The Economics of the Publishing and Information Industries

The Search for Yield in a Disintermediated World

Albert N. Greco

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317579250
• Edition: 1
• Topic: Languages & Linguistics
• Subtopic: Communication Studies
• Index: Languages & Linguistics

Books, scholarly journals, business information, and professional information play a pivotal role in the political, social, economic, scientific, and intellectual life of nations. While publications abound on Wall Street and financial service companies, the relationship between Wall Street's financial service companies and the publishing and information industries has not been explored until now. The Economics of the Publishing and Information Industries utilizes substantive historical, business, consumer, economic, sociological, technological, and quantitative and qualitative methodologies to understand the people, trends, strengths, opportunities, and threats the publishing industry and the financial service sector have faced in recent years. Various developments, both economic and demographic, contributed to the circumstances influencing the financial service sector's investment in the publishing and information industries. This volume identifies and analyzes those developments, clearly laying out the forces that drove the marriage between the spheres of publishing and finance.

This book offers insight and analysis that will appeal to those across a wide variety of fields and occupations, including those in financial service firms, instructors and students in business, communications, finance, or economics programs, business and financial reporters, regulators, private investors, and academic and major public research libraries.

Chapter 1
The Legal and Economic Foundation of Intellectual Property and Copyrights

If you can’t explain it simply, you don’t understand it well enough.

Albert Einstein

What Is Intellectual Property?

Intellectual property (frequently called IP) is a broadly defined category of products or intangibles owned by a company, an individual, or an estate. Intellectual property can consist of copyrights, patents, trademarks, or trade secrets.

Intellectual properties have value and, in some instances, great value. For example, most consumers in the United States, and in many other nations, know that the stylized symbol on certain footwear means it was manufactured either by or for Nike, that Coca-Cola has a secret formula for its syrup, or that the Coca-Cola bottle is covered by a patent. This means that a company (Coca-Cola), an individual (perhaps the author J. K. Rawling), or an estate (perhaps the estate of F. Scott Fitzgerald) is exceptionally concerned about protecting this intellectual property or properties because intellectual properties have achieved such great economic value in what is an international knowledge-based marketplace. This means that extracting value from any intellectual property, and also preventing others from deriving illegal value from IP, is a crucially important responsibility for a company, individual, or estate.

While a consumer can see or use certain forms of IP, perhaps a newspaper article or a business information database, certain forms of intellectual property cannot be listed on a balance sheet as a physical assets, but all too frequently intellectual property’s intrinsic value tends to be reflected in the price of the stock.

The Constitution of the United States

What is the legal foundation for intellectual property in the United States? Article 1, Section 8 of the Constitution of the United States is the legal bedrock for intellectual property in this nation. This section lists a number of powers given to the Congress of the United States, which include taxation, financial obligations, and a requirement to “provide for the common defense and general welfare of the United States.” However, the substantive section of the article that is of interest to anyone studying the publishing and information industries is as follows:

To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. ¹

The first 10 amendments to the Constitution are called the Bill of Rights, and they were added after the adoption of the Constitution. The First Amendment states the following:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances. ²

Article 1, Section 8 of the Constitution and the First Amendment to the Constitution are both rather brief, and both were left to future interpretation by the U.S. Supreme Court, a myriad of Federal courts, various acts of Congress, and a number of philosophers.

As for the First Amendment, it addresses freedom of speech and freedom of the press, cornerstones of intellectual property rights in this nation.

Judge Oliver Wendell Holmes believed that freedom of speech was an absolute protection guaranteed by the First Amendment and could not be prohibited by Congress under any circumstances. ³ The British philosopher John Stuart Mill developed what became known as the “marketplace of ideas” theory, and he argued that all members of society needed access to many different kinds of ideas, both false and true, in order to discern the truth. ⁴

However, in spite of Holmes’s spirited defense of freedom of speech and Mills’s position that citizens should be exposed to all types of speech or publications, some degree of legal control over expression has been in place in the United States, including the following:

• Prior restraint laws.
• Public nuisances (the “barking dog” case).
• Prohibition of yelling “fire” in a crowded theater.
• The Federal Trade Commission (FTC): The FTC has issued “cease and desist” orders against anticompetitive or deceptive ads, and the FTC can order a company to publish a corrective statement, as can other U.S. regulatory agencies (e.g., the Securities and Exchange Commission).
• Copyright law, which provides for court-issued injunctions to restrain illegal use of copyrighted materials.
• National security: in the Near vs. Minnesota case (1931), the U.S. Supreme Court ruled: “No one would question but that a government might prevent actual obstruction to its [military] recruiting service or the publication of sailing dates of [military] transports or the number and location of [military] troops.” ⁵
• Hazelwood School District vs. Kuhlmeier (1988): The Supreme Court ruled that public school officials had the power to impose pre-publication censorship on student newspapers since a school need not tolerate speech that is inconsistent with its educational mission, even though the school cannot censor such speech outside the school. The Court ruled that the school’s newspaper in question was part of the school’s curriculum, a regular educational activity. ⁶
• Courts’ determination that certain oral statements can be viewed as slander and certain printed statements can be libelous. However, “truth,” “privilege,” and “fair comment and criticism” are generally considered to be legal defenses against libel or slander.
• New York Times Co. vs. Sullivan (1964): In this pivotal case, the Supreme Court ruled that critical words must be used with “actual malice,” that is, known falsity or reckless disregard for truth. ⁷
• Privacy laws, which address “intruding on one’s ‘solitude’” as well as “invasion of privacy.” However, “newsworthiness” is considered a “good defense” in an invasion-of-privacy case.
• Commercial exploitation of a person’s name or likeness or distinctive voice is protected by a number of laws.

