TOWARDS AN AMERICAN ARTS INDUSTRY (page 3)

CONDUCT  

The third facet of the IO model is conduct or the pattern of behavior followed by enterprises in adapting and adjusting to an ever-changing and evolving market.  Only two issues are explored.  First, copyright which provides the legal foundation for industrial organization of the arts is examined.  Second, the unconventional nature of research and development or 'R&D' in the arts industry is reviewed.

a) Copyright  

Many types of law - statutory, regulatory and criminal - affect the conduct of arts enterprises including broadcasting and cable licensing, censorship and copyright.  Law can be used to prohibit certain types of economic activity, e.g. anti-trust statutes, resale price maintenance, predatory pricing, insider-dealing, etc.  On the other hand, law can create markets where none existed before, e.g. copyright. In fact, the evolution of market capitalism is characterized by changing legal definition of property and of what can be legally bought and sold.  In summary, over the last two and a half centuries legal definition of property has matured from physical things towards 'intangibles' and 'rights' (Commons 1924).

i - Concept & Origins

Copyright and other forms of intellectual property rights - registered industrial designs, patents and trademarks - are justified as a protection of, and an incentive to human creativity which otherwise could be used freely by others. In return, creators are expected to make their works available in a market so that their works can be bought and sold.  But while the State wishes to encourage creativity, it does not want to foster harmful market power.  Accordingly, limitations are imposed, limitations embracing both time and space.  Rights are granted for a fixed period of time, and protect only fixation of creativity in material form, i.e. ideas are not protected but rather their fixation in material form.  There are therefore inherent tensions in copyright.  For example,

... intellectual property is, after all, the only absolute possession in the world... The man who brings out of nothingness some child of his thought has rights therein which cannot belong to any other sort of property... [but] We should start by reminding ourselves that copyright is a monopoly.  Like other monopolies, it is open to many objections; it burdens both competitors and the public. Unlike most other monopolies, the law permits and even encourages it because of its peculiar great advantages.  Still, remembering that it is a monopoly, we must be sure that the burdens do not outweigh the benefits.  So it becomes desirable for us to examine who is benefited and how much and at whose expense ... (Chafee 1945)

This tension reflects the origins of copyright in the Tudor and Stuart period of English history in the midst of the Protestant Reformation and the Catholic Counter-Reformation.  To keep heretical works from being reproduced, the Crown granted to selected printers the right to copy approved works, i.e. 'copyright'.  It should be kept in mind that the printing press, as the first engine of mass production, generated more anxiety at the time of its innovation than radio, TV, satellite communication and the World-Wide Web (WWW) in our time.

Copyright thus began as a Crown grant of industrial privilege to printers and a means of censorship.  Only with the Statute of Queen Anne in 1710 did authors gain any rights and even these were explicitly balanced by rights granted to 'proprietors' (MacDonald 1971).  To this day, all rights of the creator can be extinguished by contract with a copyright proprietor.  The legal instrument used to extinguish creator's rights, after a one-time payment, is the 'blanket licence'. which strips away all an artist's rights to subsequent exploitation of a work.

In most cases creators therefore do not sell work directly to the public.  Rather, they sell or license its copyright to corporate market intermediaries known as dealers, employers, publishers or producers.  These intermediaries act as gatekeepers screening new works for marketability and then investing in production, advertising, sale, and/or distribution.  A corporate copyright proprietor having purchased all or part of a creator's rights then exploits the many revenue streams flowing from such copyrights.

Consider a book written in India which, through sale or licence of its copyright, becomes a play in London's West End theater district.  The play becomes a movie in Hollywood from which posters, a sound track, T-shirts and toys are spun-off and manufactured in Taiwan.  The movie is then broadcast on Italian television and the sound track on rock radio in Ghana.  The styles and fashions of the film inspire a Munich designer who previews a fashion collection in Paris. Furniture makers in Ohio licence the design and manufacture 'look-alike' furniture.  A book is then written in New York City about the making of the movie and a film sequel is shot in Saskatoon.  All associated income streams have their source in the copyright vested in the initial work - in this case, a book.  The bargaining power of the average creator to set prices or retain residual rights to such a work is limited.

ii - International Differences

There are five distinct legal traditions of creator's rights illustrating the fact that copyright is as much a 'cultural artifact' as a law (Chartrand 1996).  First, there is the British tradition in which copyright is subject to a restrictive concept of 'fair dealing' which exempts only a very small number of very specific uses from infringement.  'Crown copyright' also exists in all documents published by the government.

Second, there is the American tradition with two strands.  First, copyright is subject to a liberal concept of 'fair use' which exempts most not-for-profit uses from infringement, including private copying.  Unlike the British tradition, there is no 'Crown copyright', i.e. works of the Government and its agencies are in the public domain.  The second strand is a tradition of granting preference to domestic manufacturers. Thus prior to 1909, no English language work could be sold in the U.S. unless printed there (Hanson, 1973).  From 1909 until the mid-1980's the Manufacturers' Clause of the U.S. Copyright Act specified that any book written by an American could only be sold in the U.S. if it was printed in the U.S.  This effectively stopped Henry Miller's works, published in Paris, from being sold in America.  This tradition continues with certain rights being granted outside of the U.S. Copyright Act and applicable only to Americans.

Third, there is the Civil Code tradition in Europe and Japan. Under this tradition, a creator's rights are inherent in and inalienable from the individual creator.  Some rights can never be transferred by contract.  The Code does not accept that a corporation has the same rights as an individual.  The ability of copyright proprietors to exploit copyright is limited relative to both the British or American traditions (Vaver, 1987).

