A Little Understanding Motivates Copyright Abusers to Pay Up

Many Internet users don't give a second thought to copying and reusing an image. Hong Luo and Julie Holland Mortimer explain how copyright holders can gently persuade abusers to do the right thing.
by Michael Blanding

Obtaining an image from the Internet is as easy as right-clicking and downloading. We’ve all done it—or, ahem, know someone who has. We rarely think about who created these images or whether we have the rights to use them. This leaves the owners of those images with a conundrum: Should they pursue the violators?

First off, the monetary amounts at stake are often small—tens or hundreds of dollars in licensing fees. Is it worth the time, cost, and effort to send a bunch of settlement request letters? Second, few of these types of digital copyright infringements wind up in court. So why bother if the ultimate enforcement mechanism seems so far-fetched?

“By understanding why people make mistakes, it may help you creatively design an approach to resolve these disputes”

Harvard Business School Assistant Professor Hong Luo looks at these questions in a 2015 working paper, Copyright Enforcement: Evidence from Two Field Experiments, co-written with Julie Holland Mortimer of Boston College and the National Bureau of Economic Research. The paper was updated earlier this year.

Their findings about how to motivate copyright violators to actually pay up are important not only for copyright holders, but also applicable to many disputes involving small amounts.

The customary approach

When a digital image infringement by businesses is identified, the typical approach used by copyright owners is to send infringers a cease-and-desist letter, demanding they stop using the image and pay an amount, including the licensing fee and an additional amount to recoup enforcement costs.

Complicating the issue is that many infringement incidences in this context appear to be “uninformed,” that is the businesses are unaware they infringed and had legal obligations to meet to rightfully use images obtained from the Internet. Furthermore, many businesses use a third-party designer, whom is presumed to have cleared related rights.

Motivating copyright compliance on the Web is complicated by
users who don’t know they are violating the law. Source: NorthernStock

In these cases, says Luo, “legal threats may not be very effective.” Someone who willfully downloads music or movies may be liable for thousands of dollars or even more in statuary damages. However, fees for inadvertent usage are typically limited to the actual damages, which are smaller in amount. Infringers may also resist settling on moral grounds, since they don’t feel they did anything wrong.

The problem is a big one for stock photo agencies—not just because of loss of revenue but also because unchecked abuse cuts into future business by motivating some violators to continue the practice.

“On the one hand, if they don’t enforce, they are going to frustrate their photographers,” says Mortimer, speaking with Luo at a recent faculty seminar at HBS. “On the other hand, if they go after infringers in the wrong way, they may upset their customer base.” For example, a litigious reputation may hurt copyright holders’ chance to convert inadvertent users to future customers, especially when there are potentially multiple alternative suppliers.

Were there alternatives to explicit legal threats that could be used to increase compliance? Luo and Mortimer began working with a stock photo agency to find out.

The agency that they approached was already trying a kinder-and-gentler tactic by waiving the fee to recoup enforcement costs ($400 per image) and just asking for the actual cost of licensing the image that averages between $380 and $825 per image. “Despite the substantial difference, reducing the initial requested amount barely moved the needle,” says Luo. She noticed that the agency reduced the requested amount without informing the infringers of the price reduction. She was curious about what might happen if the infringers are informed that the price has been reduced.

Luo and Mortimer designed another experiment, using variations of the letter that explicitly told infringers of the price reduction. The reason for the reduction, as explained in the letters, was that they “understood this unlicensed use may have been unintentional.”

In some of the letters, they also imposed a deadline on top of the above messages, stating that if the case was not settled before a specific date, it would no longer be eligible for the fee reduction.

This time, the needle jumped. Whether they described the lower costs as a discount or waiving the surcharge, adding that simple language increased the probability of settling in the first 30 days by 12 percent, and increased the amount of settlement revenue by 80 percent. Adding messages that also include a deadline increased the settlement rate by up to 19 percent, and the revenue by 130 percent.

While it’s difficult to tell exactly what changed the infringers’ behavior, Luo speculates that acknowledging that the mistake may have been unintentional may put them in a more conciliatory mood.

“People may have different decision frames. If they get a confrontational letter, they say, let me calculate the risk—and if they think the risk is low, then they are not going to pay,” says Luo. “If they get a letter saying they are not the culprit, then it may soften their legal frame of mind, and moves them into thinking, what is the right thing to do given that a mistake was made.”

For some businesses, Luo adds, the acknowledgement of possible unintentionality may also make the settlement request conform more closely to standard invoices, providing a smoother path for processing payment, instead of initiating an internal legal review.

She says it is interesting to observe the contrast between the small effect of purely reducing the initial requested amount, though by a substantial amount, and the large effect of imposing a deadline after which the same difference is added back.

“A plausible explanation for the small price effect is that infringers perceive the agency as being less serious when the requested amount is lower,” Luo says. “In other words, a lower request may not generate a higher settlement rate if it simultaneously sacrifices an implicit threat of escalation. In contrast, adding a deadline appears to have simultaneously created additional pressure by making them think that delaying would only make the price go up, and possibly lead to legal action.”

Helpful in settling small disputes

This collaborative approach may not work in every situation, says Luo, but in cases where monetary damages are small, where explicit legal threats are not effective or undesirable, and where violations are likely results of inadvertent mistakes, striking a softer tone may increase chances of settlement.

Luo speculates that this tactic may be helpful in other cases of copyright infringement, for example when companies use songs or video clips in marketing materials, or café owners play songs without getting licenses for the rights.

The potential applications, however, go beyond copyright cases.

“There are many kinds of disputes between people or businesses where inadvertent mistakes lead to bickering over small amounts—because something isn’t delivered on time or an employee made an error,” she says.

Acknowledging that mistakes may have been unintentional and offering to compromise may help smooth over settlements and avoid costly legal battles.

“By understanding why people make mistakes,” says Luo, “it may help you creatively design an approach to resolve these disputes.”

Related Reading:

Monetizing IP: The Executive’s Challenge

About the Author

Michael Blanding is a writer based in Brookline, Massachusetts

Post A Comment

In order to be published, comments must be on-topic and civil in tone, with no name calling or personal attacks. Your comment may be edited for clarity and length.