Economics of Automated Licensing and Metadata

Attaching Digital Rights Expression information serves several purposes. The main economic factor for using DRE is the significant lowering of the transac-tion costs and more generally informatransac-tion costs. DRE allows also new business models, which are bound to change the way the content industry works. Many of these business models rely heavily on DRM that is used to limit licensee’s abil-ity to use works and thus are not in the scope of this work. In economics and related disciplines, a transaction cost is described as a cost incurred in making an economic exchange¹⁰⁸ or more specifically costs associated with defining and en-forcing property and contract rights and which are necessary occurrences of or-ganizing any activity on a market model.¹⁰⁹ Transaction costs are typically di-vided into three categories.

1) Search and information costs - These occur while the parties of a transac-tion are looking for each other.¹¹⁰ Also the costs of evaluating the goods and their prices typically belong to this category.

2) Bargaining costs - These are born while negotiating the agreement and reaching acceptable agreement with the other party. Attorney fees for drawing up an appropriate contract and time used in negotiation belong to this category.

105 Michael W. Carroll, Creative Commons as Conversational Copyright, Villanova Law/Public Policy Re-search Paper No. 2007-8 457, http://ssrn.com/abstract=978813 (points out the “efforts to create a policy aware Web, appear to be a next step that lawyers should keep an eye on”).

106 See, e.g., BERNERS-LEE &FISCHETTI,supra note 92, at 157-177 (describing the semantic web).

107 Parts of the next chapter were published as part of Herkko Hietanen & Ville Oksanen, Legal Metadata, Open Content Distribution and Collecting Societies inINTERNATIONAL COMMONS AT THE DIGITAL AGE, (Danièle Bourcier & Melanie Dulong de Rosnayeds. 2004), available at

http://fr.creativecommons.org/articles/finland.htm#2; Herkko Hietanen & Melanie Dulong de Rosnay, Legal Metadata for Semantic Web Applications: Case Creative Commons presented at Symposium on Digital Seman-tic Content across Cultures Paris, the Louvre (4.5.2006), available at http://www.seco.tkk.fi/events/2006/2006- 05-04-websemantique/presentations/articles/hietanen-DulongdeRosnay-Legal-Metadata-for-Semantic-Web-Applications.pdf.

108 Ronald Coase, The Nature of Firm, 4 ECONOMICA 386 (1937) (even if transaction costs form the basis of Coase’s theorem, he did not actually coin the term).

109 Benkler, supra note 2, at 371.

110 Eldred v. Ashcroft, 537 U.S. 186, 251-52 (2003) (J., Breyer, dissenting opinion) (points out how difficult it is to find the current copyright holders of older works); see also NAT’L RESEARCH COUNCIL,THE DIGITAL D I-LEMMA:INTELLECTUAL PROPERTY IN THE INFORMATION AGE 65 (2000).

3) Policing and enforcement costs - These costs take place after the contract is accepted by the parties. Monitoring the compliance and taking action against possible contract violations cause most of the costs in this cate-gory.¹¹¹

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 transactions. Low transaction costs are absolutely indispensable for an environ-ment, in which the values of single transactions are minuscule. Traditionally this possible market failure¹¹² has been partly bypassed in legislation by using the re-strictions of copyright (in Europe) or fair use doctrine (United States) and collect-ing societies that are able to sell blanket licenses. The danger of sanctions for in-fringement has made this approach risky and expensive in the current heavily sanctioned Internet environment. The hope of Creative Commons has been that the clearly defined Open Content Licensing could open possibilities for projects and communities, which would be otherwise economically infeasible.

Transaction costs have very much to do to how people organise their eco-nomic activities. Much of the theory of large corporations has been explained by Ronald Coase’s theory of firms which is based on transaction costs.¹¹³ According to Coase large companies are necessary to organise production in efficient ways when transaction costs between companies are high. The low transaction costs also mean that the big companies that were necessary in the past to manage the transaction costs between specialised producers may no longer be needed.¹¹⁴ Spe-cialization increases until the higher productivity from a greater division of labor is balanced by the greater cost of coordinating a larger number of more special-ized workers.¹¹⁵ This is not to say that the firm is dead, but rather that we are seeing new forms of resource organizing.¹¹⁶ Coordinating costs are shrinking with the development of ICT technology. The development is clearly visible in

111 See Raymond Shih Ray Ku, Consumers and Creative Destruction: Fair Use beyond Market Failure, 18 Berkeley Tech. L. J. 539 (2003); Dan L. Burk, Muddy Rules for Cyberspace, 21 CARDOZO L.REV. 121 (1999);

Julie E. Cohen, Lochner in Cyberspace: The New Economic Orthodoxy of 'Rights Management, 97 MICH.L.

