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16 Rev. Econ. Rsch. on Copyright Issues 1 (2019)

handle is hein.journals/rvwoecrh16 and id is 1 raw text is: Review of Economic Research on Copyright Issues, 2019, vol. 16(1/2), pp. 1-39 THE U.S. COPYRIGHT TERMINATION LAW, ASYMMETRIC INFORMATION, AND LEGAL UNCERTAINTY MICHAEL KARAS ABSTRACT. This paper investigates the conflict between authors and their publishers that occurs as a result of publishers using an ambiguous work made for hire clause to sue the author for copyright infringement. A Bayesian signaling model allows a publisher to send an informative signal to the uninformed author that includes his reaction towards a license termination to induce termination deterrence. The model is used to examine the effectiveness of the statutory intervention. The results reveal that complete termination deterrence is an equilibrium outcome only if a publisher sues with certainty. The mere threat to sue is not sufficient for complete termination deterrence. Under most parameter settings, the results indicate positive termination probabilities. The highest probability for a neutral publisher type is obtained in situations where an author has weak outside options or is strongly dependent on his publisher. An author with valuable outside options increases the probability that a publisher will threaten to pursue legal action. If courts tend to favor authors, then termination incentives increase, which may lead to more friction between authors and their publishers. 1. INTRODUCTION In 2015, the core copyright industries in the U.S., i.e., industries whose purpose is to cre- ate, produce, distribute or exhibit copyright materials, extended the GDP by $1.2 trillion dollars, which accounts for 6.88% in relative measures (Siwek, 2016). Licensing plays a significant role in these industries because authors license their creative goods to interme- diaries, such as publishers, who manage their economic successes (Caves, 2000). Evidence shows that older licenses become more and more valuable in most markets because back catalogs provide a dependable bottom line for profitability and stability to publishers I would like to thank Oliver Englisch, Luigi Franzoni, Ansgar Wohlschlegel (SIDE in Rome 2017); George Barker, Jonas Severin Frank, Wolfgang Kerber, Nicola Searle (EALE in London 2017); Shubha Ghosh, Sven Hoeppner (GLEA in Marburg 2017); Olivier Bomsel, Christian Handke, Paul Heald, Will Page, David Safir, Matthew Sag, Clemente SAnchez, Gerry Wall (SERCIAC in Turin 2017); Susana Martfinez, Mireia Artigot Golobardes (AEDE in Madrid 2017) and Jennifer Powers for their helpful comments and discussions on the current version of the paper. Sebastian Eichfelder, Annette Kirstein, Michael Kvasnicka, Sven Wegner (faculty research seminar in Magdeburg 2017); Danny Blaustein, Orlin Yalnazov (PSEAP in Warsaw 2017) commented helpfully on an earlier version of this paper. I am especially thankful to Roland Kirstein for the many fruitful discussions and his great support over the years. Finally, I thank an anonymous referee and the editor Richard Watt for their very helpful reports and comments. All remaining errors are my own.

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