Faculty Scholarship Digest

Guy A. Rub



Guy A. Rub, Stronger than Kryptonite?: Inalienable Profit-Sharing Schemes in Copyright Law, 27 Harv. J.L. & Tech. 49 (2013).

In this timely and comprehensive article, Guy provides a thorough analysis from a law and economics perspective of the provision of inalienable rights to the copyright on an artist’s work. In the Copyright Act of 1976, Congress provided authors with an inalienable, non-waivable, right to terminate any sale of the copyright of their work 35 years after the sale. Since the Copyright Act became effective in 1978, the first possible terminations under this “time bomb” provision only became possible in 2013. Under this termination provision, “the author of a song may unilaterally terminate a license allowing a record company to record the song . . . the author of a book may . . . prevent a movie studio from producing a film,” and so forth. This protection for authors was justified on arguments that artists tended to be in much weaker bargaining positions relative to their licensees (i.e., publishers and recording companies) and the uncertainty of the value of the license at the time of the initial creation of the work required this second bite at the apple.

Guy’s analysis begins by reviewing profit-sharing supportive legal alternatives in contract law and property law as alternatives to inalienability. Guy’s analysis concludes that, on balance, the “starving artist” and “value uncertainty” arguments (even if true as a factual matter) do not justify inalienability. Guy’s close examination of the negotiation between the creator and the buyer does show that when competition among buyers of copyrighted works is limited, inalienability can improve the creator’s total compensation (and hence potentially encourage creativity, the goal of copyright law). Unfortunately, by delaying much of the compensation (the 35-year termination right makes the sale less valuable at the start but provides a potential windfall decades down the road), it also shifts compensation from young authors to older ones and shifts risk from risk-neutral buyers to risk-averse sellers. In addition, termination rights create inefficiencies by restricting the buyer’s incentive to promote the work as the termination date approaches and because the termination right as created by Congress wipes out all the agreements with the many intermediaries the buyer has expensively negotiated (think about all the copyright permissions a book publisher must collect if the author quotes and uses other copyrighted material). This leaves the work more vulnerable to the so-called tragedy of the anti-commons which leads to underuse of the work. Guy suggests both judicial and more comprehensive legislative means to address these drawbacks, but ultimately concludes that the rising competition in most industries that use copyrighted works (no longer do a few publishing houses, record companies and television networks control access) probably means that the negatives of the inalienable right outweigh the positive, and the “continuous decrease in barriers to entry into many copyright industries” will make “termination rights even less desirable going forward.”

Guy A. Rub, The Unconvincing Case for Resale Royalties, 124 Yale L.J. F. 1 (2014), http://yalelawjournal.org/forum/the-unconvincing-case-for-resale-royalties.

This essay addresses the American Royalties Too Act of 2014 (the ART Act), introduced in Congress in 2014. The ART Act would grant visual artists a right to collect royalties when their artworks are resold. This is the fifth introduction of such legislation, but this time it is armed with the U.S. Copyright Office’s urging of Congress to consider such legislation. Guy’s essay strongly sets out the arguments against enactment. Such resale royalties have traditionally been justified as a protection for artists’ weak bargaining position---the “starving artist.” In addition to questioning this stereotype as a general matter, the essay emphasizes that visual artists operate in a “very competitive” market with low barriers to entry that completely undermine this rationale. In the case of the ART Act, a different rationale now being offered is that copyright law currently “discriminates” against visual artists because it primarily helps non-visual artists (e.g., book authors) who are hurt when copies of their works are cheaply made and sold. So this advantage for visual artists is needed for balance. Yet, Guy notes, “visual artists, like most producers of goods, simply do not suffer from the problem that copyright law mitigates.” Describing current law as discriminating against visual artists, he contends, is like saying the law forcing car manufacturers to provide a method for securing child seats “discriminates” against people without children because they receive no direct benefit. There is nothing discriminatory, the essay contends in limiting a solution to those affected by the problem it addresses.

Finally, the essay notes that the proposed legislation, particularly with its unusual provision that would allow such rights to be waived and transferred would not even achieve its purported objective of protecting visual artists as a class. In some cases, Guy explains, the law would have no impact, and in others it would provide a windfall to well-established artists and their heirs.

Guy A. Rub, The Economics of Kirtsaeng v. John Wiley & Sons, Inc., 81 Fordham L. Rev. Res Gestae 41 (2013), http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1016&context=res_gestae.

In this essay, Guy Rub offers his advice on how the Supreme Court should resolve the application of the “first sale doctrine” to copyrighted works purchased abroad—the issue presented in the then pending case, Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. ___ (2013). The importer pressed for a rule that allows buyers of copyrighted works to freely import and resell them. The publisher sought to prohibit the unlicensed importation of works published abroad. Rub contends that both positions are economically unsound. He sets out the economic justification for a rule permitting the copyright owner to control importation into the country, but limit the control once the items are in the US. Essentially this would require importers (sophisticated professionals) to get a license, but not resellers (individual small-scale sporadic sellers). Unfortunately, Rub’s sound argument for economic efficiency was lost on the Court’s majority. On March 19, 2013, a six-justice majority adopted the view advanced by the Thai importer. If it is any consolation, Justices Kagan and Alito seem in favor of Rub’s rule, but nonetheless concur leaving it to Congress to do the implementation.

Guy A. Rub, Market Regulation of Contractual Terms: A Skeptical View, 54 Can. Bus. L.J. 258 (2013).

In this essay, Professor Guy Rub explores the use of a bottom-up, private-market based approach to the problems created by boilerplate contract provisions. Rub’s thinking was influenced by Margaret Radin’s book, Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law—a work he describes as a masterpiece of analysis on boilerplate provisions. For those unfamiliar with Radin’s book, Rub thoughtfully provides a description of the differences between top-down and bottom-up approaches. If auto emissions were the concern, a top-down approach would be the county government refusing to register a vehicle if it failed emission standards. The bottom-up approach would allow the price of gasoline and associated taxes to create a demand for more fuel-efficient vehicles. The same approaches can be seen in consumer contracts. Using a warranty as an example, a top-down approach would involve the government dictating the scope of a warranty. A bottom-up approach would allow buyers to decide the scope based upon how much they were willing to spend for the warranty protection. As Rub points out, in the context of boilerplate provisions, consumers’ failure to read or understand the provisions thwarts efficient use of a bottom-up approach. Rub goes on to explain the difficulty in trying to facilitate a market for contractual terms given this problem of unobserved terms. Despite the general advantages of decentralized decision-making driven by consumer preferences, Rub concludes that in the context of boilerplate contractual terms, some top-down involvement by a central authority is likely necessary.