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- Table of Contents -

Introduction to the online version

Chapter 1 – The Commission and Its Recommendations

Chapter 2 – The Establishment, Mandate, and Activities of the Commission

Chapter 3 – Computers and Copyright

Chapter 4 – Machine Reproduction – Photocopying

Chapter 5 – Summary

Appendix A – Summary of the Legislative History of Computer-Related Issues and the Photocopy Issue

Appendix B – Public Law 93-573 and Public Law 95-146

Appendix C – Commissioners

Appendix D – Staff

Appendix E – Lists of Witnesses

Appendix F – Alphabetical Listing of Persons Appearing before the Commission

Appendix G – Transcripts of Commission Meetings

Appendix H – Summaries of Commission-Sponsored Studies

- Economics of Property Rights as Applied to Computer Software and Data Bases

- Legal Protection of Computer Software, An Industrial Survey

- Costs of Owning, Borrowing, and Disposing of Periodical Publications

- An Analysis of Computer and Photocopying Issues from the Point of View of the General Public and the Ultimate Consumer

- Survey of Publisher Practices and Current Attitudes on Authorized Journal Article Copying and Licensing

- Library Photocopying in the United States, with Implications for the Development of a Royalty Payment Mechanism

Appendix I – Bibliography

Appendix J – Selected Provisions of the Copyright Act of 1976 and Copyright Office Regulations

Full table of contents

PDF version of the report

Picture of commissioners and staff

Final Report of the National Commission on New Technology Uses of Copyrighted Works


Appendix H – Summaries of Commission-Sponsored Studies


REPORT TITLE: Economics of Property Rights as Applied to Computer Software and Data Bases

CONTRACTOR: New York University Economics Department

AUTHORS: Yale M. Braunstein, Dietrich M. Fischer, Janusz A. Ordover, and William J. Baumol

NTIS ORDER NO.: PB 268 787


For the past several years, the New York Uni­versity Economics Department has conducted a basic investigation of the economics of informa­tion. This work, sponsored by the National Science Foundation, has delineated the difference between the peculiar characteristics of informa­tion as an economic commodity and the char­acteristics of ordinary goods and services and has explained why a private market for infor­mation products may not function properly. A special area of study has been the transfer of information, in particular through scientific and technical journals. In this report the authors apply their basic research on the economics of information to the production of computer programs.


1. The discipline of economics offers a basis for making analytical statements regarding the pertinence of intellectual property rights in general, and copyrights in particular, to the production of computer software.

2. As the American economy relies increas­ingly on information products and electronic data processing, the importance of software will grow. Examples suggest that private production in response to incentives may not entirely meet the nation's needs and that some public subsidy may be justified. A failure to develop an ade­quate policy towards computer software could conceivably have an inhibiting effect on the overall growth of the economy.

3. With proper specifications, and under cer­tain conditions, copyright can provide an effec­tive incentive for the production of computer software. The authors prefer a system of copyright protection to the currently prevailing reliance on trade secrecy on a variety of counts. Trade secrecy, which works better for inter­mediate than final products, restricts the range of direct users in a way that copyright would not. Trade secrets necessarily inhibit the flow of information about computer programs, thus making it more likely that separate efforts will result in wasteful duplication, making it more difficult for buyers to search out suitable prod­ucts, and possibly making it more difficult for new firms to go into the programming business. Trade secrecy may also result in the bundling of programs with other services or products as part of an overall package, to the detriment of cus­tomers or consumers. Finally, the need to main­tain secrecy leads to building certain undesirable qualities into software, such as obscure codes and  unnecessary complexity.  Copyright  is claimed to have superior characteristics in all of the above interests.

4. In general, the New York University economists support broad specification of prop­erty rights through the copyright mechanism, so as to allow the copyright owner to exploit as many markets as possible. In this vein, the practice of charging some customers a higher price than others-which sometimes involves an antitrust violation-may have merit if it permits an otherwise unprofitable enterprise to make money and hence be undertaken. The exemption of certain users of copyrighted works, whether through fair use or library or educational pro-visions, results in an implicit subsidy for those {Page 126} favored users, a subsidy whose burden is felt partly by other users who are fully subject to the provisions of the copyright law. Economists generally prefer open subsidies borne by the general public through taxes as both more effi­cient and more equitable.

5. This report specifies a model to estimate the best length of copyright protection to pro­vide maximum benefits for the public but taking into account the need to provide adequate in­centives to producers. The length of protection should be greater than the time needed for a producer to recover costs and make a profit, but less than a work's useful lifespan, so that some software will be in the public domain while still useful. The variables employed in the calcula­tions included the average useful lifetime of programs, the possibility of economies of scale in production, the responsiveness of demand to changes in price, the rate of decay of what customers will pay for a given program over time, and the social interest rate. Since the values of these variables were not known defi­nitely, the best length of protection was esti­mated as falling in the range between two and fourteen years.

6. Any legislature has only two basic con­siderations in designing a copyright law to provide incentives: the breadth or scope of protection, and its length. Increasing either one increases the opportunity for profit but also imposes a greater cost on the public. There exists a tradeoff between these two dimensions: the more there is of one, the less there needs to be of the other. The Copyright Act of 1976 stands at one extreme, with a very long period of protection but filled with multiple exemp­tions. However, a quite different system might work for computer software: very short but very tight protection.

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