Copyright law has become an important part of American industrial policy. Its rules are felt by every industry that touches information, and today that means quite a bit. Like other types of industrial policy, copyright in operation purposely advantages some sectors and disadvantages others. Consequently, today's copyright courts face hard problems of competition management, akin to those faced by the antitrust courts and the Federal Communications Commission.
How should courts manage competition using copyright? Over the last decade, writers have begun to try to understand the "other side" of copyright, variously called its innovation policy, communications policy, or regulatory side.Here I want to focus attention on a crucial problem of decisional method that is becoming more clearly important to copyright decisions. Courts in both copyright and antitrust face a choice between what we can characterize as "bad actor" and "welfarist" models of deciding cases. The "bad actor" approach punishes alleged wrongdoers based on malicious behavior of the suspect and the prospect of harm to favored sectors of the economy, like small businesses (in antitrust) or the entertainment industries (in copyright). The "welfarist" approach, by contrast, calls for judges generally to ignore intent or "bad behavior" in exchange for a disciplined focus on questions of industry economics and consumer, or user, welfare. The welfarist approach accepts Adam Smith's premise that certain forms of malicious behavior may promote overall social well-being, on balance, though some may not.
The tension between these approaches became clear in the Supreme Court's 2005 decision in Metro-Goldwyn Mayer Studios, Inc. v Grokster, Ltd. In Grokster the Court side-stepped a welfarist calculation called for by existing law, and turned instead to a "bad actor" approach. Faced with a vicious fight between disreputable firms and the incumbent industry, the Court chose to punish the bad guys. To the Court, and to many observers, the Grokster decision was a good political way out of a very difficult problem. As a one-shot political compromise, the decision managed to avoid outraging either the electronics or incumbent distribution industries, and was successful in that regard. However, if Grokster is also meant to serve as a model of how copyright should manage competition, the drawbacks of the Grokster model are manifest.
The Copyright Paradox,
Sup. Ct. Rev.
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