Intellectual Property 4:B - 1(37) Entertainment and Media: Markets and Economics Intellectual property: Definition, types, rights Economic foundation

Intellectual Property4:B - 1(37)

Entertainment and Media:

Markets and Economics

Intellectual property: Definition, types, rights Economic foundation for valuation Fair and unfair use


The Right?The Valuation?The Mechanism?


Property

Tangible property: Usually dealing with minerals and natural resources

Intellectual property: Output of creative activity Copyright: Writing Patents: Invention and design Trademark: Marketing symbols Secrecy and contract: “Know how” (e.g., Coca Cola,

KFC seasoning formula, business secrets)


Property Right

Property: After transformation, a stream of “rents” Right

Ownership of the stream of rents generated by the property Control over usage

Establishment of property rights Foundational function of a government Provision of a court system in which to assert, defend and

contest property rights


Rent for Creative Works

Persist Through Time Nonperishable, e.g., sculpture Works of art – resale

Vary Across Space Different markets – U.S. & Int’l films Spinoffs and licensing - The Lion King

Take Different Forms Wyeth’s Helga paintings;

Resale of the paintings, catalog, Museum exhibition

Jackson Pollock’s paintings: Which ones are fakes?


Tangible Property Rights

Tangible property Exhaustible resources Consumption is private and exclusionary

Motivation for the rights Conserve and manage resources Avoid the tragedy of the commons (e.g., American vs.

Australian lobster industry) Creates a social good: Conservation


Intellectual Property Rights

Intellectual property Consumption is nonexclusionary (public good) Production is often input to further innovation

Motivations Reward producers Ensure others access (mainly for patents) Exchange for Secrecy: Reduction of costs

that results from reinvention or rediscovery. Incentivize creative, beneficial activity. Profit incentive: Profit motive calls forth

desirable innovation that might not occur otherwise. (Not everyone believes this – there have always been creators of music and literature before and without property rights.)


Views of Intellectual Property

Creates a social bad: Monopoly Social point of view – monopoly Private: Strategy? Coca Cola and KFC. Patent does not pass cost

benefit test. Creates a social good by incentivizing creative effort Merely establishes a property right to a piece of capital (like real estate) Conflict: The Sonny Bono law – did nothing to spur creative activity;

merely extended the life of a stream of rents (to Mickey Mouse).


The counterpoint is the competitive form of the same market with P=MC and no deadweight loss. Compared to no market, the monopoly is unambiguously better.

This is a recurrent theme in the discussion of “property” and royalties. What would a market look like without the “monopoly” in the right? See, e.g., Capital Cities.

Monopoly in Intellectual Property


Ownership and Valuation

Property right = ownership claim to the long lived stream of rents.

Copyright: 95 years (Sonny Bono’s Mickey Mouse new law)

Patent: 20 years (17 previously)

Trademark: As long as the trademark continues to be both used

and productive (PTO classifies as “DEAD or ALIVE”)

Year1 Year 2 Year 3 Year 4 Year 5 Life of the right


Property ValuationGeneral Result

Years in the rightt 1

Net benefits (rents, profits) t(1 interest rate)


The value of a corporation is the discounted present value of the stream of profits.

Prozac (Eli Lilly): Scheduled to expire 2003 Generic by Barr Labs – successful patent challenge – due out in 2000. Lilly stock fell from 109 to 76 the day of the ruling. Barr Labs rose from 46 to 77 the same day.

A huge transfer of wealth from Lilly owners to Barr owners.


Valuing Happy Birthday By the time its copyright runs out in 2030, Happy Birthday should have made nearly 55

million pounds. American sisters Patty and Mildred Hill wrote the lyrics in 1893 It is now among the top three

most popular songs in the English language, along with Auld Lang Syne and For He's A Jolly Good Fellow.

The lyrics were copyrighted in 1935, 11 years before Patty's death, and the ownership has swapped hands in multi-million pound deals ever since.

