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A New Methodology for Assessing the Operation of Copyright Systems

The Finnish Foundation for Cultural Policy Research (Cupore), at the request of the Finnish Ministry of Education and Culture, has developed a methodology for assessing the operation of copyright and related rights systems. While the methodology on its own will not provide policymakers with a tool to make specific copyright policy choices (e.g., whether to adopt a particular exception), it does tell policymakers what questions they should be asking and what factors they should be considering. Moreover, the methodology recognizes the importance of balancing the interests of diverse stakeholders in order to achieve the goals of the copyright system. As such, it is an extremely useful contribution to the copyright policy field.

The methodology is likely to gain traction at the World Intellectual Property Organization not only because of its subtlety and sophistication, but also because of its chief sponsor, Jukka Liedes, the former Director of the Finnish Ministry of Education and Culture. Liedes was chairman of the WIPO Standing Committee on Copyright and Related Rights for many years, and helped develop the methodology WIPO adopted for assessing the contribution of copyright industries to national economies.

The main purpose of the methodology is to support national governments when they are designing new measures for improving the operation of the copyright system. The handbook describing the methodology states that it is designed to help “build a profound understanding of the copyright system, its different elements and different aspects of its operation, therefore serving as a tool in the formulation of copyright policies and strategies.” (p. 12)

The handbook recognizes the methodology’s limitations. It provides “an understanding of the current state of a copyright system,” but “it does not focus on the possible future impacts of policy proposals.” (p. 39) Accordingly, the methodology would need to be complemented by impact assessment studies when changes in the law are contemplated.

Further, with respect to the indicators the methodology highlights, the handbook acknowledges that it “can be challenging to distinguish the effects of the copyright system from those of other forces influencing the markets. In many cases, in-depth analysis is needed to understand the potentially complex causal chains.” (p. 40) Although the handbook concedes that the methodology has “many descriptive elements,” it urges that the methodology be used to discover “the effects of the system’s operation on different stakeholders.” (Id.)

Pillar I: The Copyright Environment

The methodology is based on three “pillars.” The first pillar is the copyright environment: “The particularities of the system cannot be fully understood without taking into account the characteristics of the society and culture in which it is rooted, as well as the markets in which it operates.” (p. 41)

  • Users of the methodology are directed to gather information concerning the national context, including languages, levels of literacy, national creative traditions, and public and private support for creative activities. The international and regional context should be described, including the treaties and regional instruments to which the country is party. The level of technological development should also be considered, including the level of Internet access.
  • The methodology then asks about the macroeconomic importance of copyright industries, such as the value added of copyright industries as a share of GDP, the number of employees in copyright industries as a share of the total labor force, and the value of exports and imports in copyright industries as a percentage of foreign trade. The handbook recognizes that this estimation is “limited to those industries that are defined as copyright industries and do not measure all activities in the economy that are affected by copyright, such as activities depending on exceptions and limitations or that are not reported in national statistics. For example, they do not show the value of voluntary work or user-generated content.” (p. 53)
  • The methodology also looks at the markets for copyrighted products and services, including the concentration of the markets and their level of internationalization. The methodology turns to the volume of domestic production of copyrighted products and the volume of exported and imported copyright products. The handbook acknowledges, however, that “the volume of production of cultural products and services is affected by many other factors than copyright….” (p. 57)

Importantly, the methodology directs inquiry concerning digital business models. The handbook notes that “discovering new ways of doing business promotes economic development and the availability of culture.” (p. 61)

  • By assessing the market for digital distribution, the methodology enables its users “to evaluate how the existing markets have adapted to the opportunities and challenges brought forward by the development of information and communications technology.” (Id.)
  • The discussion of digital business models observes that “new information and communications technologies have created new opportunities for the development of user-generated content and digital distribution.” (Id.) Additionally, “companies can create new business models based on open licensed content, such as content provided by user communities, as demonstrated in software industries where this type of license is most commonly used for commercial purposes.” (Id.)
  • The handbook observes that “the adoption of new business models and orientation to digital distribution by existing and new companies affect the dynamics of the markets.” (Id.) In particular, it can “affect the level of copyright infringement if companies succeed in providing attractive services to customers.” (Id.)
Pillar II: Function and Performance of Elements of the Copyright System

The second pillar of the methodology is an in-depth analysis of the functioning of the various elements of the copyright system, including a description of copyright legislation and enforcement mechanisms.

