The Economics of Fair Use

Because the economic growth of nations is driven by the intellectual property of their people, the balanced protection of IP creates the necessary incentives for innovation and the structure for sharing results that yields an expansion of knowledge creation and economic prosperity. It is not a one-sided system but rather a perfectly balanced system, where those who create knowledge and those who use it contribute to economic growth.

While the economics of copyright-based industries have been studied extensively, there are few studies about the value of fair use. Last year, the Computer & Communications Industry Association released a study of the Economic Contribution of Industries Relying on Fair Use. In the Preface the CEO of CCIA, Ed Black, states that, "Balanced copyright law – the sort envisioned by the Framers of the Constitution – was once the law of the land. Unfortunately, the past decade has seen a slow erosion of this balance. This study illustrates that this erosion is not merely a philosophical issue; it endangers our economic growth and threatens millions of jobs."

Significant findings include:

• The fair use economy in 2006 accounted for $4.5 trillion in revenues and $2.2 trillion in value-added, roughly one-sixth of total U.S. GDP. The most significant growth occurred in electronic shopping, audio and video equipment manufacturing, Internet publishing and broadcasting, Internet service providers and web search portals, and other information services.

• It employed more than 17 million people and supported a payroll of $1.2 trillion. About one out of every eight workers in the United States is employed in an industry that benefits from the protection afforded by fair use.

• It generated $194 billion in exports and rapid productivity growth.

What are the industries based on fair use? The most obvious examples for an academic include those based on scholarship (teaching) and research (product development). But it also includes Internet-based and high-tech businesses including web hosting, search engines, and software development. The growth of these businesses supports is beneficial for supporting industries such as fiber optics, consumer hardware, and communications. Because fair use also allows consumers to make personal copies of copyrighted material, such as recording television programming and moving digital music from one device to another, it supports the manufacturing and sales of related equipment.

But once again, it must be emphasized that the economics of copyright depend on a balanced system, not one that lacks economic incentives for creation. Civil society recognizes that this balance is necessary, so discussions of exceptions and limitations to copyright laws should never be reduced to the simple argument that "one side just wants everything to be free." Creators, producers, and distributors contribute to this system and should recognize the important economic contributions of the industries dependent upon this balance.