Copyrights evolved as an incentive program. Give people a temporary monopoly in the form of a copyright and they will have an incentive to innovate. This begs the question what motivates innovation? The basic premise behind copyright is that innovation springs from commercial considerations. Somebody will innovate only if he or she can see some sort of eventual payoff. However, innovation comes from need and not from purely commercial considerations. Even in the absence of copyrights, innovation will still take place because the need to do so will be there. In the entire debate on copyright law and copyright issues, this point is usually overlooked.
So the question is does the presence of copyrights enhance innovation, has no effect on it or dilute it? And how does innovation happen in the first place? There is a lot of confusion on this latter point. The general impression is that innovations spring full blown springing seemingly out of nowhere. This is not and never has been the case. All innovations are additive in the sense that they rely and build on previous work. The ability to do so freely is a critical factor in spurring innovation. Where a monopoly is granted that prevents such additive work, innovation comes to a screeching halt.
Do copyrights enhance innovation. The short answer is no, they do not. The reason for this is the nature of protection that copyrights give. Granting a copyright to a product or a service or a process or whatever means giving a monopoly to a private party. All monopolists behave in the same fashion: they become rent seekers. The desire and ability of a monopolist to innovate declines in proportion to the length of the monopoly. This is true in all cases of a monopoly including market based ones. To illustrate this point consider the browser wars of the 1990s between Netscape and Microsoft. During the tussle itself, there was great innovation in browsers. When the latter won out, there was a resultant market based monopoly. The end result was that all innovation in browsers came to a halt. This situation remained until Firefox came along and eventually broke Microsoft's monopoly. In the case of a government granted monopoly (in the form of a copyright), there is no such happy ending as long as the monopoly remains. The copyright holder has very strong incentives to extract maximum revenue by charging high prices and at the same time has no incentive to improve upon the product (except perhaps incrementally) whatsoever - a classic case of rent seeking. Copyrights at best freeze the innovation process and at worst dilute it.
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