Article

Contracting around Copyright: The Uneasy Case for Unbundling of Rights in Creative Works

Guy A. Rub

Associate, Munger, Tolles & Olson LLP; SJD Candidate 2011, University of Michigan Law School

For helpful comments, I thank Omri Ben-Shahar, Rebecca S. Eisenberg, Margaret J. Radin, and the participants in the Law and Economics workshop at the University of Michigan Law School and the Licensing of Intellectual Property Symposium at The University of Chicago Law School. The views expressed in this work, as well as all remaining errors, are, of course, my own.

The Copyright Act grants authors and users a set of entitlements in copyrightable works. It is questionable whether and to what extent authors and users can reallocate these rights by entering into legally enforceable contracts. The Seventh Circuit’s historic decision in ProCD, Inc v Zeidenberg, which held that contracts are usually not preempted by the Copyright Act, produced an extensive debate in the copyright literature regarding the enforceability and desirability of such contracts. Many participants in this debate, both supporters and critics of the court’s holding, assume that the ProCD rule enhances economic efficiency by allowing authors to unbundle the set of rights prescribed by the Copyright Act. In this Article, I claim that, from an economic efficiency perspective, it is difficult to defend the ProCD rule. I argue that the prevailing belief that this rule reduces the wasteful deadweight loss associated with copyright is oversimplified and inaccurate. A more persuasive argument is that the ProCD rule increases the incentive to create in the long run. Such an efficient outcome, however, is desirable only when it allows society to mitigate the harm caused by other damaging components of the copyright system, and this was not achieved by the ProCD decision.

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