# propositional writing

# A Copyright Tax and Alternative Compensation Manifesto

Philip Dorrell, 8 January 2012

The issues of copyright tax and alternative compensation are intrinsically linked: if we have a copyright tax, then the funds collected should probably be disbursed as part of an alternative compensation scheme, and if we have an alternative compensation scheme, then it probably should be funded from a copyright tax.

This propositional manifesto summarises some of the ideas contained in my articles Published Digital Information is a Public Good: the Case for Voted Compensation and Copyright Levies.

- Published digital content is a public good.

  Published digital content is a public good, because:

  - It is non-rivalrous: consumption of the good by one party does not reduce the ability of any other party to consume that good.
  - It is non-excludable: it is not possible to prevent anyone from consuming it.

  The non-rivalrous-ness of digital content is I think indisputable.

  If you believe in the viability of copy-control, a.k.a. "DRM", then you might believe in the potential excludability of published digital content. But there is little reason to believe that copy-control can ever succeed, unless we are so committed to the enforcement of copyright that we are willing to destroy modern technology and Western civilisation (in particular we would need to destory both democracy and freedom of speech) in the process of making copy-control work.

  Actually there is a third property which should generally be included in the definition of a "public good", which is that of universality, i.e. does everyone benefit from the "good"? In the case of digital content, this is more true of the more popular items of digital content, and it can be considered to be a property of digital content if we aggregate it, i.e. group enough items of content together such that everyone benefits from at least some of the items in the aggregation.

- Times have changed: in the past, published content was not a public good.

  Prior to the invention of computers and internet, and the development of these technologies to the point where a substantial proportion of the world's population could easily afford them:

  - Digital content was not non-rivalrous, because copies of content had to be physically manufactured, possibly at a cost much less than the selling price, but still at a non-zero cost. Any individual physical copy could only be used by one individual at a time. If "home-made" copies were possible, they were typically of inferior quality, and still cost something to make.
  - Content was somewhat excludable: the capital cost required to manufacture high-quality copies of content cheaply was sufficiently high to add substantial risk to the criminal enterprise of manufacturing high quality illegitimate "pirate" copies of content.

  That things have changed is important: in the past, it was arguable whether or not copyrightable content could be considered a "public good". Now, with the availability of computer and internet technology, digital content has become the perfect public good, actually more "public" (i.e. less rivalrous and less excludable) than all the other things typically considered a public good, such as roads, policing, justice and national security.

- Taxation is the best way to pay for public goods.

  In short: the public should pay for public goods.

  It is in the nature of public goods that they cannot be provided to some people without providing them to everyone, although depending on the nature of the "good" in question, some people may benefit more than others. If most people agree that the public good is "worth it", and if almost everyone is going to benefit, then we might as well make everyone pay for it, which means paying for it out of a government-collected tax. (To make things more "fair", such a tax may be collected in a manner which reflects the proportion of benefit expected to be received by the individual paying the tax, for example road tax might be levied on people and organisations who own road vehicles.)

- Taxation should not be used to compensate the victims of criminals.

  Copyright tax is sometimes advocated as a means to compensate copyright holders who are the victims of "piracy". The tax is collected to fund payments to copyright holders to replace those payments they presumably would have been paid if the pirates had been forced to pay for the content they pirated. When copyright-holders advocate such a compensation scheme, there is an implicit assumption that the copyright-holders (or some organisation representing them) will be in charge of deciding how much "compensation" to allocate to which "victims".

  The problem with compensating victims of crimes, especially in situations where one has given up all hope of catching the criminals or preventing their crimes, is that in effect taxation is being used to indirectly fund benefits to the criminals.

  In the case of a copyright tax, paid to the victims of unstoppable piracy, the tax is being used to pay for the production of the goods which are being created for the benefit of the criminal pirates, but the tax is not being specifically levied on the pirates (since if there was some way to reliably determine who the pirates are, then they could be caught and punished directly, and there would be no need for an on-going compensation scheme to compensate for on-going piracy). Rather the tax is being levied on all content consumers, including those people who scrupulously don't pirate content, and those "innocent" consumers are therefore paying for their content twice.

- Taxation should only be used to pay for goods that benefit all taxpayers.

  If a copyright tax is levied, the funds should only be disbursed to those digital content producers who make their content available, at no further cost, to all taxpayers.

  In practice, this means that digital content producers should make their content available for free distribution to everyone in the country, and only then should they expect to be eligible to receive payment apportioned from copyright tax funds.

- The allocation of copyright tax funds should be determined by the public, not by content producers.

  The proper beneficiaries of a "copyright tax" are not the copyright holders – the proper beneficiaries of a copyright tax are the people who pay the tax, i.e. the general public. As mentioned in the previous item, those who pay copyright tax should expect to be licensed for the consumption of all tax-paid content at no additional cost (other than the minimal cost of receiving the content over the internet).

  It follows that the allocation of tax funds to those content producers who produce tax-paid content should be decided by those who pay the tax. It should not be decided by those who receive funds allocated from the tax.

  Exactly what is the best way to determine such allocations is itself a problem that needs to be solved, in order to achieve the best "value for money" for the taxpayers, and it is not necessarily a simple problem to solve. (Following items consider issues in relation to this problem.)

