Not sure how I missed this one, but last month the US Senate introduced a bill that nearly doubles the standard income tax deduction threshold for performing artists. The bill also:

• Allows the $30,000 limit (which is currently $16,000) to be applied on a per-individual rather than per-return basis, which is a boon to households with multiple professional performers;
• Indexes the limit to inflation.

Senator Charles Schumer, who sponsored the legislation, observed:

This tax code is so outdated, it’s more appropriate for court jesters from the Middle Ages than for today’s performing artists.

Indeed.

Loyal readers know that I’m following the Orphan Works Act that’s currently making its way through Congress. I still haven’t made up my mind whether or not to support the bill, but I’m glad to see that some more reasoned voices are joining the debate.

I was particularly excited to read Lawrence Lessig’s thoughts in today’s NY Times. Lessig is a hero of mine for his contributions to the free software movement and for founding Creative Commons. He is one of the most vocal and respected proponents of reduced legal restrictions on intellectual property.

Interestingly, Lessig comes out strongly opposed to the orphan works legislation:

This “reform” would be an amazingly onerous and inefficient change, which would unfairly and unnecessarily burden copyright holders with little return to the public.

Lessig’s main objections are that the “reasonable diligence” standard is too vague and that the bill does little to mitigate the legitimate problem of orphan works. I find his case persuasive, and I’m intrigued by a simple alternative proposal that he offers:

Congress could easily address the problem of orphan works in a manner that is efficient and not unfair to current or foreign copyright owners. Following the model of patent law, Congress should require a copyright owner to register a work after an initial and generous term of automatic and full protection.

For 14 years, a copyright owner would need to do nothing to receive the full protection of copyright law. But after 14 years, to receive full protection, the owner would have to take the minimal step of registering the work with an approved, privately managed and competitive registry, and of paying the copyright office $1.

This approach strikes me as being very much on the right track, but there’s one critical problem with it. Lessig’s main goal is to ensure that the rules are simple and transparent, thereby making it easier to liberate legitimate orphan works with no risk of legal liability. But how is a would-be infringer to know how old a particular work is? Sure, there are some cases where it’s obvious that a work was created very recently (or a very long time ago) but those are exceptions to the rule. If the full force of punitive damages still awaits anyone who illegally appropriates a copyrighted work within that 14-year undocumented period, how does this help libraries or museums protect themselves from liability?

I’ve been tracking the controversial Orphan Works Act of 2008. Today I received a “bill alert” from the Alliance of NY State Arts Organizations that includes some great analysis, which I think comes from Americans for the Arts:

H.R. 5889, the “Orphan Works Act of 2008″ introduced by Representative Howard Berman (D-CA) in the House, and S. 2913, “The Shawn Bentley Orphan Works Act of 2008″ introduced by Senator Patrick Leahy (D-VT), seek to amend the Copyright Act of 1976 by limiting certain liabilities of potential copyright infringers depending on whether a reasonable due diligence search before use is made according to guidelines established for the U.S. Copyright Office (USCO) by Congress.

New Copyright Search Criterion and Database Proposal
To achieve this goal, the legislation sets forth rules that govern whether an infringer is either a bad faith user or a good faith user to determine what damages are available to the copyright holder or what liability has been limited to the user. The bills differ slightly on implementation, but rely on similar criterion for qualifying a copyright user for certain liability exemptions:

1. give notice of usage to USCO (House version);
2. conduct a search of USCO certified searchable independent databases for pictorial, graphic and sculptural works administered under agency rules and best practices;
3. and, that these actions were taken before using the work.

The establishment and certification of electronic databases that facilitate searches for pictorial, graphic and sculptural works is a critical development in this legislation. The bills seek to propose certification guidelines in which a database must list the copyrighted work’s authors, contact information, and image or description - all searchable by text or image with the latest advances in security. In addition, the databases must be available to the public through the Internet by 2011 in the Senate, and 2013 in the House, which will serve as effective dates for the new infringement criterion.

Doubts have been raised primarily by the visual arts community that the search criteria will not adequately protect artists that have volumes of images that may or may not be registered in databases that have not yet been constructed by the USCO. The potential for an image or work to get cleared for usage by a system of registries that are privately contracted by USCO rules but whose effectiveness is not proven, would allow damages to be limited for many works that may not be litigated because of the prohibition on legal fees for good faith users. Some in the visual artists see this legislation as shifting the burden of copyright protection to the holder by making their work’s inclusion in the registries as part of the final say on a diligent search.

