CNI REPORT: Copyright and the Economics of Networked Information

Copyright 1994 CAUSE. From _CAUSE/EFFECT_ Volume 17, Number 1, Spring 
1994. Permission to copy or disseminate all or part of this material is 
granted provided that the copies are not made or distributed for 
commercial advantage, the CAUSE copyright and its date appear, and 
notice is given that copying is by permission of CAUSE, the association 
for managing and using information resources in higher education. To 
disseminate otherwise, or to republish, requires written permission. For 
further information, contact Julia Rudy at CAUSE, 4840 Pearl East 
Circle, Suite 302E, Boulder, CO 80301 USA; 303-939-0308; 
e-mail: jrudy@CAUSE.colorado.edu


            COPYRIGHT AND THE ECOMOMICS OF NETWORKED INFORMATION
                           by Richard P. West


From a technology point of view it is quite simple. Place a copy of, 
say, a scholarly journal on a file server, place the file server on the 
Internet, advertise its address, and every Internet surfer can be 
informed. Conceptually, one electronic version (with perhaps a few more 
copies for security and backup) can now do what previously could only be 
accomplished by making thousands of printed copies and physically 
distributing them to subscribers, libraries, and bookstores. Today's 
technology allows the display of full print pages as clearly as a 
printed page you would hold in your hand. The combination of 
telecommunications networking technology and inexpensive mass storage 
with excellent display monitors is the reason for these capabilities.


A few copies of a journal article in a networked environment serve many 
more thousands of people than the traditional several thousand printed 
copies would reach. The promise of networked information to remove the 
barriers of time and space has been fulfilled. Technologically speaking, 
we have won the battle of making information universally accessible to 
all. Yet, by succeeding with our technological capabilities, we have now 
raised issues in several extremely important areas: the labyrinth of 
legal property rights; the complexity and frustration of getting 
permission to digitize materials; the economics of networked 
information; and the incentives and economic risks inherent in any 
marketplace in a capitalist society.

Our ability to understand and resolve these issues will determine our 
success in exploiting our networked information technologies. The 
Coalition for Networked Information has several initiatives under way in 
this very important, but at times maddeningly complex, area. READI
(Rights for Electronic Access to and Delivery of Information) has been a 
project of CNI for two years, identifying the consistent themes that any 
contractual arrangement between an information provider and an 
information consumer properly should consider in a networked 
environment. Other CNI initiatives include the exploration of the 
economics of networked information through the Task Force on Scientific 
and Technical Scholarly Information, sponsored by the Association of 
American Universities (AAU), and the solicitation of a grant from the 
Council on Library Resources (CLR) to further explore the changing 
economic environment for creating, distributing, organizing, and using 
networked information. The presence of CNI helped focus these questions 
with both providers and consumers recognizing that CNI provides a forum 
for exploring these issues.

This article focuses on CNI's activities related to the non-technical 
implications of networked information. These areas divide into copyright 
law involving intellectual property; contractual rights negotiated 
between two parties; and the intriguing interplay of the forces of 
supply and demand and hence the price of networked information, i.e., 
the workings of an active economic marketplace for scholarly 
information.

First, copyright issues. Questions dealing with copyright in a networked 
information environment are often characterized as copyright "problems," 
or the observed need to change underlying law involving copyright. At 
the risk of oversimplifying copyright issues, let me be provocative and 
say that underlying copyright law, which recognizes property rights of a 
producer/owner and gives protection to those rights, probably does not 
need to change nor, even more realistically, is it likely to change. 
Technological changes have been a challenge to the management of the 
property rights protected by copyright law for the past forty years. 
Copy machines, and now digitized information, have made the making of 
copies of traditional printed, and now networked, material easier and 
easier. Unfortunately, the ease of making these copies has not been 
matched, at least yet, by increased ease in compensating the owners of 
the intellectual property. To promote the copying and use of materials 
for the public good, owners and users of copyrighted materials developed 
the concept of "fair use" of such material. Use which is occasional and 
limited is allowed under this concept without additional compensation 
being paid to the property owner. Owners and users of copyrighted 
materials also developed guidelines for interlibrary loans, now mostly 
done by fax transmissions. Obviously, the relatively few copies allowed 
under "fair use" and interlibrary lending will not extend to the easy 
and widespread use of networked information that can be imagined by 
electronic journals on national and international networks. Much of the 
CNI discussion of copyright focuses on how to manage the appropriate 
payment of use fees to copyright owners of networked information in this 
new, more expansive setting.

A second area of property rights management is site licenses and other 
multiple use or unlimited use arrangements that are contract 
arrangements between two parties that recognize the property rights of 
the producer or owner of the intellectual property recognized by 
copyright law. The terms of use and price are negotiable between the 
parties. CNI's READI project will have as one of its products a sample 
contract for networked information that can be adopted for specific use 
by higher education institutions.

Since the price we will pay for networked information is governed 
primarily by contractual arrangements, it will be the economics of the 
marketplace which determine how much we pay for the scholarly materials 
we will want to use on the network. Supply and demand forces, as in all 
markets, should determine price in the scholarly information 
marketplace. However, certain journals are so important to a particular 
discipline that any major research library is pressured to subscribe to 
them, since such journals are the primary outlet of the most important 
work in that field. Empirical studies have shown that this phenomenon 
exists in the scientific journal area and creates a "monopolistic" good 
that can distort normal market forces and allow prices that escalate 
without regard to costs. The owners of intellectual property (who, 
particularly in the sciences, are commercial publishers) are in the 
power position to gain most from the new economics of networked 
information.

This is not new. The print versions of today's scholarly journals and 
books are part of a very active capitalist marketplace. Our libraries 
participate in this market by purchasing hundreds of millions of dollars 
worth of information every year. What is new, however, is that we have 
new ways of receiving, storing, and distributing such information due to 
our improved communications and computing technologies. Increasingly, 
our challenge will be to manage a larger share of our information 
resources in electronic form rather than printed form. To take advantage 
of these new capabilities, we must rethink the way we manage our 
"purchased" information at our universities and colleges.

In today's lexicon this requires reengineering our processes of 
acquiring and storing our information resources, and it will likely also 
require reengineering our processes of creating and distributing these 
resources. We are quite well organized to manage our print-based 
information, but we are not at all well organized for the management of 
electronic information. The CLR grant and the AAU studies focus on the 
need to assess the total cost of different ways of organizing and 
storing information. To not change our ways means we will not benefit 
from the economies presented by today's information technologies.

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Richard P. West is Vice Chancellor for Business and Finance 
for The California State University System. He has chaired 
the steering committee of the Coalition for Networked 
Information since its establishment in 1990.

CNI Report is a regular CAUSE/EFFECT department that 
provides reports about the activities of the Coalition for 
Networked Information (CNI), formed by the Association of 
Research Libraries, CAUSE, and EDUCOM in 1990 to promote the 
creation of and access to information resources in networked 
environments.

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03/30/94 (MEH)
CNI REPORT: Copyright and the Economics of Networked Information