  • Interestingly, the methodology provides a lengthy list of exceptions users of the methodology should look for, including “fair use/fair dealing,” “rights concerning transformative/secondary works,” “user generated content,” and “text and data mining.” (p. 67)
  • It also requires examination of “adaptability and neutrality of the copyright system to new technologies,” including “Internet service providers’ liability provisions.” (Id.)
  • Additionally, the methodology calls for description of public policies and strategies “directly related to copyright,” including competition, innovation, electronic commerce, data protection, and freedom of speech.

The methodology calls for examination of the collective management of rights, including the transparency of the operation of Collective Management Organizations (CMOs).

  • The handbook lists the availability of annual reports and whether “they provide detailed break-downs of different sources of revenue and distribution to various right holders” as indicators of transparency. (p. 92)
  • The methodology asks about other organizational aspects of CMOs, such as whether “there is a body approving CMOs or supervising, their operation,” and “is competition law applicable to the operations of CMOs.” (Id.)
  • The methodology then turns to the efficiency of CMOs, drilling down on administrative costs as a proportion of the total remunerations administered. Obviously, the methodology’s authors are aware of the long history of abuses by CMOs.
Pillar III: Operational Balance of the Copyright System

The third pillar, the operational balance of the copyright system, is the most interesting. According to the handbook, this pillar seeks to answer the question: “Is the copyright system fit for its purpose?” (p. 107) In this pillar, the methodology considers the incentive function of copyright, then assesses the access to copyrighted works by the public and access to copyrighted works for follow-on creation. The handbook observes that the aspects of incentives and access “can be seen as equally significant and heavily influencing each other. The indicators of the incentive and access areas should be studied together in order to reveal the balance in a country’s copyright system with respect to the interests of different stakeholder categories.” (p. 109)


The methodology looks at several indicators of the incentives provided by copyright.

  • It studies the direct copyright revenue streams for different stakeholders, e.g., royalties or license fees. It then assesses the return on investment for copyrighted products. Specifically, it aims at calculating the amount of investment in copyrighted products and comparing it to the level of revenues from copyrighted products. The handbook states that “analysis of the return on investment (ROI) in activities of copyright industries is at the core of the incentive function of a national copyright system.” (p.112)
  • However, the handbook concedes that “it should be taken into account that several other issues unrelated to the copyright systems can affect revenue levels.” (Id.) This is a bit of an understatement. The fact that a copyrighted product generates a revenue stream, or a positive return on investment, does not necessarily indicate that the revenue or the ROI is attributable in whole or in part to copyright protection. In other words, the causal connection between revenue and protection is assumed, not proven.
  • Perhaps recognizing this logical leap, the methodology calls for collecting stakeholders’ opinions on whether they consider copyright “as an effective incentive for the creation of different kinds of products and services, for the production in copyright industries, and for the use of copyrighted works in follow-on creations.” (p. 114)
  • To its credit, the handbook recognizes that there are incentives other than those generated by copyright, e.g., recognition of an artist’s work or the feeling of self-fulfillment and satisfaction of working in a specific profession. Further, the handbook acknowledges the limitations of gathering stakeholders’ opinions on the incentive provided by copyright: “There might be large differences between individuals in creating stimulus to creative activity through monetary or other incentives. It might also be difficult for authors…to estimate the importance of the different types of incentives motivating their creative work.” (p. 116)

Although the methodology’s ability to accurately assess the incentive provided by copyright is somewhat weak, it is much stronger in its analysis of the issue of access.

  • The handbook concedes that copyright may “create barriers upon the creation of new works and reduce the access to culture.” (p. 117) It adds that “a well-functioning copyright system is built to take both the incentive aspect…and the access to works into account in a balanced manner.” (Id.)
  • The handbook explains that creative works have characteristics of public goods in that they are non-excludable and non-rivalrous in consumption. These characteristics are particularly present in works in digital form, where the marginal cost of producing a copy is near zero. However, “copyright creates an exclusion mechanism to limit the ability of individuals to exploit the works. In order for the ideas themselves to remain public, the scope of the restrictions have to be carefully adjusted.” (Id.)
  • The handbook proceeds to describe these adjustments. “The term and the scope of copyright should be set so the system ensures reward from creative work without excessively diminishing the welfare of other stakeholders or the general welfare of society.” (Id.) This welfare turns on the availability and accessibility of lawful content.