Meeting these criterions would then qualify as a “good faith search” or “diligent effort,” thereby exempting the copyright user from statutory damages (as much as $150,000 per infringement) and legal fees. A bad faith user who has not met the criterion is still liable for all the available remedies to the copyright holder (statutory and compensatory damages and legal fees) as is current practice.

Natural Right to Copyright and other exemptions
The natural right to copyright is not changed by the proposed legislation. Compensatory damages - the amount that a willing buyer and seller would have agreed to before infringement - are always available to the copyright owner should they later be found. Also, museums (Senate version), archives, nonprofit educational institutions, and public broadcasting receive a specific protection from monetary liability if acting in good faith.

There is also a concern that the legislation allows continued usage of a copyright that is integrated into another original work - one that consists primarily of the infringer’s expressions. The infringer’s new work can be continued if:

1. they made a good faith reasonable search;
2. reasonable compensation is paid to the copyright holder;
3. and attribution is made despite discovery of the copyright holder.

The bills as they are presently constructed may be amended and address some of the issues previously discussed above.

Congressional Action
Markups are currently scheduled for May 7th and 8th in the committees of jurisdiction in the House and Senate, respectively. We will keep the field informed as to what changes may be implemented and the progress of the legislation as further consideration is scheduled. If you have suggestions, comments or concerns regarding this legislation, please contact: Gladstone Payton, Associate Director for Federal Affairs, Americans for the Arts payton@artsusa.org

Report on May 7th House Subcommittee Consideration
On May 7 the House Judiciary Subcommittee on the Courts, the Internet, and Intellectual Property held a mark up of H.R. 5889, the “Orphan Works Act of 2008.” Markups consist of opening up the bill to a first round of amendments that may be considered in the full committee markup at later consideration. During this markup, Chairman Berman used a manager’s amendment as substitute for the base bill that now mirrors the Senate companion bill S.2913 by adding a provision that limits damages against museums, as well as archives, libraries, public broadcasting and nonprofit educational institutions. The House bill had not included museums in its original form. As well, the manager’s amendment would add that both parties must agree on what constitutes “reasonable compensation.”

Members of the subcommittee each then spoke briefly on the concerns for the bill, but without offering any amendments, deciding that discussion of germane amendments would be better suited for a soon-to-be scheduled briefing for interested stakeholders and then the full committee markup. The briefing will provide another opportunity to submit proposed changes to committee staff in writing.

Many Members voiced concerns but also willingness to work to on the more “controversial” aspects of the proposed legislation. Namely, the minimum standards, best practices, and statutory guidelines that will constitute a reasonable due diligent search were the most talked about topics. The bill’s chief sponsors and committee members acknowledged that more specificity and statutory guidance will be needed before a final bill is reported out for floor consideration. Other topics included further protection for nonprofit institutions and addressing ambiguity on what is commercial use of an orphan work.

It’s been a while since a bill in Congress has sparked as much panicked hand-wringing in the arts community as the Orphan Works Act of 2008 (pdf).

The Illustrators’ Partnership of America calls it “cultural theft on an unprecedented scale.”

Tom Richmond says it is “a license to steal.”

Mark Simon really goes over the top:

You May Lose All the Rights to Every Piece of Art You Have Ever Created!… [T]he Orphan Works bill … affects every artist and photographer in the world…. [Y]ou are about to lose your copyright protection. Every one of you needs to stand up and be heard in order to protect what we have all created.

So just what is this terrible legislation that will punch your mother in the nose and drink the blood of your first born? Here’s a fairly straightforward description of the legislative intent from Arts Technica:

The “Orphan Works Act of 2008″ (HR 5889 and S 2913) attempts to create a system where new creators can use old works without fear of massive lawsuits, provided that a good faith effort has been made to find out if the work in question is copyrighted.