The song generated royalties of 625,000 pounds per year for Warner Communications, who bought the rights to the simple tune for more than 15 million pounds ($28,000,000) in 1989

Currently owned by Summy-Birchard Music (AOL-TW). Current royalties about $2,000,000/year.

http://www.snopes.com/music/songs/birthday.asp


An Active Market for Property Rights


Online auction finds the market’s highest valuation of the future stream of rents (royalties). Outright purchase of the entire stream or a share of the stream.




Copyright Lifetimes

http://en.wikipedia.org/wiki/Copyright_Term_Extension_Act

Pre Bono: Life of the author + 50 years or 75 years for a work for hirePost Bono: Life of the author + 70 years or 120 years for a work for hire. Works made for hire from 1923 to 1998 (such as Mickey Mouse) do not enter the public domain until 2019 (instead of 1999).



Advances Against Royalties: Retain Rights

A Bank

Conventional banks don’t like the uncertainty (risk) and don’t understand the workings of the market.

Accepts risk

Advance will heavily discount against the uncertain royalty stream.


Technological Change and Uncertainty Will Affect Property Valuation

AA Milne-Winnie the Pooh Shirley Slesinger Lasswell held then sold the rights in the 1930s

Disney, 1961, obtained rights for merchandising (more lucrative than the mouse)

Videocassettes? DVDs? Could not have been foreseen in the 1930s. Who’s entitled, Shirley or Walt? The value of the rights in the 1960s-1990s looked very different in

1990 than they did in 1960. What rights were obtained in 1961? For uses and forms that did not

yet exist in 1961 but did in 1991? Laswell’s court case was dismissed after 13 years, 3/29/04. Walt

Disney won.


Fair Use

The concept of fair use: Use of parts of copyrighted material for certain purposes.

Relevance: Commercial value of posted videos to YouTube even if not to the person who posts the material


Fair use by Professor William Greene(1) Small part of the website; change of form moved to course notes, added material(2) Not using in an attempt to earn money


Not Fair Use


The Pirate Bay has been involved in a number of lawsuits, both as the plaintiff and as the defendant. On April 17, 2009 Peter Sunde, Fredrik Neig, Gottfrid Svartholm and Carl Lundstrom were found guilty of assistance to copyright infringement and sentenced to one year in prison and payment of a fine of 30 million SEK (app. 3,620,000 USD; 2,385,000 GBP; or 2,684,000 euro), after a trial of nine days. After appeal, the verdict was upheld.

The entire operation was disbanded in 2010.

It has reformed (zombie like). Exists now in the Seychelles. Proxy servers exist worldwide.


Further disputes.2015, under DMCA . ISPs that help Pirate Bay are not safe harbors.


The Anti-Pirate Bay


Renmin University of China

All 827 pages

Definitely Not Fair Use


Called into question what was meant by fair use


Application: Who Owns Fame?

The Right of Publicity Who owns the value of a public figure?

The public figure who is famous? The public who make them famous? The paparazzi as agents of the public?


Alison Chang vs. Virgin Mobile USA

(Diss in Australia)


Alison v. Flickr and Virgin

Alison Chang, a 16-year-old Texan teen girl, sued Virgin Mobile phone company for stealing her photo which was taken by her youth counselor Justin Ho-Wee Wong during a Christian camp in Australia.Chang's family filed a lawsuit late Wednesday (September 19, 2007) in state district court in Dallas against Virgin Mobile USA LLC, its Australian counterpart, and Creative Commons Corp., a Massachusetts nonprofit that licenses sharing of Flickr photos. The case vs. Creative Commons was dropped in November, 2007. The case against Virgin was dismissed for lack of jurisdiction in 2009.

http://blog.internetcases.com/2009/01/22/no-personal-jurisdiction-over-australian-defendant-in-flickr-right-of-publicity-case/


Right of Publicity?