The Copyright Law

The following material is adapted and/or directly quoted from relevant sections of the Copyright Law of the United States (Title 17 U.S.C. and the Code of Federal Regulations Title 37). ⁸ The Copyright Law is available from the U.S. Copyright Office’s website, and this office also provides a number of important circulars outlining and describing key provisions of the law. The Copyright Law is immensely important to every company operating in the newspaper, magazine, book, or information industries since it is a form of protection provided by the laws of the United States (Title 17 U.S.C. and Title 37) to the authors of “original works of authorship,” including literary, dramatic, musical, artistic, and certain other intellectual works. This protection is available to both published and unpublished works. Section 106 of the 1976 Copyright Act generally gives the owner of copyright the exclusive right to do and to authorize others to do the following: reproduce the work in copies or phonorecords; prepare derivative works based on the work; distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending; perform the work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, motion pictures, and other audiovisual works; display the work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work; or perform the work publicly by means of a digital audio transmission (in the case of sound recordings). ⁹ In addition, certain authors of visual artworks have the rights of attribution and integrity as described in section 106(a) of the 1976 Copyright Act. It is illegal for anyone to violate any of the rights provided by the copyright law to the owner of a copyright. These rights are not unlimited in scope, however. Sections 107 through 122 of the 1976 Copyright Act establish limitations on these rights. In some cases, these limitations are specified exemptions from copyright liability. ¹⁰

One major limitation is the doctrine of fair use, which is given a statutory basis in section 107 of the 1976 Copyright Act. In other instances, the limitation takes the form of a “compulsory license” under which certain limited uses of copyrighted works are permitted upon payment of specified royalties and compliance with statutory conditions. ¹¹

Who Can Claim Copyright?

Copyright protection subsists from the time the work is created in a fixed (i.e., durable) form. The copyright in the work of authorship immediately becomes the property of the author who created the work. Only the author, or those deriving their rights through the author, can rightfully claim copyright. In the case of works made for hire, the employer and not the employee is considered to be the author. Section 101 of the copyright law defines a “work made for hire” as

• a work prepared by an employee within the scope of his or her employment; or
• a work specially ordered or commissioned for use as a contribution to a collective work, a part of a motion picture or other audiovisual work, a translation, a supplementary work, a compilation, an instructional text, a test, answer material for a test, an atlas, or if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. ¹²

The authors of a joint work are co-owners of the copyright in the work, unless there is an agreement to the contrary. Copyright in each separate contribution to a periodical or other collective work is distinct from copyright in the collective work as a whole and vests initially with the author of the contribution.

Two General Copyright Principles

Mere ownership of a book, manuscript, painting, or any other copy or phonorecord does not give the possessor the copyright. The law provides that transfer of ownership of any material object that embodies a protected work does not of itself convey any rights in the copyright. Minors may claim copyright, but state laws may regulate the business dealings involving copyrights owned by minors.

Copyright and National Origin of the Work

Copyright protection is available for all unpublished works, regardless of the nationality or domicile of the author. Published works are eligible for copyright protection in the United States if any one of the following conditions is met:

• On the date of first publication, one or more of the authors is a national or domiciliary of the United States; is a national, domiciliary, or sovereign authority of a treaty party; or is a stateless person, wherever that person may be domiciled.
• The work is first published in the United States or in a foreign nation that, on the date of first publication, is a treaty party. For purposes of this condition, a work that is published in the United States or a treaty party within 30 days after publication in a foreign nation that is not a treaty party shall be considered to be first published in the United States or such treaty party, as the case may be.
• The work is a sound recording that was first fixed in a treaty party.
• The work is a pictorial, graphic, or sculptural work that is incorporated in a building or other structure, or an architectural work that is embodied in a building and the building or structure is located in the United States or a treaty party.
• The work is first published by the United Nations or any of its specialized agencies, or by the Organization of American States; or the work is a foreign work that was in the public domain in the United States prior to 1996 and its copyright was restored under the Uruguay Round Agreements Act.
• The work comes within the scope of a presidential proclamation. ¹³

A treaty party is a country or intergovernmental organization other than the United States that is a party to an international agreement.

What Is Not Protected by Copyright?

Several categories of material are generally not eligible for Federal copyright protection. These include, among others:

• works that have not bee...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• Introduction
• 1 The Legal and Economic Foundation of Intellectual Property and Copyrights
• 2 Money Never Sleeps: The Search for Yield in a Disintermediated World
• 3 Major Marketing and Economic Theories and Issues Impacting the Newspaper, Magazine, and Book Publishing Industries
• 4 The Economics of the Newspaper Industry
• 5 The Economics of the Magazine Industry
• 6 The Economics of the Book Publishing Industry
• 7 The Information Industries
• 8 Disruption in the Book and Information Industries: The Impact of the Kirtsaeng Decision on Trade, Educational, Scholarly, and Information Industry Publishers
• Bibliography
• Index