If the provisions in the bill are followed and a copyright holder does emerge later, the bill prevents the copyright owner from seeking the normal penalties for infringement. These can include massive statutory damages that need have no relation to any actual losses, and even the threat of such a lawsuit often leads creators to avoid using archival material in documentaries and other such works. Under the Orphan Works Act, a copyright holder can only claim “reasonable compensation,” which is defined as “the amount on which a willing buyer and willing seller in the positions of the infringer and the owner of the infringed copyright would have agreed with respect to the infringing use of the work immediately before the infringement began.”

To qualify for this protection, creators must perform (and document) their “good faith” search for the copyright owner. They must be able to show that they could not locate any owner. They must file a “Notice of Use” with the Copyright Office before using the orphan work. They must provide attribution about the original copyright owner, if they can find this information (imagine a publisher who owned the copyright in a book but went out of business thirty years ago). They must include a special “orphan works” symbol that will be determined later by the Register of Copyrights. If all of these prerequisites are met, the creator can use the work in question with confidence, knowing that he will only have to pay a reasonable license fee if the copyright owner does emerge.

The Copyright Office also has to certify databases that can aid in the search for “pictorial, graphic, and sculptural works that are subject to copyright protection.” While it won’t actually run such a database, it will make sure that private databases meet proper criteria and that they are able to do visual searches.

I’ll be honest, I haven’t yet decided whether I think the Orphan Works Act is good, bad, or neutral. But I have serious concerns about the overheated rhetoric, rife with factual inaccuracies, that I’m hearing on this topic.

Please, before you allow yourself to be worked into a frenzy and sign on to fight in a holy war, read the bill. It’s not long and, compared to most legislation I’ve read, it’s fairly easy to follow. Maybe you’ll come to the same conclusion as those folks above or maybe you’ll decide the bill is innocuous or even positive. Either way, hopefully you’ll discover that much of the shrillest critiques are based on “facts” that just aren’t in the bill. For example:

1. Under no circumstances can you lose your copyright on a work because it is “orphaned”. You are always entitled to reasonable compensation for the use of your work, even if your copyright is infringed upon by someone who is protected under the Orphan Works Act.
2. The bill does not propose any requirement that works be documented in paid registries. Registering your work would simply be one way to minimize the likelihood that a “reasonably diligent” would come up empty handed.
3. Some folks are saying that the legislation is just a giant hand out to companies like Corbis or Getty, which would presumably establish commercial registries. That may be true, but only if those corporations can add real value to the process. After all, it would be trivial for a non-profit organization like Fractured Atlas or the Illustrators’ Partnership to set up a free registry for the artists in its constituency.

Again, I’m not saying that I support the Orphan Works Act. There are some legitimate problems with it that I haven’t seen anyone address, such as the extent to which it relies on internet-connected databases which aren’t universally accessible. But before we get our collective knickers in a twist, let’s all take a deep breath, read the bill, and then make an honest assessment of the dangers and opportunities it proposes.

Once more:
House version (HR 5889)
Senate version (S 2913)

Feel free to use the comments on this post as an opportunity to have at it!

Senate Majority Leader Harry Reid wants to deputize the nation’s colleges to fight illegal file sharing on campus.

It’s hard to avoid being cynical about this. The Democratic Party gets a lot of love from Hollywood, which is increasingly panicked about the alleged threat to its business model from peer-to-peer networks. Since college networks see a ton of P2P traffic, they’ve recently landed in the crosshairs of MPAA/RIAA’s increasingly aggressive enforcement efforts. Harry Reid looks an awful lot like the industry’s enforcer.

Here’s what I’ve always struggled with on the file sharing issue:

This is a classic case in which the interests of emerging and established artists diverge. At the risk of oversimplifying a complex issue, the artists hurt by illegal file sharing are those in the top 0.01% who sell millions of albums and/or DVDs. Almost everyone else stands to benefit from increased exposure to their work, which helps sell concert tickets and build an audience base.

The trite answer to this problem is to support legal, opt-in networks which only allow sharing of works authorized by their copyright owners. However, the very existence and efficacy of file sharing networks depends on participation (whether voluntary or involuntary) by those few extraordinarily popular artists who can draw a large enough user base to make the P2P concept work. Somewhat counter intuitively, if no one’s looking for Britney Spears or Metallica, no one’s going to find your brilliant but unknown avant garde fusion work. Heck, you don’t even have to be a complete unknown to want your stuff on P2P networks. Band-facilitated sharing of bootlegs was a driving force behind Phish’s growth, and they continued to permit it long after they became an A-list act.

