protocols might also open up a commercial actor to significant potential liability. Therefore, a legislated collective solution sounds appealing, and the Register of the Copyright Office, Maria Pallante, has indicated publicly that her office is advising Congress on “collective licensing and the relative merits of both opt-in and opt-out solutions for rightsholders.”

Libraries are preemptively contesting collective licensing for non-commercial uses, and internet activist groups are expressing broader concerns. Collective licenses often include books whose rightsholders are not known or determinable. Many of these works – including many academic books – would either be properly in the public-domain, or the author would be willing to make them available for open access under Creative Commons or other non-legislated licenses. Further, collective licenses often impinge on Fair Use and Fair Dealing; even when these exceptions are protected, CROs often encroach on these rights by requesting license fees for all potentially coverable uses – fees which libraries and archives often accept from fear of time-consuming and expensive litigation. The millions of dollars wasted in the lawsuits by publishers against Georgia State demonstrate the extent to which CROs are willing to invoke dubious claims of infringement to increase their franchise.

If the next Congress contemplates collective licensing, then legislators need to keep their eyes on the prize. Collective licensing schemes are intended to aid the goals of the copyright system in which they are framed. Like copyright itself, enacting new collective licensing must ultimately serve the public good, not private interests, by placing ideas into circulation and spurring innovation, creativity, and learning. As a writer in the New York Times recently observed, “It’s not that we don’t need to protect intellectual property at all. But the protections must take into account that innovation is often a cumulative process, with each step piggybacking on the ideas before it. … Everybody infringes to some extent on everybody else.”

Instead of drafting legislation based only on the inputs of a few, we must commit to a deeper definition of governing that invites analysis of how to foster the rise of new economies premised on network access, serving a public that knows how to copy. The law resides in increasingly testy service between our old selves inhabiting a world of things, and our newer selves, interacting with each other and the world on very different presumptions than in the past. We must encourage a new discourse on intellectual property that revitalizes how we promote artistry and creativity, using our new rhetoric as a basis for new law.

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