Bachelor Thesis

Analysis of Copyright Infringement of E-book Industry
Chapter 1 The cause of copyright infringement of E-book Industry
1. Origin of copyright infringement
(1 !on-e"clusi#e characteristics
Without external constraints such as copyright protection, technical limitations, or network
control, e-books have the attributes of public goods, that is non-exclusive. No reader can
monopolize an e-book and exclude others from using it, so that it is easy for people to spread
and share e-books on line
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($ !on-competiti#e characteristics
he cost of copying an e-book is negligible, once an e-book is produced, it can be copied
indefinately, thus e-books are easily disseminated.
$. %ase of copyright infringement
(1 &emand basis' consumers( purchase cost is lo)
!udget lines and indifference curves can be used to explain why consumers choose to buy
pirated e-books instead of original e-books
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#iagram " !udget lines and indifference curves
$ reader buys one e-book %, the price of the original e-book is &
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, the price of the pirated
e-book is &
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, which is less than &
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. $part from %, the reader will purchase another commodity ',
the price is &y. !udeget line e(uation is &x)%*&y)'+,, the slope is -&x.&y, &
"
/ &
1
, so -&
"
.&y0-
&
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.&y, so the slope of pirated e-book is bigger than that of original e-book, hence the pirated e-
book budget line is to the right of the original e-book budget line. ,f the reader buys the original
e-book %, he can choose ! group 1%2, '23 in order to achieve maximum utility 456 ,f the reader
buys the pirated e-book, he can choose $ group 1%7, '23 to achieve maximum utility 47. %7 is
greater than %2, and $ point is farther from the origin point than point !, thus 47 is greater than
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im !erry. 8books, 9opyright, &iracy.
http:..www.huffingtonpost.com.tim-berry.ebooks-copyright-piracy;b;1<=>1?.html
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&eter @oore. Ateal his #isk: 9opy &rotection, 9onsumers2 Bights, and the #igital @illenium
9opyright $ct CDE. Northwestern 4niversity Faw Beview, "<<>, ?G1>3
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42. With a certain budget, a consumer can gain more overall utility by buying the pirated e-book
than by purchasing the original e-book. he consumer will rationally choose to purchase the
pirated e-book.
($ *upply basis' supliers( manufacturing cost is lo)
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+ree to obtain patents and copyrights
he cost of producing pirated e-book is low because the pirates are not concerned about
patents and copyrights. $lthough the sales price of pirated e-books is low, their production and
tranasaction costs are even lower. he relatively high profit attracts large numbers of e-book
publishers to publish pirated e-books increasing further the spread of pirated e-books.
$ The risk to pirates is lo)
$lthough pirates meet legal risk, due to defects in current regulation system, people
engaged in piracy activities easily avoid inspection and punishment, so many publishers are
wiling to take the risk to publish pirated e-books.
(, *ociety base' The cost of fighting piracy is high
Hovernment2s anti-piracy cost covers the whole process of the production, sale and
consumption, including the collection, arrangement, feedback, research of information, the
enactment of law and regulations, the establishment of supervisory institutions and staffing,
restrictions and penalties for piracy. $s e-book2s character of non-exclusive, when the
government adopt stringent anti-piracy measures, they will spend a great deal of manpower and
resources. herefore, because of high cost of anti-piracy, it encourages the existence and spread
of pirated e-books.
Chapter $ The impact of copyright infringement of E-book Industry
#iagram > Auppy and demand curves before and after pirated e-books enter the market
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-roducer surplus'
%efore pirated e-books enter the market: the producer surplus of the original e-books is
c*b6
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What5s the influence of piracyI http://www.kuqin.com/shuoit/20081025/24393.html
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After pirated e-books enter the market: the producer surplus of the original e-books
becomes c, so the producer surplus declines by b.
-irates obtain surplus c*d.
Consumer surplus'
%efore pirated e-books enter the market: the consumer surplus is a6
 After pirated e-books enter the market: the consumer surplus becomes a*b*e, so the
consumer surplus increases by b*e.
*ocial )elfare'
he change of the social welfare before and after pirated e-books enter the market is c*d-b*
1b*e3 + c*d*e0<, it seems piracy can increase the social welfare.
