A Productive Efficiency Theory of Fair Use

Abstract: Fair use is one of the law’s most fascinating and troubling doctrines— amorphous, vague, and notoriously difficult to apply, but vitally important and perhaps the most frequently raised and litigated issue in the law of intellectual property. This article offers a novel theory of fair use that provides both a better understanding of the underlying principles and better tools for applying the doctrine. Rejecting the dominant understanding of fair use as addressing market failure, the article proposes viewing fair use as a doctrine for sorting intellectual property rights based on expected incentives for authors and utility for users. The article’s theory thus accords with recent Supreme Court cases by conceptualizing fair use not as an exception for costly transactions, but rather as a central feature of the copyright system that ensures productive efficiency. The article views copyright law as granting not one, but two large blocs of legal protections: fair uses to the public and exclusive rights to authors. The grant of exclusive rights to authors (such the right to copy) is intended to give authors the ability to profit enough from their expressions to make it worthwhile for them to create. The grant of fair uses to the public, by contrast, is intended to allocate to the public the privilege of utilizing creative expressions in a manner that engenders follow-on utility for non-users (such as scholarship and political speech). Thus, fair use is not simply an allocation of rights for minor uses or those accompanied by high transaction costs between user and author. Fair use is, rather, the dividing line establishing the limits of rights granted to the author. It is a grant of privileges as fundamentally important as the grant of rights to the author, albeit in service of a different aim. The only limit to fair use, in this article’s conception, is a grant of privileges to the public that is so large as to threaten to eliminate the author’s incentives to create.