This past week saw the publication of competing visions about the importance of intellectual property protection to the economy.

At IPI’s IP Day event on April 26, NDP Consulting released The Impact of Innovation and the Role of Intellectual Property Rights on U.S. Productivity, Competitiveness, Jobs, Wages, and Exports (April 2010) (supported by the Global Intellectual Property Center).

Research that attaches actual numbers to the impact of intellectual property is notoriously difficult, given the number of variables involved and the intricate interactions among them, but NDP does a respectable job. Its conclusion is that “innovation is a crucial driver of competitiveness, growth, and value” and that “IP-intensive industries create jobs and spur economic growth as results from high investments in research and development (R&D).”

Data of 27 U.S. exportable and importable industries during 2000-07 shows:  (1) IP-intensive industries created highly-skilled jobs during the entire business cycle and low-skilled jobs during the economic downturns while non-IP-intensive industries lost jobs in all levels; (2) IP-intensive industries paid their highly- and low-skilled employees nearly 60 percent more than non-IP-intensive industries; (3) Output and sales per employee in IP-intensive industries were more than double that of non-IP-intensive industries; (4) IP-intensive industries promoted exports and enhance competitiveness; (5) IP-intensive industries generated trade surplus and therefore reduced U.S. trade deficits; (6) IP-intensive industries spent almost 13 times the on R&D expenditure per employee that non-IP-intensive industries spent, which directly creates jobs and economic activities in R&D industries as well as in their supporting industries; and, (7) IP-intensive industries allocated over 2.2 times on capital expenditures per employee that non-IP-intensive industries, did which in turn stimulated jobs and economic activities in the U.S. economy. As such, protecting the intellectual property derived from innovation is essential to the future of a wide range of American industries.

The next day, the Computer & Communications Industry Association released Fair Use in America: Economic Contribution of Industries Relying on Fair Use (2010), prepared by Capital Trade, Inc. This report “employs the latest data available to answer a very important question: what contribution is made to our economy by industries that depend on the limitations to copyright protection when engaged in commerce? As this report shows, such industries make a huge contribution.”

I confess to not understanding what question the CCIA report purports to answer. ALL INDUSTRIES rely on limitations on intellectual property, the same way that all industries rely on limitations on property rights of all kinds (e.g., I rely on the fact that my neighbor’s property rights stop at a boundary between us and do not extend to my house).

Industries that especially depend on intellectual property also depend especially on its limitations. For example, a movie studio or a book publisher relies on copyright, but it also relies on the limitation that one cannot copyright ideas, or basic plot devices, or obligatory scenes, or even titles.  (Good thing, since the old saw says there are only seven plots in all of literature.) And all of these industries that rely on limitations also rely on the fact that the IP has been produced in the first place, so they are hardly independent of benefits of the affirmative side of IP. As PFF’s Solveig Singleton said about the 2007 version of this CCIA report:

Fair use is always fair use *of* something copyrighted… so do we add fair uses on to the value of copyright uses? There is a case to be made that the copyrighted materials–and the consequent fair use of them–would not exist in such abundance but for copyright. The logical response to that is, yes, but we wish to measure in particular the value of this particular *exception.* Fair enough, so long as one bears in mind the risk of the exception’s swallowing the rule. Also, that a substantial part of the economic activity in question might well occur in similar form even without the exception, due to the growth of markets in snippets and bits and other licensed material for downstream use.

Tech guru Nick Carr was also skeptical of the 2007 work, in A very silly report on “fair use:

There’s a little problem, though. Even by the woeful standards of the bespoke research industry, this study is a crock. It’s not just bad; it’s absurd. What the authors have done is to define the “fair-use economy” so broadly that it encompasses any business with even the most tangential relationship to the free use of copyrighted materials. Here’s an example of the tortured logic by which they force-fit vast, multifaceted industries into the “fair use” category: Because “recent advances in processing speed and software functionality are being used to take advantage of the richer multi-media experience now available from the web,” then the entire “computer and peripheral equipment manufacturing industry” qualifies as a “fair-use industry.” As does the entire “audio & video equipment manufacturing” business. And the entire software publishing industry. And the entire telecommunications industry. And – hey, why not? – the entire insurance industry. Stock markets and commodity exchanges? Sure, throw them in, too.  Here, to illustrate the extent of the absurdity, is the full list of industries and industry sectors that the researchers include in the fair use economy: [LONG LIST FOLLOWS]

Judging by the Appendices, the CCIA did not take Carr’s criticism to heart, since the current list is equally comprehensive.

The bottom line is that to say that Fair Use is important is a trivial statement. The real point is that this doctrine is a subset of the overall protection of IP rights, and the real import of the CCIA report is to illustrate the extent to which industries of all kinds rely on those protections.