Jowever we ignore e-book has externality characteristics, which may make the market
analysis incorrect, because the market itself can not perceive externality, so sometimes
externality may cause market failure, and analysis of the malfunctioned market can not truly
reflect the social welfare. 9onsidering the externality, the impact of copyright infringement
should be:
1. The impact on producers of original e-books
$fter the pirated e-books enter the market, the producer surplus of the original e-books is
greatly reduced and the producers may face collapse.
$. The impact on producers of pirated e-books
$lthough the producers of pirated e-books can make a profit in the short-term, but
eventually will collapse after the bankruptcy of the original e-book companies, because they
lose the source of e-books and have no version to copy.
,. The impact on authors
8-books are 7knowledge products7 which consolidate human creativity. he authors need
to be rewarded and their copyright protected, otherwise the authors2 enthusiasm for innovation
will be depressesed. his would lead to a reduction in new works and inhibit the development of
the e-book industry.
.. The impact on readers
(1 In the short term/ readers )ill benefit from pirated e-books
Aince pirated e-books are cheap, readers can buy more e-books to ac(uire information, and
improve knowledge, so that their welfare is increased
($ In the long term/ readers( )elfare )ill decrease
,f the government does not take measures to prevent and combat piracy, the market will be
full of pirated e-books and producers of original e-books will stop producing e-books. hen the
pirates can not develop, further, and readers will have no e-books to read any more. Kurther,
disregard for intellectual property rights will mislead readers into establishing wrong values.
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0. The impact on society
,f the government does not take measures to combat piracy, producers of original e-books
will not develop new technology and new products. his will result in a decrease of total outputs
and the e-book industry will stagnate. #isregard for intellectual property rights will subvert the
concept of a Lust social value system, and damage the e-book industry
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Chapter , The rule of sol#ing copyright infringement
$ssuming the two extreme conditions, no copyright protection and overprotection of
copyright. 8conomic theory is used to analyze the effects on the intrest groups and society and
seek a solution to solve the problem of copyright infrigement.
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!o copyright protection
#iagram M &erfect competition market formed by no copyright protection
,f the government does not take any measures to combat piracy, pirated e-books will
s(ueeze the market and form a perfect competitive market. he e(uilibrium price line will shift
below the supply curve of the original e-books and the producer surplus of the original e-book
will reduce to zero. he original e-books producers will give up production because there is no
profit. &irates will have no 7version7 to copy, the whole e-books industry will depresses and
eventually producer surplus, consumer surplus, the welfare of whole society will be destroyed.
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O#erprotection of copyright
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Bochelle 9ooper #reyfuss, Boberta Bosenthal Nwall. 《,ntellectual property: trademark, copyright, and
patent law : cases and materials》C@E. Koundation &ress, 2004
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#iagram O @onopoly market formed by overprotection of copyright
$ government crack down on piracy will give authors certain benefits and stimulate their
creative enthusiasm. Jowever, there may be negative effects. Atrict control of piracy will
eliminate piracy, so that e-book producers will monopolize the market. hey will increase the
price, and the e(uilibrium price line will shift above demand curve. herefore, readers reduce
their purchases of e-books due to the high price and, consumer surplus will decrease to zero.
Atrict restrictions on copyright will affect the realization of maximum utility of e-books, so that
it will reduce publishers and authors5 interests. $ccording to the e-book2 non-exclusive
characteristics, when the government adopts stringent anti-piracy measures, they need to spend a
lot of money and time, which consumes a lot of social resources.
,. -rotect copyright appropriately and resourcefully
#iagram P ,nverted 4 curve of e-book copyright protection
,f the government does not protect copyright, social welfare is zero. $s copyright
protection increases, social welfare increases. $t the e(uilibrium point, social welfare reaches a
maximum. Kurther increase of copyright protection is matched by decreasing social welfare.
With maximun copyright protection, social welfare becomes zero again. o conclude, both no
protection and overprotection of copyright will have a negative impact on society. hus, a
balance point between the two extreme cases is the best way to solve the problem, namely
protect the copyright appropriately and resourcefully. Not only guarantee the author2s copyright
to promote innovation, but also satisfy readers5 need of increasing knowledge. 9racking down
on piracy meanwhile realizing maximum utility of e-books. Jence, the solution to the problem
of copyright infrigement is to protect copyright appropriately and resourcefully.
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