Intellectual Property Rights

In my Business and Government class this week, we covered intellectual property rights and how much a copyright is worth. My econ professor, explaining the theory, boomed, “How much do we want to reward someone for inventing a new mousetrap? How much is someone’s novel worth?”

It is an old question in a new light.

My professor likened the government to a cheerleader when it comes to copyrights: by granting intellectual property rights, it incentivizes innovation and encourages creativity. More shocking, granting copyrights sanctions monopolies for those innovators. With a copyright, you have the sole right to reproduce, display or perform, distribute, and develop derivative works of your creation. You are the sole producer, which means you have full market power to price and produce at any quantity you want.

Of course, it’s never as simple as that. To produce your novel into something to sell, you need to print it (or put it in epub format), design it, advertise it, publicize it, and all that jazz. Most people rely on an economy of scale and experience (ie a company that already knows how to do all this and has the infrastructure to do it) to get that done. So you license the rights in a contract to a publishing house that will take care of the production for you. The publisher has to pay an advance as a deposit to show that they are serious about producing your work. More than that, they have to pay you royalties because it’s still your work, and you’re not just going to let them take all the spoils after producing it. Then, if you’ve negotiated it into your contract, at a certain point after they stop producing your novel, your rights revert and you own them completely by yourself again.

Notice the language I used in the last paragraph. The writer does not “get” an advance or a royalty as a treat for writing a book the publishers like; the publishers are paying for the right to produce a book they love. This is a dynamic I think many writers forget too easily. They are the monopolists granting an oligopoly; it is the publishers that are paying for the right to the book. One of the good things about self-publishing is that we authors are reminding publishers of this fact: the writer is the one with the power. If the publishing house cannot make it worth it to the writer, the writer will keep all their rights.

Just some musings as I study for my econ midterm. Let’s hope I can draw the graphs to back up my theory!