More Unfair Claims About Fair Use: This Time in New Zealand

In two earlier papers I outlined how some stakeholders, large companies and private advocacy groups are currently engaged in a concerted effort to enact major copyright policy changes in Asia Pacific. (SSRN: Barker 2016 and Barker 2018). In this paper I review another new report this time written for Google in New Zealand, authored by Deloitte: Access Economics (2018) in New Zealand, entitled “Copyright in the digital age: An economic assessment of fair use in New Zealand”. This new report purports to assess the economic effect of introducing in to New Zealand law a US style statutory fair use exception to copyright found in the section 107 of the US Copyright Act of 1976 (henceforth called US Style fair use). This new Deloitte New Zealand (Deloitte NZ) report is in fact very similar to, and copies a lot of the material, from another paper in Australia written for Google in Australia, again by Deloitte: Access Economics (2018), also entitled ‘Copyright in the Digital Age’, which was the subject of one of my previous (second) review papers mentioned above Barker (2018). In this paper I review a number of errors in the Deloitte NZ report. Many of these errors replicate the Deloitte Australia Report. However there are key new elements in the Deloitte NZ report to address. The new material is in part due to differences between Australian and New Zealand law, and the fact Deloitte New Zealand replaced the anecdotal evidence in the Australian report, with anecdotal evidence from interviews in New Zealand to make its case more relevant to the local market. The Deloitte NZ report also relied heavily on a model from Scotchmer (2004) to make the case for US style fair use. This was not presented or relied on in the Australian report. I therefore provide a number of additional sections on this in my review of chapter two of the Deloitte NZ report. I also present a new critique of the Deloitte NZ economic model of the responsiveness of US style fair use in my review of chapter five of the Deloitte report, and include a new and better model that clearly contradicts Deloitte NZ's predictions. The main conclusions of my review of the Deloitte New Zealand Report however remain the same as that for the Deloitte Australia Report involving four key flawed assertions in the paper. Assertion 1: that substantial downstream value is lost as a result of current copyright law in New Zealand. The downstream uses of copyright works involved include: text and data mining, digital analytics, cloud computing, transformative, educational and informational uses involving existing copyright works. Assertion 2: that this downstream value is lost due to current copyright law in New Zealand reducing cumulative innovation, and that a US style fair use law can remedy that. Assertion 3: that creativity is booming in the digital world and that introducing a US style fair use law in New Zealand will benefit creative output. Assertion 4: that transaction costs would be lower under a US style fair use system. As we shall discuss this presents an unbalanced picture of the likely impacts of adopting a US style fair use law in New Zealand, the nature and extent of the real current market problems, the scope for market solutions to the alleged problems, the nature and role of copyright and of transaction costs. The Deloitte NZ paper is indeed based on a fundamental misinterpretation of copyright. It fails to adequately acknowledge that copyright merely requires the creator's consent, and provides the basis for a market in creative works and does not prevent use. The Deloitte NZ paper then does not adequately explain why any copyright market might be expected to fail in the manner alleged, nor why the proposed legal intervention (fair use) might be expected to improve outcomes. The Deloitte NZ paper also doesn’t present any real new evidence, particularly drawing on the so-called “big data” that must now be available on digital copyright market transactions. A more useful contribution would further have examined the practical limitations of licensing markets, and the extent to which these might be addressed by new digital technologies, such as artificial intelligence and distributed ledger technology in order to enhance creative market growth, investment and innovation.