- Tax-paid content production is such a good idea, that many governments already do it.

  Examples of tax-paid freely licensed content include:

  - In many countries, taxes are used to assist the development of various local forms of content, particularly content that may be seen to have cultural significance.
  - "Works of the US government" are not entitled to domestic copyright protection under U.S. law.
  - Again, in many countries, government-funded educational institutions generate content, some of which is made available to the general public for free.

  A common feature of most current tax-funded content is that the decision to fund the production of the content is always made before the content is produced. Which is the opposite of what usually happens when copyright royalties are used to "fund" the production of content (i.e. someone has to pay for the costs of producing content before the content producer can hope to receive any proceeds from the sale or licensing of copyrighted content). Which leads to the next proposition ...

- There is no need for tax-funded content to be funded before it is produced.

  In the private sector, copyright royalties are always received after content is produced, promoted and finally sold. (Although publishers may pay authors advances, which reverses the order, but which also means that the publisher is carrying the risk that the author may not generate enough royalties to pay for the advance.)

  A tax-funded alternative compensation scheme can and probably should allocate funds in the same order. That is, content is produced, at the content producer's expense, then promoted and freely licensed for distribution to all taxpayers, and only then, after they have downloaded and consumed the content, tax-paying consumers will decide (somehow) how much tax funds to pay to the producer of that content.

- Any "measurement"-based allocation scheme will require DRM, and will therefore fail.

  A common proposal with regard to alternative compensation, or universal licensing, is that everyone is file-sharing content (or if not everyone, then everyone who is pirating), so somehow we should just measure which files are being shared, and pay the alternative compensation to the identified authors of that content.

  The problem is, that as soon as file sharing statistics become the determinant of compensation, content-producers will file-share their content (which may be total junk content), just so they can receive some compensation.

  There is no solution to this problem that does not require a similar level of control and intrusion as that required by proposed "Digital Rights Management" schemes. That is, it is not sufficient to measure files shared, one has to measure files played, which means that every playing device and every content-playing software application must correctly "measure" which content is played and how much, in a manner which cannot be altered even by the person who owns the device or the computer platform which is playing the content.

  For the same reasons that DRM will fail, any such "measurement" scheme will fail.

- "Measurement" can always be corrupted by the consumer being measured, so we should "measure" by just asking each tax-paying consumer to vote.

  If consumers can "corrupt" the result of any attempt to "measure" which content they play, then those consumers are effectively just voting for the content they want to vote for, i.e. for the purposes of receiving allocated compensation.

  There is nothing wrong with voting, per se, as the phrase "No taxation without representation" famously tells us. If taxpayers are paying for the compensation of content-producers who pay for content, then taxpayers should be able to vote for which content-producers should receive how much allocation.

- In a Voted Compensation scheme, fund allocation does not have to be directly proportional to positive votes made.

  A naive implementation of a Voted Compensation scheme is that each voting taxpayer receives a fixed number of votes (perhaps the same for each voter, or perhaps proportional to the amount of tax paid), which are used to vote for content-producers, and content-producers receive allocation in direct proportion to votes received.

  This seems simple and fair, but the problem is that voters can simply vote their proportion of funds to someone they know who wants the money, or even to themselves – the so-called "band of me".

  But a voted compensation scheme doesn't have to work this way, and this is not how government-controlled tax funds are normally allocated.

  What happens normally is that different candidates for political office take positions on how much funds should be allocated for different purposes, and voters vote for particular representatives. In effect, elected representatives are intermediaries between voters and the actual decisions that governments make.

  Also, in as much a representative may be against using funds for certain purposes, a vote for that representative is a vote against funding that useage of funds.

  To avoid the "band of me" problem in a Voted Compensation scheme, it may be necessary to make it more like normal government funding decisions, both to introduce intermediaries into the voting system, and to introduce some element of negative voting.

- In a Voted Compensation scheme, controversial content may receive less funds, which may or may not be a bad thing.

  For example, people may vote against pornography, not because they have some opinion about the quality of the pornography, but just because they don't think pornography is a good thing.

  This doesn't amount to censorship, because no one is being prevented from creating or distributing pornography. But it does mean that voters in a vote-based compensation system people have the option to express an opinion on the value of particular content items to society as a whole. This is not necessarily unreasonable, given that "society as a whole" is paying for the content, and therefore the overall benefits to society should be considered when determining the "value" of such content. (Or to put it another way, if in the future, copyright almost completely failed, and failed for everyone except for content producers producing pornographic content, then probably we would decide to get rid of copyright anyway.)

- Because it's difficult to optimise a Voted Compensation scheme in advance, any such system should include meta-voting about the formula for translating vote counts into compensation allocations.

  A basic voted compensation system will require an infrastructure for content-producers to register votable content, and for voters to vote for or against registered content, and possibly to vote for aggregated voting decisions made by registered intermediaries.

  But it may be difficult to determine the optimum values for parameters used calculate compensation allocations from vote counts. For example, what value should negative votes have relative to positive votes? Should there be some minimum vote count before a given item of content is eligible to receive compensation? Can different content items have their votes aggregated by an intermediary in order to get over any such minimum?

