After reiterating the economic arguments for and against indirect liability, Posner concludes:
There is a possible middle way that should be considered, and that is to provide a safe harbor to potential contributory infringers who take all reasonable (cost-justified) measures to prevent the use of their product or service by infringers. The measures might be joint with the copyright owners. For example, copyright owners who wanted to be able to sue for contributory infringement might be required, as a condition of being permitted to sue, to place a nonremovable electronic tag on their CDs that a computer would read, identifying the CD or a file downloaded from it as containing copyrighted material. Software producers would be excused from liability for contributory infringement if they designed their software to prevent the copying of a tagged file. This seems a preferable approach to using the judicial system to make a case by case assessment of whether to impose liability for contributory infringement on Grokster-like enterprises.
It’s fascinating that Judge Posner, with his vast knowledge about the law and about economics, avoids a case-by-case law and economics approach and looks instead for a technical deus ex machina. Unfortunately, his knowledge of technology is shakier, and he endorses a technical approach that is already discredited. Nobody knows how to create the indelible marks he asks for, and in any case the system he suggests is easily defeated by encrypting or compressing the content – not to mention the problems with malicious placement of marks. In short, this approach is a non-starter.
Becker is right on the mark here:
But several things concern me about the issues raised by this and related court decisions. I basically do not trust the ability of judges, even those with the best of intentions and competence, to decide the economic future of an industry. Do we really want the courts determining when the fraction of the total value due to legal sales is high enough to exonerate manufacturers from contributory infringement? Neither the wisest courts nor wisest economists have enough knowledge to make that decision in a way that is likely to produce more benefits than harm. Does the fraction of legitimate value have to be higher than 50 per cent, 75 per cent, 10 per cent, or some other number? Courts should consider past trends in these percentages because new uses for say a software-legal or illegal- inevitably emerge over time as users become more familiar with its potential. Must courts have to speculate about future uses of software or other products, speculation likely to be dominated by dreams and hopes rather than firm knowledge?
One of the tenets of the law and economics movement is that decisions about legal regulation of economic behavior should be grounded in a deep understanding of economics. Sound economics can predict the effect of proposed legal rules; but bad economics leads to bad law. As luminaries of the law and economics movement, Posner and Becker understand this as well as anyone.
What is true of economics is equally true of computer science. Only by understanding computer science can we predict the impact of proposed regulations of technology. As we have seen so many times, bad computer science leads to bad law. Posner seems to miss this, but Becker’s stance shows appropriate caution.
One criticism of law and economics is that it works well in a seminar room but may lead to dangerous overconfidence if applied to a hard case by an overworked, generalist judge. One solution is to teach judges more economics, and economic seminars for judges have proliferated. Perhaps the time has come to run seminars in computer science for judges.