I suppose it might be possible to create specialized networks that permit aficionados of particular artists or genres to share authorized works with other fans. You could even be all Web 2.0ish about it and try for a user-driven-community-wisdom-of-the-crowds model. To make it work, you’d have to build a mechanism for contributors of recordings to gain social capital for the quality and quantity of their contributions. You’d also have to convince the non-artist copyright holders (e.g. record labels) to participate, which might be the hardest part.

Any way you look at it, this issue’s got to be resolved sooner or later. P2P networks aren’t going away. Heavy handed enforcement efforts like Harry Reid’s have been laughably ineffective and have actually spurred the invention of more resilient P2P technologies like bit torrent and enforcement-resistant havens like The Pirate Bay. The biggest question in my mind is how much longer the music and movie industries will persist with their current (crazy, suicidal) strategy of suing their own customers before they get creative and figure out a way to make P2P work to everyone’s advantage.

This piece originally appeared as an article in the Fractured Atlas newsletter on April 15, 2006.

The American healthcare system is a spectacular mess, and artists are disproportionately underserved by our current employer-based model. Meanwhile in Washington, Congress is facing a handful of proposals that would radically alter the market for health insurance, especially with respect to self-employed individuals like artists. Here are a few of the bills that Fractured Atlas is watching closely:

The Small Business Health Fairness Act of 2005
(H.R. 525 / S. 406)
This bill would expand the Employee Retirement Income Security Act (ERISA) to allow for federally regulated Association Health Plans to cover small businesses and self-employed professionals on a national basis. Allowing associations like Fractured Atlas to offer ERISA-qualified plans should result in a dramatic increase in the accessibility and affordability of health insurance for our nation’s artists.

Benefits: Greater flexibility for associations to provide coverage on a national basis
Dangers: Weakens consumer protections; some risk that self-employed artists may not be eligible to join ERISA-qualified association health plans
Bottom line: Fractured Atlas supports passage of this bill

The Healthcare Choice Act of 2005
(H.R. 2355 / S. 1015)
This bill would allow health insurance companies to market individual policies approved for sale by any state to consumers in all other states. Passage would undoubtedly flood the market for individual health insurance, increasing consumer choice and presumably lowering costs. Unfortunately, this bill goes too far in dismantling the consumer protections provided by state insurance departments. Unlike the Small Business Health Fairness Act of 2005, which relies on ERISA rules to protect consumers from predatory or dishonest practices, this bill would allow the market for individual health insurance to be governed by whichever state has the most aggressively pro-business policies, whether or not it provides adequate consumer protections.

Benefits: Vastly increased options, especially for healthy people, on the individual market
Dangers: Terribly weakens consumer protections; would make it almost impossible for sick or elderly to buy health insurance on the individual market
Bottom line: Fractured Atlas opposes passage of this bill

“The Walmart Bill”
(Various state legislatures)
Earlier this year, Maryland’s state legislature passed a law requiring all businesses with over 10,000 employees to spend 8 percent of payroll on healthcare. Since Walmart was the only company in the state large enough to be affected, this has been informally dubbed the “Walmart Bill.” More than thirty other states are currently considering similar legislation. While superficially attractive, this is a terrifically misguided approach. It further entrenches a broken system (i.e. employer-sponsored healthcare) and imposes what amounts to a huge tax on American businesses that is not levied on foreign competitors. It also does nothing to help the nation’s growing self-employed workforce, including artists.

Benefits: You get to say you stuck it to Walmart???
Dangers: Entrenches broken system, does nothing to help self-employed
Bottom line: Fractured Atlas opposes passage of these bills

You may notice the conspicuous lack of a proposal for single-payer universal coverage. I wish I could report that such a proposal was getting serious attention in Washington. Unfortunately, that hasn’t happened yet, despite the fact that nearly every serious economist (including more than one adamant free-market enthusiast) who has looked at the issue has come to the same conclusion: that a federally managed single-payer model is the only workable solution. Until the folks on Capitol Hill figure this out, we’ll have to muddle through as best we can with stop gap solutions like these.