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The Economics of Creativity: A Q&A with the Copyright Office’s Chief Economist

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In 2022, the U.S. Copyright Office welcomed Dr. Brent Lutes to serve as the Office’s first chief economist. Office staff recently sat down with Dr. Lutes and discussed the intersection of economics and copyright as well as some forthcoming economic research the Office of the Chief Economist (OCE) is producing.

What is the mission of the Office of the Chief Economist?

As chief economist, my work is focused on cultivating scientific evidence to help inform decisions that are relevant to both copyright policy and the administration of copyright systems. I advise Register of Copyrights Shira Perlmutter and other senior officials on how these decisions may impact the Copyright Office, key copyright stakeholders like creators and consumers, and the general public. Through these efforts, OCE plays an important role in helping the Copyright Office achieve its strategic goals.

OCE is located within the Office of Policy and International Affairs and is composed of a small team of economists. We collaborate with colleagues from the academic community, from other U.S. government agencies, and from intellectual property offices around the world to produce policy-relevant research. We’re also producing tools that can be used by others outside the Copyright Office to help expedite research relevant to copyright policy.

The copyright system is operationalized through laws and policies, but those laws and policies are often aimed at achieving economic goals. That’s why we typically see a collaboration between economic and legal experts in intellectual property. It’s only natural that the Office wants to have both legal and economic expertise.

What economic goals does copyright achieve?

Copyright is fundamentally an economic issue. Before I explain what that means, let me dispel some misunderstandings about economics. When thinking about economics, people may think about money and finance. Economists do look at those things, but very often we’re looking at those things as a measure of something else. In particular, we’re looking at those things to measure social welfare. And we’re using those things to gauge the incentives that influence how people choose to behave. While money and finance are aspects of economics, that’s not what the core of the field is; rather, the study of economics is centered on incentives and social welfare.

With this in mind, it’s not hard to see that copyright is intended to achieve an economic goal through an economic mechanism. That goal is to enhance the welfare of society by promoting access to creative works now and in the future by promoting cultural and scientific innovation. We are trying to reach that goal through market-based behavioral incentives. Copyright gives creators some degree of market power around the consumption of their creative works. Through that market power, creators are able to capture some of the value that is inherent in their work, for example, by selling access to it (a transaction that is only possible if access is otherwise restricted, such as, through copyright). The anticipated proceeds from these sorts of transactions provide both the incentives and the means by which creators produce creative works.

How does producing policy-relevant research on copyright impact the Copyright Office, copyright stakeholders, and the general public?

Policymakers create optimal policy based on the information that is available to them. One limitation in copyright policymaking is that there isn’t always enough clear, reliable information available. By producing rigorous economic research, we’re improving the depth and quality of information that policy makers can use to help move us closer to what might be optimal policy. And that is of broad benefit—when we’re talking about optimal policy, we’re talking about enhancing social welfare.

What are some of OCE’s forthcoming reports?

OCE will soon be releasing several reports:

  • First, we have a forthcoming report on the geographic distribution of copyright activity. It’s useful for us to explore where the concentration of creative activity is, both individually and commercially, to help us better understand users of the copyright system and focus the Office’s outreach efforts. So far, we’ve found that creative activities are largely concentrated where one would expect, but some surprising creative enclaves show up in the data. We’ve also learned a lot about the types of creators that tend to be most reliant on copyright protection.
  • Second, we have a forthcoming report on the demographic characteristics of creators. One of the interesting things we’re learning from this study is that racial and ethnic diversity is highly correlated with creative output. We are still working to understand what the drivers of these correlations are, but knowing that such a robust relationship exists is a helpful step toward better understanding the factors relevant to creative ecosystems.
  • Third, we’ll be releasing a study examining the impact and recovery from the COVID-19 pandemic on employment, revenues, and creative outputs in creative industries. The study identifies which industries and which U.S. states experienced the largest impacts from the COVID-19 pandemic and, subsequently, which returned to their pre-pandemic trends. Our analysis also reveals other potentially useful observations, such as shifts in the sources of creative activity.
  • Fourth, OCE is involved in the Office’s ongoing fee-setting process. As part of the current fee study (the process that occurs roughly every five or six years before we recalibrate our fees), OCE is conducting statistical analyses to project the impact of fee changes on copyright registration and recordation activities.