To “determine whether the access to copyrighted works balances the exclusive rights granted to authors and other stakeholders,” the methodology directs its users to consider two issues: first, “the balance between authors’ interests to extract economic value from the results of their creative work and users’ interest to have effective and affordable access to those works;” and second, “the balance between the interests of authors or pre-existing works to benefit from protection and the ability of follow-on creators to built on pre-existing materials in their creative work.” (Id.) The handbook declares that “in a well-functioning copyright system, these two kinds of balance are established by a carefully defined scope of protectable subject matter, a limited term of protection, and appropriate limitations, exceptions and exemptions that allow certain uses without authorization by the rights holder either for free or against compensation.” (Id.)

  • To determine the access to copyrighted works by the public, the methodology calls for gathering information on the number of works legally distributed in physical and analogue form in the country. It asks about the experience of libraries and educational organizations, focusing on the functioning of licensing, the administrative burden when dealing with large amounts of copyrighted content, access to digital material, and the impact of copyright on the delivery of services. The methodology then turns to access to works by people with disabilities. Finally, the methodology considers solutions to the problem of identifying copyright holders, including the availability of registries and databases and extended collective licensing.
  • With respect to follow-on creation, the handbook notes that it is “closely connected with freedom of expression.” (p. 121) The handbook explains that from a legal point of view, access to protected materials for follow-on creation is affected by several factors, including the scope of protection, the term of protection, and the availability of exceptions. “Such exceptions, together with an appropriate scope of copyright protection should permit transformative uses of protected material that do not compete with original works. A proper regulation of these three factors should ensure that copyright promotes rather than hinders freedom of expression and the availability of information.” (p. 121-22)
  • The methodology calls for description of regulations, policies, and other measures facilitating access for follow-on creation, “in particular various provisions in copyright law aimed at enhancing the robustness of the public domain.” (p. 122) These include the national copyright rules relating to scope of protection (including “effective implementation of the idea/expression dichotomy in copyright law, and required level of originality”), term of protection, and limitations allowing transformative uses and scientific research. They also include “arrangements supporting or promoting open licensing and the use of open access models.” (Id.)
  • Further, the methodology asks about “measures to address abuses of copyright by copyright holders” such as regulations regarding freedom of expression, consumer protection, and competition. (p. 124) Additionally, the methodology recommends gathering opinions on the challenges of acquiring licenses for re-use of works for follow-on creation and scientific research.
Infringement and Legitimacy

Other aspects of the balanced operation of the copyright system include the unauthorized use of copyrighted works and public acceptance of copyright. The handbook observes that “a high level of copyright infringement might be a signal of poor functioning of certain elements of the copyright system, inadequate access, unequal bargaining power, or excessive transaction costs.” (p. 131) Additionally, copyright infringement can sometimes be explained by a lack of public support towards copyright rules….” (Id.)

  • The methodology suggests collection of data on the extent of unauthorized use and comparison of the levels of authorized and unauthorized use to assess the impact of unauthorized use on legal markets.
  • The handbook contains a lengthy footnote concerning the academic debate on the impact of unauthorized uses on authorized uses: “Some studies report negative impacts of unauthorized use on the sale of legal products and services, and a consequent reduction in investment in creative works. However, other studies suggest that unauthorized file sharing for non-commercial purposes might have positive effects on the market for copyrighted products and services. For example, unauthorized file sharing might help consumers make more informed buying decisions and increase consumer willingness to pay, it might have a positive effect on the sale of complementary products and services, and it might enlarge the network of users and help suppliers in segmenting the buyers according to their willingness to pay. Both positive and negative impacts of unauthorized use on the legal markets should be considered in the assessment.” (p. 134 n.155 (citations omitted))
  • The methodology also recommends a survey to assess the legitimacy of the copyright system. The handbook states that “the sense of fairness of copyright perceived by the public is likely to affect levels of non-compliance.” (p. 135)


The methodology is designed to result in “an exhaustive assessment of a copyright system.” (p. 26) At the same time, it has a modular structure so that a user can apply it in parts to conduct more limited research of specific aspects of the copyright system. The Internet Policy Task Force of the U.S. Department of Commerce in effect followed an approach similar to sections of the methodology when it produced its Green Paper on Copyright Policy, Creativity, and Innovation in the Digital Economy followed by its White Paper on Remixes, First Sale, and Statutory Damages. So did Professor Ian Hargreaves in his study commissioned by the UK Prime Minister. These studies, like the Cupore methodology, start with data about the copyright system, not with ideology. Additionally, they all recognize the critical importance of balanced protection to permit access and follow-on creation.

The methodology provides a good roadmap for policymakers in the copyright space. Even if they cannot conduct the methodology’s “exhaustive assessment” of their copyright system, policymakers should carefully read the methodology’s handbook to gain a nuanced understanding of the complexities and tradeoffs inherent in copyright systems.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.