REV., (1998) (for the development of the recent discussion).

112 E.g., Wendy Gordon, Fair Use as Market Failure: A Structural and Economic Analysis of the Betamax Case and Its Predecessors, 82 COLUM.L.REV. 1600, (1982): Wendy Gordon, Excuse and Justification in the Law of Fair Use: Transaction Costs Have Always Been Only Part of the Story, 50 J.COPYRIGHT SOC’Y. 149 (2003);

William M. Landes, Copyright, Borrowed Images and Appropriation Art: An Economic Approach, UCHI.L.

&ECON., Olin Working Paper No. 113 (2000).

113 Coase, supra note 108.

114 DON TAPSCOTT &ANTHONY D.WILLIAMS,WIKINOMICS:HOW MASS COLLABORATION CHANGES E VERY-THING 55-57 (2006); also Benkler supra note 2; and CLAY SHIRKY,HERE COMES EVERYBODY,THE POWER OF ORGANIZING WITHOUT ORGANIZATIONS (2008).

115 Gary S. Becker & Kevin M. Murphy, The Division of Labor, Coordination Costs, and Knowledge, 107 Q.J.ECON. 1137, 1157 (1992).

116 Dan Hunter & F. Gregory Lastowka, Amateur-to-Amateur, 46 WM.&MARY L.REV. 951, 1017 (2004).

‘web 2.0’ -world where companies that have grown from garages or dormitories are valued in billions of dollars. Large initial capital is no longer necessary to create successful versatile services for the masses as everything can be outsourced and purchased as services. The same applies to the data and creativity that feeds the new services. The next phase of web services will most likely take advantage of data interchange to create mash-ups.¹¹⁷ Having data and content that carry simple rules to govern exchanges between services will be crucial for the success of the new services.

Creative Commons manages to lower costs in several ways. In the following, I will examine in more detail how this machine readable information can be used to bargain, identify, index, search, interchange and preserve the legal metadata.

2.3.1.1Search and Information Costs

Another very important and unique feature of the CC is the level of standardiza-tion it has been able to achieve as the de-facto license for Open Content distribu-tion. The legal knowledge embedded in intelligent agents needs to be represented in human-readable applications and interfaces. CC ensures accessibility for non lawyers and non computer scientists through user-friendly application and lan-guage, including standardized semiotics like icons that represent each licensing option. Icons also help the users to read and understand the metadata that is typ-ically included in html-header in xml-form. This brings down the transaction cost in two ways. Firstly, people are already familiar with the licenses, which mean that they do not have to spend time reading the text. The human readable summaries of the licenses also help this cause by reminding the licensees of the central terms of the licenses. Secondly, the authors and users alike are able to trust the quality of the licenses, because they are carefully reviewed. The licenses have already been tested in court which adds to the legal predictability. The pre-dictability is a key part of lowering the costs of transactions.

DREs are designed to be searched and interpreted by computers. This means that it is very easy to configure search engines to find content, which fits to the needed requirements also in a legal sense. This can bring down the cost of searching ten to hundred-folds compared to the situation, in which there is no such service available. DREs typically also include information about the owner of the content. This makes it 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 NC licensed music in a commercial film).

117 JONATHAN ZITTRAIN,THE FUTURE OF THE INTERNET —AND HOW TO STOP IT 124 (2008); see, e.g., Hous-ingMaps, http://www.housingmaps.com/ (combines Google maps with popular classifieds website Craigslist).

MozCC is an extension that can be installed to Mozilla-based applications like the Firefox Web browser.¹¹⁸ It was developed by Nathan R. Yergler. MozCC extension displays the appropriate icons if a webpage includes CC-metadata. When embedded metadata is detected, MozCC stores it and looks for license information relating to the displayed webpage. If license information is found, MozCC places human readable license icons that CC has designed on the status bar (Figure 1). Even if the author of a docu-ment has only included the machine readable license into a non-visible part of the code, the software client can help the user of the document to identify the license from the meta-data.

Figure 1. MozCC displays the license element on the status bar (red emphasis added).

118 MozCC - CC Wiki, http://wiki.creativecommons.org/MozCC; MozCC :: Firefox Add-ons,

https://addons.mozilla.org/firefox/363/ (currently MozCC has to be separately installed as an extension to the Firefox Web browser).