BOSTON (AP) – A Red Sox fan angry that Johnny Damon defected to the New York Yankees has fought off an attempt by his high-powered agent to stop her from selling baby bibs with a very grown-up insult.Tucked among the "I Love My Mommy" bibs and "Pregnant Princess" maternity clothes, Ann Sylvia also offers bibs and onesies adorned with the ballpark epithet "Damon Sucks." Last month, eBay pulled the listings after the Scott Boras Corp. complained that they violated Damon's right of publicity, a legal claim that allows celebrities to control the products they endorse. (hmmm… is this the “right?”)

On the “Right of Publicity:” http://www.law.cornell.edu/wex/Publicity


(The end of that story…)

Sylvia hadn't sold any of the Damon items at the time, but the complaint threatened to blemish her eBay rating and jeopardize her PowerSeller status. "I'm just a stay-at-home mom. I just want to raise my children, sell my stuff," said Sylvia, who works part-time at The Standard-Times of New Bedford, which first reported on her struggle. "It's all a little nerve-wracking, a little scary."If so, she didn't show it in her negotiations with Boras' staff. During an hourlong phone call, she pointed out to attorney Ryan Lubner that there are other baseball players named "Damon"; how did he know, after all, that she wasn't the world's biggest critic of Tampa Bay's Damon Hollins? "Then I knew I had him," she gloated. "So I said, 'Let's make a compromise."'Lubner agreed to lift his objection -- and clear her eBay record -- if Sylvia agreed not to use "Johnny," "Boston," "Red Sox," "New York," or "Yankees" in the listing.


Ryan Hart vs. Electronic Arts

Ryan Hart is one of the most famous quarterbacks in the recent history of Rutgers football. He led the 2005 Scarlet Knights to the Insight Bowl, the first bowl game that Rutgers had played in decades.Four years later, Hart took on another leading role, this time as the named plaintiff in a class action lawsuit against Electronic Arts. Hart's legal team claims that EA has infringed Hart's "right of publicity". Hart also claims EA infringed the rights of other college players by including their information and statistics in EA's college football games without authorization. Specifically, Hart's complaint is about a nameless quarterback that appears on the Rutgers team in EA's 2004, 2005, and 2006 games. The player wears jersey number 13, is six feet and two inches tall, weighs 197 pounds, wears a wristband on his left wrist, and hails from Florida. Not coincidentally, that is all true of Ryan Hart. Since the EA games additionally have allowed players to fill in names on team rosters, many people play the nameless Ryan Hart under the name Ryan Hart. Downloadable and accurate rosters of all the featured college teams are currently shared online. Last fall, a federal district court dismissed Hart's case, explaining that the free speech rights of Electronic Arts trumped Hart's right of publicity claims. Hart appealed and now is arguing his case before a federal appellate court in Philadelphia.

Hart won his appeal before a 3 judge panel of the Federal Appeals Court in Philadelphia (May, 2013)

Right of Publicity vs. First Amendment Right of Free Speech. Right of Publicity wins … so far.


Yahoo Fantasy Baseball Provider

Who owns the numbers the day after the game?


The Fantasy Sports Market• 300+ Operators of fantasy sports leagues: Subscriptions, prizes; NFL, MLB, NBA• At least $1.5 billion• Input data source: Yesterday’s newspapers• Content Purchase: License arrangements with Major League Baseball CBC Distributing and Marketing (St. Louis) – 9% of gross = royalty paid to MLB.• 2005 CBC application for license renewal is denied. MLB wants to (greatly) restrict the

number of licenses. (The foreclosure) CBC sues, claiming it doesn’t need a license Issues:

Not a copyright dispute Ownership of the persona of the players First amendment Control of the valuable resource – the fame of the players. Who has the right to exploit that fame?

The case began in court September 5 and ended in August 2006.

Documents

Intellectual Property 4:B - 1(37) Entertainment and Media: Markets and Economics Intellectual property: Definition, types, rights Economic foundation