What implications does AI have for economic frameworks of copyright policy?

As many are aware, the Copyright Office has been very active in examining copyright law and policy issues raised by artificial intelligence (AI) technology. It’s also important for us to understand the economic factors at stake.

Development of AI technology is going to have very meaningful implications for the economic frameworks of copyright policy. For example, AI can make the production of creative works by human creators much less costly, thereby increasing creative output and access to it. In contrast, the work produced by generative AI can, in many contexts, directly compete with traditional human creators, thereby decreasing their creative output. In fact, there are many complex and often countervailing factors inherent in generative AI that will affect the creative ecosystem, and economists have only just begun to explore those.

To help expedite research in this area and coordinate the research community, OCE, earlier this year, convened an economic roundtable on AI and copyright policy. We invited ten highly regarded economists, each with targeted expertise in relevant areas, to discuss what empirical and theoretical evidence should be developed to make well-informed policy decisions. We are drafting a report that will come out later this year providing a careful examination of the very nuanced economic issues along with guidance for the research community on what research would be most impactful for policy decisions. Our hope is that this will help bridge the gap between researchers and policy makers in a very productive way.

Participants in the first U.S. Copyright Office Economic Roundtable on AI held in January 2024 (left to right): Joshua Gans (University of Toronto), Joel Waldfogel (University of Minnesota), Ryan Safner (U.S. Copyright Office), Shanne Greenstein (Harvard), Abhishek Nagaraj (Berkeley), Mike Palmedo (U.S. Copyright Office), Andy Toole (USPTO), Catherine Tucker (MIT), Adam Jaffe (Brandeis), Imke Reimers (Cornell), Michael Smith (Carnegie Mellon), Rahul Telang (Carnegie Mellon), Brent Lutes (U.S. Copyright Office). Photo by Stan Murgolo/U.S. Copyright Office

Are there any other research areas that OCE is focused on?  

Another area of research my team and I are focused on relates to what we refer to as “rights of publicity,” meaning protection of one’s image, likeness, voice, or even style. New technologies have made copying these things easier. Rights of publicity have long been protected at some level within various states, but so far there aren’t any harmonized federal laws dealing with them. For those reasons, rights of publicity have been the focus of increased attention from federal legislators. However, there is little reliable empirical evidence available on what the effects of these rights may be on creative output.

To help remedy this gap in research, OCE is collaborating with some of our international colleagues at the World Intellectual Property Organization (WIPO) to develop an understanding of how these rights of publicity might effective the creative ecosystem and the commerce that arises around it.

Lastly, I want to mention OCE’s research on notices of termination, an interesting nuance of copyright policy that not a lot of people outside of the legal world are aware of but could benefit certain creators. Essentially, the Copyright Act permits creators or their heirs, under certain circumstances, to unilaterally terminate transfers or licenses they have granted to a third party. The intention is to give creators a second chance to share in the later economic success of their works. However, there is very limited empirical research around termination rights, so it’s hard to know the extent to which they are achieving that goal and what other effects (intended or otherwise) these rights have on the creative ecosystem. We now have complete data on statutory copyright terminations, and we’re currently using that data to lay the foundation for gaining such understanding.

Where is the economic copyright research space headed?

Although there has been a dedicated core of researchers studying the economics of copyright, the research has historically been somewhat constrained (compared to other sub fields of economics) by the difficulty in obtaining reliable data.

The reason this constraint matters is that, while economists think a lot about economic theory and how to understand economic activity, at the end of the day, it’s critical to use data to validate our theories and enrich our understandings. I am proud to oversee OCE’s release of a comprehensive and very large dataset of copyright registrations going back more than forty years, with about twenty million copyright registrations. The dataset also includes a host of other types of records such as copyright transfers, terminations, copyright collateralized financial agreements, and much more. Every day we’re finding new ways to use that data and to make it accessible to more people. We’re on the precipice of an expansion to the economic copyright research space, and it’s exciting to be a part of that.

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Find more information about the Copyright Office’s economic research agenda, published and forthcoming reports, and publicly available research datasets on the Copyright Office’s Economic Research webpage.

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