  Given that the effect of any such parameters on the final result may be rather difficult to determine in advance, the best approach is probably to allow voters to also vote on decisions about what general parameters should be applied to future compensation calculations, taking into account observations about what effect current parameter values have on the results of the voting.

  This is not completely unlike what happens in some democratic countries, were voters regularly vote for candidates and parties to make up their national government, but they also occasionally get to vote on possible adjustments to the electoral system itself.

- A Voted Compensation scheme can co-exist with "traditional" copyright.

  Although Voted Compensation is designed as an "alternative" to existing copyright law, as a mechanism for paying authors of digital content, it can be put into place without changing existing copyright law in any way. Individual authors can choose, for each item of content, whether or not to go with the new system, which requires licensing for free distribution, or whether to stick with the traditional approach, i.e. not licensing for free distribution, and collecting royalties on "sold" content in the normal manner.

  An important consequence of this is that Voted Compensation can be introduced without violating any international copyright treaties. (However, some very pro-copyright countries might object to such a scheme because it involves providing a de facto government "subsidy" for locally produced content, which might violate some international trade agreement, even if it doesn't violate any international copyright agreement.)

- Voted Compensation can be trans-national in some respects.

  Because Voted Compensation involves the collection and allocation of tax funds, the operation of the scheme has to be entirely national, because there is no such thing as international taxation or international allocation of tax funds (except perhaps for certain very specific purpose, e.g.funding the UN).

  However, the registration of freely licensed content does not have to be limited to local authors. If an Australian musician wishes to register content for Voted Compensation in New Zealand, which necessarily involves licensing the content for free distribution to all New Zealanders, then New Zealanders may be quite willing to vote for that content. (Or New Zealanders might turn out to be too mean to vote for overseas content – there's no way to know in advance.)

  Of course once content is licensed for free distribution in one country, it will probably be impossible to prevent such content "leaking" into other countries, so if you register in one country's voted compensation scheme, you will probably want to register your content in all countries that have such schemes.

  Individual countries could also provide the option of freely licensing content to everyone in the whole world. There will be no way to force the rest of the world to directly pay for the benefits, but each such country will be able to account for how much their taxpayers have funded content which benefits everyone else (although such content may or may not be of interest to people in other countries), and they will be able to make a public statement to the world about how much they have contributed to the funding of freely distributable content.

- In a Voted Compensation scheme, the most difficult (and expensive) thing will be security.

  Designing systems to register votable content, count all votes received, add up the total votes made for each content item, and calculate compensation amounts, is probably not so hard to do.

  The one thing that will be hard to do is to reliably identify voters, and to ensure that what voters think they are voting for is the same as what's in the votes received by "voting central".

  Unlike a "measurement" system, a voting system doesn't require anything like DRM, i.e. there is no need to secure the voters' use of the voting system against the voters themselves (i.e. to force them to "vote" for what they actually "play" on their digital media consumption appliances). However, depending on how the voting system is implemented, it may be necessary to secure the system against general hackers, who may happen to be working for content producers who wish to inflate their allocations.

  In the modern computer age, a possible cheap and easy implementation of a voting system would involve the development of voting software which is distributed to every household, to run on home PCs (or mobile phones). Voters would use this software to vote, perhaps identifying their votes using tokens included somehow in the receipts for copyright taxes paid.

  However, home computer systems are notoriously insecure, and in this case, if voting is corrupted, individual voters may not even care that much because it is not their money which is being stolen. So they won't necessarily care about putting much effort into securing their installation of the voting software on their home computer.

  If follows that implementing a sufficiently secure voting system is not a trivial task, and may require the deployment of special hardware which exists separately from voters' own computer systems (but perhaps communicating securely with the central voting computer via voters' internet connections).

  This will cost something, the important question is whether it is a large cost in proportion to the quantity of tax funds being collected and then allocated. (And even if the cost of implementing a secure voting system seems high, we have to remember that the alternative of unlimited copyright enforcement is either impossible, or if it can be done, it can only be done by severely constraining the development of all new technologies, which is a very high indirect cost that we should not be prepared to pay.)

- Existing "free" software will be eligible to receive compensation in a Voted Compensation scheme.

  Some people object to the idea of a copyright tax to replace the payment of copyright royalties, on the grounds that they only ever install "free" or open-source applications on their computers, and they only consume content which is already licensed for free distribution.

  However, just because existing authors have foregone the benefits of copyright (as is typical for developers of free or open-source software), because they prefer not to restrict distribution, alteration or redistribution of their content, does not mean that those authors would object to receiving payment as compensation for their efforts to develop that content.

  A Voted Compensation scheme would allow all authors to receive income while forcing them to release their content for free distribution. It follows that authors who have already licensed their content for free distribution would also be eligible for compensation in such a system.

  Effectively, a Voted Compensation scheme would remove the current dilemma of choosing between making content available for free distribution to everyone, or, "selling" content, which requires that the distribution and re-distribution of content be severely controlled and restricted.

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This manifesto is a Propositional Manifesto. It is licensed under the Creative Commons Attribution-ShareAlike license.