Legal metadata can be easily indexed and thus it is searchable just like any other metadata. Creative Commons-metadata enables users to narrow their searches to relevant content according to their licenses.¹¹⁹ For example, searches can be lim-ited to images that can be used for non-commercial purposes. Yahoo and Google have incorporated CC-search as part of their advanced search pages.¹²⁰ These search engine algorithms index documents using the licenses data as one of the attributes. This enables users to search works that are currently licensed under CC-licenses. Sites like online digital image repository Flickr¹²¹ have taken CC-licensing as part of their publishing work flow by enabling photographers to automatically attach the licenses at the time of publishing. Flickr users can also browse and search tens of millions of CC licensed photos according to their li-censes.¹²² Searches can be formulated to find for example an image of the Eiffel Tower that can be altered and used for commercial use.¹²³

119 See Carroll, supra note 89, at 49-51.

120 Yahoo! Search for Creative Commons, http://search.yahoo.com/cc/faq; Yahoo! Advanced Web Search, http://search.yahoo.com/web/advanced; CcSearch, http://wiki.creativecommons.org/CcSearch; Google Advance Search, http://www.google.com/advanced_search.

121 Welcome to Flickr - Photo Sharing, http://www.flickr.com.

122 Flickr: Creative Commons, http://www.flickr.com/creativecommons/ (In February 2008 the webpage in-dexed over 60 million CC-licensed works).

123 http://www.flickr.com/search/?q=eiffel&l=4

Figure 2. Flickr search returns 4664 results with “Eiffel” -image search. All the pho-tos have a CC attribution-license that permits alteration and commercial use of the photos.

From a more technical perspective, it must be noted that CC rights description system can be used to attach almost any kind of license to any work distributed on the Internet.¹²⁴ Creative Commons has created a template to include GNU GPL, the most popular open source software license, as the “CC-GPL” package.

CC provides a “human readable” summary of the GPL license with the corre-sponding logos and machine readable technical rights description.¹²⁵ The lawyer readable license is linked to the Free Software Foundation’s GPL website.

2.3.1.2 Bargaining and Interchange

Creative Commons’ licensing tools offer a bridge toward other semantic web-based applications. CC has hosted the development of open content research tools and interfaces to gather content and organize derivative works. Legal metadata can enable automated transfers of files between web services by laying out the basic rules for the transactions which help the exchange of files between

124 Välimäki & Hietanen, supra note 58.

125 Creative Commons GNU General Public License, http://creativecommons.org/licenses/GPL/2.0/.

applications. Legal metadata facilitates automated tracking of the author infor-mation and licensing options. This ability can be used by remixing programmes to give credit and possible other rewards to those who it belongs to.

A popular music remix service ccMixter¹²⁶ is a community music site featur-ing remixes licensed under Creative Commons. The service enables its users to

“listen to, sample, mash-up, or interact with music” in a way they want and li-censes permit. ccMixter has enabled a community of music makers and re-mixers to document their works linkages with subsequent contributions and contribu-tors. Every song shows the remixed content that was used to produce it. The site also documents who else has used the samples in their remixes. ccMixter is a good example of a concept of how licensing metadata can benefit remixing web services. Authors can easily track where their works are used and remixers bene-fit from the system that gives credit to remixed works automatically.

Figure 3. ccMixter preserves legal metadata from remixed content and enables legal interchange of works

126 ccMixter - Welcome to ccMixter, http://ccmixter.org.

In future this feature could be used to manage community projects that use con-tent that has different sources and licenses.¹²⁷ Huge projects like motion pictures include several copyrighted elements, and keeping track of what is licensed and by who requires resources. Having a content metadata management system from the beginning would help to clear the rights before releasing the movie and would also simplify and automate the task of creating the end credits. The CC licenses include quite complex requirements for proper attribution. The automa-tion could considerably lower the costs of attribuautoma-tion.

Collecting societies need metadata of the copyrighted works in order to dis-tribute royalties according to the works effective usage. Unfortunately, existing rights management applications currently used by collecting societies leaves a lot to hope for. For example, a member of the French public accountings control body Cour des Comptes considered the current society information management system as a relic inherited from the Middle Age.¹²⁸ European Commissioner for the Internal Market and Services, Charlie McCreevy, has criticized the European system: “Europe’s model of copyright clearance belongs more to the 19^th century than to the 21^st.”¹²⁹ Collecting societies and the record industry¹³⁰ are sitting on a data collection that not only includes who is the composer of music but also how they can be contacted. There are also commercial services that enable identifica-tion of records. For example, American firm GraceNote has a service that enables people who play their CD’s on their computers to lookup the data from their service. GraceNote has gained a big market share by protecting aggressively its business with software patents. One of its competitors MusicBrainz has cho-sen another way by opening its databases with CC-license. The chapter five will describe the relation more closely. For now it is relevant to understand that legal metadata has not been collected and the few that are in possession of the infor-mation are not accustomed to sharing it openly.

