Levy vs. License: Collective Licensing in the United States

Jessica Pettitt: I’m joined here today by Vice President, Secretary and General Counsel of Copyright Clearance Center, Fred Haber.

Fred, I’m interested in knowing more about the US approach to collective licensing— a market driven option approach.

Why is this more beneficial than a levy system, or something more compulsory, like what exists in other parts of the world?

Frederic Haber: The short answer is that our model provides for greater choice. The levy model, or another model like that, eliminates the possibility of choice on at least one side. What I mean by that is that, in a levy system, often one side or the other might want to opt out but effectively can’t. The model that we’ve developed over the years enables rights holders to choose whether to participate in the licensing system, and if so, which works to license through the system.

The classic example is that you can buy the New York Times on a newsstand for a dollar every day, but you can’t buy a high intensity research biology journal for less than $10,000 a year.

On the flip side, users choose whether or not to take a license based on the terms that are available. The US model is not exclusive in that if our price is too high for what it is that the user wants, for example, the user is able to go directly to the rights holder. If we’re out of line with what the market can support, then it’s possible for both rights holders and users to connect directly.

For example, the Wall Street Journal and a major bank probably have a one-to-one relationship for the use of the Wall Street Journal’s information within that bank. But the Wall Street Journal will participate with us as well, because we’re also going to issue licenses to companies that quarry rocks, or that run retail stores, or that are law firms, which might not be worth a one-to-one negotiation for the Wall Street Journal.

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JP:  Are there any further advantages of a voluntary licensing services beyond choice

FH: Yes, market sensitivity. Market sensitivity determines participation. If, in the long run, rights holders and users don’t both agree with the price at which we’re offering licenses, then one or the other won’t participate.

In a levy system, you’re all in or you’re all out. You really don’t get anything more to it than that.

What our system has also provided is respect for this market sensitivity. It exists in some other systems to a degree, but it doesn’t work all that well there. We offer different prices to different groups of users in the marketplace. This is based on surveys that we do, which indicate that, for example, R&D companies use far more of our science-oriented, copyrighted information than anybody else. So, the prices are higher there, than, for example, in the retail industry, where our surveys indicate very little of the stuff that we have available is used, so the price there is brought down commensurately.

For distributions to rights holders, we also have market sensitivity in that our distribution model is a compromise between a pure volume model (that is, the more that’s copied, the more money you make from us) and a pure value model (that is, the higher your prices in the marketplace already are, the more money you make from us). The classic contrast intended to explain what we are trying to do is that you can buy the New York Times on a newsstand for a dollar or so every day, but you can’t buy a high intensity research biology journal for less than $10,000 a year. There’s something that the market is saying there about the relative value of the two items, and that relative value is built into our distribution model as well.

Author: Frederic Haber

Frederic Haber is Vice President and General Counsel of CCC and has previously held positions as a lawyer in the publishing, technology and retail industries.
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