Fourth, there is a distinct Islamic copyright tradition based on Islamic law - the Shar'ia.  The following summary is based on private correspondence between the author and Mustafa Salman Habib, Ph.D, Barrister at Law (Lincoln's Inn) in London England (Habib 1998).  The roots of Islamic copyright lay in the Koran and the traditional portion of Islamic law based on the Prophet Mohammed's words or acts but not written by him and known as the "Sunna".  This traditional portion of Islamic law is accepted as authoritative by the Sunni branch of Islam but rejected by the Shi'ite branch. One relevant saying in the Sunna is: "the works of a person do not cease even after his death are three: a continuing charity, a beneficial know-how or a worthwhile son".  Such 'know-how' is recognized as generating a continuous benefit that outlives the author.  Sunni jurists are also unanimous in their high regard for the author, researcher and scientist who are collectively called "A'Lem" to whom several references are made in the Koran and the Sunna.

Early Islamic jurists recognized copyright and offered protection from pirates.  Unlike written legal codes of today, traditional Islamic copyright treated copyright infringement as a breach of ethics, i.e. a moral rather than a criminal act.  Punishment took the form of defamation of the infringer and casting shame on his tribe. An exception was blasphemy or incitement against Islam.  The infamous case of Salman Rushdi is an example of what an author can expect if convicted of writing such a work.  Only in recent years have formal copyright statutes been drafted, e.g. in Saudi Arabia eight years ago.

Fifth, there are Aboriginal Heritage Rights (AHR).  These are based on a collectivist or communal concept of creation.  To tribal peoples, a song, story or icon does not belong to an individual but to the collective.  Rights are often exercised by only one individual in each generation often by matrilineal descent.

iii - Outside Rights  

There are creator's rights that exist 'outside' of the Copyright Act.  Generally they derive from the Civil Code tradition and can not be transferred by contract from a creator to a proprietor.  Furthermore, national treatment often need not be extended to non-residents allowing a nation, state or province to target and reward the creativity of its own citizens.  Some American examples demonstrate.

First, the Chip Protection Act provides copyright-like protection for the design of integrated circuit chips, but only for U.S. manufacturers.  Similarly a proposed new Industrial Design Act recommended rights only for U.S. residents (Andrews 1990).

Second, Aboriginal Heritage Rights (AHRs) are outside rights.  For example, Public Law 101-601: The Native American Graves Protection and Repatriation Act of 1990 converts native art and artifacts into 'inalienable communal property'.  This right may eventually be extended to include stories and sacred tales (Farrer 1994).

Third, the Visual Artists Right Act of 1990 provides special rights to creators of "recognized stature" including the right to prevent destruction of their work (Sullivan 1996: 43).  This right is similar to 'moral rights' granted to creators under the Civil Code and by the Canadian Copyright Act.

Fourth, at the state level, the right of following sales or droit de suivre has been granted to visual artists resident in California.  A young artist sells low but as his or her career matures earlier works increase in value.  While collectors benefit from the re-sale of early works, the artist gets nothing.  The right of following sale insures a percentage of all subsequent sales go back to the artist.

Two foreign examples demonstrate that outside rights are available not only in the U.S.  First, Canadian public lending rights (PLRs) are granted for books written by Canadian authors and held in Canadian libraries. PLRs assume the public benefits from libraries but authors suffer lost sales.  Therefore, market failure exists justifying a public policy response. PLRs compensate authors from a special federal fund.  Payment is capped so no one author receives too much. Payment is restricted to Canadians and goes directly to the creator.

Second, the Republic of Ireland (Eire) exempts copyright income earned by resident creators from income tax.  The exemption applies only to individuals, not to corporations.  The result has been an influx of creative talent who pay sales and other taxes offsetting the tax expenditure to the public treasury.  In addition, such talent enriches the cultural as well as economic life of the country.

b) Research & Development  

Research & Development (R&D) in art is different.  First, Natural Sciences & Engineering and Social Sciences & Humanities research is centered in the university; arts research is not.  This is reflected in federal subsidies to universities.  Roald Hoffmann, professor of chemistry at Cornell University, asked the university what was the ratio of federal funding to science and art. It was 'about 500:1' in 1992 (Hoffman 1997).  Arts research also does not benefit from: contracts between industry and universities; targeted research by private foundations; or, industry research institutes inside universities.

Art R&D primarily takes place in the nonprofit 'fine' arts. It is here most new talent and technique are developed, new scripts and scores created, and new images and styles set.  Results of Arts R&D, like the results of pure scientific research, are sometimes adopted by for-profit enterprises - in and out of the arts industry.  Results can inspire society-wide changes in design, fashion and style, e.g. art nouveau and art deco in the early part of the century.

With respect to private support of Art R&D, there is anecdotal evidence of increasing business support of 'arts' high schools in California and planned animation training institutes in Canada.  Unfortunately, the only comparative industrial evidence is quite outdated.  In 1984 Business Week published a comparative analysis of 16 major American industries.  Of the 16, only the entertainment industry spent nothing on R&D (Business Week 1984: 236). An update of this comparative analysis is long overdue.

The university also plays a lesser role in professional development (Busch 1985; Robinson 1982) and there is a well documented gap between graduation from university in the Arts and attainment of professional status.  Art is learned by doing; it is experiential.  Old craft methods, apprenticeship and master classes survived the Industrial Revolution and remain the most effective methods of professional training in the Arts.

Second, artistic knowledge is unlike scientific knowledge.  Scientific knowledge tends to depreciate through time, e.g. Greek deductive science was displaced by modern experimental science.  In Art, however, knowledge can appreciate through time.  King Tut, Shakespeare and Bach still speak, still sell. In media art, Hollywood film libraries have become multi-million dollar assets.  Maintaining classical repertoire in the performing arts provides continuing inspiration to contemporary creators and establishes standards of excellence against which new work is judged.  This 'religio' or linking back is embodied in heritage art which conserves and preserves past and present creation for subsequent generations.