1. Fair Use in the U.S. Economy: Economic Contribution of Industries Relying on Fair Use September 12, 2007 C A P I T A L T R A D E C A P I T A L T R A D E I N C O R P O R A T E D Thomas Rogers and Andrew Szamosszegi (202) 463-1850

2. 2 Why Measure the Fair Use Economy? Estimates of the economic contribution of copyright industries are widespread. Anecdotal evidence suggests that fair use is increasingly important to the U.S. economy. –Fair use undergirds important economic activities and products in the digital age. –Beneficiaries of fair use are widespread. Businesses and consumers benefit. This study aims to quantify the economic contribution of fair use.

3. 3 Summary of Findings Fair use industries account for –One-sixth of U.S. GDP –Nearly one-fifth of economic growth –More than 17 million workers –$1.2 trillion in payroll –High levels of compensation and productivity in core industries.

4. 4 What is Fair Use? “Fair use” is an important restriction to the rights conferred on original works by the U.S. Copyright Act of 1976. For this study, the term “fair use” includes fair use and other related limitations and exceptions to copyright enumerated in Title 17: SectionForm of Protection 102(a)Noncopyrightability of facts 102(b)Idea/expression dichotomy 105No copyright in U.S. government works 107 Fair use: criticism, comment, news reporting, browser, cache copies, reverse engineering, space shifting 108Library uses 109First sale doctrine, copies 112Ephemeral recordings 114(a)Exception to sound recording performance right 117(a)Back-up, essential step 302-304Copyright term 512ISP safe harbors

5. 5 Methodology Identify industries that benefit from fair use. –Core industries –Non-core industries Determine revenue, employment, and payroll of those industries. Estimate value added for those industries. Compare fair use values with overall economy. Use 2002 and 2006 data. Follow the WIPO (World Intellectual Property Organization) framework of analysis.

6. 6 Methodology (ctd.) Core industries depend in large measure on the limitations and exceptions to copyright law. –Internet service providers and web search portals –Computer and peripheral equipment manufacturing –Legal services –Newspaper publishing, etc. Non-core industries facilitate output of the fair use core or are major users of fair use industries. –Book, periodical, and music stores –Consulting –Communications equipment manufacturing

7. 7 Data Sources 2002 sources: –Census Bureau’s Economic Census (revenues and payroll) –Bureau of Labor Statistics (employment) –Bureau of Economic Analysis (value added estimates) 2006 sources: –Department of Commerce economic releases and industry sources (revenues) –Bureau of Labor Statistics (employment) –Bureau of Economic Analysis (payroll and value added estimates based on 2005 relationships)

8. 8 Selection of Fair Use Industries Report Table 1 contains a list of industries, descriptions, and applicable fair use provisions. –Links to relevant provisions provided by Professor Peter Jaszi, American University. Industries based on 2002 North American Industrial Classification System (NAICS): –Detailed industry descriptions –Better coverage of Internet Used the most specific industry definition available (3-or-more-digit codes)

9. 9 Core Fair Use Industries Photographic & photocopying equipment mfgMotion picture and video industries Computer and peripheral equipment manufacturingSound recording industries Audio & video equipment manufacturingOther financial investment activities Semiconductors and related device manufacturingInsurance carriers Manufacturing and reproducing magnetic and optical media Other investment pools and funds Electronic shopping Video tape and disc rental Electronic auctionsLegal services Newspaper publishers Architectural, engineering, and related services Directory, mailing list, and other publishers Graphic design services Software publishersScientific research & development services Internet publishing and broadcastingEducation services Internet service providers and web search portalsPerforming arts companies Other information servicesIndependent artists, writers, and performers Data processing, hosting, and related services Computer and office machine repair and maintenance Securities, commodity contracts, and investments

10. 10 Non-core Fair Use Industries Printing and related support activitiesCable networks Communications equipment manufacturingWired telecommunications carriers Communication and energy wire and cable manufacturing Wireless telecommunications carriers (except satellite) Computer & peripheral equip merchant wholesalersCable and other program distribution Computer software (packaged) merchant wholesalers Other telecommunications Business to business electronic marketsSecurities and commodity exchanges Electric appliance, TV & radio merchant wholesalers Agencies, brokerages, and other insurance related activities Communications equipment & supp merchant wholesalers Insurance & employee benefit funds Electrical & electronic goods agents & brokersComputer system design and related services Radio, television & other electronics stores Management, scientific, & technical consulting services Computer & software storesEducation services Book, periodical, and music stores Promoters of performing arts, sports, and similar events Radio & television broadcasting Agents and managers for artists, writers, and performers

11. 11 Measuring Fair Use Industries Revenues—value of net sales Value added—value of output minus value of purchased inputs –Measures firm’s contribution to Gross Domestic Product (GDP) –No double counting Payroll—all forms of compensation Employment—number of workers Trade—export value

12. 12 Results— Revenues of Fair Use Industries % increase 2002 to 2006—Core: +42%; Non-core: +20%; Total: +31%

13. 13 Results— Value Added of Fair Use Industries % increase 2002 to 2006—Core: +39%; Non-core: +18%; Total: +30%

14. 14 Results— Fair Use Industries’ Contribution to U.S. GDP Growth, 2002 to 2006

15. 15 Results— Employment in Fair Use Industries % increase 2002 to 2006—Core: +3.1%; Non-core: +0.4%; Total: +2.0%

16. 16 Results— Payroll in Fair Use Industries % increase 2002 to 2006—Core: +39%; Non-core: +17%; Total: +31%

17. 17 Results— Exports of Fair Use Industries % increase 2002 to 2006—Goods: +40%; Services: +53%; Total: +48%

18. 18 Results— Productivity and Compensation in Fair Use Industries Productivity and compensation growth have been especially strong in core industries. MeasureType 20022006Change Payroll per EmployeeCompensation$53,558$72,312+$18,754 Value Added per EmployeeProductivity$94,097$126,628+$32,531

19. 19 Conclusions Fair use industries play an important role in the U.S. economy. One sixth of the economy Nearly one-fifth of economic growth One in eight U.S. workers (17 million) $1.2 trillion payroll High levels of compensation and productivity in core industries