Standardized metadata could provide additional income for the societies and their members. CC metadata experience can bring an added value during negoti-ations toward the compatibility between the CC licensing scheme and some col-lecting societies’ statutes. Unfortunately, most of the European colcol-lecting

127 Erik Ketzan, Rebuilding Babel: Copyright and the Future of Online Machine Translation, 9TUL.J.TECH.&

INTELL.PROP. 205, 225 (2007) (discusses the automated translation services that CC licenses enable).

128 Jean-Pierre Guillard & Marie-Thérèse Cornette-Artus, de la commission de contrôle des SPRD Les droits d'auteur, un système « opaque » et d'« un fonctionnement trop cher, LE MONDE, July 9, 2005.

129 James Delahunty, EU official pushing for cross-border music licenses, AFTERDAWN, http://www.afterdawn.com/news/archive/6915.cfm (Oct. 8, 2005).

130 International ISRC Agency (IFPI Secretariat), International Standard Recording Code (ISRC) Handbook (2^nd ed. 2003), http://www.ifpi.org/content/library/isrc_handbook_2003.pdf (the International Standard Re-cording Code (ISRC) provides a means of uniquely identifying sound reRe-cordings and music videos internation-ally).

ties’ rules currently prevent their members from using CC licenses and the meta-data catalogues of collecting societies have remained only available for internal use. One of the arguments of the collecting societies has been that mixing CC licensed works with all rights reserved catalogues would make it more expensive to administrate the catalogue. Improved semantic web reporting systems, user authentication and the growth of e-commerce all speak on behalf of giving more flexibility and autonomy to authors who want to distribute their work using new business models. Currently most creators still have to choose whether to use the collective management system or new innovative Internet based systems. We will return to the question of relationship of CC and collecting societies in chapter six.

Negotiating a deal is typically one of the most expensive parts of a trade.¹³¹ In mass markets licensing the negotiation cost has been traditionally reduced by using standard agreements, which are same for each group of transactions. The other party has two options i.e. take it or leave it (adhesion contract).¹³² This model is also in use for today's commercial digital content distribution. For ex-ample, iTunes sells their songs with a single license agreement. It is also good to notice that the collecting societies offer this kind of service for commercial con-tent for certain kinds of digital distribution channels (e.g., Web radios).

DREs offer a simple and effective way to describe to the licensees what they can get and DREs 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 licensor that he really has the right he is proposing to give to the distributed material is sometimes needed.

This inevitably raises the transaction costs, but on the other hand, it happens probably only in cases, where licensing is only a small part of the total costs of a project.

Creative Commons’ web-based license chooser application simplifies the choosing of a license and thus lowers the bargaining costs. Simplifying the choosing process would at first sight seem a good thing. However, oversimplify-ing licensoversimplify-ing has drawbacks. The ease of the system has been criticized by col-lecting societies as rights owners are using the license chooser to permit perma-nent access to rights that are at the core of copyright.¹³³ The critique has

131 Marshall Leaffer, Licensing and New Network Mass Uses, 1 NIR 149 (2001); Robert P. Merges, Contract-ing Into Liability Rules: Intellectual Property Rights and Collective Rights Organization, 84 CALIF.L.REV. 1293 (1996); see also LESSIG,supra note 59, at 95-107.

132 See, e.g., MIKA HEMMO,SOPIMUSOIKEUS I, 145 (2007).

133 Emma Pike, What You Need to Know About Creative Commons, 'M' - the MCPS-PRS members' music magazine, available at http://www.amcos.com.au/writers/downloads/creative_commons.pdf, and APRA | AMOCS, Creative Commons, http://www.apra.com.au/writers/forms_and_guidelines/creative_commons.asp (Australasian Performing Right Association points out that irrevocability of licences, the possible conflict with

nated in Péter Benjamin Tóth’s article about the permanent nature of the

nated in Péter Benjamin Tóth’s article about the permanent nature of the

In document The Pursuit of Efficient Copyright Licensing : How Some Rights Reserved Attempts to Solve the Problems of All Rights Reserved (sivua 51-64)