Copyright as Protecting a Business Model

rusty lock2.JPG

Apparently a cell phone company is suing to have the U.S. Copyright Office reverse a ruling that allowed people who buy cell phones to disable the software lock on the phone so that the phone could be used with other carriers. The company is called Tracfone. Many have noted that the DMCA goes well beyond classic copyright protection. I think that in some ways one could argue that as opposed to the government providing a system of incentives with all the attendant issues of intangible and nonrivalrous goods, this case shows that industries are using copyright law to protect business models not expressive works. At least one other person has said as much. The software at issue is a lock. Disabling it simply means one can use the item at issue as one wants. It seems that this sort of use (or abuse according to some) is simply a way to hinder competition and allow otherwise weak business models to survive. Whether one could argue that the changing landscape means that the classic form of the music industry is also a dying business model because of the drop in creation and even to some extent marketing prices, I leave for others to argue. Nonetheless, one could imagine a system that puts more money directly into artists’ hands and where rather than megastars we have a proliferation of more ministars who can actually earn a living as artists and indeed give up their day job. Yet it seems that copyright may have better arguments when capital is the question. If I recall correctly, Benkler (the Wealth of Networks) and Fisher (Promises to Keep), are two people who have delved into these questions and are worth reading. Even if a media industry is capital intensive and we give it copyright laws to protect it, that does not mean we are not subsidizing it, it may just mean that we have made a choice. If so, the question may be when should we subsidize an industry if at all?

In any event Tracfone’s complaint is here. Counts five and six cover the circumvention issues. The reply of the Wireless Alliance (with an assist by Stanford’s Cyberlaw Clinic) is here. It seems to be a part of what lead to the exemption that Tracfone is now opposing.

You may also like...

6 Responses

  1. jerome says:

    this sounds exactly like a techdirt article published a couple of days ago.

  2. mmm says:

    What the brief summary leaves out is that these are phones offered at steep discounts from the COST to Tracphone (not the market price). Ordinarily, those losses are recouped by customers paying for and using the service. What some of the customers are doing is essentially purchasing the phones, removing the little thing that forces the phones to be used witht he Tracphone service, and reselling them at less than market value for use on any service.

    It may be “protecting a business model” but it might also be “enabling a business model.”

    The first sale probably bar much in the way of Tracphone’s ability to limit by contract the end users “use” of the phone. Moreover, since there isn’t really a required “service” like in the ordinary mobile phone sense, there’s really little to stop them from doing this.

  3. Bruce Boyden says:

    I’m not sure the fact that a given law is being used to protect a business model tells us very much. Lawsuits for breach of contract are attempts to protect business models, namely, business models that rely on the enforceability of contracts. That’s not a very strong argument for the abolition of all contract law.

    Tracfone seems to have developed a business model, or at least a pricing plan, that depends on its ability to prevent free riders. It may or may not be able to do that given the legal tools available. But there doesn’t seem to be anything nefarious about the attempt.

  4. Deven Desai says:

    Hmm. Techdirt. Did not know about that site but I see what you mean. Thanks for the heads up. Looks like there is more to read.

    The point that there is a deep discount is a good one. As for Bruce’s idea, no one (except perhaps Bruce) is saying abolish contract. Sure if one wants to sell below cost and then require a service plan, one can try to do so. As mmm points out that may be hard to do. But that contract issue is not the same as the public ordering that is involved in copyright law which is now being used for the private contract matter.

  5. Bruce Boyden says:

    Hi Deven. I picked contract law out of a hat. I think you run into the same issue even with laws that don’t enforce private ordering. E.g., the fact that businesses bring antitrust suits to protect their business models (business models that depend on the lack of unreasonable restraints of trade) doesn’t tell us much about the value of antitrust law. The fact that businesses bring tort claims to protect business models that depend on the absence of tortious behavior doesn’t tell us much about whether tort law is a good thing. Etc.

    It seems that in order to get there, you need to make an argument something like: “The Tracfone suit demonstrates that the anticircumvention rules are bad law because they can be used to protect a BAD business model, and do not have other benefits that outweigh the costs.” For one thing, it’s not clear that the first part is true — it’s not clear that there is anything wrong with Tracfone’s business model. And the second part depends on demonstrating that protection of copyrighted works is unnecessary or harmful. But of course, if you could do THAT, I don’t think you’d really need the business model argument.

  6. Critics of today’s copyright laws often contend that instead of trying to control the use of their works through copyright, “old industries” must adopt “new business models” that would address the public’s desire to have unlimited access to content and impracticality of copyright enforcement in the context of the Internet. Usually adoption of such new business models is offered as a remedy for the growing number of copyright infringements.

    In my new article, Failed Business Models of the Past, Eh?, at (, I explain why adoption of new business models has nothing to do with abandonment of the underlying principle that the owner of copyright should be allowed to decide how its content is used. If a business decides to use their property in an inefficient manner, it is perfectly OK to let such a business fail. We should not “save” this business by stealing from it the property that we think it uses inefficiently.