Relationship between Copyright and Contract Law

Abstract

Contracts lie at the heart of the regulatory system governing the creation and dissemination of cultural products in two respects: (1) The exclusive rights provided by copyright law only turn into financial reward, and thus incentives to creators, through a contract with a third party to exploit protected material. (2) From a user perspective purchases of protected material may take the form of a licensing contract, governing behaviour after the initial transaction. Thus, a review of the relationship between copyright and contract law has to address both supply- and demand-side issues. On the supply side, policy concerns include whether copyright law delivers the often stated aim of securing the financial independence of creators. Particularly acute are the complaints by both creators and producers that they fail to benefit from the exponential increase in the availability of copyright materials on the Internet. On the demand side, the issue of copyright exceptions and their policy justification has become central to a number of reviews and consultations dealing with digital content. Are exceptions based on user needs or market failure? Do exceptions require financial compensation? Can exceptions be contracted out by licence agreements? This report (i) reviews economic theory of contracts, value chains and transaction costs, (ii) identifies a comprehensive range of regulatory options relating to creator and user contracts, using an international comparative approach, (iii) surveys the empirical evidence on the effects of regulatory intervention, and (iv) where no evidence is available, extrapolates predicted effects from theory.